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Citation: Glückler, J.; Panitz, R. Live
Music in the Time of Corona: On the
Resilience and Impact of a
Philharmonic Orchestra on the Urban
Economy. Sustainability 2023,15, 3611.
https://doi.org/10.3390/su15043611
Academic Editors: Justin Lewis and
Marlen Komorowski
Received: 25 January 2023
Revised: 11 February 2023
Accepted: 13 February 2023
Published: 16 February 2023
Copyright: © 2023 by the authors.
Licensee MDPI, Basel, Switzerland.
This article is an open access article
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4.0/).
sustainability
Article
Live Music in the Time of Corona: On the Resilience and
Impact of a Philharmonic Orchestra on the Urban Economy
Johannes Glückler * and Robert Panitz
Economic Geography Group, Institute of Geography, Heidelberg University, 69120 Heidelberg, Germany
*Correspondence: glueckler@uni-heidelberg.de
Abstract:
During the COVID-19 pandemic, many governments enforced epidemic policies of social
distancing, restrictions of professional practice, and the prohibition of cultural live performances.
Because such policies dried up important sources of income in the cultural and tourism industries,
this paper examines how cultural institutions coped with this crisis. Drawing on the case of the
Mannheim Philharmonic Orchestra in Germany, we collected original data and employed a regional
economic impact analysis to determine both the financial resilience of the Orchestra and its impact on
the urban economy. Because the Orchestra could not reduce costs during the COVID-19 pandemic,
public subsidies were crucial to fill the income gap of missed live concerts. In turn, the regional
impact analysis suggests that the Orchestra maintained its positive effect on the economic demand
for goods and services in the urban economy. When balancing the city’s subsidies with the rental
(city concert halls) and tax incomes generated by the Orchestra’s local impact, the Orchestra managed
to induce surplus revenue for the city’s treasury.
Keywords:
creative industries; cultural industries; philharmonic orchestra; regional economic impact;
urban economy; economic geography; Germany
1. Introduction
In the public perception, cultural performances primarily contribute to creating an ed-
ucational and entertainment offering that enriches the city and its inhabitants, contributing
to their overall quality of life. For a long time, research and planning therefore recognized
culture as a soft location factor [
1
], i.e., as having only an indirect economic effect, such as
attracting highly qualified workers. Current studies which have looked at the appeals of
the creative class [
2
,
3
] and the importance of arts and culture to urban innovation, have
focused on the direct economic impact of culture on the economic development of cities.
The cultural and creative industries [
4
–
7
] not only comprise a large number of eco-
nomic sectors that generate jobs and create value through their commercial offerings,
they also compose a disproportionate share of the creative work in cities, which supports
creativity and innovativeness and has an impact on other economic sectors [8].
An outstanding example of this in Europe is the construction of the Guggenheim
Museum in the Basque Country, which stimulated the economic development of Basque
in significant ways. Known as the ‘Bilbao Effect’, initial investments of more than USD
180 million were already amortized after seven years of construction and led to an overnight
boost in tourism in Bilbao [
9
]. Similarly, the new opera house in Oslo attracted additional
visitors, making Oslo a tourist destination [
10
]. Therefore, it is hardly surprising that,
e.g., the New Leipzig Charter on Sustainable European Cities sees culture as the center of
sustainable urban development [11,12].
Economic crises, and the COVID-19 crisis in particular, have shown that the consump-
tion of cultural goods such as music is strongly affected by economic development and
economic outlook [
13
]. During recessions, private households reduce their spending on
leisure and culture to secure the basic goods needed for daily life. In turn, the regional
Sustainability 2023,15, 3611. https://doi.org/10.3390/su15043611 https://www.mdpi.com/journal/sustainability
Sustainability 2023,15, 3611 2 of 14
economic benefit of cultural service providers declines, and many cultural organizations
and workers run the risk of insolvency and failure. An underlying question based on this
observation is how the positive regional economic impact of cultural service providers
might be stabilized in times of crisis. In particular, in social market economies such as
Germany, state interventions are often seen as a solution to prevent providers of cultural
goods from market extinction. Given the federal system of the German state, there are
different types of public subsidies at different regional levels.
This paper pursues the two following research goals to contribute to the current
debate on cultural industries and a post-COVID-19 economy: first, we aim to trace how the
COVID-19 crisis has affected the Philharmonic Orchestra as well as the Orchestra’s impact
on the urban economy. To assess these effects, we employ a regional economic impact
modeling approach to calculate the effects the Orchestra has on local demand, employment,
value-added and local tax revenues in the period between 2018 and 2022. Second, we
examine the effect of public subsidies on the survival of the Orchestra. We found evidence
that the public subsidies not only helped sustain the Orchestra and spurred its continued
growth, but, at the same time, the city earned higher returns than the initial subsidies given.
2. Theoretical Background
2.1. COVID-19 and the Live Music Industry
Over the last decades, digitization and the shift to consuming music via streaming
services has led to declining revenues in the music industry. As a solution for musicians
to compensate these losses in income, the use of digital services was proposed to raise
popularity, and then transform that popularity into income from live events [14,15].
Compared with previous economic crises (e.g., the financial crisis of 2007/2008), which
had reduced the demand for music services, the COVID-19 pandemic has been an exception.
Due to anti-COVID-19 regulations, live music performances became practically forbidden.
In other words, the single most important income for orchestras across Germany dried
up, and digital solutions could hardly compensate for those losses. Live Nation, a world-
leading ticket provider and event agency, promoted approximately 40,237 live events in
2019, whereas this number sunk to only 8117 (2020) and 17,234 (2021) events during the
pandemic [16].
