By Jeff Jones

Atlanta Symphony buys into telemarketing industry

The Atlanta Symphony Orchestra is dialing up a new earned income lead. ASO's recent acquisition of a professional telemarketing firm could mean more total revenue but also has the potential to shake up the performing arts world.

Atlanta-based Robert W. Woodruff Arts Center and its ASO division in April purchased Los Angeles-based MKTG Teleservices, formerly owned by Media Services Group, Inc. (MSGI) for $3 million. Woodruff created a wholly owned subsidiary, SD&A Teleservices, specializing in fundraising and ticket sales for culture and arts nonprofits.

Not only was ASO a client of the company it now owns, but SD&A also touts Carnegie Hall, Chicago Symphony Orchestra, New York Philharmonic and San Francisco Opera among its clients.

ASO's purchase turned heads in the performing arts community.

“It's obviously an odd thing,” said Kevin Giglinto, vice president of sales and marketing at Chicago Symphony Orchestra. Giglinto said the Chicago Symphony made clear it wanted to see increased strategic support from SD&A and has received reassurances from the telemarketing firm that it is interested in helping.

“We look for their continued support,” Giglinto said. “We have been hearing from them that they have a commitment to (our) local campaign.”

The deal also raised the eyebrows of Susan Elliott, editor of MusicalAmerica.com, a business publication serving the performing arts community. Elliott asked in an article if MKTG's clients viewed the ASO's move as a conflict.

Charlie Wade, vice president of marketing at ASO, responded with a letter to MusicalAmerica.com and further explained ASO's thoughts to The NonProfit Times.

Wade said ASO called eight of SD&A's major clients during its due diligence, and at first the groups were curious and startled. “Once they understood it wouldn't affect them in any adverse way, they viewed it in a positive way,” Wade said. “The feeling was that now the company would be aligned with an owner that was understanding of their mission.”

Wade added that competition doesn't usually go across cities. “How are we going to harm the New York Philharmonic?”

“I don't think that there's any competitive problem,” said David Snead director of marketing, New York Philharmonic. “I think very few people subscribe to both. I was pleased to hear about it. It's nice to know leadership of the company is sensitive to our needs and will be very responsive to our concerns.”

The telemarketing company had been in turmoil, and there was a possibility of it ending up in the hands of a company that would have very little sensitivity to the nonprofit world, Snead said.

Paul Papich, president of the newly named SD&A Teleservices in El Segundo, Calif., said clients “weren't any too pleased that we were part of a corporate structure. Now that we're actually part of the nonprofit world (there's a) greater degree of comfort.”

ASO will also let SD&A invest part of its profits back into the company, leading to new product development and service lines, Papich said.

For instance, SD&A will test a service delivery mechanism this summer with a targeted fall roll out, he said.

SD&A's gross revenue was approximately $14 million last year and has been profitable for all but one of its previous 21 years, he said. SD&A is in the process of five-year planning within the company and pulling together a budget for next fiscal year to submit ASO, Papich said.

ASO's Wade said the organization had several reasons for pursuing the company, but a key factor was the changing business environment for orchestras, which have seen several challenges in recent years.

“Orchestras and performing arts in general are increasingly constrained in tickets they can sell and money they can raise, and the ability to control costs,” he said. “Part of what led us to this project was trying to be creative and innovative.”

It was a good opportunity that didn't involve a lot of day-to-day management by ASO, and wasn't outside of its mission, said Wade, who suggested the acquisition.

ASO viewed it as one step toward a better picture of financial health, which also included a pay freeze for staff and musician contracts with modest increases, Wade said.

Woodruff, which paid MKTG Teleservices $638,872 for marketing services during the fiscal year ending June 30, 2002, remains a client of the telemarketing company it now owns. Woodruff will continue to pay SD&A for its services, Wade said.

ASO absorbed the risk of additional telemarketing regulation increasing SD&A's operational costs. Indeed, MSGI pointed out as much in a recent filing with the U.S. Securities and Exchange Commission. Increasing federal and state regulation of the telemarketing industry could result in monetary penalties, and additional regulation could limit telemarketing activities, MSGI said in SEC filings last October.

“We looked at that a long time and listened to competitors and legal counsel and talked about it a lot. Nothing you do is without some risk,” said Wade. “We felt that the risk was mitigated by the nonprofit orientation of (SD&A).”

Nonprofits and professional telemarketers calling on their behalf are exempt from the federal do-not-call list. Do-not-call lists in some states, such as Indiana, do not exempt professional telemarketers calling on charities' behalf.

SD&A has approximately 50 clients, all of which are nonprofits, Papich said.

“I think our being owned by a nonprofit doesn't affect how we'll be treated by individual states when imposing regulations,” he said. “I don't see this (regulation costs) as impacting business at all. Most people welcome the calls.”

At least one performing arts group is content to let ASO be a telemarketing trendsetter when it comes to earned income. “No, we're not getting into the telemarketing business,” said Giglinto, when asked if the Chicago Symphony was looking into any earned income avenues.

Instead, Chicago Symphony's focus is on getting more people in the seats through ticket price reductions and packages, and a rush-hour concert series from 6:30 p.m. – 8 p.m. that will launch this fall, he said.

© 2006 The NonProfit Times Privacy Policy