PRODUCER’S PERSPECTIVE Ken Davenport, Broadway Producer, Off-Broadway, Theater

Who the furkus is Burton Turkus?

Burton Turkus was an attorney, an author, and most influentially to our industry, an arbitrator.

Waaaay back in the days of the original Promises, Promises, in April of 1963 to be exact, Mr. Turkus presided over an arbitration between, well, just about every theatrical union, and the then named, League of New York Theatres.

Here's what went down 50 years ago . . .

There was a 13-day strike in 1960 known as the "Broadway Blackout" which was the result of the failure of Actors' Equity and The League to come to terms on a new agreement.  The biggest outstanding issue?  The creation of a brand new pension fund for the Actors.

The Actors got their pension fund as a result of the walkout.  As part of the agreement, they graciously agreed to help The League lobby the City of New York for the removal of the 5% Admissions Tax that was levied on all theater tickets at the time.

The theory was . . . if they could get rid of this 5% tax, they could use that 5% to pay pensions to all the unions.  The league would be happy because they wouldn't be paying any more than they already were.  And the unions would be happy, too, because they would all get pensions.  Happy-happy, joy-joy! 

Well, it wasn't so easy.

The two sides were successful in getting the City to do away with the tax on tickets (!) . . . but there was a disagreement in how much of that 5% should go to AEA, and, consequently, how much of the remaining amounts should be distributed to the other eight unions involved.

Make sense?

Simplified:  The 5% tax went away.  So they had a pot of 5%.  But how to whack it up?

Enter the esteemed Mr. Turkus, who, in the "Burton Turkus Award of 1963" (as it is affectionately referred), created a system for determining who got what.

First, the actual net "tax relief" that we ended up with after the repeal was a net of 4.5%, not 5%, or "the 045" (as it is also affectionately referred).

Next, in order to distribute the funds accordingly, BT examined the books of Broadway shows to determine what percentage of gross payrolls was attributed to the actors, what was attributed to the musicians, the stagehands, and so on.  These percentages make up the guts of the "Award".

A complex chart was created which awarded different percentages of "the 045" to the various unions, depending on a few factors, like whether it was a play or a musical, and even how many musicians a show had.

Confused yet?

Let me use a specific example, using modern day numbers:

A production grosses $1,000,000 for a week.

4.5% or .045 of $1,000,000 is $45,000.

$45,000 is then allocated towards the pension of our various unions.

In a musical with over 16 musicians, The BT Award allocates Actors' Equity 50% of the $45,000 or $22,500.  Local One gets 15% or $6,750.  Local 751, the Treasurers, got 1.88% or $846.00 and so on, until the entire $45,000 is distributed.

This happens every week on Broadway to this day!  

Now, IF on your show, your 045 monies don't pay for pension that you are responsible for, you still have to make up the difference (if the Treasurers actual pension on the salaries was supposed to be $1000, then you got billed another $154).  The .045 only contributes towards the pension due, but it doesn't necessarily cover all of the pension due.

Why is this history lesson relevant?

The wise Mr. Turkus, who ended one of the most bitter disputes our industry has seen, and is known as a hero in certain circles, created this chart using the payroll allocation formulas that were in front of him at the time . . . that are now almost 50 years old.

Back then, the Actors made up the bulk of the payroll, which is why they got the bulk of the 045.  Things have shifted just a teensy bit over the years, and salaries for some of the other unions have increased dramatically . . . which has thrown the whole 045 off its axis.

It's very common now that the amount due to Actors' Equity greatly exceeds that amount that is actually due.  So you could "overpay" by thousands of dollars . . . and the 045 ain't a Discover card.  There's no cash back.  

At the same time, shows can often have a "deficiency" to Local 1, meaning that their 045 contribution fails to pay for the entire pension due, which then means that the show has to make up the difference.

So, while you're overpaying to one union, you're underpaying to another, and you cannot apply the overpayment from one to the other.  You gotta make good on the underpayment, and the overpayment stays with the union.  (I remember Show Boat having a million-dollar overage at one time!)