The global revenues generated by live events in the music industry dropped by
75 percent in 2020 when compared with the revenues in the year before COVID-19 [
17
].
Forecasts showed that in 2021 the revenues were estimated to be 50 percent below revenues
in 2019. While the revenues of live performances had dropped, the revenues for digital
streaming remained stable, with a slight growth in 2020 [17].
During COVID-19 the situation was even worse for classical orchestras, for which
live events rather than revenues from recordings have always been a major source of
income [
13
]. Further, the continuous rise in overall revenues from live events until 2019 was
driven by large-scale events performed by national and international reputable artists [
18
].
Yet, at the same time, revenues had been declining for small-scale theaters, music halls, and
music clubs, which offered platforms for young talent and newcomers, and represent a
vibrant part of the urban night-time economy [
19
,
20
]. The term night-time economy alludes
to the necessity for visiting urban areas at night to understand the potential of culture for the
economic growth of cities [
20
]. The urban night-time economy has long been the subject of
strategies to improve a city’s competitiveness in the globalized economy [
19
,
21
]. Since the
1990s, many cities have adopted public policies as part of creative city approaches to attract
tourists, investors, and highly skilled workers [
21
,
22
] while addressing problems such as
the dying of music clubs with supportive policies [
20
]. Indeed, studies provide evidence
that cities that operate symphony orchestras, opera houses, etc. are more successful at
attracting and retaining highly skilled labor [
23
]. In other words, cultural service providers
of live acts offer long-term benefits for urban economies. However, following the uno
actu principle, live acts cannot be preproduced, nor can they be caught at a later date [
24
].
Sustainability 2023,15, 3611 3 of 14
Consequently, it is challenging for cultural service providers to compensate for losses before
or after an economic crisis.
2.2. Regional Economic Impact Assessment
Cultural work serves the public interest by securing and expanding cultural education
and entertainment in a variety of ways. However, even in times of economic prosperity,
a large part of the cultural economy often fails to achieve economic viability from the
proceeds of admission fees alone. Instead, contributions are required from the private
sector, through sponsorship and donations from companies, foundations or charities held
by the civil sector [
25
], and from the public sector as part of cultural policy funding. Many
theaters and concert halls as well as drama and orchestra ensembles would not be able to
sustain themselves without this support. The COVID-19 crisis has increased the importance
of such funding to compensate for the revenues gained from live events. In addition, public
funding supports security planning and the professionalization of funded institutions,
which often contributes to the attraction of additional funding and more efficient structures.
Due to the high level of competition for public funding, the public sector must consider
the distribution and use of its subsidies appropriately and needs to justify them accordingly.
In addition to the political struggle, there has been increased focus on the question of what
economic effect can be achieved with the help of the funds used. In order to measure
the direct economic effects of public funding for a specific geographic area of impact,
regional impact analyses are particularly suitable [
26
,
27
]. Researchers have investigated the
economic impact of both cultural institutions, such as the Lucerne Theater [
11
] or British
theaters [
28
], and of cultural events, such as the Jazz Festival in Perugia [
29
], individual
rock concerts [30], or a folk music festival in Finland [31].
In contrast, the present study is dedicated to the task of measuring the direct economic
impact of a musical ensemble in a geographic area of influence, namely the impact of the
Mannheim Philharmonic Orchestra in the city of Mannheim. The city of Mannheim, the
case of interest in this analysis, has been a ‘City of Music’ member of the global UNESCO
network of Creative Cities since 2014. It has committed itself to supporting its cultural and
creative economy with numerous initiatives in cultural policy and economic development.
The UNESCO Creative City Network connects cities that have made a special contribution
to music and want to exchange experiences, concepts, and model practices in the field of
contemporary art and culture. Other German cities, including Berlin, Heidelberg, Karlsruhe,
Hanover, and Potsdam are also part of this network. As part of the Mannheim Model for
the Promotion of the Music Industry, founded in 1999, the city created the position of a
representative for music and pop culture, founded the subsidiary ‘Start Up Mannheim’
for the promotion of the creative industry, and established the ‘Mannheim Music and Pop
Culture’ initiative.
Both spatial incidence analyses, which use cost-benefit considerations to balance
subsidies used against regional revenues, and more complex multiplier analyses, which
include the stimulation of demand in related economic sectors through intermediate inputs,
are used to evaluate the economic impact of cultural institutions. Regarding the Mannheim
Philharmonic Orchestra, the present study evaluates both aspects, i.e., the cost-benefit
balance for the local government as well as the economic impact on the entire urban
economy of Mannheim.
3. The Mannheim Philharmonic Orchestra
The Mannheim Philharmonic Orchestra was founded in 2009 as a unique organiza-
tional concept in Europe to build a bridge between the training of orchestral musicians
at the State Music Academies on the one hand, and their professional employment in
orchestras and philharmonic orchestras on the other [
32
]. The Orchestra pursues three
main goals: first, to provide excellent support for young musicians at the highest artistic
level; second, to make an important contribution to the cultural offerings of the city of
Mannheim; and third, to promote the musical education of children and young people.
Sustainability 2023,15, 3611 4 of 14
Since its founding, over 500 young musicians from more than 40 countries have
performed at over 60 concerts in the city of Mannheim. In the 2021/2022 season, more than
5000 guests attended the concerts. In addition, the Orchestra has reached more than half a
million people annually in 105 nations to date through live broadcasts of its concerts on the
Internet. Video views have already more than doubled since 2019 [32].
In addition to the local concerts held in the city of Mannheim and the live broadcasts
around the world, the Mannheim Philharmonic Orchestra has toured and guest-performed
extensively at major concert venues in Europe, including, for example, in Antwerp, Ham-
burg, Madrid, Milan, and Munich. The Orchestra’s growing international reputation is
reflected, among other things, in the fact that various world-class soloists regularly give
guest performances at Philharmonic concerts in Mannheim.
