How to make money producing on Broadway
If every great Broadway show is thrillingly unpredictable, the same can also be said for investing in theater productions.
Theater backer Jim Freydberg headed a team of investors who put in $500,000 in “The Phantom of the Opera” when it opened on Broadway in 1988. He has earned an estimated $15 million profit from the show and is fond of remarking that only his Apple stock has been a better investment.
Total Broadway box-office revenue has successively risen over the past five years. Last year’s cumulative sum of $1.44 billion is expected to be eclipsed by the numbers from the most recent season, which includes lavish new shows such as “Harry Potter and the Cursed Child” and “Frozen.”
Yet the success is distorted by the huge success of a few blockbuster musicals, led by “Hamilton” and “Wicked.” Given only a third of shows recoup their cost, investing on Broadway is riskier than ever. In fact it’s such a gamble that most Broadway producers don’t hide the fact that investors are unlikely to get their money back.
“Investing on Broadway can often be philanthropy by another name,” says entrepreneur and theater investor Luke Johnson. “The risks are too great and returns too unpredictable that people should only invest if they love the theater and enjoy perks such as opening nights.”
Get it wrong and the financial fallout from an epic flop can be staggering. “Spider-Man: Turn Off the Dark” lost $60 million for its investors when it closed in 2014.
“It’s like backing a racehorse,” says Matthew Byam Shaw, co-founder of Playful Productions and producer of “Frost/Nixon” and “The Audience”, starring Helen Mirren as Queen Elizabeth II. “The investor must understand the vagaries, strangeness, and eccentricities of theater, and sometimes the plain injustice of it all when a good show doesn’t work. But when shows do succeed, it’s a really good feeling, and you get a proper return on the money,” he says.
Here’s a guide for the ingenue investor.
How does a high worth net investor actually enter the Broadway arena? According to producer Ken Davenport whose credits include this year’s Tony Awards Best Revival of a Musical winner “Once on This Island’, the journey appropriately begins in the auditorium.
“When you’re enjoying a show, look at the names above the title and the ones at the very top are the people you want to get hold of,” he says. “Not only because they’re the lead producers but your taste aligns with theirs. It’s a couple of Google searches away to try and find them, whether by sending a letter, making a phone call or writing an email.”
But according to Michael Riedel, veteran New York Post theater columnist, 710 WOR radio host and author of “Razzle Dazzle”, the financial barriers to entry have been raised. “In the 1980s you could get into a show with an investment of $10,000-$15,000,” he says. “Now I hear the minimum unit for most shows is $250,000.”
Davenport counters that different producers have different financial requirements but he adds, “The larger check you can write, the easier it is to push the door open.” He says it’s easier to become an investor on a production which doesn’t on the surface look like a surefire success: “One of the biggest mistakes first-time investors make is they wait for the perfect show, the guaranteed hit. We all know when investing in anything- whether real estate or stocks- there’s no such thing as a guaranteed hit.”
“First-time investors, especially with the bigger players, sometimes have to wait as it’s a closed door community. But you can usually get into investing in projects that entail a higher risk much quicker, which may be a little bit harder for the producer to raise money for, and the long-term rewards might be greater than for an expensive celebrity vehicle.”
“The more successful producers are not craving for investors unless they’re caught short on a difficult, risky production,” Matthew Byam Shaw says. “ But the producer has got to want the investor as well.”
“An enduring, grown up relationship between the investor and the producer”, is critical, Byam Shaw adds. “The best relationships are long-term relationships. I don’t think the investors, who just dip in and dip out, have very good returns.”
CENTS AND SENSIBILITY:
In addition to their own portfolio of shows, each producer has a unique theatrical sensibility.
Kevin McCollum, producer of “Rent” and “The Play That Goes Wrong” says: “All my shows are typically about us needing to belong to family- characters sing about how they fall in love and take care of each other.”
For Ken Davenport, “my USP is I will only ever do shows that are unique and stand out from the competition because that’s what people talk about and word of mouth sell tickets.”
Michael Riedel believes investors should step back from the creative process: “The key thing for an investor is you’re not backing the shows, because you don’t really know what’s going to be a hit. You’re backing a producer whose taste, intelligence and integrity you believe in. Let them pick the shows. Finding the hits is their business, not yours.”
“You want a proper grown-up discussion with the investor and have them on your side because they have a shared interest in the production,” Matthew Byam Shaw says. “You’re interested in their initial critical appraisal of the whole package but not whether Dame Judi Dench’s hem is too long or short.
But investors should monitor weekly Broadway box office figures and theatrical trends. For instance, after 9/11, musical comedies such as “The Producers” and “Mamma Mia” reigned supreme on Broadway.
Now, thanks to the “Hamilton” phenomenon, the original musical is enjoying a renaissance, witnessed by the recent success of “Dear Evan Hansen” and “Come From Away.”
Random inexact science comprises Broadway’s DNA. An aggressive confrontation ensued between two lead producers on the opening night of “Wicked” in 2003 following a tepid New York Times review, only for the pair to reconcile the next morning when they realized they had a blockbuster hit on their hands.
The stage version of Hilary Mantel’s much-anticipated Tudor drama “Wolf Hall” flopped when it came to Broadway in 2015, significantly because a rival “Wolf Hall” TV adaptation happened to be airing on TV at the same time. Conversely a 2012 revival of “The Heiress” starring Jessica Chastain wound up a hit after a sluggish start, powered by the awards heat she was simultaneously generating for her performance in the movie “Zero Dark Thirty.”
Investor motives aren’t always straightforward. “There are a fair number of society lady investors whose husbands allow them to invest on Broadway and lose money because it’s cheaper than getting a divorce!” Michael Riedel observes.
For all the risk, there aren’t many greater thrills than making a killing from Broadway. “Theatre successes can deliver 100% profit in quick order,” Luke Johnson says. “Not many ever do more than two times your investment. The key is to find a commercial producer and consistently back him or her in good and bad times so that if a hot show comes you participate.”
Ultimately it pays for the investor to listen to many but believe a few on Broadway. “Every show I’ve done, I’ve been told it wouldn’t work- from “Rent” to “In the Heights” to “Motown,” Kevin McCollum says.
“One of the most commercial things you can do is create a show that people have low expectations for and have it surprise people. Unlike film or television, theater isn’t based around formula. It’s a place you go for surprises.”
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