Grand opera is dying along with its increasingly ancient audience, according to Peter Gelb, general manager of one of the grandest operas in the world, the Metropolitan in New York. The renowned 3,800-seat opera house is fighting a losing battle on many fronts, and could face bankruptcy within three years, he says – and the crisis he sees in his own company could be a warning to many other opera houses.

A long-running dispute with unions, which are threatening strike action, is only one of his many problems. Box office receipts are flatlining, and seat occupancy was down to 80% in the most recent season, while costs are soaring: the opera recently spent $169,000 (£100,000) on a spectacular poppy field set for a new production of Borodin's Prince Igor.

The Met's much vaunted innovation of HD live broadcasts to cinemas, pioneered by Gelb and copied by opera companies across the world including the Royal Opera in Covent Garden, is merely entertaining an existing and dwindling audience, he says, rather than creating a new one. "What we've basically done is to extend the lifespan of the opera-goer. In the US, 75% of the cinema audience are 65 or over. And 30% are over 75. Those are people who are so old that they can't go the Met, to the theatre, any more."

His warning could not be more stark, but his analysis is flatly rejected by Alex Beard, chief executive at the Royal Opera. "I don't want to get into a slagging match with the Met, but that is just so far from our experience. Opera is on a roll. As long as love, death, longing and despair are part of the life experience, and people want to hear great stories told through music, opera has a vibrant future," he said.

Beard says productions are selling out, with shows in the cinema season often selling fastest. He says the composition of ticket buyers at Covent Garden is visibly changing, and he is convinced that the live cinema screenings, for which student standby tickets will be introduced at many venues next season, are helping to build a new audience, along with initiatives such as student ambassadors in universities, and its "young friends" scheme, which has gone from "zero to a thousand members in months".

"We should welcome in first time student opera-goers, but we should welcome in first-time pensioners too," he said. "It's not just in Covent Garden. English National Opera is having a cracking season, other companies and opera festivals are booming. Wind the clock back a century, and we're seeing far more productions for more people in more places."

John Berry, artistic director at ENO, also rejected the glum analysis: "We are having a tremendous season here, and our audiences are not dying – they are getting steadily younger."

Peter Gelb, general manager of the Metropolitan Opera. Photograph: Brigitte Lacombe/Metropolitan Opera

However, Gelb's problems at the Met are very real. He has until the end of July to come to an arrangement with the 16 unions who represent the Met's employees and avoid "some kind of work stoppage". Given the acrimonious atmosphere that surrounded the negotiations even before they had their first session on 5 May, that's entirely possible. Gelb says he has "no expectation that anything will be achieved before midnight on 31 July, and maybe longer".

"This battle is an existential one that has to be won. If we're not able to create a more sustainable business model now, we know we will face a bankruptcy situation in the next two or three years."

How is it possible that the world's biggest, richest, and arguably most successful opera house is close to what Gelb says is "the edge of the precipice"? As far as the unions are concerned, it's all Gelb's fault: Alan Gordon, executive director of the American Guild of Musical Artists, one of the most important unions at the Met, representing its chorus members and production staff, says in a leaked letter that Gelb's spending, "especially on new productions which are not supported by ticket buyers, and on HD productions which are cannibalising the live audience", has made the Met financially unsustainable.

Not surprisingly, that position is contradicted by the Met's own figures, which show that $200m of the venue's $300m-plus annual running costs are taken up with payments and benefits to unionised employees. "Even if I was the worst manager in the world," Gelb said in a Guardian interview, "clearly, we have to make savings there."

He also pointed out how "extremely careful" he had been in managing the money the Met spent on productions – and defended the $169,000 poppy bill as being good value for a set that formed the spectacular backdrop to a whole scene of the show.

Christopher Maltman as Eisenstein and Susanna Phillips as Rosalinde in Die Fledermaus. Photograph: Ken Howard/ Metropolitan Opera

The Met's musicians earn vastly more than their UK equivalents, with chorus members on an average of $200,000 a year. Their contracts, according to Gelb, mean that they are paid even when they're not working. Funding from other sources is also falling – the bulk of the Met's money comes from donations as there is virtually no government support for it or any other opera company in the US.

The HD cinema broadcasts, which beam to 2,000 cinemas in 66 countries "in every continent apart from Antarctica", are Gelb's most famous innovation. It has inspired every opera company worth its salt to roll out similar schemes and on the surface could hardly be more successful, allowing more people simultaneously to be part of a live operatic experience than ever before – as well as, arguably, creating a new, hybrid art form of opera and cinema.

Yet instead of celebrating a new world-wide audience, Gelb says the HD broadcasts have "captured the audience that's already there. So there are hundreds of thousands, maybe millions, of people who love opera out there. But that base is getting smaller."

Recent research backs him up: a report commissioned for English Touring Opera found that the audience for operas in cinema was full of people who already knew and loved the art-form. And the fact that attendance figures at the Met were less than 80% last season bears out Gelb's assertion that "there aren't enough new audience members replacing the older ones who are dying off. It's no secret that the frequency of operagoing in the US is decreasing." Despite Gelb's mission, since he took over in 2006, to reinvigorate the Met's production style, to connect with younger people, to make opera relevant to people's lives, it has not yet led to results at the box office. Even the closure of New York City Opera – a disaster for New York's opera lovers, but another audience for the Met to attract – has not boosted attendances.

Critics argue that Gelb could do more to make the Met appealing to the new and younger audience the company so desperately needs. But Gelb sees a larger cultural question at the root of the problem. "Where is opera being taught in public schools? I don't know of any place, certainly not in America. I think that's pervading the rest of the world as well. Children are brought up to be technological wizards and to have the attention spans of mice. How do you educate them to like opera, which takes three or four hours, and which is in a foreign language? As long as governments are not interested in arts education, I think we're in a catch-22 situation. How can we possibly hope to create new audiences for this art form if we're not introducing children to it or educating them?"

How other opera houses fare



Vienna State Opera

Box office: 98.8% occupancy; €33.1m income; 599,724 tickets sold

Annual running costs: €109m

Government grant: €58.7m

Private donations: €2m

Bavarian State Opera

Box office: 95.2%; €34.7m; 539,827

Annual running costs: €99.3m

Government grant: €61.8m

Private donations: €4.1m

La Scala

Box office: 95%; €32m; 425,000

Annual running costs: €115m

Government grant: €43m

Private donations: €34m

Royal Opera House

Box office: 95%; £37.1m

Annual running costs: £114.6m

Government grants: £27.4m

Private donations: £24m

Hear Peter Gelb interviewed by Tom Service on Radio 3's Music Matters, on Saturday 7 June at 12.15pm and on BBC iPlayer.