As a non-profit organization under private law, the Orchestra does not pursue any
economic interests in making a profit; instead, it focuses its activities solely on qualifying
musicians and making a cultural contribution to the city of Mannheim. Since ticket revenues
cannot cover the operating costs of the society or the musicians’ stipends, the Orchestra
relies on financial support from public, private, and civil society sponsors. Since its
founding, the Orchestra has not only generated increasing concert revenues—with the
exception of the concert break during the COVID-19 pandemic in the 2020/2021 season—
but the Orchestra has also received increasing support from donations from civil society
and sponsorship from private actors. These funds have financed a significant portion of
the scholarships for musicians, as well as the concert performances.
On a smaller scale, the City of Mannheim has in the past sponsored individual concerts
and events for the Mannheim Philharmonic Orchestra. This project-related funding has
usually had a direct regional economic effect. For each of the 2019/2020 and 2020/2021
seasons, the City of Mannheim provided an operating subsidy of EUR 50,000, which made
a basic contribution to the necessary operating and personnel expenses of the organization
(at the time this report was prepared, the 2021/2022 season had almost been completed.
Because six out of seven orchestra concerts had already taken place, the majority of expenses
and income had become regionally effective). Furthermore, the Orchestra was able to
attract additional public funding in the following season and professionalize its concert
operations beyond the musical ensemble in management and fundraising, contributing to
its viability. Since the operating grants were provided in tranches, they primarily affected
the expenditure structures of the following seasons.
In 2022, however, the city’s cultural funding was not renewed [
33
]. The withdrawal of
financial support from the city of Mannheim has threatened the continued existence of the
Mannheim Philharmonic Orchestra. This is because municipal funding is also a necessary
prerequisite for eligibility for funding through other public funding programs, such as the
institutional cultural funding of the State Ministry of Science, Research, and the Arts. Due
to the demands of different social areas on public funding, there is a well-founded interest
in determining the effect of public funding on the regional economy. In this way, it can be
shown, for example, how much targeted public funding affects the urban economy and
whether these effects, in turn, generate urban revenues that can compensate for the funding.
4. Methods
This study uses regional multiplier analysis to determine a detailed model of the
economic impact of the cultural work of the Mannheim Philharmonic Orchestra and to eval-
uate it in terms of the subsidies used by the city. The methodological basis for the analysis is
a regional economic impact model, which the authors have further developed to assess the
regional impact of universities as public research and educational
institutions [26,27,34–36].
The data basis for conducting the regional multiplier analysis is a primary data set
collected by the Mannheim Philharmonic Orchestra [
32
], which was systematically ana-
lyzed in collaboration with the authors. The data set includes information on expenditures
and funding for various years. Missing data, which were not within the influence of the
Orchestra’s reporting, were supplemented either via official statistics or via justified esti-
Sustainability 2023,15, 3611 5 of 14
mates based on equivalent studies. Overall, the comprehensive and differentiated primary
survey contributes to the fact that the present study achieves a high validity and relies to
a lesser extent on estimates and assumptions when compared to similar studies. The re-
gional multiplier analysis is used to model the periodic economic effect of the expenditures
associated with a facility on increasing demand, value-added, income, and jobs and tax
revenues. The total effect is the sum of three individual effects [34]:
1.
Direct effect. The sum of the demand and regional effects of the Orchestra’s operations,
its musicians, and out-of-town audience constitutes the direct effect. (a) The demand
effect takes into account which part of the expenditures is actually spent on consump-
tion. These are the material and investment expenditures of the Orchestra as well as
the expenditures of the scholarship holders excluding taxes, social security contri-
butions, and other deductions, such as those for saving purposes. (b) The regional
effect is the share of consumption-related expenditures that are spent on procurement,
investment, and consumption in the city of Mannheim [37].
2.
Indirect effect. As a result of the direct demand for goods and services by the Orchestra,
its musicians, and out-of-town concertgoers, there is an increase in the production of
corresponding goods. In order to meet this increased demand, an increased quantity
of intermediate inputs is also necessary, so that the additional production is passed
on to the upstream sectors as demand. The calculation of this intersectoral multiplier
effect is based on the interdependencies between the economic sectors in Mannheim.
The nationwide input–output table [
38
] maps these relationships nationwide. Based
on established estimation methods [
39
,
40
], this study models the regional interdepen-
dencies in the City of Mannheim.
3.
Induced effect. In order to provide for the additional production, the demand for labor
grows simultaneously in the affected economic sectors. The additional economic effect
resulting from this increased employment describes the induced effect. As a result of
the increased employment, the sum of wages and salaries paid out in the upstream
sectors rises. Part of this income flows back into the regional economy as consumer
demand and in turn generates regional economic effects. The increase in employment
in the upstream sectors runs simultaneously with the increase in production. Indirect
and induced effects can therefore be determined jointly based on regional economic
linkages using a combined multiplicator [26,41,42].
The regional economic impact of the Orchestra can be modeled for various economic
indicators. The demand effect captures the total demand of the Orchestra and its members
and visitors in Mannheim, as well as the indirect and induced demand effects arising
from this. The value-added effect describes the shared value of a good that is added
to the economic sector. The direct value-added effect of the Orchestra is therefore to be
understood as the cultural work performed there, and includes the sum of personnel
compensation and stipends [
43
]. The direct, indirect, and induced employment income
generated regionally as a result of the demands of the Orchestra and its members define the
income effect. To determine the employment effect, these incomes can be translated into
concrete employment figures using industry-specific job coefficients. Finally, the tax effect
takes into account the payments of income or sales tax in the state of Baden–Württemberg
associated with consumer demand and additional income, some of which are passed on
to the municipalities via apportionments (most of the tax revenue of the state of Baden–
Württemberg is attributable to income tax and sales tax. Other types of taxes are not taken
into account in this study due to their low revenues). Since these types of taxes are joint
taxes, the revenues accrue jointly to the federal and state governments, with a certain share
being passed on to the municipalities via apportionment. The present analysis only takes
into account the municipal share that accrues to the independent city of Mannheim.
