Much of Great White Way singing in the red
Web posted on: Wednesday, September 23, 1998 4:41:36 PM
A NewsStand: CNN & Entertainment Weekly Report
NEW YORK (CNN) -- This past season was a record-breaker on Broadway, with box office grosses and attendance higher than ever. Box office seats were up almost 12 percent in New York, and a record 11.5 million people bought tickets to shows.
So business is booming, right? Wrong.
The Great White Way has a dark secret. Broadway is hemorrhaging money. This past theater season, losses from failed shows totaled nearly $50 million. And some of the shows that look like hits are actually in the red.
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Jed Bernstein tracks the business of Broadway for the League of American theaters and Producers.
"Only one out of four shows even makes back its initial investment, let alone earns a profit," says Bernstein. "One out of four breaks even."
"Triumph of Love" reportedly lost $3 million. "Capeman," the long-awaited musical by singer/songwriter Paul Simon took an $11 million hit. And "Side Show," a musical about Siamese twins which received five Tony Award nominations this year, ended up $7 million in the hole.
Here's the way the business has always worked: Investors put up the money, the initial investment to get the show onto Broadway; patrons buy tickets; eventually, investors get their money back.
"It used to be said in the old days that musicals should pay back in a year or less and a play in six months," Bernstein says.
Not anymore. Today the business of Broadway requires some real financial tap dancing. Since the early '80s, shows have gotten more and more spectacular, with special effects and elaborate staging. The productions have grown bigger, bolder and significantly more expensive.
When you add all this up, plays typically require an initial investment of around $1 million.
Musicals are a much higher-stakes gamble. With its intricate sets, "Ragtime" reportedly cost $10 million. The sophisticated puppetry of "The Lion King" ran its tab to as much as $15 million.
In addition to that initial investment, there are weekly operating costs.
"The costs to keep a show running at sort of a break-even basis are very high in the case of a big musical," says Bernstein. "They might be $500,000, $600,000, $700,000 a week."
Labor costs on Broadway, a heavily unionized business, have skyrocketed. There are salaries for the actors, musicians and stage hands.
Add to that the high rent of a New York City theater and, Bernstein says, "You can see that the first $500,000 goes to just keeping you at even for the week, and then you can earn another $100,000 or $200,000, well, even on that kind of basis, that's a lot of weeks until you make up the $10 million or $12 million."
In the case of "The Lion King" and "Ragtime," shows that are playing to sell-out audiences, some say it could be 10 years before they recover their initial investment.
So what does it take to make a profit on Broadway?
Entertainment Weekly took a look at two musicals, "1776" and "Jekyll and Hyde."
A revival of a 1969 Tony Award winner, "1776" was a hit with critics and audiences alike. And in the world of astronomically-priced musicals, the initial investment for this show was a steal at $3 million.
And yet after four months of playing to near-sellout audiences, "1776" was barely covering its weekly operating expenses. The producers figured they could increase their revenues at a bigger theater. They moved from the 500-seat Roundabout to a theater nearly four times its size, the 1,900-seat Gershwin, just in time for the busy Christmas tourist season.
They also lowered ticket prices to ensure a fuller house. But the show didn't sell out as planned. Although revenues picked up in the spring, investors still hadn't seen any kind of return. Then in May of this year, "1776" was nominated for three Tony Awards.
It failed to win, however, and the show failed to receive that famous Tony boost. After seven years in pre-production and 10 months on stage, "1776" was one more of 1998's casualties. Two days after losing the Tonys, the show announced it was closing.
Meanwhile, "Jekyll and Hyde" had a familiar title and one catchy tune. This show debuted on the road and traveled for six years before it came to the Great White Way.
And yet when the show opened in April 1997, it also seemed destined for Broadway's ash heap. Critics hated it. The "New York Times" called it "a plastic monster assembly kit of a musical."
But something strange happened: "Jekyll and Hyde" became a hit. And it may be about to turn a profit.
