Musicals are expensive to run (weekly nuts)

EDIT: BWW forum update has removed a lot of my formatting (e.g., paragraphs). Ignore the clumsiness.

It just occurred to me that it is easy to calculate the actual average weekly nuts of shows that have announced recoupment when we know their initial investment, with the following two assumptions:

• Producers announce recoupment very shortly after actually recouping

• A show recoups because its box office receipts minus a certain amount of expenses per week equals the initial investment, and this amount per week is the 'weekly nut'. And I assume that if a show does not meet its weekly nut, that loss is added back to the money it has to recoup (e.g., If MEMPHIS in total lost 20k before it won BEST MUSICAL it had to recoup back its original investment plus the 20k it lost from simply running).

• I've taken 9% off the grosses for tax, thanks Mikem

• My % of "gross potential" figures should be considered +/1 about 4% because I wasn't too precise with this particular calculation. I find the financial aspects of Broadway shows interesting, so I am going to post some random thoughts and knowledge I have found in case anyone else is interested. Looking at some shows that have recouped, there are some interesting surprises here.

1. The Book of Mormon (still running) The Book of Mormon is expensive to run. According to the NYtimes the investment was 11.4 million, and it recouped approx. November 29th 2011. For it to only generate 11.4 million dollars of profit in 42 weeks of performances it must have had an average weekly nut of 768k. This is higher than I would have imagined, and approximately 75% of the “gross potential”. Interestingly, this is far above the “50%” number that is thrown around here – and there was a month of initial performances where they likely lost a substantial amount of money ($400k) (I am adjusting the weekly nut pro rata for the number of performances cause they didn’t start with a full 8, which is likely not a perfect estimate but it’s all I can do at the moment).

2. Wicked (still running) Wicked is (was) also expensive to run back in 2003. Because of inflation and increased salaries, it is likely even more expensive to run now. According to the NYtimes the investment was $14 million, and it recouped approx. December 21, 2004. For it to only generate $14 million of profit in 63 weeks of performances it must have had an average weekly nut of approx.. 872k. This is approx. 77% the gross potential, and once again far above the “50%” number that is sometimes thrown around here.

3. Pippin (still running) Pippin is also surprisingly expensive to run. According to the NYtimes, the investment was $8.5 million, and it recouped approx.. December 2, 2013. For it to only generate $8.5 million of profit in 38 weeks of performances it must have had an average weekly nut of 592k. We are a bit closer to the 50% number now, at around 65%. Interestingly, it also suggests that if the weekly running cost of Pippin has not reduced substantially, they could be in trouble for the future.

4. Once (still running) According to the NYtimes, the investment was $5.5 Million, and it recouped approx.. August 13th 2012. For it to generate $5.5 million of profit in 24 weeks it must have had an average weekly nut of $508k. This is approx.. 54% of the potential grosses over this period, so here we can see it was an indeed accurate rule of thumb. Once could be in trouble.

5 Kinky boots (still running) Kinky boots recouped $13.5 million in 30 weeks. Its nut must have had an average of 752k per week (approx. 57% gross potential)

6. Memphis (closed) Memphis was an interesting show because it only just recouped when it closed after three years! According to NYtimes it costs $12 million. For it to generate $12 million in profit in 150 weeks it must have had an average weekly nut of approx. 548k. Interestingly, this is almost exactly 50% (52%) of their gross potential, which is consistent with the 50% rule of thumb. It’s also such an interesting risk the producers took, which paid off. The show likely had not even covered its weekly operating costs until it won the Tony Award for best musical. In fact, the show may not have made its weekly nut for 30% of the weeks it was open.

7. next to normal (closed) The story of next to normal becoming a hit is so nice. To get back 4 million in the time it did Its weekly nut on average must have been 260k* (approx. 46% of gross potential) - surely one of the cheapest musicals to ever run on Broadway. It likely didn’t reach its weekly nut for 6 weeks after previews started. The choice to bring in replacements instead of close was an interesting risk. They may have lost money for 9 of the 25 weeks after the replacements came in (although they might have been able to reduce costs without Tony Award winner Alice Ripley). However, a few strong weeks throughout and particularly at the end of the run meant in total they could have made a profit of 822k for the total replacement run (785k (95%) of which in the final 6 out of 25 weeks), at the same time exposing another approximately 120,000 people to the show and brand. A very smart decision to close when they did. * This is consistent with a NYTimes article that says their weekly nut was "early to mid 200s". What about shows that haven't made a profit?

