Why investing in Broadway or Off Broadway is better than investing in the stock market.

Whenever you are selling anything . . . from tickets, to why a star should sign on to your show, to a vacuum, you have to remember that you’re never selling IN a vacuum.

There is always something that your “consumer” could buy instead.  They could always get tickets to another show (or, God forbid, a movie).  The star could always sign on to another show (or, God forbid, a movie).  And they could always get a Swiffer (or, God forbid, they could just leave their apartment a mess and go to the movies.)

You not only have to sell why your product is worth whatever price they are paying, you also have to sell why your product is better than the other products that are out there.

For example, when raising money, one of the common questions that I always have to be ready for (and one that you should be ready for when you start raising money) is, “Why should I throw money into such a high risk venture when I could throw it in the stock market instead?”

Hmmm, good question, right?  Actually it’s a great question.

There are of course a bunch of reasons why someone would invest in the theater as opposed to the market:  opening night tickets, high risk but big upside potential, house seats, billing, potential tax write off, or just because they believe in you.

But most of those are indirect comparisons.  When you’re selling stuff, you need to find direct comparisons between the competition, like . . .

Yes, investing in the market is safer, without a doubt.  And you should encourage your investors to do so, to create the most diversified portfolio possible.

But when you buy a stock, you not only have to know when to buy . . . you also have to know when to sell.  Stocks go up, but they also come down.  You could invest in a blue chip a year ago that everyone was recommending and a year later it could post almost a 10 billion dollar loss.  And no matter how much your stock went up over the last year, if you didn’t get out in time, you lose.  You may have made a smart decision a year ago, but if you’re not a expert market watcher, then you could end up with a tax-write off anyway.

Here’s the thing about shows . . . once they get over that humungo hurdle and actually recoup, they never go the other direction.  Once you’ve got a winner, you’ve got a winner, and your gains only increase.  Sure, the gains may be small, or they may slow down when the Broadway show closes and when your show is only being done in high schools, but you never have to worry about selling.  Returns diminish, but never reverse (barring some sort of extreme circumstance like litigation).

When you buy a stock, you have to be smart twice.  When you buy Broadway, the pressure is on only once.

Ok, that’s not true.  You also have to figure out what to wear to the opening night party.  (And there’s another reason why people invest in the theater instead of the market – you don’t see Citigroup throwing parties for investors when they buy 100 shares, do you?)

Would the traders at Goldman Sachs punch holes in the above theory and find direct comparisons of their own to prove why investing in the market is better than a musical?  Probably.

That’s just as much their job as it is yours.

Then again, they were also recommending Citigroup last year.

So don’t sell in a vacuum.

(Insert your own Davenport-style “sucking” reference here)

 

If you are interested in learning more about investing in Broadway shows, click here.

It Happens To The Stock Market And It Happens To Broadway.

We had our own version of a “market correction” 2 days ago when Color Purple announced that it is closing.

Although everyone knew that Purple was showing signs of weakness post-Fantastia, the announcement, leaving the Broadway Theater empty during the Spring, was a bit of a shock, just like the Dow dropping a few hundred points in one day.

I should have predicted this one.  I picked up on a sign that we were due for a correction a few weeks ago when Variety reported that Broadway grossed 15 million on 30 shows.

But what did it gross during the same week last year?  17 million.  On 28 shows.

2 more million.  2 LESS shows.  With last year’s prices.

Something had to give.  And it was Oprah.

While the closing of Purple is unfortunate, let’s hope that it helps stabilize the street and sends us (and the Dow) back up.

This brings up an interesting point.  Too often we worry about watching our grosses from week to week.  We celebrate being “up from last week”, or lament being down.  For those of you who have never seen a box office statement, look at this . . . you’ll see that the weekly comparison is part of the automatic reporting.

What’s the problem with obsessing over week to week comparisons?  Too many factors that affect sales change from week to week:  holidays, Super Bowls, weather, etc.  What we really should study is the gross changes from year to year.

Unfortunately, since the average run of a new musical on Broadway is only 52.67 weeks, most people don’t bother to look at yearly trends.

Here’s a graph of three years of data for one my shows.  Look at how closely the weeks line up from year to year.  Cool, huh?

Your sales trends emerge naturally.  When you discover them, that’s when you can really put your producing skills to work.  Discounts (or cutting discounts during busier weeks), expense cutting, etc.

When I look at a graph like this, I think of the low points like enemy targets, and my initiatives are my missiles.  By analyzing the trends over several years, I’ve isolated by targets.  And when you isolate your targets, your missiles are much more effective.