Sustainability 2023,15, 3611 6 of 14
5. Results: Resilience and Local Economic Impact of the Orchestra
5.1. Deveopment of Costs and Income during COVID-19
The financial reporting of the Mannheim Philharmonic Orchestra follows the orchestra
season starting and ending in the middle of the year. As COVID-19 reached Germany in
March 2020, and the majority of the concerts of the season 2019/2020 had already been
performed, this season technically represents the last pre-COVID-19 season. During the
pandemic, the economic consequences of anti-COVID-19 regulations were drastic. Bans on
live performances hit the Mannheim Philharmonic Orchestra during the 2020/2021 season,
and concerts could only take place in the new 2021/2022 season.
Due to contracts negotiated before the COVID-19 crisis, it was difficult to reduce costs
during the COVID-19 season. The overall expenditures of the Mannheim Philharmonic Or-
chestra only dropped slightly from EUR 580,000 in 2019/2020 to EUR 567,000 in 2020/2021.
Expenses could only be reduced for the rental costs of concert halls, services for hospitality,
sound and music technology, and stipends. Against the trend, the Mannheim Philharmonic
Orchestra started hiring additional employees for management and support services in
2020/2021 to prepare for the post-COVID-19 2021/2022 season. Apart from planning the
current and upcoming season, these employees concentrated on raising additional funds
from the public, civic, and private sectors. These efforts led to donations being raised and
subsidies of EUR 306,000 in 2019/2020 to EUR 471,000 in 2020/2021, and up to EUR 670,000
in 2021/2022. The main sources of subsidies were public COVID-19 aids paid for by the
federal state of Baden–Württemberg and by the central government. In 2020/2021, these
subsidies added up to EUR 270,000, and up to EUR 200,000 in 2021/2022. Additionally,
subsidies from the City of Mannheim of EUR 50,000 in 2019/2020 and in 2020/2021, as
well as specific funding that required previous investments by the local municipality of
EUR 65,000 in 2019/2020 and EUR 50,000 in 2020/2021 and 2021/2022, secured financial
income during the COVID-19 crisis and helped to compensate for the missing income
from concerts. Income from concerts amounted to EUR 197,000 in 2019/2020, whereas it
dropped to EUR 46,000 in 2020/2021, before the situation normalized again in 2021/2022
with concert revenues growing to up to EUR 260,000.
5.2. Attraction of Out-of-Town Concert Guests
It is due to the preparations in 2020/2021 that the Orchestra was able to bear total
expenditures of EUR 1.782 million in 2021/2022. These expenditures comprised of EUR
1.366 million for investments, materials, and services, as well as EUR 416,000 for the
remuneration of the staff and the scholarships for the musicians. In addition, the Orchestra
attracted over 5000 concert guests from all over Germany and abroad. During the COVID-
19 season of 2020/2021 only 500 guests attended the concerts, whereas there were around
4200 visitors in 2019/2020 (see Table 1).
Based on the counterfactual assumption that without the Orchestra’s cultural offerings,
a large proportion of the guests would attend classical music concerts elsewhere, the guests’
expenditures must also be included in the impact calculation. Without the Orchestra, the
city of Mannheim would attract less purchasing power from other regions and a certain
part of the existing demand for music concerts would flow away. For this reason, the
Orchestra can be viewed as the reason that out-of-town concert guests trigger additional
demand in Mannheim during their stay.
This additional demand is directed towards the consumption of goods and services in
the retail trade (e.g., experience shopping), private and public transport (e.g., parking fees,
tickets), gastronomy (e.g., restaurants, cafés), and the hotel industry (overnight stays). Here,
the expenditures of residents are to be excluded, since their expenditures were already
being incurred and have no additional effect on the city’s value added [
29
]. Instead, the
calculation is limited to out-of-town visitors who come to Mannheim in large part due to
the concert event.
Sustainability 2023,15, 3611 7 of 14
Table 1. Empirical and estimation parameters of the regional multiplier model.
2016/2017 a2018/2019 2019/2020 2020/2021 2021/2022
Expenditures by the Orchestra in EUR 257,187 452,114 498,429 437,102 1,366,553
On rents in EUR b22,747 32,154 57,438 23,043 253,052
On hospitality in EUR 27,923 52,666 68,776 42,014 141,695
On sound and music technology in EUR 4349 6335 20,698 - 2100
On logistics in EUR 7180 6200 4120 1586 13,333
On video in EUR 10,147 14,782 14,488 - 12,600
On music services and advertising in EUR 110,905 203,987 199,746 222,276 566,264
Other expenses in EUR 73,936 135,991 133,164 148,184 377,509
Share of expenses in the city in % c67 80 90 70 90
Stipends for musicians in EUR 35,248 68,714 35,020 18,500 184,065
Number of stipends 196 196 177 74 413
Share of musicians living in city in % d15 25 30 35 20
Expenditures by employees in EUR 6103 40,912 46,761 111,480 231,708
Number of other employees 1 3 3 6 7
Employer contribution social security in EUR 703 4589 5271 12,036 26,517
Total gross wages in EUR 5400 36,323 41,490 99,444 205,191
Share of employees in the city in % d100 100 100 67 71
Expenditures by concert visitors in EUR 99,299 178,849 231,587 27,583 280,575
Concert visitors e1800 3242 4198 500 5086
Share of visitors living in the city in % 31
Share of external visitors (day) in % 38
Share of external visitors (overnight) in % 31
Consumption (excluding the concert)
Per external visitor in EUR f26.8
Per external overnight visitor in EUR f147
Share of Value Added Tax in % 14.76
Notes:
a
To assess the impact of COVID-19 on the Orchestra as well as the regional economic impact of the
Orchestra on the city of Manheim, we focus on a comparison of the four seasons between 2018/2019 and
2021/2022. Since 2018/2019 the Orchestra has been managed by full-time employees and has been treated
as a professional project orchestra. In addition, we report data for the 2016/2017 season to exemplify the
differential impact of a volunteer project orchestra managed by part-time employees. Since the Orchestra
transitioned from a volunteer to a professional orchestra during the 2017/2018 season, we excluded it from
our analysis.
