Death spiral at the Met?

In the March 8 New York Times a sentence appeared that ought to have struck profound alarm in the minds of all serious-minded operagoers. "What we really need," declared Metropolitan Opera General Manager Peter Gelb, "is one of these triple-digit billionaires to give us a billion dollars.”

It is impossible to overstate the level of denialism, desperation and sheer wish-casting in that statement. The man responsible for the world's biggest-budgeted opera company sounded more like a degenerate gambler declaring that his strategy for wiping out his losses at blackjack would be to win the lottery.

I know a few things about gambling. I've covered it for 30-plus years. I make my living writing about the ups and downs of business. And, from a business standpoint, the Met's predicament is beyond alarming. It is potentially fatal. The opera company is all but locked in free-fall and Gelb is in charge of the keys. When one is reduced to begging that notorious philistine Elon Musk for a few philanthropic crumbs, how much more desperate can you get?

It's ironic that a $326 million-a-year nonprofit would face its undoing at Gelb's particular hands. After all, he came to the Met from such profit-making enterprises as Sony Classical and Columbia Artists Management. However, he tenure at the Met has increasingly become a reign of error, enabled by a board of directors that is mysteriously beholden to Gelb's cult of personality (a strange thing to cite about the almost personality-free Gelb). Board members, individually and as a group, seem constitutionally incapable of saying "No" to bad decisions, let alone "You're fired."

In terrifyingly messianic remark, Gelb told the Times, "I was the right person for the job, and I still am." He also took credit for "live broadcasts," which suggests delusionism, unless specifically meant high-definition transmissions into cinemas. After all, Sirius XM Met relays predate Gelb's 2006 arrival at the Met (a Joseph Volpe legacy) and live radio broadcasts date back to 1931.

Then again, Gelb is not given to modesty, often taking to the op-ed pages to proclaim that his way is The Only Way To Save Opera. His artistic and socio-political agendas, while controversial, are not our concern. His apparent lack of business acumen very much is.

For his 1960-1 season, Rudolf Bing limited himself to one new production, at a time when civic support for the arts was thicker on the ground. During 2022-3, at a time when the Met was already in dire financial straits, Gelb mounted seven, some arguably redundant, replacing Volpe-era stagings that had yet to amortized. (No love was lost between Volpe and Gelb, which may explain the latter's apparent desire to erase as many vestiges of Volpe's tenure as possible ... but we digress.) To whatever challenge confronted the Metropolitan, Gelb's answer has seemed to be spending, spending and yet more spending, egged on by a compliant board.

Nowhere has the board's dereliction of duty been more apparent than in the evisceration of the Met's endowment, which the NYT reports is but 67% (or $212 million) of what it was when Gelb arrived. In a basic nonprofit no-no, Gelb has repeatedly raided the endowment to underwrite his profligate spending habits.

Endowments are for raising income via interest accrual, not a slush fund for covering deficits. And the more one draws upon the principal, the lower the earning power of the endowment. Less principal = less interest accrued, a vicious downward cycle in which the Met has trapped itself.

(According to the NYT, the Met board is merely "rethinking" ceasing to plunder the endowment.)

Another blunder was to largely forego the stock market in favor of hedge funds and volatile private-equity investing. At a time when the S&P 500 rose 16%, according to the Times, the Met's investments improved only 6.8%. The Met's board says it has learned from its speculative mistake—but at what cost?

Gelb has tried cut his way to break-even by sacking some personnel and cutting the salaries of others. In a largely symbolic move, he shaved a mere $150,000 off his $1.4 million/year payday.

Put bluntly, this is what is known as a death-spiral business model. Without serious remedial action, the institution known as the Metropolitan Opera could well go dark.

Already it is in danger of losing its signature Marc Chagall murals, which Bing commissioned to celebrate the company's move to Lincoln Center in 1966. They collateralize a pair of $65.7 million loans which will shortly come in 11 months. Gelb hopes (repeat, hopes) to roll over the loans and thereby save the Chagalls. But, given the Met's "extremely thin" liquidity and low credit rating (downgraded twice by Moody's in 2025) what are the chances that Gelb will get more-favorable loan terms or lower interest rates?

I can tell you: Poor to nonexistent. Banks are not in the habit of rewarding bad business results.

Speaking of results, Gelb claims to perceive some green shoots. The box office, which has been poor to mediocre in recent years (witness the acres of empty seats at Saturday matinées), is said to be finally trending upward—as indeed it must. And lightning struck in the form of a Tristan und Isolde production starring Lise Davidsen (the Met's brightest draw) that has had a performance added to sate ticket demand. But a Wagnerian one-off is not a business plan and the Met has no choice but to sell more tickets if it is to survive. Does one congratulate the U-boat commander when his sinking submarine finally hits bottom?

(The Met played to just 72% of capacity during the 2023-4 season—and that was an increase from 2022-3's dire 66%.)

To that end, Gelb has been brandishing on high the results of a study commissioned (doubtless at great expense) from Boston Consulting Group. It recommended—wait for it—longer runs of revived productions and a heavier diet of blockblusters (think La Boheme and Turandot). Such recommendations are hardly rocket science to those familiar with opera.

Besides the Met's "blockbuster" productions are getting awfully long in the tooth. Its go-to Boheme is 44 years old (the average age of a current Met ticket buyer) and its Turandot has seen 38 seasons. Gelb, to his discredit, has spent heavily on 'one-and-done' new productions of operas which either have had scant revival prospect (think Prince Igor) or contemporary operas of which the same could be said (too many to mention). The operatic graveyard is becoming ominously full of Gelb initiatives.

Unfortunately for Gelb and perhaps for the box office, his taste in productions runs to avant-garde provocations of that kind that tend to divide audiences and age quickly. One of his worse business ideas, thankfully smothered in the crib, was to import Spanish enfant terrible Calixto Bieito to stage La Forza del Destino for an initial run of just four performances. Good luck monetizing one's investment at that rate!

The NYT story is full of Gelbian double-talk. He poor-mouths the Met's 15 unions, whom he has screwed out of income by outsourcing construction overseas. But he also incepted regular Sunday performances ... which obliged him to pay some unionized employees double-time. People get fired for less.

Could I run the Metropolitan Opera? No. Can Peter Gelb? The dollars-and-cents results respond with an even more emphatic "No." Scarily, the Met is stuck with him through 2030, when Gelb will be 76. Let's hope there still is a Met when Gelb's contract runs out and we are delivered from his and the board of directors' comedy of terrors.

David McKee is editor of Casino Life Magazine, and contributes to CDC Gaming, Casino Reports and Las Vegas Advisor, when not attending an opera.