Ken Davenport - Opinions from a Broadway Producer

How to invest in a Broadway show. Part I

I've gotten a lot of questions from readers all over the world expressing interest in investing in a Broadway or an Off-Broadway show.  Usually they are unsure about how to get involved and, more importantly, they want to know how to pick their first show.

Since this seemed to be such a hot topic, I thought I'd take a couple of blogs to dispel a few of the nasty rumors associated with investing in Broadway or Off-Broadway shows, and also give you my checklist of how to choose a show to invest in.

 

Today, we'll deal with the rumors.  Tomorrow, the checklist. 

 

BROADWAY INVESTMENT RUMOR #1:  Investing in Broadway shows is only for the super-rich.

Because Broadway capitalizations can range from $2 million for a Play up to $20 million for a Broadway Mega-Musical, many people fear that the "entry point," or the amount of money required for an initial individual investment, must be astronomically high. 

Not true.

 

While the average smaller investor in a big Broadway show is probably about $25,000, I have seen many shows where investors were able to get in for as little as $10,000, and even a few where the entry point was only $5,000!  There are a lot of publicly traded mutual funds that don't allow you to get in at that level.  These lower investment thresholds are very common in the Off-Broadway arena.

 

What determines the lowest investment level?  Here's how it works.  Capitalizations are divided into 'units', just like shares of a stock.  What defines a unit is up to the Producer.  Some Producers like to have a round 100 units per show, regardless of the capitalization. Some like to pick the lowest amount they can accept as an investment (some shows are limited to the # of investors they can have).  Some just make it up arbitrarily.

 

Here's a tip.  If you're considering a show and you get sticker shock when you hear the price of one unit?  Ask for a partial.  Splitting units ain't like splitting an atom.  It can be done with ease.  Depending upon a variety of circumstances, including how hot the property is, who the producer is, and whether or not other investors took "round units," it may be possible for you to invest in a smaller amount than the "ask."

 

The key is, of course, never be pressured into investing more than you're willing to lose.  If the entry point on one project is too high, don't worry, there are others.

BROADWAY INVESTMENT RUMOR #2:  Investing in Broadway shows is only for the super-crazy.

So many people think that it's bonkers to get involved with Broadway. 

The fact is, if you're an individual of a certain net worth, your traditional financial advisor will probably recommend that you allocate a certain amount of your investment portfolio (usually about 10%) to higher risk instruments or so-called Alternative Investments in order to diversify yourself (most Broadway and other AIs require investors to be "Accredited," although this is not always the case for shows).  Look at the Smith Barney site here to see a description of the Alternative approach.

Why would Broadway, with its high risk but potentially high return, be excluded from that list?  In fact, it isn't.  Check out the Wikipedia entry for Alternative Investments here.  Recognize anything? 

Alternative Investments, including Broadway and Off-Broadway shows, are high-risk, without a doubt.
The commonly quoted statistic is that only 1 out of 5 Broadway shows recoup their investment (that ratio is even lower for Off-Broadway shows).  But it's not the only high risk instrument on the market, by any means.  Investing in Broadway shows is a lot like investing in a restaurant, a piece of art,  or frankly, in any entreprenurial start-up.  Look at this statistic that puts the success rate of start-ups at the exact same percentage as I just quoted above - 20%!  See, it's not as bad as we thought.

And, if you do proper due diligence, as we'll discuss tomorrow, you can increase those odds. 

Also, with big risk can come big rewards.  Even if you do end up performing according to the stats, the goal and hope is that the 1 show out of 5 ends up paying for any other previous losses (it's a marathon not a sprint) and then some. Imagine what it would have been like to invest in Annie, West Side Story, Cats or Wicked.

BROADWAY INVESTMENT RUMOR #3:  Investors in Broadway shows belong to an exclusive 'club' that doesn't accept new members.

While it is true that there are a lot of investors in the Broadway world that have been in the circle for a long time, it's not as closed door of a club as you think.  While it can be hard for a new investor to get in on the hottest shows coming to town, it's not impossible, and sometimes, Producers will let you get in on a 'sure-thing' (which doesn't exist, by the way) if you also agree to come into something a bit more risky.