b
corresponds to the values exclude expenditures for municipal operations, 100% of which was
local demand;
c
corresponds to the proportion of material and capital expenditure in the city of Mannheim
excluding hall rentals, as these go 100% to Mannheim’s municipal operations;
d
corresponds to the regional share
of expenditure;
e
corresponds to the number and origin of guests that could be precisely determined from the
digital booking system for the 2021/2022 reporting year, but not for previous seasons. Therefore, the values for
the year under review were taken on a pro rata basis for the other years; and
f
corresponds to the expenditure
per visitor and is taken from the Report on Tourism as an Economic Factor of the Rhine–Neckar Region (2019):
https://issuu.com/rhein-neckar/docs/wirtschaftsfaktor_tourismus_neu_s (accessed on 27 May 2022).
Since the geographic origin, the motive for the journey, the duration of the stay, and
the amount of consumption accompanying the concert by non-resident concertgoers are
not precisely recorded statistically and could only be approximated even by guest surveys,
the relevant parameters must be realistically estimated on the basis of existing knowledge
of the Orchestra and via comparable studies. Problems in estimating the number of visitors
also arise when cultural services are provided free of charge or when, for example, several
concerts are held per day or even simultaneously as part of a festival [
29
]. The number of
concert visits per visitor varies considerably, depending on the nature of the festival and
what it offers [
44
]. Based on realistic reference data, total consumption expenditures of out-
of-town concertgoers amount to EUR 281,000 in the city of Mannheim. These expenditures
exclude admission fees for the concerts, as these are already included in the Orchestra’s
expenditures and should not be counted twice [44].
The primary expenditures recorded above do not have a full effect on the urban
economy. Since only a part of the expenditure has a regional impact on demand, a regional
ratio must first be determined in order to calculate the direct effect. The regionally effective
expenditures are then determined in their multiplier effect for the other economic sectors
Sustainability 2023,15, 3611 8 of 14
in the urban economy as indirect and induced effects. The sum of the three effects forms
the total effect, which can be represented for various economic indicators (see Table 2).
Table 2. Regional economic impact of the Philharmonic Orchestra in the city of Mannheim 2020.
2016/2017 a
(Volunteer Orchestra) 2018/2019 2019/2020 2020/2021
(COVID 19) 2021/2022
Demand in EUR
Direct 285,422 575,621 685,138 112,603 1,625,467
Indirect 25,068 39,389 48,336 45,823 141,047
Induced 27,409 38,405 46,793 49,669 167,953
Total 337,900 653,415 780,267 208,095 1,934,468
Value added in EUR
Direct 41,350 109,627 81,781€129,981 415,773
Indirect 156,325 216,909 264,609€288,515 955,073
Induced 16,642 23,318 28,411€30,156 101,973
Total 214,316 349,854 374,801€448,652 1,472,819
Employment
Direct 1 3 3 4 5
Indirect 2 3 3 4 14
Induced 0 0 1 1 2
Total 4 6 7 9 21
Income in EUR
Direct 10,687 53,502 51,996€105,919 242,004
Indirect 79,271 111,073 135,334€143,650 485,747
Induced 9288 13,014 15,856€16,831 56,912
Total 99,246 177,589 203,186€266,400 784,663
Local taxes and public
incomes in EUR
Direct 24,203 35,418 36,011€25,475 263,260
Indirect 2527 3586 4342€4620 15,590
Induced 294 412 502€533 1802
Total 27,024 39,416 40,855€30,628 280,652
Notes:
a
To assess the impact of COVID-19 on the Orchestra as well as the regional economic impact of the
Orchestra on the city of Manheim, we focus on a comparison of the four seasons between 2018/2019 and
2021/2022. Since 2018/2019 the Orchestra has been managed by full-time employees and has been treated as a
professional project orchestra. In addition, we report data for the 2016/2017 season to exemplify the differential
impact of a volunteer project orchestra managed by part-time employees. Since the Orchestra transitioned from a
volunteer to a professional orchestra during the 2017/2018 season, we excluded it from our analysis.
5.3. Regional Economic Impact on Demand, Value-Added, Employment, Income and Tax
Demand effect. Before the COVID-19 crisis in 2019/2020 the primary expenditures of
the Orchestra, its members, and concert guests (EUR 812,000) generated a direct demand
effect in the city of Mannheim of EUR 685,000. Based on the methodology of the regional
multiplier analysis, this results in a total demand effect of EUR 780,000 via preliminary
economic links. During the COVID-19 season of 2020/2021 the direct effect dropped to
EUR 113,000, and the total demand effect has been reduced by 73 percent to the level of
EUR 208,000. However, already in 2021/2022, the direct effect rose up to EUR 1.625 million
and the total effect up to EUR 1.934 million. This effect is 148 percent higher than the total
demand effect before the COVID-19 crisis.
