Try to remember a more Fantastick investment.

Most articles about investing in the theater are all about how bonkers one has to be to put money in a Broadway or Off-Broadway show. Well, imagine my surprizzle when I read this article in the NY Times about the fantastic returns investors in the original Fantasticks have received over the last fifty radish-filled years.

The Times article details how the return of The Fantasticks has beat the S&P 500 over the last half-a-century, and helped one investor “put our three children through college.”

Some of my other favorite points in the article:

  • Smaller shows may make less in dollars than bigger shows, but the percentage return can be greater and the risk is lower.
  • The Fantasticks, one of the most successful shows of all time, had trouble finding investors, and struggled to get off the ground.  Its Producer almost closed the show on several occasions.
  • The original investors did it for love, not expecting great returns, just hoping “to earn our $330 back and get free tickets to a couple of performances.”

As I often tell my investors, goldmines like The Fantasticks are hard to find, but they are out there.  There is another Fantasticks, another Wicked, another August: Osage County being written right now (hopefully by one of you!).  If you learn the ins and outs of the numbers, only invest in what you love, and stay in the game for the long term, you’ll find one sooner or later.  (That’s the same advice famed mutual fund manager, Peter Lynch, would give you for picking stocks, by the way.)

Is investing in Broadway and Off-Broadway shows risky?  Yes.  I’m sure those original fantastic investors did what most producers encourage all their investors to do:  write a check that you don’t expect to see again.  But as I like to say, investing in shows is the riskiest investment you’ll love to make.

Congratulations on the anniversary, Fantasticks.  And thanks for being part of the data that demonstrates why entertainment should be considered its own asset class in everyone’s portfolio.

To read the NY Times article, click here.

Got 2.5 hours to see a reading? No. Got 20 minutes? Who doesn’t?

I’ve written about the difficulties of “selling” a piece in a typical reading scenario before (and that entry is actually one of the most read blogs – see the new list on the left hand side of the blog).  They’re in the middle of the day.  They are under fluorescent lights.  The audience’s iPhones are vibrating a hole through their pockets, etc.

And of course, one of the greatest challenges is that a typical musical reading is easily a three hour commitment for anyone attending.  That’s a good chunk of an audience’s very busy business day.

So what do you do instead?  I’m glad you asked!

I’m advocating the 20 minute lunchtime reading.  Give me a couple tunes, a couple of scenes and maybe a sandwich, and I’ll swing down, decide if the show suits my taste, and be back in time to make sure the paperwork on my desk hasn’t hit the ceiling.

You follow up, and if I liked it (and the odds are better that I will if I’m only seeing 20 minutes), you send a script and a demo, which I can go through on my own time.

Then you present a more complete reading a month later for the really interested parties and for the creatives, so they can get feedback on the flow, the development of the characters, etc.  (I did this for Altar Boyz, and based the concept on the NAMT model, and I got a great producing partner out of the deal.)

To put it a little more clearly . . .

When I walk by Auntie Anne’s Pretzels on 8th Avenue, they’ve always got this nice employee out front offering free samples of a pretzel bite.  I may not have time to go in the store and pick up a full size, but I can certainly do a grab and go . . . even if I’m on my way to lunch!

And in that one bite, Auntie Anne succeeds in whetting my appetite.  And when I do have time, I’ll go far out of my way for an original with salt and a side of cheese.

How Korean producers raise money for their shows.

I “broke toast” with a Korean theater producer this morning.

As with most conversations I have with fellow producers, the topic turned to raising money.

We compared strategies, types of investors, and why it’s easier to raise money for one high risk project than several low risk projects in a blind pool (answer: theatrical investing is like investing in art.  Investors want to see what they’re getting.  They want to love it because they think its value will increase, yes, but also because they think it’s beautiful enough to hang in their house.  Blind pools and/or funds don’t give them that tangible opportunity).

Just when I thought what we did was identical, he said to me, “And of course there are the ticketing companies.”

I choked on my rye.

He explained that the ticketing companies in Korea were always willing to throw money in to his ventures, because they knew they could recover some of that investment on the ticketing side, even if the show didn’t work out.  They were always good for it.

I have to admit, for a brief moment between my OJ, I wondered if I could grow to love Kimchi and move to Seoul.

Imagine if all bets were off when you walked into a venue here in NYC and you could cut any deal you wanted.  You got to pick your own ticketing company, your own concessions company, your own Playbill, etc. just like you pick your own costume shop, merch company, etc.  Imagine the leverage you could have and how much easier it would be to fund projects (I also have to believe that the quality of those services would increase because of the increase in competition).

This quid pro quo investing happens here on some level, with merch companies mostly.

I’d expect it more often, especially if risk increases, capitalizations increase, and investment dollars shore up.

And don’t be afraid to use quid pro quo when you can.  As a Producer, remember, you’re building a business that people are going to benefit from. Asking those that benefit most to shoulder some of the show’s risk is more than appropriate.

Just don’t be surprised if they tell you to go eat a plate of Kimchi.

Need more tips on how to raise money for your project?  Click here to read all my best practices.

Are investors from the UK smarter than investors from the USA?

A faithful reader who I’ll call Bruce (because that’s his name), sent me this article that recently appeared in the general news section of the London Evening Standard.

The article is about a flood of investment money that went into the theatrical market this summer.  Why?  Apparently, there are some savvy investors over there who have realized that the theatre just isn’t as risky as it used to be, when compared to other investment vehicles.  Sure, it’s still a gamble, but if the last twelve months have taught us anything it’s that there is no security that’s a sure thing.