Don’t have a show that has run years?  Graph overall Broadway/Off-Broadway trends from year to year.  It is better than nothing.

(Anyone have any ideas what the giant spike is on that graph?)

100% of Zero is Zero.

Speaking of publishing statistics
, one of the most gossiped about stats around Broadway water coolers is percentage attendance.

“Did you see Variety?  Moose Murders only did 30% capacity!”

But this number actually does very little to diagnose the fiscal health of a show.  It just counts bodies in the house (including comps).  Even Moose Murders could get up to 100% if it really wanted to.

My favorite number in Variety?  Average Ticket Price.  This is where you can really see the market’s demand for a show.  If the ticket price is close to the full price, you know you’re in good shape.

And then look at the percentage.  Get a high average ticket price and a high percentage attendance, and you should be feeling pretty high yourself.

What’s Grosser Than Gross?

Not knowing what your industry’s grosses are.

At the first meeting of the Off-Broadway Brainstormers,, founded by the Executive Director of New World Stages,  Beverley D. Mac Keen (who is one of the most foreword thinkers I know), a proposal was made by now president of the League of Off-Broadway Theatres and Producers, George Forbes, to collect grosses from all currently running Off-Broadway shows, in an effort to truly understand our own economic impact.

It was one of those very simple proposals that made perfect sense.  How can we formulate budgets, contemplate theater sizes, etc. without knowing what our market bears.  Right?

Well, believe it or not, this idea met (and still meets) with resistance from some of my fellow producers.

The League and The Brainstormers came up with a great policy to address some very valid concerns:

– We made agreements with the ticketing companies so grosses would be sent directly to the League so no additional work would be required on behalf of the production.

– The grosses would be sent to one person at the League, and only three high-ranking individuals would have access to the show’s individual data, and would sign confidentiality agreements never to share the information.

– No show’s individual grosses would ever be released to any party.

– The aggregated data would also never be released unless a committee at the League approved of its use.

Despite all of these efforts to keep the data confidential and to install safeguards so that it was only used for the good of the industry, many producers still refused to allow their grosses to be reported.

Most simply say that they don’t want their grosses getting out to their competition.
I kind of understand this, but, uhhhh, remember the confidentiality agreements and the fact that only 3 people can access the data???  And that we’re not releasing an individual show’s data, but only looking at the combined results? 
Oh, and this is my favorite part . . . do these producers remember that these numbers are sent to unions every week?  ATPAM has a sliding scale compensation that is based on gross so they have to send them the numbers.  Most likely their show has an SSDC director on a royalty pool, which means that union is getting their information (and the director and the director’s agent, and his assistant, etc.).  If there was “competition”, wouldn’t the unions be the competition more than The League?  Add the advertising agencies (which we already know leak like the Titanic), box office personnel, managers, etc. to the list of people that already get grosses, and you’ve got more people who know your business than a public company!

I mean, really, are three more people who sign confidentiality agreements and work for the League going to all of a sudden open up your show to attention from the National Enquirer?  (If only!)

Sorry, but no one, other than the people trying to figure out how to solve the Off-Broadway problem, cares that much.

Sharing your grosses publicly (like Broadway shows do in Variety) is up for debate, and I’m not sure where I stand on that just yet, but sharing numbers in a private, protected environment for study and analysis is not only smart, it’s essential.  And just like your mom told you, it’s just plain selfish not to share.

What are people afraid of?  That we might see some low numbers?  Guess what, with all the Off-Broadway shows that come and go, I think we have a clue that you’re not doing so well.

And besides, we learn from the bad ones.  It’s just like learning to ride a bike. You learn more when you fall off than you do when you don’t.

So why do some of these very smart people choose not to opt-in to this program?  Look, I’m a control freak.  As an Off-Broadway producer, I’m not in control very often.  I think that most producers are just like me.  And they are refusing to release their numbers (even though they are released other ways), because it is one of the few things that they can control. 

If any Producers out there are struggling with this issue, let me know.  I see a therapist once a week to help me get over it and would be happy to give you a recommendation.  The industry will be better off as a result.

P.S.  What do you think of Broadway shows publicly sharing numbers in Variety?  I’ve turned my comments on, so comment away if you’d like (yes, even you Mom).

Trivia Time: Who Has Produced the Most Broadway Shows In The Last 20 Years?

Cameron Macintosh?  Disney?  The Weisslers?

Nope.

The Roundabout.

They’ve produced more Broadway shows than anyone.  More in one SEASON that most producers produce over two decades.

And they are a non-profit.  Coincidence?  Or evidence that a different economic model is what is needed to be a prolific producer.

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