Why Funds are a hard sell on Broadway.

If I had a dollar for every time someone asked me if I have ever considered a fund for Broadway shows, well, I wouldn’t need a fund for Broadway shows.

Since Godspell, I’ve gotten this question a lot, and while it’s an interesting idea, I don’t see it working on Broadway shows . . . and here’s why.

Funds, whether they are bond funds or stock funds or real estate funds, usually work this way . . . You give the fund manager money.  They invest your money in whatever they think will make the most money.  They give you a return on your money (fingers crossed).

While fund investors can usually peek at the things inside the fund, they don’t get a choice on what the manager is buying or selling.  They are investing with an expert with the sole purpose of making money.  Period.

And that’s just not what drives most Broadway Investors.

While sure, making money is an objective (and I don’t do any show that I don’t believe can make money), investing in Broadway shows is about so much more.  Because you are investing in art.  In fact, think about it this way . . .

The Broadway Investors I’ve worked with (and even the ones I haven’t) think about shows like literal works of art . . . like paintings you hang on your wall.  Now, if you were putting a painting on your wall, would you let someone else pick it out without even seeing it?  Not a chance.  You’d not only want to see it before you bought it, you’d want to fall desperately in love with it.  You’d want to be moved every time you saw it.  You’d want to be proud to hang it in your home, to show off to your friends.  Yes, you’d love it to increase in value . . . but if it didn’t, well, you’d probably still be ok, because you just loved it so much.

That’s how the Broadway Investors I know think about their shows.  And that’s just not the experience that  investing in a blind fund gets you.  It takes the emotion out of investing in a show. There’s no rooting for a fund at the Tony Awards.  There’s no waiting for the fund’s reviews to come out.  It’s just not as fun-d.

The upside of funds is that they provide diversification for investors, which I’m a huge fan of.

So, what I do with my investors is try to create a unique custom fund just for them.  They get to choose what goes in it (what they’ll hang on their wall), and spread the risk out as well.

When you’re raising money for a basket of shows, you’ll have a heck of lot more luck selling the shows . . . than trying to sell the basket.

 

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Comments
  • RichMc says:

    While average invested dollars may be approximately equal, I think equating B-way investors with art investors is in general, a poor analogy. While it’s true some art investors fall in love with their investment, and are content to hang their (e.g.) painting(s) in their salon indefinitely if they cannot realize a profit, I think many are personally indifferent to their investment’s aesthetic appeal, and are motivated solely by investment works’ potential appreciation value (i.e., over time).

    B-Way investors do not have the luxury of waiting out appreciation to realize an ROI. The show either recoups, or it doesn’t, in a comparatively shorter time frame. Given the small percentage of shows that do recoup, I surmise that B-way investors are, as a class, generally less obsessed with obtaining an ROI than their art-investing brethren, and are content to have ‘altruistically contributed to theater development as an art form’ when their money spins down the toilet.

  • Janis says:

    Money is a poor measure of art.

  • Janis says:

    Money invested in art pays dividends in pleasure.

    • Actually, Ken, although I think you are an amazing fount of knowledge, on this topic I beg to differ. I’m a member of http://gamechanger-films.com/ , a fund created to advance the work of women film directors, and contrary to your points it has been a deeply engaging and rewarding experience. We have four films of various genres out so far, and more in production, with a range of financial success but averaging out to a more-than-acceptable return – that’s the money piece. The fund president, Mynette Louie, is an experienced producer herself, and I think she has great judgment. She has also been able to attract a huge number of proposals to choose from. And it’s more than just a fund; the investors are engaged all along the way in learning about and understanding the decisions that are made; we have regular calls with Mynette as well as with directors and producers and an annual educational summit which is a fabulous gathering of both the members as well as others in the industry – some directly involved with our films (notice I said “our” films – we think of them that way!). Many of our members attend the major festivals; and we eagerly promote “our” films.

      Do I absolutely love all of the films? Would I have picked every one of them myself? No, *but* the tradeoff is reduced financial risk. And the purpose behind the fund (to advance women film directors), or if you will, the basket itself, is meaningful. If there were a Broadway fund built around a theme or mission (e.g. new writers; new directors; casts of color; women; revivals …) a fund would be even more attractive, and it could even allow *more* artistic risk-taking overall precisely *because* the financial risk is spread. And I contend that funds would be good for Broadway: they would expand the pool of money available because they would interest small investors who don’t invest on Broadway now due to the fear of mistakes and losses.

      I’m probably leaving out some other appealing aspects, but suffice it to say I think it is a model that could work for a certain kind of Broadway investor – particularly the kind, like me, who has already asked “why couldn’t there be a fund for Broadway shows?” Seriously: designed to overcome the obstacles you’ve listed, why not? The rule of thumb in corporate angel investing is to have at least 8 to 10 companies in a portfolio, with the assumption that two or three won’t make it, some will make a decent return, and one or two will be breakout hits. The problem, of course, as in Broadway investing, is that you can’t know ahead of time which ones will be the hits. I would be delighted to do what I do now as a corporate angel investor and a Gamechanger investor: diversify my investment in one swoop, so I would be less likely to have lost every dime I’ve invested on Broadway so far.

  • Frank says:

    B-way left “art” for money a long time ago. While some shows that reach the main stem are artistic achievements, none of them get there without being believed to be able to make money. If the idea is ‘altruistically contributed to theater development as an art form’ then there would be no need for 20+ “producers” on most shows.

    I love B-way, but lets not act as though it is a beacon for high art all the time. It’s first function will always be commerce.

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