Cinderella Recoupment?

[ucjrdude902]

Posted: 8/26/13 at 11:00am

Wondering if anyone knows the originally investment and what the weekly running cost is?

[bdn223]

Posted: 8/26/13 at 12:44pm

15 million and the general consenus on the boards is a running cost of $700,000-$750,000. So Cinderella has recouped anywhere from 50%-66% of its initial investment. If Cinderella's grosses remain somewhat consistent it will likley recoup by the time this seasons Tony Award nominations are announced (May).

[AEA AGMA SM]

Posted: 8/26/13 at 1:14pm

I would imagine the show will see a significant bump in grosses during the holiday season, so it could potentially announce even sooner than that (not sure if you took that into account bdn, and don't feel like doing the math to double check your work).

[averagebwaynut]

Posted: 8/26/13 at 4:20pm

bdn -- not sure I'm in agreement with your math.

As you know, the figures reported are Gross Gross. Actual net figures will likely be around 91% of Gross Gross (rough average). That gives the show net revenue of around $28.5M. Let's say $725K weekly operating costs (pro-rated for weeks of less than 8 performances) gives them expenses of at least $21.9M. Which would leave profit of $6.6M, which isn't even 50% of the assumed $15M capitalization.

What that doesn't factor in is that while $725K is a hypothetical average weekly breakeven figure, 1) there is higher theatre percentage rent at higher grosses and 2) the percentage royalty obligations almost certainly increase at higher grosses.

For theatre rent, let's assume it's 6% of gross (though it's likely 7%). That means on a net gross of $1M, you have to add at least 6% x $275,000 = $16,500 above and beyond what is covered in the $725K.

For percentage royalties, let's be generous and reduce the minimum weekly operating expenses all the way to $680K (using the low-end $700K figure you cited for breakeven, less a guesstimated $20K (at least) for minimum guaranteed percentage royalties). But then let's also assume that the percentage royalty recipients get a total of 35% of operating profit (inclusive of minimums paid). The show hasn't -- to my eye -- played a losing week yet, so even if royalties are paid out using a 4-week cycle calculation, that shouldn't impact our math.

By that calculation, the show has $28.5M net gross against somewhere around $23.5M in expenses, leaving around $5M in profit, or 33% of the $15M capitalization.

There is certainly plenty of room for variance -- for example, if they've paid royalties based on gross (instead of profit), they may have saved a bit of money given how high their grosses had been for a while (but that could come back to bite them later). And perhaps there are favorable pre-recoupment deals that help them even more.

But my best guess based solely on the published numbers and knowledge of "typical" deals is that they've earned back around 30-35% of their money to date.

[ClaraJohnson]

Posted: 8/26/13 at 6:37pm

averagebwaynut, thank you for the fascinating and educational post! I was just reading about how grosses are reported and very interested in how the Broadway League changed their reporting method a few years back to start reporting the 'gross gross' as opposed to the 'net gross.'

[charliebrown5]

Posted: 8/26/13 at 10:41pm

Robyn Goodman, the main producer, stated in an interview in March 2013 that the show cost $13 million.



Theater Talk @ 1:55

[Wynbish]

Posted: 8/26/13 at 11:48pm

Has Rock of Ages still not recouped?

[ggersten]

Posted: 8/27/13 at 12:03am

Rock of Ages reportedly has recouped. April 23, 2013 posting on TheatreMania of an interview with Matthew Weaver contains this:

And you finally recouped.

MW: We finally did! Let the chest bumping begin.
Rock Recouped

[Liza's Headband]

Posted: 8/27/13 at 12:31am

"the general consenus on the boards is a running cost of $700,000-$750,000."

Color me naive or just plain ignorant but where did this number come from? $750,000 seems awfully high to me when you consider that there are no major special effects; the 'magic' they perform on stage is not complex or expensive. I would imagine the $650,000 range to be much more realistic. Then again, what do I know.

[AEA AGMA SM]

Posted: 8/27/13 at 12:55am

$750,000 a week means they would have to hit 46% of their gross potential each week. This seems like a realistic number for the producers to have set. I would imagine that most producers would budget their shows so that their weekly nut would be somewhere between 40-50% of the gross potential.