However, it is a relationship business, and preferential treatment is often given to investors who have been doing it longer, and to those that have been faithful to the Producer. 

So what does a new investor do?

Start the relationship. 

Call a Producer.  Email them. Fax them.  Simply state that you're looking to invest in a specific show (if you know one that they are about to do), or ask to be put on the list to be called about their next show. It's not a commitment for either party, and I don't know any Producer out there who would mind putting you on a "potential" list.  Just make sure you are serious about your interest. 


Those are three of the biggest obstacles potential Broadway and Off-Broadway investors tell me prevent them from taking the first step and joining the ranks of Broadway investors.  Tomorrow, we'll talk about just how you choose a project to invest in, once you've decided that investing in Broadway is something you definitely want to do.

If you are interested in learning more about investing in Broadway shows, click here.

A Beepin' Follow-Up on Followin' Tweets.

Last week I blogged about keeping an eye on what people are saying/typing/tweeting about you in the social media space.

Yesterday, I stumbled upon (pun intended) a site that I've fallen in geek-love with, that I have to tell/type/tweet you about.

Check out TweetBeep, which is exactly like Google Alerts but for Twitter.  Sign up, enter your keywords, and TweetBeep will email you every hour if you'd like, letting you know if anyone has tweeted your keyword.

An example?  TweetBeep just sent me a note letting me know that the Bristol Riverside Theatre in Bristol, PA just had this to tweet: 

Hopes you enjoyed that BEAUTIFUL weekend! The cast of ALTAR BOYZ arrives in Bristol this Friday! We can't wait!

TweetBeep is so fast, you'll be able to find your ambassdors in the social media space before . . . well, before they can come up with the next Twitter.  I mean, Friendster, anyone?  MySpace?  

Will we be wondering what happened to Facebook someday?

If you have a third party app to share, that helps you keep in touch with your social media-ites, comment below!

I got laughed at today.

Here's how it went down:

I mentioned a marketing idea to someone.  And right after it came out of my mouth, I watched as a smile slowly started to snake across my "friend's" face. 

The world seemed to slow down for a few seconds, as the smile opened up, and the laughter began.  You know how a laugh sounds in slow motion?  All deep and reverby and scary?  Yep, that's how it sounded.  Just like that.

And it was like that laugh reached out and clocked me upside the head as if to say, "Whatta ya, crazy?  You can't do that."

It was almost enough to make me apologize for ever saying the idea out loud in the first place. 

Almost.

See, the way I think of it is . . . if someone laughs at something I say, or if someone says, "you can't do that,"  or if someone calls me crazy . . .  that's exactly the moment when I know I'm on to something . . . big.

And that's when I know I have to do it. 

Broadway Grosses w/e 4/26/09

Show Name	Gross
33 VARIATIONS	$291,195
9 TO 5	$625,252
ACCENT ON YOUTH	$176,923
AUGUST: OSAGE COUNTY	$203,577
AVENUE Q	$236,576
BILLY ELLIOT: THE MUSICAL	$1,158,561
BLITHE SPIRIT	$524,435
CHICAGO	$516,557
DESIRE UNDER THE ELMS	$190,498
EXIT THE KING	$520,068
GOD OF CARNAGE	$747,164
GUYS AND DOLLS	$553,946
HAIR	$829,747
IMPRESSIONISM	$212,523
IN THE HEIGHTS	$691,181
IRENA'S VOW	$195,899
JERSEY BOYS	$1,037,565
JOE TURNER'S COME AND GONE	$263,799
MAMMA MIA!	$875,597
MARY POPPINS	$762,384
MARY STUART	$283,488
NEXT TO NORMAL	$207,775
REASONS TO BE PRETTY	$104,247
ROCK OF AGES	$376,529
SHREK THE MUSICAL	$693,744
SOUTH PACIFIC	$842,947
THE 39 STEPS	$172,636
THE LION KING	$1,128,044
THE LITTLE MERMAID	$689,228
THE NORMAN CONQUESTS	$131,403
THE PHANTOM OF THE OPERA	$764,301
THE PHILANTHROPIST	$179,498
WAITING FOR GODOT	$385,712
WEST SIDE STORY	$1,191,832
WICKED	$1,458,664

What's the difference between Best Musical and Best Revival of a Musical?

