#51
Posted: 9/11/12 at 11:54pm
Two small points:
bk: it's not just the last decade. It's been happening for at least two decades (which I can attest to first hand) and likely a lot longer (which I can attest to second hand). Merrick and the others spent money on shows long before they were fully capitalized too. The differences were a) the economics (even adjusted for inflation, shows weren't as costly so 25-30% of capitalization meant a much lesser sum than $4.5M if it suddenly dropped out); b) the major producers then were true producers with substantial financial means of their own and not just fundraisers and/or fundraisers who partnered with other fundraisers. If need be, they could and would cover shortfalls with their own money. But their spending habits were no different.
CapnHook: actually, the latest date that a show can typically be fully capitalized is Opening Night. You're correct that most shows set the deadline at no later than first rehearsal. But some set the deadline only as of 1st preview. And still others set the deadline as Opening Night. As long as the deadline is fully disclosed in the Operating Agreement of the entity formed to produce the show, and as long as the show can sustain operations on a cash flow basis without all of the cash in hand (which it sometimes can if it's only a small amount missing since part of the capitalization is often a reserve that may not be spent anyway), there's nothing stopping a producer from waiting that long to have cash in hand. Of course, if the show never makes it to performances and the producers have spent investor money and the investors have not waived their right of refund, the producer is liable to repay the money. So there's certainly a great risk. But in and of itself, the deadline can actually be quite a bit later than first rehearsal.
bk: it's not just the last decade. It's been happening for at least two decades (which I can attest to first hand) and likely a lot longer (which I can attest to second hand). Merrick and the others spent money on shows long before they were fully capitalized too. The differences were a) the economics (even adjusted for inflation, shows weren't as costly so 25-30% of capitalization meant a much lesser sum than $4.5M if it suddenly dropped out); b) the major producers then were true producers with substantial financial means of their own and not just fundraisers and/or fundraisers who partnered with other fundraisers. If need be, they could and would cover shortfalls with their own money. But their spending habits were no different.
CapnHook: actually, the latest date that a show can typically be fully capitalized is Opening Night. You're correct that most shows set the deadline at no later than first rehearsal. But some set the deadline only as of 1st preview. And still others set the deadline as Opening Night. As long as the deadline is fully disclosed in the Operating Agreement of the entity formed to produce the show, and as long as the show can sustain operations on a cash flow basis without all of the cash in hand (which it sometimes can if it's only a small amount missing since part of the capitalization is often a reserve that may not be spent anyway), there's nothing stopping a producer from waiting that long to have cash in hand. Of course, if the show never makes it to performances and the producers have spent investor money and the investors have not waived their right of refund, the producer is liable to repay the money. So there's certainly a great risk. But in and of itself, the deadline can actually be quite a bit later than first rehearsal.
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