Show Financials

When I look at the Broadway Grosses, I see a show like back to the future grossed over 1 million and I think "that's amazing". But then other people who comment say that number isn't good. 

I guess I'm curious as to why, and when people talk about a show "nut", what is that? Is it the number a show wants to hit in order to break even, or keep up their run? 

I don't follow the financial details of shows. I'm sorry if this is a stupid question. 

ErmengardeStopSniveling said: "In very broad terms, there are two key factors when analyzing a show's finances:

• Its capitalization:This is the money raised to produce the show in the first place. Set construction, costumes, tech & load-incosts, pre-previews marketing, author advances, rights procurement, development costs, auditions, legal fees, opening night party, etc etc etc. For a musical, that's usually going to cost between $12 million and $25 million. A nonmusical play could be cheaper, in the $4-10 million range.
• Its weekly operating cost:That's the money that it costs to run the show every week. If you meet or exceed that, you "break even" on the weekly nut.Salaries & wages (actors, band, crew, service providers, etc), theatre expenses, weekly royalties and percentages to key creative team and profit participants, laundry, weekly advertising spend, nominal general manager & producer office fees, etc etc etc. That number could be between $400K for a tiny play or $1 million++ for a large musical.

 


After you break even on the weekly running cost, any additional money goes towards paying off the capitalization. So if you cost $600K a week to run and you earned $900K last week, that's $300K of profit; if it's an 18 million musical, at that rate it could recoup the capitalization after 60 weeks. If you cost $1mil a week to run and you earned $900K last week, you just lost $100K and that deficit comes out of the show's contingency or additional money has to be put up if they want to keep it running. A financial "flop" is any show that does not pay back its capitalization in full. Some shows pay back part of the capitalization before closing. Then, when a show tours or has international productions, there will be a royalty (around 3% of total ticket sales) paid back to the Mother Company (the original Broadway or West End production, wherever it began first). So that is another way for a show to earn a sloooooooooowwwww trickle of money.

It's impossible to know if a number "seems good" without knowing the approximate operating cost per week. For a show that reportedly costs north of $1 million to run each week, like BTTF and WFE, a weekly gross of $850K is bad. For a show that costs $500K a week to run, a weekly gross of $850K is great."

 

Wow thank you for this breakdown! But where do people look to see the operating costs of shows? It seems like everyone on here knows what those are for shows- is that widely available information??

All that I wrote above brings us to ticket sales. Ticket sales are basically the ONLY meaningful revenue stream for a show.

Rising costs of goods & services, union minimums, development costs, technology, and other factors have caused weekly running costs and capitalizations to balloon, especially post-pandemic. Shows are priced with the intention that if they can sell almost every seat, they make a profit that week. Easier said than done: if sales soften then they try to create more attractive ticket prices and/or different marketing strategies.

Tickets could be $10 back in the day because, among other reasons, union minimums were ridiculously low and profit margins of producing a Broadway show were higher. Nowadays, wages are more aligned with the modern cost of living. (Among other costs that have risen such as scenic automation, sound, projection, new ways of marketing to buyers, etc)

A hit show is also trying to combat the secondary market, which is far more ruthless now than in the days of the original MY FAIR LADY. Any tickets sold by the secondary market mean that the upcharge doesn't go to the hardworking people who created the show.

People can complain about prices as much as they want but unless costs of producing a show go down or new sources of significant revenue magically emerge, ticket prices won't be lower than they are now.

Updated On: 8/20/24 at 02:47 PM

This great discussion brings to mind a very specific question I've had about Moulin Rouge since it opened. What kind of negotiation did they do for music royalties? It's not even a catalogue show where they could negotiate with one artist or estate. It's about a billion songwriters. Did they do some kind of package deal that keeps the rights costs manageable?

ErmengardeStopSniveling said: "All that I wrote above brings us to ticket sales. Ticket sales are basically the ONLY meaningful revenue stream for a show.

Rising costs of goods & services, union minimums, development costs, technology, and other factors have caused weekly running costs and capitalizations to balloon, especially post-pandemic.Shows are priced with the intention that if they can sell almost every seat, they make a profit that week. Easier said than done:if sales soften then they try to create more attractive ticket prices and/or different marketing strategies.

Tickets could be $10 back in the day because, among other reasons, union minimums were ridiculously low and profit margins of producing a Broadway show were higher.Nowadays, wagesare more aligned with the modern cost of living. (Among other costs that have risen such as scenic automation, sound, projection, new ways of marketing to buyers, etc)

A hit show is also trying to combat the secondary market, which is far more ruthless now than in the days of the original MY FAIR LADY. Any tickets sold by the secondary market mean that the upcharge doesn't go to the hardworking people who created the show.