This question came in over the weekend, after a reader noticed my tweet about going to see the new Broadway revival of West Side Story. 

Obviously, the person who asked knew the basic difference between the two awards categories, but she was more interested in how revivals were judged.

It's a great question - considering that shows like West Side or Hair or Guys and Dolls may have been seen countless times by the voters of The Tonys, Drama Desks, Outer Critics, etc.  These shows have been on Broadway, on tour, in dinner theaters, in high schools, on cruise ships, etc.  Many of the voters have probably performed in these shows at one point in their life!  (When I was working on the Rosie O'Donnell revival of Grease, I mentioned to Author and Greased-Lightning Zillionaire Jim Jacobs, that I once played Kenickie in summer stock. His response?  "Ken, I don't think I've met anyone who hasn't done Grease.")

With such familiarity and such an emotional (or lack thereof) connection, how do voters (and reviewers, for that matter) distinguish one revival from another?

This question reminded me of the end of the season awards banquets my high school baseball team used to have.  Every year when the season was through, we got together in the high school cafeteria. After some bad pasta and some bad speeches, the coaches gave away two awards: 

Most Valuable Player . . . And Most Improved Player.

And that's what a great revival is to me; the most improved.  It's a take on the material that makes it seem even better or more relevant now than it ever was.

The trouble is that it takes a lot of sweat to be an MIP, in baseball and on Broadway.

And if you're not ready to go "sweatin' with the oldies,"well, then stay away from producing revivals. 

Because, without an MIP mentality, you'll just end up being another one of the millions of Kenickies out there.

What's The Buzz from The Theater Bloggers' Social?

Thanks to the 30 plus Theater Bloggers who showed up at Planet Hollywood yesterday for the first Theater Bloggers Social!

We had a great time, discussing everything from the upcoming awards season (can N2N or 9:5 threaten that giant-sized kid, Billy Elliot?) to the rise and fall of the newspaper (will Seth Godin's prediction that "there will be no significant newspapers printed on newsprint in the US by 2012" come true?) and the difference between theatre with an RE and theater with an ER ("RE is the art, ER is the building," was one concise answer).

Oh, and we ate a lot of Chicken Crunch.

For those of you who aren't bloggers . . . become one and come to the next social.

Because I guarantee, something cool is gonna come from this group. 

Stay tuned.

  

People are talking about you behind your back. And now, you can listen.

Bad word of mouth is like a little forest fire.  

Get enough bad word of mouth and those little fires will combine and be on your doorstep, smoking you out of house and theater, before you can say, "Smokey The Bear." 

Since so much word of mouth occurs online these days, there are several online "smoke detectors" that can help you monitor your word of mouth and online reputation.  

And if you're smart enough, you can actually throw some water on those fires, extinguishing them before it's too late (insert scary fire music here).

Here are three "smoke detectors" you should be using to monitor what people are saying about your shows, and an example of how we've used them here in my office.

1.  The Google Alert

The Google Alert is the classic detector. Sign up, tell Google the word, phrase, etc. you'd like to track, and it will send you a daily email of all the web sites with that word, phrase, etc. in it.

Put in your show's name (and any variation), your name, your theater's name, whatever, and let Google do the work.  Or, put in the name of a competing show . . . he-he-he.

How have we used it?  

We've used Google Alerts to find good reviews, both in the 'traditional' press and from the new media corps (bloggers).

But most recently, a Google Alert sounded an alarm about a a rogue and unauthorized production of The Awesome 80s Prom.  We were able to react swiftly and shut them down before any damage was done to the brand.  Thank God for Google, because we were about to enter into an agreement for The Prom in the same city!  That Google Alert saved that deal, without a doubt.

2.  Tweet, Tweet.

Thanks to Twitter, there's a new type of online conversation going on now.  Luckily, there are ways to monitor it.  Twitter has a search function which pulls up recent activity on any word or phrase that you're interested in. 