Value added effect. In 2019/2020, the total effect of gross value added (GVA) by the
Orchestra amounted to EUR 375,000. This includes a direct effect of EUR 82,000, an indirect
effect of EUR 265,000, and an induced effect of EUR 28,000. Comparing these numbers with
the COVID-19 season of 2020/2021 reveals an increase in all value-added effects. Due to
public subsidies, the Mannheim Philharmonic Orchestra followed its growth path by hiring
new people and by extending job contracts. These expenditures increased the direct effect
up to EUR 130,000. Adding the indirect effect of EUR 289,000 and the induced effect of EUR
30,000 led to a 19 percent higher total effect on urban GVA of EUR 449,000 in comparison
to the 2019/2020 season. In 2021/2022 the effects increased again, ending with a total effect
of EUR 1.473 million.
Employment effect. The Mannheim Philharmonic Orchestra managed to grow continu-
ously between the 2016/2017 and 2021/2022 seasons. While in 2016/2017 the Orchestra
employed a part-time employee, in 2018/2019 and 2019/2020 there were three employ-
ees, including someone in a full-time position. In 2020/2021, the number of employees
Sustainability 2023,15, 3611 9 of 14
increased to six employees and in 2021/2022 to seven employees. Of these employees,
three in 2019/2020, four in 2020/2021, and five in 2021/2022 were registered residents of
Mannheim. In addition to this direct effect, the Orchestra generated indirect and induced
employment effects, which can be derived from the income effect using sector-specific job
coefficients and add up to a total employment effect of seven jobs in 2019/2020, nine jobs
in 2020/2021 and twenty-one jobs in the post-COVID-19 season of 2021/2022.
Income effect. We observed related effects on regional incomes. The Orchestra paid
gross salaries and stipends of EUR 82,000 before the COVID-19 crisis in 2019/2020 and
EUR 130,000 during the COVID-19 2020/2021 season and EUR 389,000 in 2021/2022 to
staff and musicians. In 2019/2020 EUR 52,000 went to staff and musicians residing in the
city of Mannheim. Against usual expectations, this effect increased in 2020/2021, up to
EUR 106,000. During the post-COVID-19 season, this effect appears to have more than
doubled. Spending these incomes in Mannheim generated indirect and induced income
effects, which, including the direct effect, add up to a total income effect of EUR 203,000 in
2019/2020, EUR 266,000 in 2020/2021, and up to EUR 785,000 in 2021/2022.
Local tax and public income effect. The Orchestra not only achieves a multiplier effect for
the city economy but it also induces direct revenues for the public sector, in this case the
local government of the city of Mannheim, in the form of fees, contributions, and taxes. The
direct, indirect, and induced impact of the Orchestra, its members, and out-of-town guests
on demand is accompanied by increased income and sales tax revenues, which are passed
on directly to the municipalities on a pro rata basis via the municipal levy. In 2019/2020,
the City of Mannheim earned EUR 9000 from income and sales tax that were earned by
the Mannheim Philharmonic Orchestra and EUR 32,000 from the Orchestra’s rentals of
public orchestra halls, which adds up to EUR 41,000. During the COVID-19 season of
2020/2021, the total effect dropped to EUR 31,000, consisting of EUR 8000 in tax revenues
and EUR 23,000 from rentals. In 2021/2022, EUR 21,000 in wage and income tax and EUR
7000 in sales tax were incurred in this context (in 2016, the city received revenues from
the allocation of sales tax in the amount of EUR 110,110 and income tax in the amount of
EUR 486,620 (source: https://www.haushaltssteuerung.de/steuer-daten-stadt-mannhei
m.html, last accessed on 27 May 2022)). In addition, the municipal operations recorded
approximately EUR 253,000 in revenue for hall rentals by the Mannheim Philharmonic
Orchestra. In total, the city treasury thus generated additional and direct revenue of EUR
281,000 as a result of the Orchestra’s activities.
6. Appraisal of the Regional Impact during COVID-19
6.1. Funding Efficiency
In addition to calculating the regional economic impact, it is necessary to evaluate
the magnitude of this effect in comparison to the funding provided [
26
]. In the case of
the Mannheim Philharmonic Orchestra, it can be shown that ongoing business operations,
scholarships, and the expenditures of concertgoers generated a gross value added of
EUR 1.473 million within the Mannheim city district in 2021/2022. This corresponds to
29 times the municipal subsidy of EUR 50,000 in 2021. Even during the COVID-19 crisis in
2020/2021, the gross value added in the city of Mannheim of EUR 449,000 substantially
overrides the municipal subsidy of EUR 50,000 (see Figure 1).
A large part of the gross value added is fed by indirect effects, which stimulate
demand in related sectors of the economy via intermediate inputs and thus benefit the
entire city economy. The additional income accruing to the city treasury each year as a
result of the concerts offered by the Mannheim Philharmonic Orchestra can be compared
to the municipal cultural subsidy. The City of Mannheim provided the Orchestra with
an operating subsidy of EUR 50,000 in 2020 and 2021. Subtracting the direct tax and
rental income of the municipality generated by the Orchestra’s activities in 2020/2021
(EUR 31,000) and 2021/2022 (EUR 280,000), this results in a revenue surplus of EUR 211,000
during the two seasons. This finding is in line with other studies on cultural institutions
and events, which show that the additional tax revenue generated by the economic impact
Sustainability 2023,15, 3611 10 of 14
compensates for the amount of public funding, as in the case of the theater in Lucerne [
11
],
or even exceeds it, as in the case of the Kaustinen Folk Music Festival in Finland [
31
].