They do have a lot of costs that you might not think about. It's a large show, both in terms of numbers of people (cast, crew, production staff, and orchestra). Salaries of course add a lot to that, but then you also have the line items that most of the public wouldn't necessarily think about, like the health and pension contributions paid out to the various unions. I would also venture that their insurance premiums are a touch higher than a number of other shows (it's amazing to see how much that can jump once the actors are doing anything that would require extraordinary risk payments, such as flying or being on the stilts in the tree monster costume). And I would also guess that the wardrobe and hair departments have a good number of day work calls to maintain everything, which of course can be a significant addition to the running costs.

[RaisedOnMusicals]

Posted: 8/27/13 at 9:32am

A friend of mine has a small amount of money in the show, and he told me that according to the investment prospectus, the show was capitalized at $12.5 million. I did not ask about the weekly nut as it was not a question I was comfortable in asking. (as in none of my business.) The capitalization was different in that it's been discussed publically.

And I was extremely impressed with the amount of information related by averagebwaynut. Sounds like a very nkowledgeable investor (or producer.) Thanks!

[suestorm]

Posted: 8/27/13 at 10:33am

a big decision will be made when its time to resign the cast. Laura and Santino im sure have tons of options, so they will not be able to lowball them

[Liza's Headband]

Posted: 8/27/13 at 10:35am

Thanks, AEA. I understand all of that. It just seemed high to me for this particular production. I'm trying to compare it to other recent musicals that I did know the (verified) nut but no one production is the same. Perhaps there is more to CINDERELLA than I realized

[theatregeek6]

Posted: 8/27/13 at 11:50am

averagebwaynut

That is exactly the kind of reply that makes me come to this board. Really indepth and clear.

thanks

[Amalia3]

Posted: 8/28/13 at 10:03pm

Definitely interesting. But I'm still unclear as to the difference between gross gross and net gross. Sorry to be such a dummy.

[Yero my Hero]

Posted: 8/29/13 at 11:33am

Gross gross is the pure amount of ticket sales income. There is a certain percentage, however, that the producers never see because it is taken right off the top, like credit card fees. The remaining amount of money that actually goes to the producers is known as the net gross and used to be the number that was reported until the League changed it.

[averagebwaynut]

Posted: 8/29/13 at 4:01pm

Just to elaborate a bit on Yero's note:

4.5% is deducted from all gross sales right off the bat. That's the Burton Turkus Award which replaced the Admissions Tax on theatre tickets. You can read more about that here: http://www.theproducersperspective.com/my_weblog/2010/09/who-the-furkus-is-burton-turkus.html

Then, as Yero notes, credit card fees of 4% are deducted. The Telecharge houses (Shubert/Jujamcyn) and Ticketmaster (Nederlander/Disney) assess these charges differently but it's worth nothing that the actual fees charged by the credit card companies are less than 4%. So quite simply, this is a profit center for the theatre owners.

Since the vast majority of theatre tickets are bought using a credit card, that's 8.5% that is being deducted from the gross income of nearly every ticket.

There are a smattering of other small fees that apply to most tickets -- per ticket printing fees, League dues (a charge per paid admission). And there are a handful of percentage commissions that only apply to some of the tickets sold for any given performance -- group sales commissions, gift certificate redemptions, et al. On a cumulative weekly basis, those extra bits and pieces can add up to anywhere from 0.5% to maybe 1.5% at most (unless it's a very, very heavy group show).

So as a rule, the difference between gross and net will typically be 8.5% - 10%. In my earlier post, I used 9% just to keep the math simpler, but anything in that range is reasonable.

[Yero my Hero]

Posted: 8/29/13 at 4:53pm

Thanks! I knew there was more than just the credit card fees, but I could not remember what it was.

[jnb9872]

Posted: 8/29/13 at 5:52pm

Very enlightening thread. Thanks for the knowledge!

[RaisedOnMusicals]

Posted: 8/30/13 at 10:32am

Very enlightening, and it's clear to me that averagebwaynut has a real, probably first hand knowledge of the "business" of the theater, either as a producer, an investor or both. So I will ask him a question I've been curious about for quite a while: Do producers, especially lead producers, generally invest their own money in a show? I do know that the "sub-producers", who produce nothing but investors, do or don't, depending on their own circumstances and their own confidence in the potential of the show's success.