8. Matilda (still running) According to independent.co.uk Matilda's capital was $16 million. For Matilda not to have recouped yet, its weekly nut must be over 800k (over 68% potential gross) No wonder ticket prices are so expensive. Broadway shows are so expensive to run. The data also suggests we should be cautious with the 50% rule. It can be true, but it can also be substantially different.

UPDATE: I estimate Matilda's average weekly nut is about 838k. They've had a few rough weeks as of late. It also makes weekly nut 71.50% of (91%) of their gross potential. Very expensive show to run. This is despite a NYtimes article when it first opened claiming the weekly nut was down at 600k: http://www.nytimes.com/2013/03/24/theater/matilda-arrives-on-broadway-with-big-dreams.html?pagewanted=all&_r=0

9. Follies revival (closed) According to the NYPost FOLLIES had a weekly nut of approximately 600k (which seems quite cheap looking at the other shows, although it was a few years ago now). GIven this, It likely only lost money 2 out of the 27 weeks, but didn't run long enough to turn a profit. It might have made back approximately half of the investment (3.5/7 million). The only chance they had to make a profit in that short timeframe were to hit a million dollars every week. I wonder "what if" It opened in a prime time (i.e., spring) and was open for the Tony awards. Maybe it would have then run to the end of the year and made a profit. Oh well.

10. A Gentlemen's Guide to Love and Murder (still running). According to the NYtimes, in 33 weeks they did not returned a single dollar of their investment. If we assume that they have at least broken even, I would estimate their average weekly nut to be about 457k, about 56% weekly potential gross (I think this is a conservatively low estimate because if they had a 1 million reserve they might be using it). If you graph their profit/loss it is clear that the Tony awards probably saved this show.

11. Fun Home

Fun Home has recouped in about 37 weeks. To be able to gross 5.25 million in profit during this time, its nut must be approximately 455k per week, which is somewhere around the 60% gross potential mark (rough). One of the cheaper shows on Broadway, but not pocket change.

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Updated On: 12/14/15 at 05:57 AM

Hi Mikem,

Thank you for that information - yes that explains it. I've now updated the figures taking 9% off the weekly gross amount for the fees and tax you describe for the dates they changed this (around March 2009 according to the Broadway League website). They seem pretty accurate now. For example, the next to normal 260k figure is quite close to the "low to mid 200s" running cost quoted in the Nytimes.

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Updated On: 6/16/14 at 08:14 AM

Some of those figures seem too high. Especially KINKY BOOTS, MORMON, and WICKED. I think your equation is close, but there seems to be 1 or 2 variabtions that you are not considering.

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Wicked seems about right but Mormon seems a bit high but then again, the royalties could be higher than the norm.

Billy Elliot was $800,000 a week in running costs so Matilda to have similar running costs is unsurprising.

Wicked seems about right but Mormon seems a bit high but then again, the royalties could be higher than the norm.

Billy Elliot was $800,000 a week in running costs so Matilda to have similar running costs is unsurprising.

The problem with this is that unless you are intimately involved with every single aspect of the production, or know one of the Producers, these numbers will never be accurate. CapN already mentioned "variables" and that's exactly what we have here.

You do not take into account holiday weekends, shortened weekly performances, and other scheduling adjustments that would dramatically shift or alter the weekly nut at least several weeks out of an entire run or year. Since you do not have access to the royalties agreement, it's also difficult to offer a full picture on the weekly gross. For certain weeks, creatives and/or writers will waive royalties in exchange for a higher licensing or mechanical (or DPD) license percentage. For certain productions, there may also be significant royalties paid to a licensor or publisher, as is the case in "Jersey Boys" for example, which could impact the weekly nut. What makes this even more difficult is that there are silent investors on Broadway and, yes, they do exist. They do not attend the pressers or the awards shows. They, too, would have to be accounted for in the weekly nuts.

It's a very impressive post and list but without insider knowledge, we'll never know the full story and we cannot paint a complete picture.

It is highly possible, and maybe even probable, that some of the figures are up to 40 to 60k off, though. That would still fall under your own classification of "approximate"?

Are Royalty Pools figured into this equation? It sounds to me like they're not... If a show is on a Royalty Pool formula (which I'm pretty sure every musical on Broadway is, at least those that have opened in the last ten years) then the creatives don't get a straight percentage of the gross, they split a pro-rated pool of between 35%-40% of the Weekly Net Operating Profits (WNOP) with the remaining 60-65% going to the investors. This means the weekly nut can change considerably week-to-week.