"We are returning money to our investors. We are," says Scott Zeiger, the show's producer. "We haven't fully recouped yet, but we're doing OK."
Tourists and 'Jekkies'
So how have they done it?
"There is a huge influx of tourism here in New York that doesn't necessarily respond to a review of a show that opened 15 months ago," says Zeiger. "There are people who are just drawn to the music or the celebrities in the show or the title. And it's up to the producer to promote and market that."
What saved "Jekyll's" hide was marketing and promotion, a savvy strategy fine-tuned on a weekly basis. They spend 20 percent of box office grosses on advertisements in tourist publications, airline magazines, even on airport luggage carts. "Jekyll and Hyde" posters are plastered on buses, in the subway, on the rail platforms.
TV commercials were aired during programs aimed at the 18-to-35 set. And their CD has sold 1.5 million copies. One single, "This Is the Moment," became the song of choice for beauty queens, the NFL, and Major League Baseball. It even made an appearance at the 1996 Democratic National Convention.
"We have a 1,100-seat theater, beautiful boutique theater, here on Broadway," says Zeiger. "We're not being shown on 3,500 screens throughout North America. So you've got to be patient. You've got to be tenacious. You've got to continue to reach for a new audience."
Not only is this romantic gothic tale attracting new audiences, it also has what every show covets: repeat visitors, fans known as "Jekkies."
"A 'Jekkie' is somebody that's just been involved with the whole process of the beginning of 'Jekyll and Hyde,' says one fan.
"I have seen 'Jekyll and Hyde' 176 times as of this afternoon," says another "Jekkie."
"They know the show backwards and forwards," says Zeiger. "And they're not, you know, crazy people. These are lawyers and doctors and dentists and housewives and teenagers."
Take it home
And now "Jekyll and Hyde" is going back on the road, making even more money for its investors.
"In the financial calculation of producing the show on Broadway in New York, you have to take into account its liability on the road," says Broadway tracker Bernstein. "And in fact, many producers are able to raise money because of the future road tour that enables the New York production to get going."
Experienced producers know that New York City, with its high cost of doing business, is not the most lucrative place to stage their shows. So Broadway productions travel to some 90 cities across the country, playing in bigger theaters that are cheaper to rent. And today, those road tours generate two-thirds of Broadway's total revenue.
Additional revenues come from marketing the Broadway experience. Producers don't just want you to see the play. They want you to take a piece of it home with you -- T-shirts, the figurines, CDs.
"First of all, maybe I can get you to come more than once. But I can certainly get you to buy the music. And maybe I can get you to buy clothes. And maybe I can get you to buy all sorts of things that are connected to that brand," says Bernstein.
The values of sponsorship
Such synergistic merchandise tie-ins have attracted major corporations to Broadway theater. Ford Motor Company, Cablevision, Hallmark, and particularly the Walt Disney Company, are using the street as another way of enhancing their brand images.
For example, Hallmark sponsored the revival of "The Sound of Music."
"The values that are part of the Hallmark brand -- family, children, warmth -- those attributes connect themselves very nicely to what the 'Sound of Music' story is about," says Bernstein.
They brought the business an infusion of cash and nerve in what is at best a high-stakes gamble. Some liken the business to wildcatting for oil -- seeking the well that's a gusher.
The big corporations can wait for the gusher, even if it takes 10 years. After all, a long run only enhances a brand name and sells merchandise.
But small investors don't get those benefits. For them, the risks are enormous, and the wait is tough to stick out. But they are still the lifeblood of Broadway.
"Who would have thought that, you know, a story about a Jewish milkman marrying off his daughters would become 'Fiddler on the Roof' and run for six or seven years," says Bernstein. "Or a professor teaching a girl from a poor part of town how to talk properly would turn into 'My Fair Lady.'"
Producers and investors can't be feeling too squeamish. Nineteen new shows, eight musicals, five plays and six limited engagement specials are set to open by January.
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