As some of you know I have a love for theater, particularly Broadway shows.
Over the last six months, I’ve been discussing some exciting new Broadway musicals with my friend and business associate, Ken Davenport.
For those of you not familiar with my friend Ken, he's a seasoned two time Tony Award-winning Broadway Producer, as well as the Executive Producer in North America for Andrew Lloyd Webber. (Yes, that Andrew!)
Ken's Broadway productions include Kinky Boots, Spring Awakening, Once on This Island, It's Only a Play, and a couple dozen more.
Ken is in the process of rolling out several new exciting shows for Broadway and I've decided to join him on their road to Broadway.
Some of the shows include:
1) Broadway Vacation, an original story based on National Lampoon’s classic 1983 comedy Vacation (that starred Chevy Chase), about what would happen if the Griswolds took a vacation to present-day Times Square.
2) An original musical based on the life and music of one of the top-selling singer-songwriters of all time, Neil Diamond, written by Oscar-nominee Anthony McCarten (Bohemian Rhapsody, The Two Popes), Directed by Tony Award winner Michael Mayer, and produced in partnership with Bob Gaudio of The Four Seasons.
3) A musical based on the life of the inventor of “The Miracle Mop,” Joy Mangano, who was the subject of the movie JOY, that starred Jennifer Lawrence.
I have a feeling many of you also appreciate and enjoy live theatre as much as I do. Even my 12-year old daughter is deep into performing arts spending 6 days a week in the studio acting, singing, and dancing.
If you share my passion for theater, or simply have an interest in learning more about how I'm playing a role in helping to make these new musicals happen, then feel free to let me know.
With a little luck, we may be part of the next big Broadway musical together.
1. HOW MUCH DO I NEED TO INVEST
When a new theater investor asks me this question I always ask them what they think the average investment in a Broadway show is. Their answers usually range between $50k and $100k. The truth is that the average investment is only around $25k. So the entry fee isn’t as high as you think.
2. CAN I LOSE MORE THAN I PUT IN?
No. Most offering documents for Broadway shows have a clause that limits your liability to only your initial investment. If you can’t find it when you read your documents, ask the Producer to point it out. Now, if the show gets into a situation and it needs more capital to keep running after it opens, the Producer has a right to ask for a “Priority Loan,” but the keyword is “ask.” You can always say no.
3. CAN ANYONE INVEST?
Most Broadway and Off-Broadway offerings are for accredited investors only, which means you must meet certain financial requirements to invest. (Please see requirements below.)
4. DO I GET TO GO TO OPENING NIGHT?
If you invest in Coca-Cola, they aren’t going to send you a free six-pack. But on Broadway, we like to give you lots of perks! And yes, opening night is one of them. But, usually, opening night tickets require a minimum investment. I try to get every investor into the opening nights of my shows, no matter the amount, but because the theaters are limited in size, this is often challenging for many Producers. Ask what the minimum is for opening night upfront.
You should also get access to “house seats” (full price tickets reserved for VIPs), and may also be invited to dress rehearsals, meet and greets, and more.
5. WHAT ABOUT TOURS AND HIGH SCHOOL PRODUCTIONS?
When you invest in a Broadway show you are usually investing in the originating production, or the “Mother Ship” as I like to call it. To compare that to the restaurant world, it’s like investing in the first McDonald’s… and then watching it franchise. Traditionally, investors in the original Broadway productions have the right (but not the obligation) to invest an amount proportional to their original Broadway investment in any additional companies produced by the same Producer (i.e. National Tours, London, etc.). Additionally, all those other companies pay a royalty and usually some net profits back to the Mother Ship. So if you invest in an additional company, you can make money on both sides (or if you choose not to invest in an additional company, your Broadway investment will still benefit from the profits (if any) of that company).
For any subsidiary activity that the Producer does NOT have the rights to (i.e. Greece, a movie, etc.) the Mother Ship is still paid a percentage of income received from the Authors for that activity (usually between 30-50%). However, it’s important to note that this doesn’t last forever. There is a ticking clock (somewhere between 7 and 30 years traditionally) that starts as soon as the Broadway production (or last production produced by the Producer) closes. The length of time that the investors receive this income is based on the percentage referenced above (the higher the percentage they receive, the less time they get this money).
Subsidiary deals do vary for each show, so ask your Producer to describe what your show’s deal is. These are very important as a good subsidiary deal can mean a long-term annuity fund for a successful show.
6. HOW DOES THIS WORK WITH MY TAXES?
Thanks to a very recently passed law, taxes for Broadway investors are easier now than they have been. First, it’s important to remember that this is an investment. You will receive a Form K-1 at the end of every year just like you would for any investment. And since Producers don’t know your specific situation, you should always talk to your accountant about how an investment (successful or not) will impact your taxes. But yes, expect to pay taxes if the show is profitable and yes, expect that you will be able to write off a loss if not. (By the way, Producers shouldn’t be giving you tax advice so if one does… don’t listen and call your accountant.)
7. HOW DO I PICK MY FIRST SHOW TO INVEST IN?
Make sure you pick something you love, so if it does disappoint you and doesn’t recoup, you will still be proud to have helped make it happen. Some people hang a piece of art on their walls. You’re going to hang a poster for a Broadway show. You want something that is going to make you think, “Look at what I helped make!”
And make sure you’re investing with a Producer you know and trust and has a good track record for returning investments, producing quality shows, and communicating with his/her investors.
8. CAN I AFFORD TO INVEST?
Investing in Broadway shows is a risky endeavor. According to industry averages, only one out of five shows recoup their investments. As I say to all my first-time investors, “Write this check like you're never going to see it again.” It’s important to have proper expectations, especially your first time out.
9. OK, I WANT TO INVEST, BUT HOW DO I FIND SOMEONE TO INVEST WITH?
Although Producers don’t usually advertise that they are looking for investments (there are regulations against that), most would be happy to take your information if you raised your hand and said you were interested in getting involved with a show. Now, don’t expect to get a call to invest in the next “sure thing.” First-time investors usually have to take a little more risk on a show before they are offered the shows that are safer bets. Why? Well, when Producers do have something that feels big (a show with a big star, etc.) they usually go to the people who have lost money on bigger risks before. There is seniority, as I’m sure you can understand.
10. WHY SHOULD I INVEST?
Because you love the theater. Period. Yes, you can make money. Yes, you can make great networking connections. Yes, you can learn if you’re looking to produce/develop your own shows. But the bottom line is to only invest if you couldn’t live without it. And you think the world shouldn’t be without it either.“Individual Investors are the lifeblood of Broadway. Without you, there would be no Les Misérables, no Chorus Line, no Rent, and yep, no, Hamilton. Without you, there would be no Broadway as we know it.”
Per Rule 501 under the Securities Act of 1933, an accredited investor is one of the following:
Disclaimer: This is not a solicitation to sell securities, which is only done through appropriate disclosure documents and only to appropriately qualified investors.