As a hypothetical illustration, let's assume our show MUSICAL!!! has fixed costs of $500K a week. Let's assume that in week 1, it grosses $800K. If the royalty pool pre-recoupment is 35% of WNOP, then that week they made $300K profit, meaning that $105K go to the royalty participants to be split (author(s), director, choreographer, designers, orchestrators, owners of the property the show was based on, producers, etc.) with the remaining $195K going to the investors. So the nut that week was $605K.

Week 2, let's say it grosses $600K. That means of the $100K net profit, $35K goes to royalty pool and the remaining $65K to the investors. So the nut that week was $535K.

Week 3, we shoot the moon. $1M gross. So of the $500K profit, $175K goes to the royalty pool and the remaining $325K goes to the investors. That week the nut was $675K.

Week 4, let's say we do terribly and we only make $500K. When that happens, everyone in the Royalty Pool gets a negotiated minimum (since there are no profits to share.) Let's say that the minimum royalty payments total $30K. So that week the nut was $530K and the show had a $30K deficit, paid for out of the reserve/sinking fund.

But - that's all too simple, right? So, this actually gets figured on four week averages. So for these four weeks of MUSICAL!!!, the grosses were $800K, $600K, $1M and $500K, for a 4-week total of $2.9M on fixed costs of $2M, for a total profit of $900K or an average of $225K WNOP. 35% of that goes to royalty pool, or $78,750.

Total nut for those four weeks: $578,750/week.

But wait, there's more! We don't know if any of these shows have been amortized. When you amortize, you add a certain amount of money that goes as a direct payment to the investors on top of all the rest of your expenses, which means you recoup faster. So, let's say MUSICAL!!! cost $10M to put up, and they amortized it at 2%. That means that in addition to the $500K fixed running costs, $200K will be paid directly to the investors as a way of getting their money back faster. When that happens, the royalty formulas are adjusted and there are additional payments, plus whatever money has been deferred by the royalty people gets paid back after recoupment plus an extra 25%. Producers make less money in the long run, but they get the investment back faster.

If that's the case, then fixed costs for the show are actually $700K a week. Without amortization, the investors have received $585K during these 4 weeks. With amortization, the profits are deflated $200K a week, but it goes directly to the investors.

So - unamortized, our WNOP was $225K/avg. With amortization, the WNOP was $25K/avg, which means the royalty pool gets the minimum ($30K/wk) and the investors get $800K over those 4 weeks. In that case, the weekly nut becomes $730,000 ($500K fixed, $200K amortization payment, $30K minimum royalty.)

Moral of the story, unless you see the specific financials of a project you're never going to better than a rough guess.

Also, don't assume that just because a show has announced it's recouped that it necessarily has. To quote Harold Prince from "The Season" when it turned out his office was inflating the road grosses for "Fiddler" in the late '60s, "No question about it. They caught us."

As Goldman points out, that's the most respected producer lying about a hit to goose his image. If Prince does that on "Fiddler", how can you believe anything these clowns today tell you about their shows?

Fun discussion. I think there are a lot of us budgety nerds around here.

That's interesting about the Royalty Pools. I'll admit that I've not kept close tabs on things the past couple of seasons, so I'm not surprised that there's some variation. As you say, though, it still becomes a variable cost.

Just curious, what do you think might be the reason that they did straight 2-4% rather than a pool (which is generally better for producers)? Were these more established creatives with more "muscle" who could demand more? Or do you think that it's a model producers are moving back to?

That would make sense that the royalty formula comes because of an earlier deal. Good for their agents for holding the producers to it.

Also, it occurred to me that recoupment announcements are often very vague about whether they've recouped the entire investment or just the direct production costs. At least a million of our $10M budget for MUSICAL!!! is reserve and bonds, meaning it's money that we need to have but not necessarily money that we actually spend. So we don't even know for sure how much money has actually gone back to investors.

bdn, another great point and observation that was not accounted for in the OP's estimates.

This is all fascinating. It's hard to believe ANY show can make it at these costs. bdn223, do you have any idea how much the average musical spends on advertising? I can see that being a huge drain on weekly numbers....

I always appreciate the expertise from our more numbers-oriented posters... this is a fun thread to read and learn. Speculative and yet informative!

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