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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What’s grosser than gross?

Why gross gross of course!

In yesterday’s box office gross posting, I alluded to a change in the box office figures as reported by the League.  After six months of deliberations about the reporting of grosses, including the fundamental question of whether or not they should be reported at all (yes, they should, btw), the League made some modifications to its policies.  Here are the basic changes:
  • Figures reported will now be “gross gross” rather than NAGBOR (Net Adjusted Gross Box Office Receipts).  The NAGBOR totals were after credit card deductions, group sales commissions, and a whole lot of other expenses from ticket printing and so on.
  • Total Attendance will now be what I’m calling Total Total Attendance.  Rather than just report paid attendance, the TT Attendance will include any and all complimentary tickets.
What does this mean?  Well, it doesn’t take a David Merrick to know that grosses and attendance are about to go up.
Bigger numbers are always better, and this will enable us to present our industry as an even bigger economic force.  The deductions that come off the Gross Gross vary per show, but it can easily be 10%+ of the total.  Another 10% tacked on to last year’s season’s totals would have put us well over 1 billion buckaroos.  In a year when we’ll be lucky to see an increase, and in an era when our flat lining gross could have put that billion dollar mark well out of our reach for another decade, modifying this reporting virtually guarantees that we’ll get there.
And why shouldn’t we?  As the League has rightly justified, this change puts us in line with other industries, most notably our big brother, Hollywood.  Do you think Hollywood’s grosses are reduced by every credit card surcharge from Fandango?  Nope.  And what about sales of video games, books, etc.?  In fact, I can’t think of any industry, entertainment related or not, that would reduce their sales by credit card service fees?  Do you?  And if there is one, they should change that up pronto.
The attendance modification, while not as justifiable as the reporting of the Gross Gross, still makes sense to me.  Frankly, the release of numbers in any private industry depends solely on how that industry wants to present itself, and the League has decided that the number of bodies present rather than just the number of paid bodies present is a better number to show.  Does it make us look better?  You bet.  That’s why press is all about.  Think about it this way, if you had to give a presentation to a big group of people, wouldn’t you comb your hair, put on some makeup, and make yourself look as good as possible so you would make a good impression?
For those that feel they’re getting an artificial financial perspective of the figures, don’t worry, the average paid admission is still being released, so you’ll still be able to get a sense of the ‘value of the experience’ for those Total Total attendees.
The only thing that concerns me is the inability for us to compare year over year over year of figures. Thankfully, the League has made some adjustments to last year’s figures, but any comparisons beyond that will be skewed.
But, the change had to be made, and so it was.  To those whose feathers may be ruffled, I ask them . . . if it had been this way from the beginning, would you have ever thought it to be odd?
And more importantly, would you ever have asked for it to be changed?
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