Since tweeting doesn't take much time or commitment, your brand is much more likely to appear all over Twitter than in more full length blogs or articles. Just click here to see all the recent random tweets about Altar Boyz!

In addition to the Twitter search function, there are a bunch of third party search applications like Monitter, etc. that are tracking the T-world. Here's a blog that discusses a few.

How have we used it?

We find out who's tweeting about us, then follow them with our Twitter and encourage those same peeps to follow us.  Presto.  We've now established one-on-one communication with someone we know has an interest in our brand, and are building a Twitter army.

3.  Manual Labor

This is the hardest and most time intensive but, regardless of all the auto-detectors out there, I still recommend having someone on your team doing walk-throughs of potential "danger areas." There's nothing better than a Forest Ranger sniffing around every once in a while.  

Put someone on trolling the message boards on Talkin' Broadway, BroadwayWorld, and BroadwaySpace.  Search the site pages for your title (use the "Find On This Page" option in your browser menu).  

How have we used it?

In previews for 13, I used this detector to find similar comments of both praise and criticism.  If one person says something on a message board, it's not as important.  But find 3 people saying the same thing, it deserves further thought (regardless of whether or not you agree).

The biggest of brands out there are all monitoring online activity.  Starbucks, Jet Blue, and so on.  And why shouldn't they?

After all, it has been said that the greatest leaders are the greatest listeners.

It's just time we listen with more than our ears.

- - - - -

The Blogger Social is tonight! 

What I learned from Hal Prince and Steven Spielberg.

I watched Schindler's List again last night. 

Schindler's List is Mr. Spielberg's most criticially acclaimed film.  It won a total of 7 Oscars, including one for his own personal mantlepiece and is #9 on The American Film Institute's list of Top 100 films of all time.  

And although I've never met Spielberg, I'd bet money that if he could be remembered for only one movie, Schindler's List would be the one.  

It's the kind of piece so many artists want to make.

And Spielberg did it . . . when he was 47 years old, and after making movies for well over 20 years.

Seeing Schindler's, and looking at Spielberg's career, reminded me of some great advice Hal Prince gave me once.

I was fortunate enough to work on three of Hal's shows (Show Boat, Candide and the workshop of Parade).  One day, I found myself in Hal's office, telling him that while Company Management was a fantastic day job, and teaching me a ton, what I really wanted to do was produce.

And I wanted to produce the Great American Broadway Musical.   

So I pitched Hal everything I had ever thought of for a show.  The biggest ideas you can imagine.  And in the middle of pitching something that I probably thought could have the musical significance of a Schindler's List, Hal smartly shut me up . . . and he asked me if I remembered what the first show he produced was?

I couldn't remember.  (Tip of the "Duh" - read important people's biographies BEFORE meeting them one-on-one).

"It was Pajama Game," Hal said.  "Don't come out of the box trying to produce West Side Story.  That was my 4th show.  Be happy if you get the Pajama Game.  It ran for over two years, made a lot of people money and made a lot of people laugh."

I'm sure the Pajama Game isn't the one show Hal would want to be remembered for, just like I'm sure Jaws or Duel (or his real first . . . Amblin') aren't the movies Spielberg would choose.  

The masterpieces for both of these gentlemen came later.  (Non-coincidental side note:  Spielberg named his production company, the one that produced Schnidler's, after Amblin:  Amblin Entertainment).  

As young artists we all want to change the world, and create the next great thing that will be remembered forever.  The truth is, we should just worry about creating the next thing . . . period.

I went home that afternoon after meeting with Hal and started working on The Awesome 80s Prom; a show that I had come up with the idea for about five years earlier, but never started because I didn't wanted to be remembered for an interactive show that was about drinking, and dancing, and bachelorette parties.  It didn't seem "important" enough to start.

Looking back?  Starting The "Unimportant" 80s Prom, was the most important thing I ever did in my entire life.

The masterpiece will come later.  :-)  As it will for all of you . . . once you get started.  

- - - - -

Only 1 Day until the 1st Theater Bloggers Social!

