Stage Money: The Business of the Professional Theater

By Tim Donahue, Jim Patterson and Ken Davenport

For decades roughly 80 percent of commercial Broadway productions have failed to recoup their original investments. In light of this shocking and harsh reality, how does the show go on? Tim Donahue and Jim Patterson answer this question and many others in this updated edition of their popular, straightforward guide to understanding professional theater finances and the economic realities of theater production.

This revised edition of Stage Money not only includes the latest financial information and illuminating examples of key concepts; it has been enhanced with a discussion of the stagehands' union plus a new chapter on marketing for the theater. These new elements combined with the essentials of the first edition create an expansive overview of the contemporary theater business. Stage Money is designed for theater enthusiasts and professionals interested in understanding the inner workings of this industry today and its challenges for the future.

Ken Davenport, two-time Tony Award winner, Broadway and Off Broadway theater producer, blogger, writer, and owner of Davenport Theatrical Enterprises writer, offers a foreword.

• Language: English
• Publisher: University of South Carolina Press
• Release date: Aug 4, 2020
• ISBN: 9781643360751

Tim Donahue

Tim Donahue is the coauthor with Jim Patterson of Stage Money: The Business of the Professional Theater. He is also coauthor of A Concise Theatre History and The Enjoyment of Theatre, ninth edition. He holds an M.B.A. from the University of South Carolina, where he recently retired as the director of marketing and development from the Department of Theatre and Dance after nearly ten years.

Book preview

Introduction

It’s All about the Money

Oscar Wilde—a man of the theater and other places—defined a cynic as a person who knows the price of everything and the value of nothing. By that standard, Stage Money is a cynical book.

Theater is valuable because it is art or, at the very least, entertainment. As an audience at the best theater, we see ourselves or others on stage, in new or deeper ways, from psychological, social, or political perspectives, and are moved to laughter and tears. Triumphant performances complete an aesthetic circle that leaves us welling up with contented excitement. Even through tears, that experience of completeness that the best art supplies is profoundly encouraging. Life has taken on meaning for a few moments at least, and we can hope for mankind again.

None of the value of theater can be found here. This book is cynical, using Oscar Wilde’s definition. We seek to give an overview of the finances of the theater today. We want to know what the cost of theater is. These questions fascinate us:

•  How are theater performances organized financially today, meaning in the period between the 2007–2008 and 2017–2018 seasons?

•  From where does the money come and to where does it flow?

•  How do the finances of theater compare with those of other businesses?

•  How does the commercial theater compare with the not-for-profit theater?

To answer these and other questions, Stage Money presents some models and approaches that are not commonly evoked in the discussion of the professional theater but will be recognized by anyone interested in other more conventional businesses. In applying these models, we find ourselves sometimes at odds with many of the traditional rules of thumb that abound in the professional theater.

Common wisdom stresses that the risk of investing in the commercial theater is out of proportion to the potential for profit; we show that although the risks are very high, they are proportionate with the average returns on investing in the commercial theater.

Common wisdom divides professional theater into Broadway and everything else. We provide a more contemporary division: between the commercial and the not-for-profit theater.

Common wisdom maintains that by standards of financial size and artistic purpose, the commercial and not-for-profit theaters are two very distinct activities. Stage Money describes the inter-reliance of these two parts of the American theater.

Stage Money makes sense of the mind-boggling array of prices for Broadway tickets by comparing the theater to the airlines, among other businesses, and describing the economic forces at work that make Broadway producers sell virtually the same seat for many different prices.

The authors of this book have fairly catholic tastes in theater. We like glitzy musicals, classic plays performed as classics and radical re-imaginings of classic plays, the post-modern theater at least some of the time, family dramas, political theater, vaudeville, Brecht and Beckett at their best, shows in 99-seat black boxes and shows in opera houses—pretty much all of it. We want more theater. We don’t know how to get it, but we trust that a business perspective might provide an infusion of fresh ideas on how to finance new and more theater.

We want the art and craft of theater, but some money must support the art somehow. Unlike a poet or novelist, a playwright can only know the value of a script by seeing it. That requires actors, a space, and for fully realized productions, a director, scenery, costumes, lighting, and so on. In short: money. The title, Stage Money, is a pun on the theater term for imitation money used in stage productions, but the money necessary to fund theater—both commercial and not-for-profit—is real money, indeed.

The U.S. Bureau of Economic Analysis estimates that theater output in 2016 was $18.9 billion.

Theater was slow to fully embrace many of the potent techniques of twentieth- century business—theater box offices didn’t accept credit cards before 1979—but it is adopting them now. Older audience members can confirm that in many obvious ways the finances of the theater have changed. Some examples:

Of course the theater, like many businesses, has changed over time. Look at the main commercial street of your city. If you’ve lived in the same place for at least ten years, you’ve seen great changes in the businesses at street level. Some thrive; others fail. The failures open space for other entrepreneurs to pursue their ideas. This is the ecology of Main Street, and the rate of change seems to increase over time.

