I’ve got the mouse on my mind.

I was looking at a bunch of different Broadway budgets recently and I wanted to compare the budgeted breakevens with what the market was currently bearing.

I wanted to see what shows were grossing over $700k, even in the tourist-free winter months, so I flipped open my Variety and here’s what I found:


Broadway Grosses w/e 02/10/2008
Wicked                            $1,310,705
Jersey Boys                     $1,127,362
The Lion King                      $962,925
The Little Mermaid              $889,942
Mary Poppins                     $731,687

What’s interesting about this?

The mouse has 3 of the 5 shows above $700k.

And this list looks very similar if you look at the week before.  And the week before that.  AND the week before that.

Leverage works.  So well, in fact, that it’s a little scary.

You know what else is interesting?

Of these five musical behemoths, only 2 got good reviews from the New York Times.

It’s not the size of your lever.

A little Pumbaa told me an interesting tid-bit recently:

During the first week of performances of the national tour of The Lion King in each city, the local ABC affiliate does a half-hour television special on the arrival of the show, featuring interviews with cast members, a behind the scenes look at the costumes and scenery, etc.

It’s a half-hour commercial that doesn’t look like a commercial, because it “teaches” the audience about the show in a news format.

How come everyone doesn’t do this?

Well, maybe it’s because not every Producer owns a television network.

Yep, in case you didn’t know, Disney owns ABC.

Ahh, the wonderful world of leverage.

Don’t get depressed because you think you’ll never have a list of subsidiaries longer than the lines at Space Mountain.

There are all sorts of levers out there of various shapes and sizes:  restaurants, limo companies, charities, dentists, etc. Anywhere that has a consumer base similar to yours.

Your job, find a partner that can benefit from promoting you and vice-versa.

You’ll find it much more economical, and the promotion will actually mean more to the consumer, because it’s comes from a vendor that already has their trust (like a news station).

So until you own a television network, find a way to exploit the levers that you do have or go out and find a few.

Because leverage is supercalifragilisticexpialidocious.

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.

I’m gonna have people start calling me Kenneth . . .

Only so there’s the slight chance they’ll confuse me with this Kenneth . . .

 

The story for Kenneth Cole started four years ago when savvy
designer Kenneth Cole had a bright idea. After lining up factories, and
going to Europe to design a collection of shoes, his idea was to borrow
a 40 ft truck and park it in midtown Manhattan during the weekend of
the big Shoe Show and sell out the back of the trailer. At the time, a
shoe company had two options. One was get a room at the Hilton and
become 1 of about 1100 shoes companies selling their goods. Kenneth
Cole did not feel like it provided the identity or image he felt
necessary for a new company, plus it cost a lot more money than he had
to spend. The other way was to do what big companies were doing and get
a fancy showroom in the Midtown Manhattan area not too far from the
Hilton. This was even more expensive. So the idea of selling out of a
truck made sense to him.

He called a friend in
the trucking business and asked to borrow one of his trucks to park in
Midtown Manhattan. He said sure, but good luck getting permission.
Kenneth Cole then went to the Mayor’s office and asked how one gets
permission to park a 40 foot trailer truck in Midtown Manhattan. The
Major said one doesn’t. The only people the city gives parking permits
to are production companies shooting full length motion pictures and
utility companies like Con Ed or AT&T. So that day all the company
letterhead was changed from Kenneth Cole, Inc. to Kenneth Cole
Productions, Inc. and the next day they applied for a permit to shoot a
full length film entitled “The Birth of a Shoe Company.”

With
Kenneth Cole Productions painted on the side of the truck, they parked
at 1370 6th Avenue, across from the New York Hilton, the day of shoe
show. They opened for business with a fully furnished 40 ft trailer, a
director, models as actresses, and two of New York’s finest,
compliments of Mayor Koch, as our doormen. Kenneth Cole sold 40
thousand pairs of shoes in two and a half days (the entire available
production) and we were off and running.

Ever
since then, the company has grown from a shoe company to a global multi
line entity making not just shoes, but also handbags, apparel and
accessories. Kenneth Cole product can be seen worn by celebrities such
as Jessica Alba, Carrie Underwood, Charlize Theron, and much much more.  (www.designerathletic.com)

Wow.  Now that’s how you kick off a kompany, Kenny.

And doesn’t it just make you want to kick yourself?  Because the idea seems so simple, so obvious, so right for a fashion company.

It’s the kind of idea that just makes cents.

For more on Ken’s story, read here.

Oh and here’s a question . . . how many people do you think laughed at Ken when he told them about this idea?

You know what I think?  Explorers and pioneers, no matter what industry you’re in, whether it’s shoes or show business, are like comedians.

When people laugh at you . . . you’re on to something.

Favorite Quotes: Volume III

“There are potentially more talented writers and directors than I working in shoe stores and Burger Kings across the nation; the difference is I was willing to put in the nine years of effort and they weren’t.”
– 3 time Academy Award nominee, Frank Darabont

This blog should be categorized under REALLY favorite quotes, because the quote is such a good one.

How many people do you know that say, “I’ve got this great idea,” and nothing ever happens with it.

How many people do you know that criticize other’s people’s work, always saying how they could do better . . . but they never do.

I bet you know lots of people like this.  I bet, at times, you’re even one of them.

I know I am.

It’s hard not to be one of those people, because it’s so much easier to sit back, watch an episode of American Idol, and let someone else do the hard (and scary) stuff.

So what’s the secret to becoming more like Frank?

Sorry, no over-priced pharmaceutical can help.  No Tony Robbins-style self help book is gonna do it either.

You just have to keep promises to yourself.  You keep them to your boss, right?  You keep them to your husband or wife, right?  Why, because you “have to”?  Why not keep them to yourself for the same reason.

The next time you say you’re going to do something, shut off the American Idol and start.  There’s always Tivo.  You can always watch it later.  When you finish.

Ironically, Idol started as just an idea once.  A pretty simple one, actually.  And I’d bet a bunch of other people in shoe stores and Burger Kings had the same one (Ooooooh, I bet they are bitter now!).

I’d keep writing now, but I have to go.  I promised a good buddy of mine that I’d do something for him.

To read the article that Frank wrote that contained the above quote, click here.

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