I’ve been caught saying this a few times recently:

“The one positive thing about an economic crisis like this is that it forces us all to get smarter.”

That’s not true.  I lied.  There are two positive things.  The second positive thing about an economic crisis like this is that it makes investing in the theatre look so much more attractive than it was.

Read the article here.

And thanks again, Bruce.

If you’ve got an article, YouTube clip, or harebrained scheme that you think the rest of The Producer Perspective readers would enjoy, email it to me.

How to invest in a Broadway show. Part II

Yesterday, we dispelled some of the rumors associated with investing in Broadway shows.  Today, we’ll step through my checklist of how to decide whether or not to invest in a particular Broadway or Off-Broadway show.

BROADWAY INVESTING RULE #1:  Have passion for the project.
Broadway shows are often referred to as the “children” of Producers and Investors.  Shows need the same type of care, hand-holding, and unconditional love.

So much love, that even when your kid F***s up royally, you (as the parent) will still love him, right?

Unfortunately, the odds are that your “kid” is going to disappoint you, so you better make sure that your bond is so tight that you won’t care either way.

This theory is based a bit on famed investment guru Peter Lynch’s theory of “invest in what you know.” Peter believed you should put money into companies that make products which you see and use every day (and products that you can’t live without).  I believe this should be adapted to entertainment investments as well.  Invest in shows that you can’t see NOT happening.  Invest in shows that you believe are important to be seen; whether that’s because it has a socio-political message, whether that’s because it features an amazing performance by an legendary actress, or whether that’s because it’s so much fun that the audience’s day will be better just by experiencing the show.Invest in shows that you love.

BROADWAY INVESTING RULE #2:  It’s all about who’s driving the boat.
Before investing in a mutual fund, Wall Street geeks will tell you to look at a variety of factors, one of the most important being who is managing the fund.  You’ve got to know who is making the day-to-day decisions.  What is their track record?  Where did they learn to do what they do?  How long have they been doing it.

These are all questions you need to ask before investing in a Broadway show.  Look at the Producer’s resume (you can find them all on the Internet Broadway Database (www.ibdb.com).  Have they produced shows that have recouped?  How many hits do they have?  How many misses?  Would you have produced similar shows?  Do you have similar tastes?Choosing to invest with Producers with a proven track record is one of the best ways you can reduce your risk when investing in a Broadway or Off-Broadway show.

BROADWAY INVESTING RULE #3:  Just like an actor, you have to know your objective.
What do you want out of investing in a Broadway show?

Different objectives will greatly affect what project you choose to do.  Do you want to make money?  Do you want to get access to opening night parties, etc. so you can network?  Are you looking to get inside access to agreements and figures, etc. so you can learn more about how to produce your own show?  Do you want to support the work of a specific playwright?

One of my favorite “objective” stories is about the investor who was thinking about graduate school as a way to learn how to produce.  They decided against it, and took the money they were going to spend on tuition and invested it in several shows.  They thought there was more to learn by playing the game.  Last I heard, they were doing pretty well and beating the odds. There are a zillion reasons to invest in a Broadway show.  Make sure you have at least one.

BROADWAY INVESTING RULE #4:  Don’t try and be a one-hit wonder.
We all want our first time to be perfect (I even wrote a show about it!), but often our first time out isn’t what we hope it will be.  Don’t expect to knock one out of the park your first time up at bat.  When signing up to invest in Broadway, imagine that you’re a baseball player playing a full nine innings.  If you strike out the first time (or even the second and the third) don’t worry, you could hit a homer in the bottom of the 9th and win the game. If your first show doesn’t make it, have a post-mortem with yourself (and with the Producer) and try and determine why it didn’t work. Learn from it, and apply those lessons to your next time up at bat.  Your odds of success should get better each time. Just don’t pull yourself out of the game.

BROADWAY INVESTING RULE #5:  Examine the lay of the land.
It’s impossible to time the market.  But, in a playing field as small as Broadway, with its limited audience, it’s important to take a look at your potential competition.  Are you doing a new musical at a time when six other new musicals are opening?  How do your stars match up against the other shows’ stars?  Are you the only classic play?  Are you the only comedy?  The big TV networks program their seasons so they can appeal to all of the appropriate demographics, without too much weight on one type of show.  Since Producers are mostly independents, we can’t program collaboratively, but as an investor you can look to see if your show is going to get lost in a sea of other similar shows, or if it will stand out amongst a lack of competition, without having to place $125k New York Times full page ads.

 

So there you have it!  The above are the first five basic questions I ask myself when contemplating investing in a Broadway or Off-Broadway show.  There are countless others you should ask when you get into the details of the production after you examine the budget, find out who’s directing, etc., but these will get you started on the road to investing in a show. You’ll notice that a lot of the above rules and checklists are very similar to the rules and checklists for investing in the stock market or any market (invest for the long haul, know your objectives, risk tolerance, etc.).  And that’s the most important thing to remember. Too many people think investing in Broadway is a hobby, which it can be, and in those cases you’ll probably only hit a winner on the average 1 out of 5 times. Broadway is big business, and should be treated as such.  And if you apply the same principles you’d apply to other investment vehicles and do the due diligence, there’s no reason you can’t turn that hobby into something that is fun, educational, and yes, even profitable.

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