investing in theater. I think investing in theater is a vital part of a balanced portfolio for those who qualify. It’s something I’ve written about on countless occasions in this very magazine. I got into this business because I believe in the commercial power of theater, and a lot of what I do as a producer is find the right projects to invest in. However, it’s really important when you are investing in theater that you know what you are talking about, and that’s why I spend so long running the numbers before we decide to invest in a show.
A lot of individual producers and producing offices, including my own, have very profitable Broadway portfolios. I wanted to share the example of The Great Comet as a cautionary tale - a lot of very smart people are allured by the idea of investing in Broadway and don’t check to make sure the person they are investing with knows what they are doing. A lot of us do, but a handful don’t.
Here’s what happened with The Great Comet:
(a) Net Gross v. Gross Gross: The gross reported to the public that the investors were working with - $1million per week - represents what is called the Gross-Gross. 10% of that figure never makes it to the production company, but instead goes towards paying fees to ticketing services, credit card processing, etc.
(b) Running Costs: Investors were initially told the show would only cost about $800K weekly to keep the show running. The GPs of the production company decided they would raise this to a bit over $1 million per week, which was probably an ill-advised decision.
(c) Loans: These investors who think there is $9 million being withheld are working under the assumption that the show only cost $14 million to put up. The truth is that there were likely priority loans of $1-$2 million that had to be paid back before they saw their returns
After taking into account these three facts, the reported return of $2 million makes a lot more sense.
Investing in a show is all about trust, knowledge, and good judgment. Not only do you need to be aware of the distinctions and financial strategies outlined above, but you need to trust that the person you empower to make these financial adjustments will do so strategically. Sometimes you need to divert from the plan in order for the show to go on. No business can run without varying in weekly expense, and sometimes businesses of any kind need a little bit of help via loans. The key is that there’s transparency, and that you work with people who you really trust to make these decisions.
Take a look at the OHenry Report Podcast, or reach out to me directly if you are interested in exploring this topic further.