Do Broadway shows need bigger reserves? Part I

Before we decide if Broadway shows need bigger reserves, we should probably define what a reserve actually is.

As I described in Breakin’ Down a Broadway Budget, a reserve is a chunk of cash built into a show’s Production Budget (the amount of money spent to open a show) that is set aside for budgetary overruns, or more often, losses during previews and the early weeks of performances.

Yep, spoiler alert, almost all new businesses, including Broadway shows, lose money during their early weeks of operation.  Why?  They’re a new business, so there is no word of mouth to support the media, advertising has only been in the market for a brief period of time, there are no reviews, etc.  Simply speaking, people don’t know if your show/business is any good yet.

So if you’re launching a new musical or a new brand or a new car wash, be prepared to not be able to cover your nut (weekly expenses) for your first few weeks of operation.

But don’t panic, that’s what the reserve is for!

Of course, until you run out.


Yeah, that’s when @#$% gets real, yo.

When your reserve runs out, and you’re still faced with losing weeks in your near future, you’ve got a decision to make.

You either:

  1. Close the show (sad face).
  2. Raise more money.
  3. Do what Homer Simpson would do and, “Hide under some coats and hope that somehow everything will work out.”

As much as we’d all like to do the Homer, it’s not an option, which leaves you with 1 or 2.

Let’s start with #1.

Now look, no one wants to close a show, but as the now Tony Award winning Producer of Fun Home once said to me, “There is no shame in closing a show.”  If reviews were mixed to bad, if word of mouth is mixed to bad, if you’re faced with more and more losses . . . and frankly, if it just feels like you’re never going to get your nose in the air, then close your show.  Put your time, energy and resources into your next show.  (One of the greatest skills a Producer/Entrepreneur can have is knowing when to close up shop and move on.  Seth Godin wrote about it so simply in this book which I strongly recommend to artists and entrepreneurs.)

And now on to #2.

There are times when you may want to dig down a little deeper and fight a little bit harder to see if your show can get roots.  Some shows take longer to take off.  Maybe traditional advertising methods don’t work for your show, but word-of-mouth is off the charts so you need more time for it to sink in.  Maybe you’ve got a real shot at a Tony Award so you’re holding off to see if a trophy can turn the tide.  Maybe you’ve got a star coming in.  Whatever the reason, if you think it’s worth staying open, then you’re going to need to get out there and raise more money to replenish the reserve.  This additional money, in most cases called a “priority loan,” is even more high risk capital than the original investment.  And in most cases, it doesn’t end up making a difference.  But it can!  One of the most high profile shows that I saw a priority loan make a difference was on Thoroughly Modern Millie, which used additional investments to stay open and fund a marketing campaign that helped them win a Tony Award (hear the Lead Producer of that show, Hal Luftig, describe that exciting and stressful time here).

All that make sense?

Good, so now we get to the question that I asked in the subject of this blog.

Which I will answer tomorrow in Part II.

But in the meantime, think about shows that you’ve seen come and go . . . what would you have done if you were the Producer?  Put more in?  Let it go?  This is one of the hardest decisions that Producers have to make.  So it’s important to start training yourself now.


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  • Andrew says:

    I was just thinking about this subject. Saw On the Town during previews. Loved the production and all the effort you see on stage. But with their revenue, how big is their reserve? Perhaps they got a sweet deal on renting the theater. Otherwise, they just aren’t making any dough compared to the weekly expenses (big show, big orchestra, big cast). YIKES!

    • Jared says:

      From what I’ve read, “On the Town” is hovering right around breaking even each week. So it’s not really making money, but it’s not losing that much either, hence the longer than expected run. (Not that I’m upset; I *love* that production.)

      • David Merrick Jr says:


        I loved ON THE TOWN as well, but i recently read that its weekly breakeven point is $675K. The last time it hit that was in April…

        And that’s a shame ’cause this is a great production.

  • Ken Wydro says:

    Better for investor to have larger reserve than have to take priority loans. Like On The Town which has had many weeks under the net.

    If priority loans are in play, the investor never gets paid back. At some point, it is better for all to stop the bleeding. Hard part is to pull the plug. On a parent or on a show.

  • Lyndsay Austin says:

    I keep wondering how On the Town manages whenever I look at Broadway grosses. Low ticket sales and low attendance. No reflection on the quality of the show but I don’t know how they manage. At the same time, Honeymoon in Vegas had great reviews, cast, music, everything and could stay open to find its audience. I was so sad when this show closed because it was really good. It had all of the makings for a hit show, but besides a weird opening date, Game of Thrones type winter challenges, why couldn’t it hang in there until it found its legs? The ticket sales and average ticket price were usually higher than On the Town, yet they survived the winter and not Honeymoon. What was the difference?

    • Jared says:

      I think you’ve got wrong information on Honeymoon in Vegas’ grosses. Vegas rarely got above $375k in weekly grosses, while On the Town can usually manage at least $500k and sometimes a fair bit more. I’m sure that $125k made a big difference in how much they had to dip into their reserve, even given the differences in running costs. Another difference may be advanced ticket sales; perhaps On the Town just has more of them, which increases the producer’s hopes of turning a profit in any given week.

      But I’d imagine the biggest difference lies in the producers; On the Town’s lead producers may just be more stubborn and willing to run at a loss longer.

      • Jared says:

        PS – I really liked “Honeymoon” as well and I’m sad it didn’t catch on.

        • Lyndsay Austin says:

          I don’t remember the specifics of the numbers, but I think the theaters are different sizes. But I think you may have nailed it with the presales. I worked with booking a group and it wasn’t pushed as much as other shows. In their defense, I was booking a group of high schoolers. Also, I never considered it as an option. Had I known what the show was like, I would have totally considered it for high school drama students. So the show would have needed a big push from the seller on the presales.

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