off-stage right

If anyone ever wonders why theatre leaders have a bad reputation or why nonprofits are treated like the step-children of business, just look to the mess that is North Shore Music Theatre and you can easily see where the misconceptions and stereo-types come from.

North Shore is the perfect example of a bloated organization that had poor leadership and made the wrong decision with every step they took.  Hopefully the story will be a lesson for theatres who are facing difficult financial and artistic decisions.  They say hindsight is 20/20, but the signs of trouble seemed to have been evident for quite some time.

Theater fell to a medley of misfortune By Geoff Edgers, Globe Staff  |  June 21, 2009

 

When Barry Ivan took charge of North Shore Music Theatre, he thought he knew what to expect. For 12 years, he had been a steady guest director at the 54-year-old Beverly institution, marshaling dozens of dancers and scores of singers in eye-popping musicals like “West Side Story’’ and “Les Miserables.’’ Just before taking the top spot in 2008, he had directed the biggest-grossing show in the 1,750-seat venue’s history, “High School Musical.’’

 

All that turned out to be the easy part.

 

Less than a year after Ivan became artistic director and executive producer, the theater postponed its 2009 season, leaving thousands of loyal subscribers in the lurch. Last week, North Shore announced it was $10 million in debt and would close for good….

 

At its peak, the theater drew more than 27,500 subscribers and some 300,000 people a year, making it the largest regional theater in New England.

 

The closing has led to finger-pointing and recriminations, with those loyal to former theater head Jon Kimbell accusing Ivan of poor management and blasting his decision to abandon the organization’s proven holiday-season winner, “A Christmas Carol.’’ But a closer look at the theater’s financial health in its tumultuous final years, which included a devastating 2005 fire and a staff revolt under Ivan, reveals that myriad factors played into the collapse….

 

It was after 11 p.m. on a summer night in 2005 that the electrical fire started. Lights and sound gear melted; the stage and orchestra pit turned into a soggy, charred mess. The run of “Cinderella’’ was cancelled. The year looked lost.

 

But Kimbell, whose 25 years in charge saw dramatic rises in attendance and subscriptions, decided he couldn’t just cancel the season.

 

“Had I closed the place down it would have been impossible to renovate the theater and keep the staff employed,’’ he said in an interview last week from his home in New Hampshire. “I had to keep producing.’’

 

He accepted an offer to put a pair of North Shore productions into the Shubert Theatre in Boston. He also decided to make improvements to the theater’s in-the-round regular home. Insurance covered some of the work, but the upgrades ran an additional $1.5 million, Kimbell estimated.

 

The theater then lost $1.5 million more as a result of shows that had to be canceled, according to board chairman David Fellows, a venture capitalist.

Some theaters could survive that. But North Shore never had an endowment to protect it during down times. When it struggled, it borrowed money.

An endowment is not an insurance plan.  A fire is not an excuse to drain an endowment even if you have one! Why  didn’t the theatre have a capital campaign to cover its losses and additional expenses?  If it did and couldn’t raise the money, why did they do renovations that weren’t covered by the insurance money?   The fire was in 2005.  The debt should have been retired in 3 years or less through a campaign. 

Still, Kimbell’s era would be marked by great growth. Since arriving in 1983, he said, he had boosted the organization’s budget from $1.3 million to more than $14.5 million, its subscriber base from 7,000 to 27,500….

 

Ivan, whom Kimbell termed a friend after working with him for 12 years, knew the theater had financial problems when he took the job, he said. But it wasn’t until he had started that he recognized their extent.

 

The information, however, was readily available in the theater’s public filings. North Shore, which had deficits in 2005 ($492,184), 2006 ($107,856), and 2007 ($621,240), had an accumulated liability of about $4.6 million in mortgages and other notes.

 

Kimbell said the debt was not his fault. His $252,473-a-year job called for him to oversee virtually everything on stage, but not the business side of the organization.

 

“I haven’t been responsible for the finances of North Shore Music Theatre since something like 1990,’’ he said.

 

Fellows, the board chairman, doesn’t necessarily blame Kimbell or his successor Ivan.

 

“No, but more to the point, I don’t hold Barry responsible for that,’’ he said.

 

Despite its existing debt, theater leaders decided that borrowing more was their only solution. The slumping real estate market foiled that idea. A bank appraiser pegged the 22-acre theater property at $4.9 million. Already owing $5 million, the theater couldn’t borrow from a bank.

 

Fellows’s wife, April, did loan the theater $400,000, using as collateral a house the theater had for actors staying in town.

Note the previous quote talks about boosting the budget – but from the filings it wasn’t a balanced budget!  I don’t know anyone who would have a problem with raising expenses.  And when did the audience decline begin? 

Also, if the title is Executive Producer or Artistic Director, you ARE responsible for the finances of the organization.  I simply can’t believe Kimbell wasn’t aware of the constant borrowing.  It had to be brought up in a board meeting or some context.  It is part of the job.

It’s nice that Fellow’s is so forgiving of everyone’s behavior (although note that his wife’s loan is secured by the theatre’s property, so she will be paid back when others won’t be).

The great plan Ivan came up with seemed to revolve around raising funds that were more than double what had been raised by the organization in previous years and High School Musical 2 selling at astronomical levels (equal to the previous production).  It’s not surprising that it didn’t work.  This wasn’t a short term issue, this was years of borrowing and poor decision-making.

When trustees sat down on Dec. 19, the day after opening night, they realized they had a budget buster on their hands, according to Fellows.

 

The theater went into survival mode. There were 57 layoffs, and the theater stopped taking subscriptions for the 2009 season, though $2.5 million in renewals had come in, much of it money that patrons are not likely to get back.

 

North Shore kept on just three staffers, plus Ivan, his salary reduced from about $240,000 to $96,000.

 

In the middle of a devastating economic downturn that shook many nonprofits, the theater tried to raise $4 million to put on another season. Then it lowered its goal to $2 million.

 

Late last week, a few days after the board announced it had given up, Fellows headed to the theater with a checkbook. He met with the three remaining staffers and wrote out checks for the electric and phone bills.

 

Looking back, did he regret anything about the way the theater operated over the last year?

 

“No,’’ Fellows said. “With the economy being what it was, this was unwinnable. I can’t think of anything – knowing what I know now, going back over it – that we would have done differently.’’

Laying off 57 people is not survival mode.  That is shut-down mode.    In the comments section of the article (which are well worth reading) a savvy reader noted the following: 

Looking at Guidestar.org, I see that for the 2006 season, NSMT had $10,446,776 in program revenue and $1,787,948 in donations

This notes that the decline in budget and sales had begun long before any action was taken.  And the $4M fundraising goal was ridiculous even if a good economy. 

How on earth can the board chair not regret the way the theatre operated in the last year?  What about the last 5 years?

North Shore’s failure is not because of the current economy its because of years of poor management and it lead to the theater not being able to withstand a slight breeze, let alone the gusts of a tough economy. 

It is a sad situation.  It is unfair to the community and industry that the situation was allowed to happen.  Unfortunately, it is the third example this week of bad leadership, between North Shore, BoarsHead and Skylight Opera Theater, it is a pretty embarrassing week for nonprofit theatre.

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