Now, Actors' Equity, recognized the issue over the years and created opportunities for Producers to use their "overages" on National Tours of a show after they play on Broadway .  They've even used that overage for a reduction to their health payments at one time.

And that's all good . . . but I don't think it's enough.

I've got another idea.

It's time for a Burton Turkus, Jr. to come in, toss out the archaic old formulas and come up with something new.  And maybe this one can also handle the annuities that shows also pay to the unions.

I know, I know, the unions that are getting the overages aren't going to take to this very well.  (I think my phone has started ringing already)  Why would they?  I wouldn't want to . . . 

But it is the right thing to do.

With all due respect to the great Mr. T, the 045 has to be readjusted, reconfigured, or simply trashed sooner or later.  These aren't the days of  the original Promises, Promises anymore.  Our economics are vastly different now, and we can't rely on economic formulas designed in the days when a brand new Ford Mustang cost $2,495.

Mr. Turkus deserves to be in the Broadway Hall of Fame.  But his Award needs to be retired. 

If you would like to read the actual Burton Turkus decision from 1963 (it's quite fascinating) and see the percentage distribution charts, click here. 

Ticketmaster tackles the subject of their fees, on their brand new blog.

There's a new voice in the theatrical blogosphere.

And it has a market cap of over a billion buckaroos.

The recently merged Ticketmaster unveiled their own blog a couple of weeks ago, written by their very own CEO, "Nathan" (he signed the blog by his first name only).  Their first (and so far only) post begins with the sentence, "We get it - you don't like service fees."

Master-of-the-Nation (my pet name for the new company formed by the Ticketmaster/LiveNation merger) continues to explain that they are going to use their blog to help educate the consumer on the fact and fiction of e-commerce, how fees are going to be presented in the future, and why the fees are what they are (news flash: that billion dollar market cap has something to do with it).

While they're a little late to the explanation party, I gotta give props for their desire to shed a little light on their world, and for the changes they are about to implement, which are a direct response to the comments they've heard from their consumers (they have frightening data demonstrating the drop-off-rate when a customers sees those fees).

But the line that made me fall in love was this . . . 

This [new] user experience mirrors what you see across the web from leaders in their field – Amazon, Apple, Expedia, Zappos and more. It’s not complicated, it’s just the right thing to do.

We are the leader in the industry, and so we are accountable for taking the initiative to drive industry change. We take that responsibility very seriously, and at the new Ticketmaster we wake up every day obsessing over the fan experience. We think this change is a big step toward creating pricing transparency that is good for fans, and thus good for business. 

Kudos, MotN.  I look forward to seeing how you will continue to think of the consumer first, and market cap second.

Now, the only other thing that Nathan has to learn right now is that a blog needs to be updated more than once every week. 

Come on.  You've got googles of stuff to talk about.  Give us some regular content, already?  

It's not that hard.  

To read the full Ticketmaster statement on their Ticketology blog, click here.

The cost/benefit analysis of DIY or "Hold the tomatoes!"

For this post, we go back to one of my fave lunch spots, the Cafe Europa, home of the guys who say "To go" when you've already told them so.

This time, it's about tomatoes. 

I hate 'em . . . so I used to tell the sandwich guys to remove them from my pre-fabbed Classic Italian. 

And then I'd have to deal with them lookin' at me funny, and then watch as they pulled apart the bread, and plucked the tomatoes off themselves.  

One day I realized that I was better off just doing it myself, back in the comfort of my office.  I could do it faster, and also ensure that there wasn't even one little disgusting t-seed left to infect the rest of the sandwich.

I did it myself.

Broadway has always been a very specialized industry.  There are few providers for our specific services.  And those providers have been able to charge, well, almost anything they want.

We're just starting to emerge from the naive, Kool-Aid-induced haze that had us believing there were only a few people who could do the jobs that we needed them to do.  We're finding that there are vendors all over the country, and all over the world, that can accomplish similar tasks, and often at much cheaper prices.