People can complain about prices as much as they want but unless costs of producing a show go down or new sources of significant revenue magically emerge, ticket prices won't be lower than they are now."

^^^I wish more people understood this about high ticket prices and how they relate to the cost of running a show. 

carolinaguy said: "This great discussion brings to mind a very specific question I've had about Moulin Rouge since it opened. What kind of negotiation did they do for music royalties? It's not even a catalogue show where they could negotiate with one artist or estate. It's about a billion songwriters. Did they do some kind of package deal that keeps the rights costs manageable?"

I'm not savvy enough about this stuff to give you hard numbers. It's usually higher than if a score was written specifically for the show, but not prohibitively so. The accounting process is also different.

It's a per-song negotiation with the rightsholder and there are companies that handle Music Clearances for shows, working closely with the Music Supervisor, the GM, and the Producer. Sometimes rightsholders deny use of a song and that requires elements of a show to change. Sometimes there can also be use limitations (such as can't use it in marketing or on a cast album, rights for Broadway only or for the show's woldwide life in perpetuity) and length and context of song can also be a factor (using a snippet of a song vs the entire song, orchestration/arrangement, etc)

Updated On: 8/20/24 at 03:15 PM

Wow thank you for this breakdown! But where do people look to see the operating costs of shows? It seems like everyone on here knows what those are for shows- is that widely available information??"

Broadway General Manager by Peter Bogyo is my go-to recommendation! Fantastic book.

Updated On: 8/20/24 at 03:34 PM

Philip Boroff in the Broadway Journal also tends to report on numbers a lot and he revealed a lot of information about weekly running costs/capitalizations for last season

hearthemsing22 said: "ErmengardeStopSniveling said: "In very broad terms, there are two key factors when analyzing a show's finances:

• Its capitalization:This is the money raised to produce the show in the first place. Set construction, costumes, tech & load-incosts, pre-previews marketing, author advances, rights procurement, development costs, auditions, legal fees, opening night party, etc etc etc. For a musical, that's usually going to cost between $12 million and $25 million. A nonmusical play could be cheaper, in the $4-10 million range.
• Its weekly operating cost:That's the money that it costs to run the show every week. If you meet or exceed that, you "break even" on the weekly nut.Salaries & wages (actors, band, crew, service providers, etc), theatre expenses, weekly royalties and percentages to key creative team and profit participants, laundry, weekly advertising spend, nominal general manager & producer office fees, etc etc etc. That number could be between $400K for a tiny play or $1 million++ for a large musical.

 

 


After you break even on the weekly running cost, any additional money goes towards paying off the capitalization. So if you cost $600K a week to run and you earned $900K last week, that's $300K of profit; if it's an 18 million musical, at that rate it could recoup the capitalization after 60 weeks. If you cost $1mil a week to run and you earned $900K last week, you just lost $100K and that deficit comes out of the show's contingency or additional money has to be put up if they want to keep it running. A financial "flop" is any show that does not pay back its capitalization in full. Some shows pay back part of the capitalization before closing. Then, when a show tours or has international productions, there will be a royalty (around 3% of total ticket sales) paid back to the Mother Company (the original Broadway or West End production, wherever it began first). So that is another way for a show to earn a sloooooooooowwwww trickle of money.

It's impossible to know if a number "seems good" without knowing the approximate operating cost per week. For a show that reportedly costs north of $1 million to run each week, like BTTF and WFE, a weekly gross of $850K is bad. For a show that costs $500K a week to run, a weekly gross of $850K is great."



Wow thank you for this breakdown! But where do people look to see the operating costs of shows? It seems like everyone on here knows what those are for shows- is that widely available information??"

 

 

Another part that you have to consider when looking at the Broadway grosses is that there's a portion that's taken off the top before the rest of the money goes to covering operating costs/recouping the capitalization. This includes credit card fees, producer's fees, and a percentage the theatre owner takes to pay the rent. All told, this is about 16% of the gross. So, if a show makes $1M a week, only $840K of that is the "take-home" gross, if you will.

My husband and I published a book in 2010 titled "Stage Money."  It's examples are a little out of date, but it's larger descriptions of legal structures and money flows in the professional theater still hold.  The book still sells.  We were led to research and write the book because we couldn't make sense out of what we read in newspapers and entertainment publications and websites. 

This is self-promotion but I think the book is still one-of-a-kind.  It's a paperback, only 192 pages.