Thursday, April 23rd.

6 PM

Planet Hollywood

For more info and to RSVP, click here.

Creating mystique is not just for magic shows.

I don't remember how I heard about Steve Cohen's Chamber Magic, but somehow I did.  Having been one of those kids that was into Chinese Linking Rings and Multiplying Sponge Balls, I was intrigued.

When I checked out the website, the intrigue increased to genuine excitement.  Yes, Steve was apparently a fantastic magician, but that's not what got me to push the 'Buy Tickets' button.  Check out how the show was described as I dug deeper:

• Shows are only twice a week.
• Steve has performed for celebrities, politicians and the ultra-elite.  
• The show is held in a suite at the Waldorf Astoria Hotel Towers (the same towers where all of the Presidents have resided when in town). 
• Jackets and ties are required for men and dresses are required for women.    
• There are only 50 seats sold for each performance.  The front row, close to the magic, is sold at a premium. 
• And . . . the show is sold out months in advance (I waited 5 to get my tickets).  

Steve is not only a master magician. He's a master marketer and showman.  So many of the bullet points above are taken right out of my favorite marketing textbook, Cialdini's Influence.  But in addition to following the Cialdini principles of social proof, scarcity, and so on, Cohen created a show that is not just a show . . . it's an experience.  And rather than do it 12 times a week, which he probably could, he does it just twice (and will probably have one of the longest running magic shows as a result).

As you'd expect, Steve is an incredible magician.  He did some things that I've never seen before.  But frankly, he also did a few things I HAD seen before (some of them were performed by Mr. Marc Salem, who was the inspiration for my Virgins Get In Free promotion).  And if I sat down and really analyzed it, I'd probably say that Marc Salem even did a few of those tricks better.

But that didn't matter.  Because I was in a jacket and tie, and we were at the Waldorf, and it took so long to get the tickets, and it just felt . . . well . . . magical.  

For the Actors, Orchestra and even Producers of your shows, it may seem like the show starts when the curtain rises.  But for the audience, the show begins when they start thinking about buying a ticket . . . so make sure you give them one.

Steve Cohen has a new show, by the way. It's called Midnight Miracles.

It's only performed once a month.  At midnight. At the Waldorf.  And for only 20 people.  Ticket price?  $250.

Don't try and bother getting tickets for April's performance, because it's already sold out.

- - - - -

Only 2 Days until the 1st Theater Bloggers Social!

Thursday, April 23rd.

6 PM

Planet Hollywood

For more info and to RSVP, click here.

Broadway Grosses w/e 4/19/09

Show Name	Gross
33 VARIATIONS	$301,812
9 TO 5	$535,354
ACCENT ON YOUTH	$186,179
AUGUST: OSAGE COUNTY	$224,692
AVENUE Q	$322,213
BILLY ELLIOT: THE MUSICAL	$1,182,663
BLITHE SPIRIT	$603,470
CHICAGO	$620,809
DESIRE UNDER THE ELMS	$199,120
EXIT THE KING	$550,308
GOD OF CARNAGE	$733,771
GUYS AND DOLLS	$677,887
HAIR	$861,450
IMPRESSIONISM	$280,075
IN THE HEIGHTS	$808,209
IRENA'S VOW	$196,244
JERSEY BOYS	$1,067,477
JOE TURNER'S COME AND GONE	$192,532
MAMMA MIA!	$1,005,981
MARY POPPINS	$923,694
MARY STUART	$189,645
NEXT TO NORMAL	$216,807
REASONS TO BE PRETTY	$146,762
ROCK OF AGES	$414,030
SHREK THE MUSICAL	$931,738
SOUTH PACIFIC	$906,795
THE 39 STEPS	$232,917
THE LION KING	$1,386,276
THE LITTLE MERMAID	$924,923
THE NORMAN CONQUESTS	$95,624
THE PHANTOM OF THE OPERA	$917,374
THE PHILANTHROPIST	$216,245
WAITING FOR GODOT	$401,048
WEST SIDE STORY	$1,310,305
WICKED	$1,539,124