We're just starting to join the DIY revolution.

I'm a huge supporter of folks DIYing their way to success.  Done right, you can save money, and learn about whatever you're DIYing in the process.  Teach a man to fish, and you've got an all-you-can-eat sushi bar in your backyard!

Will you sacrifice some expertise?  Could you sacrifice some time?  Could you screw up?  Yes.  

So it's up to you to calculate the risk quotient of taking on a task that you wouldn't normally take on. 

Here's the $ equation.

X = Cost of Expert Vendor
Y = Cost New Vendor or Yourself
Z = Your potential loss if you f' it up.

If X > (Y + Z), then you should have hired the Expert in the first place.

But, flip that alligator mouth around, and you've made out on this deal, and learned something to save you even more in the future.

You can't just be a guerrilla DIY guy.  You have to consider all the options.  The experts out there are experts for a reason.  And there are times when you need them on your team.  

But that doesn't mean you shouldn't take off your own tomatoes every once in a while.  

The "Will It Recoup" winner announced! Did you win a Kindle?

Last Sunday saw the closing of Lend Me A Tenor, our last hold-out of the limited-run plays from this Spring season.  

Sadly, my sources tell me that Tenor didn't manage to turn to profit.

The only good news is now that we know, we can finally crown the winner of this year's Will It Recoup!  (If you're new to the blog and don't know what-the-fiduciary-responsibility we're talking about, click here for the original post.)

Someone is taking home a Kindle.  Is it you?

Here's how the final profitability tally looks:

A View from the Bridge: RECOUPED!
The Miracle Worker: Did NOT recoup.
A Behanding in Spokane: Did NOT recoup.
Next Fall: Did NOT recoup.
Looped: Did NOT recoup.
Red: RECOUPED!
Lend Me A Tenor: Did NOT recoup.
Fences: RECOUPED!
Enron:  Did NOT recoup.  

THREE winners in the bunch out of nine entries!  A 33% success rate this Spring!  

Who says Broadway is a risky place?  You just gotta know how to pick 'em right?

And you certainly do.

A total of NINE of you scored a 100% in this year's contest (boy, would you made some bank if this wasn't a virtual-investment game).

The winner of the Kindle can down to the tiebreaker question:  Which of these shows would win the most Tony Awards?  (Answer:  Red)  After adding that criteria, the nine were cut down to a field of TWO.

So, we're going to pull a Solomon and cut the Kindle in half to see who really wants it.

Naaaaah.  We're going to give away TWO!

Congrats to Howard and Zach on their play-pickin' prowess!  You've both won a Kindle!

Look for an email from me with details.  

And for the rest of you . . . well, there's always next year.  Picking winners isn't a one season game.  There's always another year . . . whether you're playing a game, or producing for reals, yo.

What does the Z Deli have to do with Broadway?

A couple of weeks ago, I made my daily trip to the Z Deli on 8th Ave and 49th St., which is just a block away from my office.  I got my usual mid-afternoon snack of Red Bull, a cup of ice and some vanilla wafer cookies (Mom, please don’t comment . . . Just let me eat like a 12-year-old boy already, ok?).  I went to pay and the cashier rang me up wrong.  I asked, “Are you sure that’s $4.50 because the sign below the Red Bull says $3.95.”  She made a face like she had just seen a cat get run over by a bulldozer, sighed, and then screamed annoyingly to a subordinate to check the price.  She was wrong.  She didn’t say anything, corrected the mistake and charged me the right amount.

A few days later, there I was again, with my Red Bull and wafers (Mom – zip it), and a different cashier rang me up . . . wrong.  I asked, “Are you sure that’s right?”  The cashier paused, and then up walked you-know-who.  She looked at me and said, “Ugh.  He always does this.”  I looked at her like I had just seen a cat on water skis.  I was so confused, because she was wrong both times.  I said, “But I was overcharged.”  She said, “Whatever” and walked away.  

And then you know what I did?  I paid the wrong price for the goodies because I really didn’t care that much, and then I walked away . . . and never walked back.

