Day 2 of the Broadway League Spring Road Conference was filled with some great events, from a panel on how to engage the African American audience, to a discussion on the evolution of the current Broadway production of Fences, led by Mr. Denzel Washington himself (they served extra water at that panel, to prevent half the crowd from fainting at the sight).
One of the more spirited conversations was a discussion of the current deal structure for Broadway touring companies (the 'Broadway League' is somewhat of a misnomer, since a large majority of its membership is compromised of presenters/performing arts centers (PAC) all across the country).
There are currently three basic deals being brokered right now for touring shows like Wicked, Jersey Boys, Dreamgirls, etc.
1. The Guarantee
Under the terms of a GD, a local presenter pays a fixed fee, or a guarantee, to the Producer for showing up at the theater with a show. In addition to this fee (which can range from $250k - $400k for the big shows), the Producer usually receives a royalty (usually 10% of the NAGBOR), and a split of profit (usually 60/40%) AFTER the Presenter has recovered all of his/her expenses (advertising, stagehands, etc.).
Guarantee = More risk for the Presenter, less risk for the Producer.
2. Four-Wall
The four-wall is more of a straight rental situation. The Producer agrees to rent the facility from the Presenter, and pay all expenses associated with the Production. There is usually some profit built in for the Presenter, but the bulk of the upside is for the Producer. All the shows produced on Broadway in NYC are four-walls.
3. Terms
The Terms deal is a hybrid deal designed for Producers and Presenters to "meet in the middle." An example of a Terms deal would be a 75/25% split of the gross, after advertising expenses were taken off the top of the gross. Or a 80/20% split after advertising and stagehands costs were taken from the gross.
Brett Sirota, a partner at The Road Company (a 'wicked' big booking group), and an absolute expert in this area (and a pretty damn good poker player as well), revealed that for the first time in his recent memory, almost all the deals he has done for the coming season are "Terms" deals or as it was also called, a "Shared Risk Deal."
Some pros/cons to the Terms deals were as follows:
- Without getting a guarantee, the Producer may close the show early if it doesn't perform well. When that happens, a performing arts center might end up with no product, despite having sold a subscription on the back of that show.
- For Presenters a Terms deal really depends on those terms, and in some cases, especially with blockbusters, the Presenter is better of with a guarantee because there is much more upside potential.
- Some Producers of big shows have signed Terms deals, knowing that they were giving more money than necessary to the Presenters, in the hopes of encouraging the Presenter to book the show for a second, third or even fourth time!
- Since only one out of five shows recoup their investment on Broadway, Producers look for guarantee arrangements because they are easier to sell to investors who may have just lost money in the Broadway production and are now being asked to put up more money for the same product.
There were a lot of other creative ideas thrown around the room, including a development fee (in the style of a facility fee) that went to Producers to help defray some of the costs of developing product, since it is getting so expensive, and since the markets depend on new product to survive. There was a suggestion to have a seminar on the costs of running PACs around the country so Producers could understand why a Presenter's expenses are what they are.
But one of the most enlightening comments was a statement about the road in general, and how conversations like the one in that room at the Crowne Plaza hotel were good.
Because the road is not made up of one stop or one show. It's a continually flowing entity that connects all of us. It may start on Broadway but it circles around the country and eventually winds its way back here. So, it's important for us to come up with deals that work for all parties. That's the definition of a successful negotiation. A win2.
One more day of the conference. Until tomorrow!
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