With the recent announcement of Opera Lyra Ottawa’s collapse, the arts community has rightfully been on edge. Opera is a notoriously expensive endeavour, and with skyrocketing production costs, high creative expectations, and not-for-profit board members determined to balance the books, there is much at stake.

After four years of decline, the Canadian Opera Company (COC) has released their annual report backed up by a third-party financial statement conducted by Ernst and Young.

A careful review reveals the COC is taking responsible measures to remain financially sound and is well positioned for future growth.

“From an administrative perspective, our return to six operas per season has done what we hoped: we reallocated our resources, consolidated our revenues, looked at our costs and increased the returns from the rest of the operations,” said COC General Director Alexander Neef in a statement.

A Closer Look

Beyond the numbers, annual reports tell the story of the direction of the arts organisation. They show the goals, anxieties, creativity and future plans of an organisation. In this case, the COC is concerned about efficiencies and has moved towards more performances of fewer productions. With one less opera produced in 2015, it would seem production costs should have gone down more that they did. One less production means fewer costs, yet curiously, this was not entirely reflected in the report.

To make up for the decreased subscription revenue, The COC responded by putting efforts in attracting new audiences to their productions. This has been largely successful, and if it continues, the challenge will be translating them into loyal opera lovers that keep returning over the next few years.

One of the major struggles of opera presenters is attracting new patrons. The issue seems to stem in part to the growing competition from the arts and entertainment sector, which are constantly vying for the public’s attention.

Last year, the COC sold 23,772 tickets to new patrons; up from 21,508 in 2014. The downside was that new patrons did not convert into subscription holders, which continues to decline year-over-year.

There was an increase in attendance for the under 30 “Golden Ticket” demographic and appears to be a result of greater focus on attracting younger spectators.

Down slightly from 2014, attendance was solid at 92%.

Notably, the cost per performance is up by $5,000 on average, (1.4%), but when compared against the cost of living, comes out flat.

The report showed the COC had struggled with cash flow in 2015 and resulted in lower total asset positioning. To help with liquidity, the COC opened a bank line credit. As we have seen with Opera Lyra, acquiring debt can become a very dangerous solution to cash flow issues, and while it may help in the short-term, can quickly spiral out of control. To further that risk, the COC used some of their building assets as collateral on the loan.

COC fundraising remained robust in 2014, with a growing endowment and strong showing in restricted and operating donations.

One thing to note is that the report shows no demonstration of real cost efficiencies, including a marginal increase in costs throughout, which may simply be a reflection of inflation. If all other trends hold, this will quickly become unsustainable, and the COC will need to continue to be creative with the development of cost efficiencies.

Side-by-side Analysis:

The Verdict

It’s a flat growth season but no news is good news, and the COC appear to be on track.

#LUDWIGVAN

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