Why?

Because in New York City, there’s another deli on every block.

I counted it up, just for kicks.  That woman’s ‘tude cost that deli about $10 - $15,000 a year in Red Bull, wafers, slices of pizza, batteries, paper towels and all the other stuff that I’d buy within the course of one year.  I bet if that owner knew what this woman in need of anger-management classes was doing to his customers he’d have some ‘tude of his own.

So what does this have to do with Broadway?

Just like there’s a deli on every block, there’s another show on every block . . . And more importantly, there are so many other entertainment options on every device known to man available to your potential customers.  If you think you can afford to pee-off just one person, you may just lose them to Netflix, the net or their cousin Nancy . . . forever.

And maybe the Z Deli can afford it.  But the theater can’t.

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More performance time research revealed.

Telecharge released a third installment of their report on Broadway performance times recently, once again challenging us all to thoroughly examine our perf schedule and ask, "Do we have the best performance times for our customers or are we just going along with tradition?"

This report concentrated solely on Out-Of-Town buyers (tourists) and Suburbanites, since those two groups account from more than 80% of our sales.

Here are a few bullet points from the in-depth analysis:

• Monday night has the highest percentage of out-of-towners, but Thursday has 3x as many out-of-town sales as Monday.
• Wednesday evening is typically the weakest-selling performance, but twice as many out-of-towners bought tickets for a Wednesday evening as a Monday evening.
• Unlike out-of-town buyers, suburban buyers show a significant preference for matinee performances.
• Sunday and Monday evenings are the two weakest performances for sales to tourists but they have a high percentage of sales from them: 52% and 54%, comparable to Friday and Saturday night.  These performances depend more on tourists than other performances.
• The peak performances for out-of-town buyers fall between Thursday and Sunday afternoon.
• Thursday is a stronger performance with out-of-town buyers than Sunday matinee or Wednesday night. 

What does all the data in these three reports tell us?  Should we have 7 PM performances on other nights besides Tuesday?  Should we have Thursday and/or Friday matinees?  If tourists are here between Thursday and Sunday, what about a Friday at 5 (like our friends in London)?  What about 9 PMs on Saturday?

These reports don't have all the answers.  As a therapist once told me . . . "We don't have all the answers, we just know what questions to ask."

These fantastic reports challenge us all to ask our own questions about our own specific shows.  Don't follow tradition for tradition's sake (unless, of course, you're doing Fiddler).  Use the stats, study your audience, and shake up your times until you find what works best.

Special thanks to The Shuberts and Telecharge for releasing this info.  (To read the summaries of the previous reports click here and here.)

Let's hope for more of these in the future.

Or you know what would be really cool?  A Telecharge ticketing blog!  

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How much of an economic impact did Broadway make in 2008-2009?

For 15 years, The Broadway League has been measuring our industry's impact on the NYC economy.

This year, the League changed up how these figures were calculated (much like how the League changed the publishing of our grosses and attendance a year ago).  Previously, the impact only counted money spent by those people who came to NYC "primarily to see a Broadway show, or extended a trip made for another purpose in order to go to a Broadway show." The reason for the change was to account for the incredible increase in out-of-town visitors (especially the international crowd).  In the 1980-81 season, 69% of our audience was from outside of NYC.  In the 2008-09 season, this figure was up to 81%.

So, to get a more accurate reading, the League now asks visitors to rate Broadway's importance in their decision to come to NYC on a scale of 1 to 10, and then counts the 8s and above as a "Broadway Tourist" and studies their spending habits.

This more quantitative approach produced a much higher, and I'd argue more accurate, account of what the economic effects of our industry really are to this city. 

The results of this year's report?

In the 2008-2009 season, Broadway's economic impact was approx $9.8 b-b-b-billion dollars.  

To quote the Executive Summary of the report:

"This amount was comprised of direct spending in three areas: spending by producers to mount and run shows ($2 billion); spending by theatre owners to maintain and renovate venues ($51 million); and ancillary purchases by non-NYC residents who said that Broadway was an important reason in their coming to New York City ($7.7 billion) ("Broadway Tourists").

