FUNDING BROADWAY SHOWS

How are Broadway shows capitalized?

Let us first realize what this basically entails:  A Broadway show must be funded so that four weeks (five weeks for a musical) of rehearsals may be conducted.  This is a period in which money is being paid out in abundance, but in which virtually no money is being taken in.  The money for this period is called the "nut"

Then the show will open.  In today's world of Broadway, tickets will be sold far in advance.  A Broadway production is now a rather intricate piece of machinery--at least as far as selling tickets is concerned.  Airlines, travel bureaus, hotels, and you name it are instruments for selling tickets to Broadway shows.

The "nut" referred to, though, is usually several million dollars.  This is principally why so many Broadway shows run so long on the Main Stem (i.e., Broadway).  Another reason is the fact that tourists from many countries are today the major audience for Broadway shows.  A third one is that creative people (including producers) have developed a means of getting money all through the run of the show.  This is in the form of "royalty points."  In other words, the weekly grosses are dispersed as follows:

(1) Operating expenses (including, but not limited to) the salaries of all cast members.  This also will include the theatre rental.
(2) Taxes
(3) Royalty Points
(4) Paying Off The Nut

in that order!


Now, let's finally get to the issue of how Broadway shows are capitalized . . .

The way(s) in which Broadway shows are capitalized has changed and changed and changed since the start of what might be called the Broadway theatre in the 1880s.

(1) At first--and this continued into the 1920s--shows were capitalized by the people who produced them.  When one produced a Broadway show, one simply made sure that he (or she), together with some trusted wealthy friends, had the money necessary to mount the show.  This was possible because the cost of producing shows was not astronomical, given the cost of living.  Also, many producers owned or had access to one or more Broadway theatres.

(2) There was inflation in the 1920s.  Broadway shows had, in the meantime, become more elaborate and therefore much more costly.  The country, though, was very prosperous, and a good number of people knew who to go to in the Wall Street area if they had two or more top name performers for the show.

(3) We now come to the 1930s.  The Depression.  A number of top criminals who had made their fortunes in the prohibition laden 1920s had the money to fund Broadway shows.  They might insist that one or more of their girlfriends have parts in the show, but that was simply part of doing business.  Broadway survived.

(4) The 1950s was the epitome of Broadway shows financed by "small" investors who would contribute $10,000 or more to the show after viewing a "backer's audition."  Ten or more of these investors, and your show was in rehearsals.  Limited Partnerships was the legal term for this method of financing.

(5) Since the 1970s, Broadway shows have been capitalized by major companies, welded together by a managing director.  Sometimes, Broadway theatre owning companies such as Jujamcyn have come in with money and a theatre.

Any enterprise that relies upon people and must pay those people a weekly salary is going to need a lot of money for capitalization, to keep running, and for profit.  The ticket prices are out this world, but they are paid by upscale people--tourists, mostly, whether from inside the U.S. or from many other countries in different parts of the world.

And that is about it.
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