In such cases, cultural promotion turns into a direct profit situation for the public sector.
Nonetheless, it needs to be acknowledged that the Orchestra received a total of EUR 470,000
in public COVID-19 subsidies from the federal state and the central government (i.e., EUR
270,000 in 2020/2021, and EUR 200,000 in 2021/2022). The income and sales taxes generated
by the activities of the Philharmonic Orchestra within the urban economy created revenues
for the federal state of Baden–Württemberg and the German government of EUR 397,000,
EUR 65,000 in 2020/2021 and EUR 332,000 in 2021/2022. As our regional multiplier model
only accounts for demand and income within the urban economy of Mannheim, the full
extent of tax incomes is widely underestimated. Hence, it is justified and reasonable to
conclude that the subsidies were in full balance with the revenues earned from city income
and taxes.
Sustainability 2023, 15, x FOR PEER REVIEW 10 of 14
approximately EUR 253,000 in revenue for hall rentals by the Mannheim Philharmonic
Orchestra. In total, the city treasury thus generated additional and direct revenue of EUR
281,000 as a result of the Orchestra’s activities.
6. Appraisal of the Regional Impact during COVID-19
6.1. Funding Efficiency
In addition to calculating the regional economic impact, it is necessary to evaluate
the magnitude of this effect in comparison to the funding provided [26]. In the case of the
Mannheim Philharmonic Orchestra, it can be shown that ongoing business operations,
scholarships, and the expenditures of concertgoers generated a gross value added of EUR
1.473 million within the Mannheim city district in 2021/2022. This corresponds to 29 times
the municipal subsidy of EUR 50,000 in 2021. Even during the COVID-19 crisis in
2020/2021, the gross value added in the city of Mannheim of EUR 449,000 substantially
overrides the municipal subsidy of EUR 50,000 (see Figure 1).
Figure 1. Ratio of city subsidies, orchestra-related revenues, and effect of the Philharmonic Orches-
tra on city gross value added over the course of several seasons.
A large part of the gross value added is fed by indirect effects, which stimulate de-
mand in related sectors of the economy via intermediate inputs and thus benefit the entire
city economy. The additional income accruing to the city treasury each year as a result of
the concerts offered by the Mannheim Philharmonic Orchestra can be compared to the
municipal cultural subsidy. The City of Mannheim provided the Orchestra with an oper-
ating subsidy of EUR 50,000 in 2020 and 2021. Subtracting the direct tax and rental income
of the municipality generated by the Orchestra’s activities in 2020/2021 (EUR 31,000) and
2021/2022 (EUR 280,000), this results in a revenue surplus of EUR 211,000 during the two
seasons. This finding is in line with other studies on cultural institutions and events, which
show that the additional tax revenue generated by the economic impact compensates for
the amount of public funding, as in the case of the theater in Lucerne [11], or even exceeds
it, as in the case of the Kaustinen Folk Music Festival in Finland [31]. In such cases, cultural
promotion turns into a direct profit situation for the public sector. Nonetheless, it needs
to be acknowledged that the Orchestra received a total of EUR 470,000 in public COVID-
19 subsidies from the federal state and the central government (i.e., EUR 270,000 in
2020/2021, and EUR 200,000 in 2021/2022). The income and sales taxes generated by the
activities of the Philharmonic Orchestra within the urban economy created revenues for
the federal state of Baden–Württemberg and the German government of EUR 397,000,
EUR 65,000 in 2020/2021 and EUR 332,000 in 2021/2022. As our regional multiplier model
only accounts for demand and income within the urban economy of Mannheim, the full
extent of tax incomes is widely underestimated. Hence, it is justified and reasonable to
conclude that the subsidies were in full balance with the revenues earned from city income
and taxes.
Figure 1.
Ratio of city subsidies, orchestra-related revenues, and effect of the Philharmonic Orchestra
on city gross value added over the course of several seasons.
6.2. Underestimation of the Real Impact
This analysis is based on a detailed primary survey by the Orchestra [
32
], supple-
mentary analysis of official statistics, and a proven methodology for determining regional
economic effects of educational institutions [
26
,
27
,
34
]. It therefore enjoys high validity. In
addition, the calculation model requires several unavoidable assumptions. In order to not
overestimate the regional economic impact of the Orchestra, this study models the effects
according to a conservative strategy, which leads to an underestimation of the actual impact
of the Orchestra in Mannheim.
Numerous factors influence the actual effect which must be disregarded in the analysis.
The expenditures of the Orchestra, musicians, and guests also have an impact on the profits
of companies located in Mannheim, which in turn lead to direct municipal revenues through
trade tax. Since the trade tax revenue per business varies greatly in practice, the trade
tax effect of the expenditures of the Orchestra and guests cannot be reliably estimated. In
any case, the actual tax revenue generated by the Orchestra for the City of Mannheim is
higher than calculated in the present model. Furthermore, the Mannheim Philharmonic
Orchestra also provides free services, such as training courses and musical lessons for
children and young people in the city of Mannheim. However, the users of these services
are not precisely quantified and the origin and consumption behavior of the users and
their families in the city of Mannheim are unknown. Therefore, it can be assumed that the
training courses have further effects on attraction and demand in Mannheim, which are
not taken into account in the present impact analysis.
6.3. Long-Term Impacts
Beyond the annual economic effects determined in the present analysis, the Mannheim
Philharmonic Orchestra contributes to further medium- and long-term economic effects.