Those are some serious bucks, don't you think?  

What's more interesting to me than Broadway Tourist spending is that Producers alone are directly responsible for initiating over 20% of this impact, spending over $2 billion on the production of shows.  

Shouldn't the city, the restaurant industry, the Taxi and Limo Commission, the hotel industry, and so forth, be tripping over themselves to help us with promotions, marketing, tax incentives, and so forth to inspire us to produce more?

To read the release from The League, and to learn how to get a hard copy of the report, click here.

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At the Broadway League Conference: Day 2/What's the "deal" with the road?

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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Finish this sentence, kids. "Music is . . . "

I play basketball in a league that uses public high school gyms all over the city.

Normally, the only thing I notice is how crappy the condition of each school is. (How can a gym not have a working water fountain?)

Last week, I noticed a 2nd grade art exhibit on the walls called "Music Is . . ." The teacher obviously asked the kids to draw a picture finishing that sentence. 

Here are a couple of the drawings:

 

  

What you'd expect, right?  Music is expressive, sweet, coolio, etc. 

Here's another one . . . and I think you'll see why this one jumped off the wall and practically punched me in the face.

 

Music is . . . LimeWire.  

Now there's something I'd bet not one of us would have answered when we were in school.

For those of you who don't know what LimeWire is . . . it's online peer-to-peer sharing software that allows users all over the world to trade music, movies, etc. It's the type of service that has gotten the record and movie industries all wired up over the past decade. 

And now, this is what some kids think "Music is . . . "

That begs the question . . . What is this kid going to expect from his entertainment when he is 20 . . . 30 . . . 40?  

I'm not sure, but you can bet he's not going to expect to pay a lot for it . . . unless it's truly exceptional.

Music, movies, theater . . . they aren't going anywhere.  But people are going to expect a lot more from their entertainment than ever before.

- - - - -

When I went to my fifth gym that didn't have a working water fountain, the NYC public schools went on my list of charities that I support.  Seems odd to support a government-run institution, I know . . . but we could yell and scream about how our government doesn't do enough . . . and the kids will continue to suffer while we're yelling and screaming, or we could just do something about it.

If you want to help NYC public schools, click here.  

A test case for a "troubled" (?) musical.

- Disappointing out-of-town reviews.  Check.

- Disappointing message board buzz from early out-of-town previews.  Check.  

- Director replaced.  Check.

- Michael Riedel taking swings at the show on an almost weekly basis.  Check.  

The Addams Family had all four of these unfortunate items marked off the "troubled musical" checklist well before "it" came into town.

Now that TAF has been in performances for a few weeks, let's look at some more of what The Addams Family has to buzz about.
 

- w/e 4/18/10    $1,261,490

- w/e 4/11/10    $1,240,377

- w/e 4/4/10      $1,391,177

- w/e 3/28/10    $1,302,707

- w/e 3/21/10    $1,328,460

- w/e 3/14/10    $1,192,213

Now, all of a sudden, some people talking smack on a message board back in October, about performances in Chicago, doesn't seem so bad, does it?

Producers, actors, authors, etc. are constantly worried about bad industry buzz and how it will affect a show. No one wants the label of a "troubled" show.  Well, if ever there was a test case that proved that there is a giant chasm between what our industry hears about the development of a show, and what our audience hears about the development of a show, The Addams Family is it.

TAF feels like a big Broadway musical.  It has stars.  It has a powerful brand.  It has a powerful brand that's funny.  It already feels musical because of its popular theme song.  It is about a world that provides for spectacle.  Etc.  Etc.

And all of those elements are what a huge majority of the Broadway audience wants to see, no matter who is replaced or who is writing what.

Don't worry about what insiders may say.  Worry about what your audience will say.  They are the ones who actually pay for their tickets.

And when they really want to see a show, they'll have no "trouble" paying premium prices.