Riedel on Nerds

http://nypost.com/2016/03/25/money-scandal-roils-broadways-cancelled-nerds/

The abrupt cancellation on March 8 of the Broadway musical “Nerds” — about the rivalry between Steve Jobs and Bill Gates — shocked the cast and crew. They were rehearsing the show that very afternoon when the general manager arrived to deliver the news that a major investor had backed out at the last minute.

But now the shock has turned to alarm — and anger — as the lead producer, Carl Levin, has left stacks of unpaid bills for members of the production team. Creditors were dismayed to receive an ominous letter from Levin’s lawyer informing them of the “Nerds” cancellation but saying nothing about reimbursement.

“Tremendous sums of money were paid for set design, construction, costumes, props, lighting and the full host of costs which go into a Broadway musical theater production,” wrote Neal M. Rosenbloom, Levin’s lawyer. “As the production was throttling towards opening, the production costs were running at approximately $410,000 each week.

massofmen said: "Please explain to me how an actor is out 'tens of thousands of dollars"?"



Where did you get that's he's an actor? The passage says

“What’s really sad is that it’s the little people who are getting screwed,” says a production source. “This was the first Broadway show for a lot of people. I know of one 27-year-old who is out tens-of-thousands of dollars.”

I assume he's a producer.

Levin is the business and operations manager for the Tonys, and acts as a liaison between the League and the producers of the telecast.



wow.

What happens first - Levin pays the vendors or resigns as business and operations manager for the Tonys?

But this seems to be the way these days - it's happened before this and will happen after this, with producers who should know better but don't - it's really simple: If you don't have your full capitalization, you don't start rehearsals, you don't build sets, you don't do ANYTHING. According to Riedel this wasn't one investor it was several "third-party" investors, whatever that means. It sounds like they were very undercapitalized and Mr. Levin is behaving rather moronically.

As to the people who felt and feel it necessary to keep bringing up Ms. Murin - in the words of everyone's favorite song from Frozen - Let It Go. Really.

I am not a theatre producer myself, but I do know a few things pertinent to this discussion. First of all, whether it is morally correct to do so or not, virtually no Broadway production is fully capitalized before they start rehearsals. Most aren't fully capitalized until opening night, which is the legal cut off date they have for being fully capitalized. More often than not, producers are still actively raising money throughout the preview process -- the real reason why shows preview for six weeks these days; it's not because they are tweaking lighting cues. If they legally had to have their full capitalization before starting rehearsals, I doubt many shows would actually open.



Also, I would be very surprised if this producer is personally liable for the debt left by the production. Typically, Broadway shows create corporations (LLCs) to produce the work, and in a situation like this, where the corporation lost major investors, I would assume they would be protected by bankruptcy laws. So many shows close on Broadway these days losing everything -- probably more than everything since if a show is making less than their weekly operating costs, they must foot the bill for those costs somewhere - that I would be surprised if this kind of thing didn't happen with some regularity. But it would be the production's LLC that would be responsible, not any of the individual producers, unless those producers personally guaranteed contracts which I can't imagine happening.

Updated On: 3/25/16 at 10:53 AM

I doubt the investors would have a valid case for a lawsuit either. The subscription documents for a Broadway show (I've seen a couple) basically spell out in bold caps on every page that it is a high risk investment and that the investors are likely to lose all of the funds they are investing in the project. The only lawsuits that would 'stick' in a situation like this are if someone could make a case for 'fraud.' But it doesn't sound like this is a situation like Rebecca -- just perhaps a novice producer in over his head who rolled the dice that he could get the funding together and wasn't able to.



I was a few years back contemplating investing in a Broadway show, and did a lot of homework on how all this works. Ultimately, I decided not to invest (I didn't have the money to throw away) but most people who do invest in Broadway shows know they won't make money. They do it for the prestige or the tax write off.

Updated On: 3/25/16 at 11:04 AM

Yes, I think the bigger story is Carl Levin's connection to the Tony Awards. But I think that's a connection only suggesting that morally he shouldn't have moved forward until the project was on better financial footing. But I maintain, he likely didn't do anything illegal. He just got unlucky.

Yes, but the business has completely changed since the days of David Merrick. Show's today routinely cost 15 million dollars, and unlike the 1980s when theatre owners were selling Broadway houses because there were no shows opening; producers these days have to wait - sometimes years - to secure a theatre. It's a bit of a which comes first - the chicken or the egg -- because unless you have the writers from South Park or Hugh Jackman attached -- there is no way you are going to raise that kind of money a year in advance of a Broadway opening.



Apparently most Broadway shows raise sometimes a third of their capitalization during the preview process. A third! But many investors want to 'see' what they are putting their money into. Until then its a situation where its borrowing or deferring payment until the money comes in. And since all shows operate like this, I imagine the contractors who are hired to build scenery and install equipment must know there is some inherent risk they might not get paid.



Most of the time this formula works, NERDS is just an unfortunate situation where it didn't. But I don't get the point of Riddle's article -- unless he is calling for a change in the Broadway League or the government rules that regulate fundraising for Broadway productions -- but as usual, he just seems to want to sensationalize.

Yes, I think most people on this board don't really know how Broadway shows are financed - most are fans of going to the theatre not experts in the finances of it. If Michael Riedel thinks that this guy is personally liable for the debts of the production, he clearly doesn't know how it works either. As a long time theatre fan, it was sure an eye opening experience to me when I considered investing myself. I sure would have loved to know how this all works before hand -- so I apologize to the board if anything I write here is considered condescending and obvious.


And yes, obviously labs and workshops are designed partly for the purpose of fundraising. How else do they get the money to even begin the process of securing theatres, designers, advertising, bond money etc. But clearly they rarely are successful at raising the full capital needed to open a 15 million dollar musical on Broadway.

Updated On: 3/25/16 at 11:40 AM

I can't imagine anyone in their right mind who would hand over, say, 25,000 dollars to a producer after being told in advance that if not enough additional money was raised to capitalize the show you won't get it back. As Larry David would say "It makes no sense"!

Wish a cast of this caliber, they should have done a major regional production to garner some excitement for Broadway. I mean, these days it's rare to get a musical that's totally original. The past couple of hit musicals have been fairly original. I don't think it sounds like a bad concept, just bad producing. Which sucks cause I'd have loved to have seen it.

one can make an investment, per the terms of the offer, with or without strings, and the condition is specified in the form you sign at the time. In the former case, the funds are effectively in trust, but in the zeitgeist of producing and investing, people invest unconditionally. In fact, in some situations funds would not be accepted with the condition because they are needed. As bizarre as it may seem in any other context, and as rehearsed in earlier posts, it is not at all unusual for shows to move forward on fumes. I seem to recall that the capitalization for Hairspray came together either at 11am on the day of opening, or 11 minutes before curtain. The latter sounds sexier but the former is probably closer to the truth.