[Yero my Hero]

Posted: 8/30/13 at 11:28am

I know you didn't ask me, but I think it varies depending on the producer and their business style. I know producers who say they always invest their own money, because how can they convince investors to put in money when they apparently don't trust their project enough to risk their own money?

I'm sure there are producers out there who do things a different way.

[Amalia3]

Posted: 8/30/13 at 12:33pm

Thank you so much for the details. It seems to me that the theatre owners are making money on all sides, no? I wish I were a theatre owner.

[averagebwaynut]

Posted: 9/1/13 at 7:59pm

Not too much to add to what Yero said. In short, it depends on the producer and it depends on the project.

A lead producer who has a hot property may simply *want* to invest his/her own money in the show because it's another income stream when the show succeeds. I have no first hand knowledge, but it would not surprise me to find out that the lead producer of "Betrayal" and "Raisin in the Sun", or the lead producer of "Lucky Guy", or the lead producer(s) of "A Steady Rain" put their own money in the show.

Then again, a lead producer with a property like that could also choose to avoid all personal risk -- since if the show is a smash hit, that producer still has a sizable up side without investing anything at all -- and instead use the opportunity to court relationships with other producers and offer them pieces of the show. For example, if you've allowed people to invest in your "Book of Mormon" or "Merchant of Venice", it's easier to come back to them later and ask them to invest in "The Testament of Mary" or "The Anarchist".

Just an aside, there are also producers who sometimes tie two shows together -- one with more solid prospects and one with greater risk. The pitch goes "invest in my risky show and I'll let you invest in my nearly sure thing". Of course, there are no sure things and the money in lost in failure on one is not always so simple to make up for even with the success of the other. But it does sometimes work as a sales pitch.

And as noted above, there are some producers who always put some money of their own into the show purely on principle. May not be a lot, but they like being able to represent to all of the other co-producers and investors that they too have a financial risk. Helps promote a certain solidarity and trust (even if the amount of personal capital at risk may sometimes be minimal).

Also remember that a lead producer's development costs are often folded into the capitalization of a show. If those expenses are not reimbursed back to the producer, they can be converted by the lead producer into an investment in the production. So if a producer has spent, say, $50,000 developing a production of a new play (author option payment, casting expenses, etc), they can decide to leave that in the show and make it an investment. They would have spent that anyway even if the show didn't happen (it's the cost of being in the producing business), so in some ways, it's not "new" money that they're actively investing. But they become investors nevertheless.

So as a general rule -- and with the understanding that there are exceptions and a myriad of variations -- I'd say yes. The lead producers on most projects do have some monetary investment in their productions.

[Jonwo]

Posted: 9/1/13 at 9:26pm

Wasn't Max Bialystocks rule number 1 was never invest your own money in a show i imagine that film companies like Disney or Universal don't have outside investors and maybe a producer like Cameron Mackintosh but I imagine even successful producers like Kevin McCollum, Sonia Friedman or Scott Rudin still use investors because Theatre is risky and I imagine many wouldn't want to risk it in case it flopped.

I believe Cameron Mackintosh did invest his own money into Mary Poppins but he would have gotten royalties anyway even if he hadnt since he owned the stage rights rather than Disney.

Updated On: 9/1/13 at 09:26 PM

[averagebwaynut]

Posted: 9/1/13 at 10:10pm

Just to be clear, the question was about whether lead producers invest their own money at all so that's what my comments addressed.

To Jon's comments:

-- Disney does not typically use outside money, except if it's a co-production (as in the case of Poppins). They're very much the exception to the rule both because corporate accounting for a company as big as theirs is so wildly different from typical Broadway show accounting, and considering that the capitalization of one of their shows is a pittance compared to what they spend on films or take in over the course of a month (or even a week!) at one of their theme parks.

-- I'm nearly certain that Cameron still uses outside investors (in addition to his own money) but those investors are not credited (either because the amount of their individual investment is not enough for them to insist or because Cameron simply doesn't give them that choice).

-- Rudin and Friedman use co-producers (to invest/raise) and outside investors regularly.