This foment, this fight for survival between new and old businesses, describes more or less the ecology of Broadway, off-Broadway, the road, and not-for-profit theater. Elizabeth McCann, producer with others of Indecent, Passing Strange, Well, The Goat or Who is Sylvia?, and revivals of Equus, Who’s Afraid of Virginia Woolf?, and Butley, said of Broadway producing, It’s always been survival of the fittest and always will be.

Does America get the theater it deserves? We don’t know, but we’re certain America gets the theater it pays for.

This is a cynical conclusion, but other books can discuss and further the art of theater. This is Stage Money, a look at how theater is paid for.

But first some general notes.

In order to discuss financial and economic concepts, we present brief outlines of some very complex and interesting subjects from the disciplines of business management and economics. Look to other books for completeness and nuance on these topics.

Similarly, the legal structures of commercial and not-for-profit theater are described in a condensed overview. The general reader needs this background to understand who the shareholders and stakeholders are in professional theater. This is not a how-to book on theater producing. Several recent books cover this subject in varying amounts of detail and usefulness. The intricacies of the legal and financial aspects of professional theater are many and beyond the scope of this short book.

The chapters on ticket pricing, marketing, and unions apply to both commercial and not-for-profit theaters to at least some extent.

The information here comes from public sources. By compiling the information in one place and structuring it through the lens of conventional business and investing, Stage Money provides an altered perspective on the business of theater. However, in many cases, complete and validated data are unavailable, and the best figures that can be supplied are suggestive. More research is warranted.

In American English, the preferred spelling according to usage studies is theater, and Stage Money spells the word this way except in the names of organizations or quotations that use the theatre spelling.

A note on time frames: this second edition of the book was written mostly in early 2019. To allow time to know whether a given production was financially successful, we generally investigated shows that opened no later than the 2017–2018 season. As a starting point, we chose the 2007–2008 season, since the first edition ended with the 2006–2007 season.

The plot of Stage Money has not changed between the first edition and this edition. This book still maintains that theater is a business like some other businesses. We’ve updated figures and examples that have changed, sometimes a little and sometimes a lot, in a decade. In this vein, we’ve added information about the newest Broadway not-for-profit theater, Second Stage Theater, which became a super-NFP by its purchase of the smallest Broadway house, the Helen Hayes Theater. In addition to discussing the actors’ union, Actors’ Equity, this new edition gives some background on the stagehands’ union, IATSE Local 1. Marketing is an essential part of business, but the first edition lacked any discussion of marketing in the professional theater. A discussion of marketing for the theater has been added.

CHAPTER ONE

Commercial Theaters vs. Not-for-Profit Theaters

Key Differences

The main division made when most people talk about American professional theater is between Broadway and everything else. But really the distinction that better suits is between professional commercial theater and professional not-for-profit theater.

In the seasons from 2007–2008 and 2017–2018, 33.3% of new Broadway productions were not-for-profit. During these seasons, out of 408 show openings on Broadway, 103 shows were not-for-profit. Of the 41 Broadway theaters, six are owned or leased and operated by not-for-profit entities.

Some Broadway NFP venues are sometimes licensed to commercial productions. For example, the Stephen Sondheim Theater is operated by the NFP Roundabout Theatre Company, but from January 2014 to October 2019, the production at the Sondheim was the commercial musical Beautiful: The Carole King Musical. The converse happens, too. When Lincoln Center Theater has a highly successful musical revival in its Broadway house, the Vivian Beaumont Theater, it extends the production into an open run. But LCT still must produce the rest of its season as an obligation to its subscribers—LCT terms them members—and so it licenses another Broadway house, one that usually hosts commercial productions.

It is expensive to move a musical between theaters, as much as two or three million dollars, but in this instance, that’s just part of it. The Vivian Beaumont Theater is unlike any other Broadway theater in its stage floor and audience configuration. Moving from the Beaumont to a conventional Broadway theater would require changed sets, changed staging, and changed choreography and would be even more expensive and time-consuming,

Except for Broadway and commercial touring productions, nearly all theater in America is not-for-profit. The notable exception is a small number of dinner theaters, found mainly in the Midwest. Dinner theaters cannot qualify as not-for-profit enterprises because they serve two unrelated purposes, presenting theater and serving up a nice piece of roast beef. The National Dinner Theatre Association had 16 member theaters as of 2019. In 2007, membership totaled 24 theaters.

Once you say commercial and not-for-profit, it might seem you’ve pretty much defined the difference between these two types of theater, but there are other differences which come directly from the significant difference in financial goals. Some include:

The vitality of the American professional theater is not gauged solely or even primarily by Broadway. No one would judge American writing only by the best seller list, or American movies solely by the week’s top grossing film, or music merely by the groups that can fill a football stadium. Similarly, American theater is not described by its commercial operations alone.

Some of the most creative work of American theater is found in not-for-profit theaters. Commercial theater gets the greatest attention in the popular press because of the size of its budgets, the concentration of activity on Broadway and environs, and the availability of the national media headquartered in Manhattan. By contrast, the impact of a single not-for-profit theater not in New York City is usually felt within a single community. Since theater is a live event, no other media can duplicate the aesthetic experience of theater. Thus, for many people the not-for-profit theater is their main access to the theater experience.