For example, neighboring municipalities and districts in the Rhine–Neckar metropolitan
Sustainability 2023,15, 3611 11 of 14
region also benefit from the influx of day and overnight visitors who come to the region
solely because of the concerts held and who engage in additional consumption there. In
addition, long-term effects can be expected via the following impact chains:
Tourist spillover effects. The Mannheim Philharmonic Orchestra broadcasts live concerts
worldwide via the Internet to more than 100 nations. The number of digital users has
more than doubled since 2018 and contributes to the international visibility and increase in
tourism attractiveness. In 2019 alone, the number of overnight stays increased by 10 percent
compared to the previous year (Data on the development of overnight stays were taken
from Stadtmarketing Mannheim [
45
]). This puts Mannheim alongside Ravensburg and
Heilbronn at the top of Baden–Württemberg in terms of attracting new tourists. This effect
cannot be attributed solely to the Orchestra or any single other institution. Nevertheless, it
can be seen that the growing number of concerts goes hand in hand with the increase in
overnight stays in Mannheim.
Musical business foundations. During their time with the Mannheim Philharmonic, the
musicians enjoy excellent support for young talent. Half of all the Orchestra’s graduates
are now employed on a permanent basis, mostly by orchestras or at music schools. The
other half of the graduates are freelancers or work part-time with orchestras around the
world. To the extent that graduates later found their own ensembles or music schools in
the city of Mannheim, they contribute to the economic and cultural development of the
city with the knowledge and qualifications they have acquired through the Mannheim
Philharmonic Orchestra.
Synergy effects of the cultural offerings. The Mannheim Philharmonic Orchestra forms
part of an attractive mosaic of musical offerings in Mannheim, which has been a UNESCO
Creative City of Music since 2014. The Orchestra thus contributes to the diversity and at-
tractiveness of the cultural location. However, the mutual reinforcement of the attraction of
cultural guests and tourists through the diversity of cultural offerings is difficult to quantify.
Nevertheless, it must be acknowledged that a lighthouse project such as the Mannheim
Philharmonic Orchestra stimulates the settlement of further ensembles, organizers, music
schools, and music teachers who have also settled in Mannheim or the metropolitan region
as a consequence or pull effect of the Orchestra. These institutions generate further regional
economic effects in the state through their expenditures, which are not included in the
present model.
7. Discussion
Due to its high quality and international visibility, and thanks to its basic public fund-
ing, the Orchestra succeeded in attracting additional funding from private, public, and civil
society sources to sustain its operations. The concept of a talent orchestra, which is unique
in Europe, and the high quality of the music concerts, regularly bring top international
soloists to Mannheim for guest performances, while the Philharmonic Orchestra is invited
to perform on renowned European stages. On the one hand, free live broadcasts attract
worldwide attention to the city of Mannheim, on the other hand, local concert offerings
contribute directly to increasing the value added in the city’s economy.
Drawing on a multiplier analysis we have offered evidence that cultural funding by a
municipality or the state is not per se a money-losing investment. In fact, due to regional
expenses and the attraction of concert guests from other regions, cultural ventures stimulate
additional regional demand and economic growth.
Even during the COVID-19 season, the Orchestra managed to stimulate a regional
value added of EUR 449,000, which is nine times higher than the subsidies of the City of
Mannheim during this season. Already one year after the COVID-19 crisis, the Mannheim
Philharmonic Orchestra’s activities raised the value added in Mannheim by EUR 1.472 mil-
lion. Measured against the gross funding of the city of Mannheim, this results in an impact
of more than 29 euros of local gross value added per euro of cultural funding invested.
Accounting for tax incomes during the 2020/2021 and 2021/2022 seasons, the COVID-
19 subsidies from the federal state and the central government are almost in balance. On
Sustainability 2023,15, 3611 12 of 14
the municipal level, however, if one also takes into account that the music performances
generate direct municipal income from taxes and rents amounting to EUR 311,000 in the
2020/2021 and 2021/2022 seasons, the additional income for the city treasury, including
the municipal operations, corresponds to 3.1 times the funding invested.
8. Conclusions
Even if cultural and creative ventures depend on civic donations and public subsidies
to secure their cultural and educational mission, their economic impact on the local and
urban economy may still compensate or even outweigh the initial subsidies. The detailed
impact assessment presented in this study has demonstrated that public support is espe-
cially helpful in times of crisis to retain the viability and sustainability of a music orchestra
for at least two reasons. First, it provides for basic funding of employees necessary to
actively engage in additional fundraising, and it secures the Orchestra’s current operation
to attain a positive future regional impact on the urban economy. Second, additional public
funding opportunities at the federal or state level are often accessible only by demonstrat-
ing the receipt of public support by the municipality. This evidence suggests that public
subsidies should be assessed in the light of the real regional economic impact of cultural
and creative services and performances, which may overcompensate for initial funding
and strengthen the resilience of cultural institutions during a global pandemic.
Author Contributions:
J.G. and R.P. have equally contributed to all parts of the research, including
conceptualization; methodology; validation; formal analysis; data curation; writing—original draft
preparation; writing—review and editing; and visualization; In addition, J.G. has been responsible for
project administration. All authors have read and agreed to the published version of the manuscript.
Funding: This research received no external funding.
Informed Consent Statement:
Informed consent was obtained from all subjects involved in the study.
Data Availability Statement: Not applicable.
Acknowledgments:
This study is the result of independent, autonomous research on the economic
significance of the Mannheim Philharmonic Orchestra. It was neither commissioned nor financially
supported by third parties. We would like to thank the management of the Mannheim Philharmonic
Orchestra for providing the data required for the analysis. We would also like to thank the members
of our team, Klara Jungkunz, Helen Sandbrink and Volker Schniepp, for their support in the research.
Conflicts of Interest: The authors declare no conflict of interest.
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