Broadway has definitely been on a roll. The Great White Way had a record year in its 2007-2008 season, which ended on May 25, grossing $937.5 million.
One of last season’s biggest success stories was the all-black cast of Cat On A Hot Tin Roof starring James Earl Jones, Phylicia Rashad, Terrence Howard, and Anika Noni Rose, and directed by Debbie Allen. The revival of the Tennessee Williams classic grossed $12.6 million on a final budget of $2.1 million before it closed last month after a limited run. It generated a spectacular return for its investors, led by the African American producing team of Stephen C. Byrd and Alia M. Jones, both of Front Row Productions. A made-for-television film is now in the works, as well as a production in London’s West End.
While theater-like movies and art are undeniably risky investments–;reportedly 80% to 90% of Broadway productions lose money–;the success of Cat on A Hot Tin Roof proves that an investment in a theatrical production can generate high returns when the elements and the stars align properly, making theater a hot property for people with the appetite to see their investment live or die on the whims of the public and theater critics.
Cat’s stellar ride is a great case study of what an investor needs to contemplate when considering an investment in a play or musical. “Ultimately the investors are investing in a producer,” says Jones, the co-producer on Cat. Jones underlines the fact that a producer’s job is to not only raise the financing, but to be a sound money manager while selling ticket inventory. “The investors must have confidence in the producer’s ability to bring the production in on budget or under budget and to get audiences to the theater,” she says.
In evaluating Jones’s advice, it should help to know that Byrd and Jones are not your typical Broadway producers; both have backgrounds in the corporate sector. Before venturing to Broadway, Byrd, who worked 13 years to bring Cat to the stage, was an investment banker at Goldman Sachs, specializing in mergers and acquisitions. He’s currently a principal and co-founder of StoneHedge Capital Inc., a private equity firm. Jones, like Byrd, has an MBA, and serves as a vice president at Front Row. She is also a principal in AMU Services, a business development consulting firm, and she worked in interactive marketing at Proctor & Gamble.
With demonstrated business acumen, Byrd and Jones are the types of producers in whom investors, particularly those new to the theater world, might find some level of comfort in spite of the inherent risks such investments present.
In raising the initial estimated budget of $2.8 million, the producers targeted high net worth
individuals who had an appetite for risk, each making a minimum investment of $280,000. The producers and the play’s general manager found ways to cut costs, bringing the budget down to its final number of $2.1 million, a 25% savings.The savings included opting out of traditional theater marketing techniques such as direct mail; cutting the number of children in the cast from five to three; and using corporate sponsors for travel and lodging. “I was able to secure sponsorships with companies such as Continental Airlines, Korman Properties, and Verizon,” Jones says. She estimates that eliminating direct mail alone saved the production upwards of $150,000.
Fifty percent of the investors were African American, according to Jones, and mostly included individuals new to Broadway investing. “The investors we found have an affinity for the arts and the prestige of Broadway,” Jones points out. The producers sold the investors on the all-star cast, Allen’s involvement, the idea of the play being a “must-see event,” and the fact that no production of Cat (four preceded the most recent) has ever lost money on Broadway, dating back to the original debut in 1955.
In getting people in the theater, Byrd and Jones sought to bring new audiences to Broadway in much the way recent productions of The Color Purple and A Raisin in the Sun did, making black radio, local newspaper
advertising, and Internet advertising more effective tools in reaching the targeted theater-goers compared with direct mail. The production also used the group marketing firm Walk Tall Girl Productions to get church groups, fraternities, and service organizations to attend. Jones also attributes the savings to the play’s general manager, Nina Lannan Associates, which included a reserve in the budget of 10%, which the production ultimately did not use.In evaluating theatrical productions for investment opportunities, caution is the name of the game. Actor and producer Wendell Pierce, who was a producer on August Wilson’s final play Radio Golf, suggests that it is critical that investors understand how the play will generate income and repay investors. “It’s very important to see the recoupment schedule,” says Pierce, perhaps best known for his role as Det. William ‘Bunk’ Moreland on HBO’s The Wire and who has produced productions with investment units in the $10,000 to $25,000 range. “Look at the schedule, then assume the worst.” Radio Golf, though critically acclaimed, failed to recoup its investment.
Pierce explains that the recoupment schedule illustrates to investors how many weeks it will take the play to break even, and at what theater capacity. He advises potential investors to know the play and to know the product as part of their due diligence process. “Read the reviews for the previous productions of the play,” suggests Pierce, who also encourages would-be investors to attend a backer’s audition at which investors can watch the entire show.
Further, in evaluating the investment agreement, it is also important to understand the various platforms on which the production can play and seek to partake of any pertaining revenues. “You want to make sure that as an investor you are participating in all secondary and tertiary revenue streams worldwide,” Pierce says, “including film and DVD, as well as the licensing agreement with a publisher for productions at colleges and regional theaters.”
Pierce underscores the fact that given the high price tag of Broadway tickets today–some productions can run at $120–the biggest lesson he learned on Radio Golf is that casting and good marketing are vital. “You need a recognizable name today and you need to demand focused marketing initiatives to the community most likely to support the production,” he says, citing the success of A Raisin in the Sun, with P. Diddy, and the cast of Cat. Pierce further explains that the first month of a commercial play’s life is crucial for winning theater-goers and building momentum. “You need people to come early. You need that critical mass,” he adds.
George Alexander’s column on the business of entertainment appears weekly at blackenterprise.com. He is the author of Why We Make Movies (Doubleday Harlem Moon, $15.95).