The not-for-profit theater is an important cultural engine developing new plays and musicals. It is the rare successful Broadway show that originates on Broadway. During the 2015–2016 season, as an example, 28 new commercial productions opened on Broadway. Thirteen of these productions were first seen in not-for-profit theaters mostly outside New York City. Five were imported from London. Note that especially with musicals, the Broadway producer often has a hand in the NFP production, offering enhancement money for the NFP show, in exchange for an opportunity to see the script on stage in front of an audience. Many musicals presented at NFP theaters are done with the intention or at least the hope of the show moving to Broadway.

Between 1999–2000 and 2007–2008, 61 percent of the Best Tony Awards went to not-for-profit productions or not-for-profit originated productions, and 17 percent went to productions originating abroad. Just 22 percent of the Tony Best winners originated on Broadway. For the 2016 Tonys, five Tonys went to Broadway NFP productions. The rest of the awards for that season went to productions that originated either at NFP theaters in the U.S. or in London before being produced as commercial Broadway ventures.

The Two Sides of Professional Theater are Commercial and Not-for-Profit

The scope, ambition, and prize-winning accomplishment of the largest not-for-profit theaters in America are truly astonishing. By contrast, the commercial theater relies on long-running musicals, which make a big profit when they succeed. Broadway commercial producers have largely abandoned the serious play and the small musical to the not-for-profit community. And in much of the U.S., most professional theater available to audiences comes from not-for-profit organizations. For all these reasons, the most important division in the professional theater today is between the commercial and the not-for-profit theaters.

What Is a Broadway Theater?

Broadway theater venues are mostly commercially run, but a significant number are run by not-for-profit corporations. In the popular imagination, Broadway is any commercial live theater in New York City. Actually, Broadway as a term defines only theaters in midtown Manhattan that seat at least 500. Only productions in these theaters are eligible for Tony Awards. Union rules are different for Broadway houses than for other New York professional venues. The number of Broadway houses varies as theaters are built or remodeled or turned to other uses. In 2019, there were 41 Broadway theaters, 17 owned by the Shubert Organization, five by Jujamcyn Theaters, and nine by the Nederlander Organization. Six were owned or controlled by not-for-profit theaters. Of the remaining four, two are owned by Ambassador Theatre Group, an important British theater firm; one is leased long-term from the City of New York by the Disney Corporation; and one is independent: Circle in the Square, a small house built in the underground spaces of Paramount Plaza. Circle began as a not-for-profit theater but went bankrupt in 1996; now its facility is a commercial theater.

Broadway theaters. All illustrations by Tim Donahue.

The dotted line connection between the investors and the playwright and the producer show that these entities are not supervised by the producer.

The Helen Hayes, built in 1912, is the smallest Broadway house with 597 seats. The largest at 1,933 seats is the Gershwin Theatre, opened in 1972.

The vast majority of commercial Broadway theaters are in the hands of only three entities. One of these, the Shubert Organization, has an ownership and tax structure that are unique. There are two nested entities: the Shubert Organization, a commercial firm that operates the businesses, and the Shubert Foundation, a not-for-profit corporation which wholly owns the Shubert Organization. This scheme is not conducive to financial transparency.

In 2005, The New York Times reported, The Shubert empire is so private—the company has no press agent or public relations department—and insular that getting a clear read on anything is next to impossible. ‘It’s the Kremlin in there, circa 1962,’ said one dramatic artist who has worked with the Shubert Organization before (and hopes to again).

In addition to its 17 Broadway theaters, the Shubert Organization, Inc., operates one off-Broadway theater, and one theater each in Boston, Philadelphia, and Washington, D.C. In addition, it operates what is probably the second largest internet ticketing service in the U.S., Telecharge (also called Shubert Ticketing, Inc.)

Since the Shubert Organization is wholly owned by the not-for-profit Shubert Foundation, the Organization does not publish its financial results. Only publicly traded corporations are required to publish annual reports. The Shubert Foundation, as a not-for-profit, makes annual IRS filings which are publicly available. The Foundation’s 2016 IRS filing (Form 990) shows total market value holdings for the Foundation of $703.7 million. Its revenues were nearly $53 million, most of which must come from the commercial Shubert Organization, but some of the revenue comes from stocks and bonds the Foundation holds. The Foundation has programs of its own, different from the business of the Organization. The Foundation disbursed $30 million in 2018 to support arts education and not-for-profit professional theater and dance companies in the United States. In addition, the Foundation maintains the Shubert Archive, more than a century’s worth of production designs, scripts, sheet music, publicity materials, photographs, correspondence, business records, and architectural plans.

The Foundation’s reimbursement to its employees and officers is modest, totaling just over $1.3 million in 2016. All the officers of the Foundation, however, also serve the Shubert Organization in high-ranking positions: board members, president, executive vice president, and vice president of finance. Any compensation from these positions is a private matter between the individuals involved and the Shubert Organization.

Lawyers who specialize in not-for-profit organizations maintain this management Russian doll is a conflict of interest. As a charitable organization, the Shubert Foundation is required to serve a public good. Service to the public is what entitles the Foundation to tax-exempt status. Meanwhile the Shubert Organization’s cash flows and business dealings are hidden. Who, if anyone,