Big Business is finally taking a look at the Big Money in Commercial Theater
By Ryan Bogner (Producer, Wingnut)
Bloomberg News has taken an interest of late in the finances of Broadway hits. Last summer the news service surprised the Broadway producing community by doing an expose on the finances of the Book of Mormon by running up to Albany and getting their hands on the investment papers as part of the freedom of information act.
Yesterday in a feat of similar reporting, the site ran this article that details the finances of Broadway's biggest hit, Wicked.
Its always interesting to me when reporters from the mainstream media cover commerical theater, because its usually clear that they haven't bothered to speak to anyone to find out how the financial mechanics of our business model work.
The Wicked article, like the Book of Mormon piece before it makes an attempt to sensationalize the amount of money the creatives are getting from the show while failing to make it clear (whether through ignorance or deliberate omission) that both of these shows are using financial models that are standard fair on Broadway. For example, the Authors are collectively sharing 6.7% of the gross which is only a bit higher than the standard 6%.
The headline also doesn't go into great detail as to how well the investors have done on the project. The information might not be detailed in the documents they had available to them but its not hard to extrapolate from the data available if you know how the financial model on Broadway usually works. This is where the real story is from a business and finance perspective. 59 savvy and lucky investors, many who were private individuals have participated in a huge windfall.
If Bloomberg's reporting is correct, then the Broadway production has made 300 million dollars in profit for the investors and producers. (so after royalties one would assume). Assuming that the company is structured in the typical 50% to Producers, 50% to Investors split that means the investors in wicked have collectively made $150 Million dollars. The article doesn't list the show's capitalization (which would do doubt be listed in the papers they had available to them) but if it was 15 million dolllars (a likely number) it means they've made 10 times their intital investment by now. (and that's just on the Broadway production).
I'd have liked to see the article focus on this. Theater is a high risk, high reward investment opportunity. For Venture Capitialists and investors that are looking to diversify their portfolio, there's huge potential for return, yes the majority of these investments result in losses or moderate gains but if someone has a lot of money to spread around they might eventually hit big. Theater could fill that high risk investment trench in their diversified portfolio of investment.
Perhaps the most glaring understatment from the article is the afterthought of a mention for David Stone, Marc Platt's partner as Lead Producer on the project, and who is the one who really has run the behemoth ship of Wicked from the begining. The way the article reads you would think that Mr. Stone was just a financial producer and not one of the major brains of the operation.
I think its great that a major business newswire like Bloomberg is doing reporting on how lucrative Broadway can be...maybe it will attract more investors from the financial sector. I just wish they'd do their homework a little more and educate themselves on the nuances of our investment structures/financial models and the major players of the industry.
Hey Bloomberg: if you need a consultant, I'm available.
RYAN BOGNER is a New York based Theater Producer. He has produced Yeast Nation, Hurricane, Hater and Hey, You Know What Movie Would Make a Good Musical? among others, and is working towards an MFA in Theater Management and Producing at Columbia University. www.heyyouknowwhatproductions.com