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Yesterday, we dispelled some of the rumors associated with investing in Broadway shows. Today, we'll step through my checklist of how to decide whether or not to invest in a particular Broadway or Off-Broadway show.
BROADWAY INVESTING RULE #1: Have passion for the project.
Broadway shows are often referred to as the "children" of Producers and Investors. Shows need the same type of care, hand-holding, and unconditional love.
So much love, that even when your kid F***s up royally, you (as the parent) will still love him, right?
Unfortunately, the odds are that your "kid" is going to disappoint you, so you better make sure that your bond is so tight that you won't care either way.
This theory is based a bit on famed investment guru Peter Lynch's theory of "invest in what you know." Peter believed you should put money into companies that make products which you see and use every day (and products that you can't live without). I believe this should be adapted to entertainment investments as well. Invest in shows that you can't see NOT happening. Invest in shows that you believe are important to be seen; whether that's because it has a socio-political message, whether that's because it features an amazing performance by an legendary actress, or whether that's because it's so much fun that the audience's day will be better just by experiencing the show.
Invest in shows that you love.
Invest in shows that you love.
BROADWAY INVESTING RULE #2: It's all about who's driving the boat.
Before investing in a mutual fund, Wall Street geeks will tell you to look at a variety of factors, one of the most important being who is managing the fund. You've got to know who is making the day-to-day decisions. What is their track record? Where did they learn to do what they do? How long have they been doing it?
These are all questions you need to ask before investing in a Broadway show. Look at the Producer's resume (you can find them all on the Internet Broadway Database (www.ibdb.com). Have they produced shows that have recouped? How many hits do they have? How many misses? Would you have produced similar shows? Do you have similar tastes?
Choosing to invest with Producers with a proven track record is one of the best ways you can reduce your risk when investing in a Broadway or Off-Broadway show.
BROADWAY INVESTING RULE #3: Just like an actor, you have to know your objective.
What do you want out of investing in a Broadway show?
Different objectives will greatly affect what project you choose to do. Do you want to make money? Do you want to get access to opening night parties, etc. so you can network? Are you looking to get inside access to agreements and figures, etc. so you can learn more about how to produce your own show? Do you want to support the work of a specific playwright?
One of my favorite "objective" stories is about the investor who was thinking about graduate school as a way to learn how to produce. They decided against it, and took the money they were going to spend on tuition and invested it in several shows. They thought there was more to learn by playing the game. Last I heard, they were doing pretty well and beating the odds.
There are a zillion reasons to invest in a Broadway show. Make sure you have at least one.
BROADWAY INVESTING RULE #4: Don't try and be a one-hit wonder.
We all want our first time to be perfect (I even wrote a show about it!), but often our first time out isn't what we hope it will be. Don't expect to knock one out of the park your first time up at bat. When signing up to invest in Broadway, imagine that you're a baseball player playing a full nine innings. If you strike out the first time (or even the second and the third) don't worry, you could hit a homer in the bottom of the 9th and win the game.
If your first show doesn't make it, have a post-mortem with yourself (and with the Producer) and try and determine why it didn't work. Learn from it, and apply those lessons to your next time up at bat. Your odds of success should get better each time.
Just don't pull yourself out of the game.
BROADWAY INVESTING RULE #5: Examine the lay of the land.
It's impossible to time the market. But, in a playing field as small as Broadway, with its limited audience, it's important to take a look at your potential competition. Are you doing a new musical at a time when six other new musicals are opening? How do your stars match up against the other shows' stars? Are you the only classic play? Are you the only comedy?
The big TV networks program their seasons so they can appeal to all of the appropriate demographics, without too much weight on one type of show. Since Producers are mostly independents, we can't program collaboratively, but as an investor you can look to see if your show is going to get lost in a sea of other similar shows, or if it will stand out amongst a lack of competition, without having to place $125k New York Times full page ads.
So there you have it! The above are the first five basic questions I ask myself when contemplating investing in a Broadway or Off-Broadway show. There are countless others you should ask when you get into the details of the production after you examine the budget, find out who's directing, etc., but these will get you started on the road to investing in a show.
You'll notice that a lot of the above rules and checklists are very similar to the rules and checklists for investing in the stock market or any market (invest for the long haul, know your objectives, risk tolerance, etc.). And that's the most important thing to remember.
Too many people think investing in Broadway is a hobby, which it can be, and in those cases you'll probably only hit a winner on the average 1 out of 5 times
Broadway is big business, and should be treated as such. And if you apply the same principles you'd apply to other investment vehicles and do the due diligence, there's no reason you can't turn that hobby into something that is fun, educational, and yes, even profitable.
Choosing to invest with Producers with a proven track record is one of the best ways you can reduce your risk when investing in a Broadway or Off-Broadway show.
BROADWAY INVESTING RULE #3: Just like an actor, you have to know your objective.
What do you want out of investing in a Broadway show?
Different objectives will greatly affect what project you choose to do. Do you want to make money? Do you want to get access to opening night parties, etc. so you can network? Are you looking to get inside access to agreements and figures, etc. so you can learn more about how to produce your own show? Do you want to support the work of a specific playwright?
One of my favorite "objective" stories is about the investor who was thinking about graduate school as a way to learn how to produce. They decided against it, and took the money they were going to spend on tuition and invested it in several shows. They thought there was more to learn by playing the game. Last I heard, they were doing pretty well and beating the odds.
There are a zillion reasons to invest in a Broadway show. Make sure you have at least one.
BROADWAY INVESTING RULE #4: Don't try and be a one-hit wonder.
We all want our first time to be perfect (I even wrote a show about it!), but often our first time out isn't what we hope it will be. Don't expect to knock one out of the park your first time up at bat. When signing up to invest in Broadway, imagine that you're a baseball player playing a full nine innings. If you strike out the first time (or even the second and the third) don't worry, you could hit a homer in the bottom of the 9th and win the game.
If your first show doesn't make it, have a post-mortem with yourself (and with the Producer) and try and determine why it didn't work. Learn from it, and apply those lessons to your next time up at bat. Your odds of success should get better each time.
Just don't pull yourself out of the game.
BROADWAY INVESTING RULE #5: Examine the lay of the land.
It's impossible to time the market. But, in a playing field as small as Broadway, with its limited audience, it's important to take a look at your potential competition. Are you doing a new musical at a time when six other new musicals are opening? How do your stars match up against the other shows' stars? Are you the only classic play? Are you the only comedy?
The big TV networks program their seasons so they can appeal to all of the appropriate demographics, without too much weight on one type of show. Since Producers are mostly independents, we can't program collaboratively, but as an investor you can look to see if your show is going to get lost in a sea of other similar shows, or if it will stand out amongst a lack of competition, without having to place $125k New York Times full page ads.
So there you have it! The above are the first five basic questions I ask myself when contemplating investing in a Broadway or Off-Broadway show. There are countless others you should ask when you get into the details of the production after you examine the budget, find out who's directing, etc., but these will get you started on the road to investing in a show.
You'll notice that a lot of the above rules and checklists are very similar to the rules and checklists for investing in the stock market or any market (invest for the long haul, know your objectives, risk tolerance, etc.). And that's the most important thing to remember.
Too many people think investing in Broadway is a hobby, which it can be, and in those cases you'll probably only hit a winner on the average 1 out of 5 times
Broadway is big business, and should be treated as such. And if you apply the same principles you'd apply to other investment vehicles and do the due diligence, there's no reason you can't turn that hobby into something that is fun, educational, and yes, even profitable.
