1.A- What are the specific problems with the San Antonio Symphonys financial situation? Use data from the case to answer this question.
Soln: – Symphonies across the United States had been facing economic problems as it is and recently due to economic downturn, symphonies were receiving reduced gifts from individuals and corporations, leaving the symphonies with increased operating deficits. After cutting the 2002-03 seasons budget to $7.1 million by having Symphony musicians and staff take steep pay cuts, the Symphony faced an additional deficit of 7,000.
The Symphony faced additional difficulty in luring new major donors.
Major corporate and foundation donors were withholding additional support until the Symphony could find a way to operate in the black. The next big step down was at the end of May, the Board decided to lay off all nonessential workers, and it was leaning closer to filing for Chapter 11 bankruptcy protection. Therefore, despite the cancellation of the seasons final five weeks of concerts, the Symphony Board was unsure how to pay the seven essential workers still on the payroll, or how to pay the seventy-seven musicians whose collective bargaining agreement obligated the Symphony to pay them through June.
And finally, on June 10, 2003, having been unable to pay their musicians since May 15 and having laid off more than half of the office staff, the San Antonio Symphony Board voted to file for bankruptcy, reporting a $1.5 million debt. These are some of the specific problems with the San Antonio Symphonys financial situation.
1.B- What steps should the Symphony take to overcome the financial problems described in the case?
Soln: – Symphony had to reach an agreement for an employment contract with its musicians in order to gain their trust back. In order to get back into the business as quickly as possible it is highly important for symphony to start by cutting costs. Symphonys biggest costs were payments for the employees. According to papers on file with the Internal Revenue Service, salaries were the Symphonys biggest expense, with $3.8 million being spent on salaries and wages, $198,613 on pension plan contributions, and $563,950 on employee benefits in 2001. The Symphony had also paid $766,077 to guest artists and $245,537 to its officers and directors, including $127,380 to Executive Director Brosvik. After salaries, theater costs were the Symphonys next biggest expense, $529,000 annually, minus $140,000 a year in financial contributions from the City, and from the Las Casas Foundation and Arts Center Enterprises (ACE), who together owned and operated the Majestic Theater.
Under bankruptcy rules, the Symphony had until October 31 to file its reorganization plan with the court. So, in order to be back strong on the market, it needs a sound organization plan in order to impress the lost donors. Perhaps shutting might not be great idea since it has to start from the scratch in that case. Therefore, in order to repair its relationship with past donors the best way would be not shutting down completely and by investing in the music and the musicians and by building the Symphonys visibility. Sometimes even street concerts of musicians can help advertise the company without any pressure and will be able to bring back customers which eventually attracts the donors. Therefore, the basic mistake to learn from for Symphony is that they should not depend on limited donors and try to attract as many donors as possible for future downturns.