Fun fact: what is the most financially successful arts-entertainment product at box office of all time? A Beyoncé album? A Disney movie? Disney is right, the medium is not.
At $7.3 billion since launching in 1997, Disney’s The Lion King stage musical is the highest-grossing product in the field.[i]
The Quest to Break Even
The Lion King is not the norm; reality is that turning a profit in theatre is challenging. One in ten shows breaks even; fewer are profitable. Today’s funding requirements are staggering: most musicals cost $10-20 million before Broadway opening night; outliers include the Spiderman and Shrek musicals which cost $75 million and $25 million respectively.[ii] A Broadway musical typically requires a year to break even; stylized profits are as follows:[iii]
$45.8m: annual revenue ($110 average ticket price, 1000 seats, 8 shows/week, 52 weeks/year)
($31.2m): annual operating costs ($600k/week)[iv]
($14.5m): upfront costs
$60k: net profit after year one
However, the average Broadway show runs for far less than a year,[v] begging the question: how do Broadway shows try to make money?
Modern sources of theatre revenue are as follows:
- Original Broadway
- London and other “sit-downs”[vi]
- Touring productions
- Merchandise including soundtrack sales and royalties
- Royalties from regional and amateur productions
Given high costs of Broadway and relatively short runs, it is common that production firms enter into a Broadway engagement knowing that they are unlikely to break even until part-way through their first national tour.
Over the past few years, the growth in digital dissemination of recorded theatre raises some fundamental questions: will fewer people attend Broadway/touring productions if they are able to see expertly-filmed recordings of the same production in the comfort of a cinema or their own home for one tenth of the cost?[vii]
BroadwayHD: Friend or Foe?
BroadwayHD launched gradually over 2013-2015, laying the ground-work to stream recorded theatre to your TV /computer, à la Netflix.[viii] In June 2016, it became the first company to live-stream a Broadway show: Roundabout Theatre’s She Loves Me revival.
Conceived by Broadway producers,[ix] BroadwayHD has a troubling existential conflict: BroadwayHD’s owners are often unaffiliated with the show they are filming. This leads to a mis-match of incentives: BroadwayHD can minimize advertising costs by streaming during an ongoing Broadway run, while producers are concerned by potential cannibalization and subsequent lost ticket sales. Given that the producers hold power over broadcast rights, non-current productions form the majority of BroadwayHD’s content library.
Does Streaming Harm Live Ticket Sales?[x]
BroadwayHD’s owners have been pressuring producers to film and stream productions which are currently playing on Broadway. Rather than harming sales, BroadwayHD has pitched that streams would act as advertising for the live shows, boosting sales.
She Loves Me remains the only Broadway data point, although the off-Broadway show, Daddy Long Legs, was live-streamed in 2015. Audience surveys were carried out after both streams.[xi] The critical new data-point is that ~75% of those who had seen a stream and had never seen a live show were now “likely” to pay for a live show. However, anecdotal feedback was received that consumers may not see the same streamed show on Broadway or on tour.
Following discussion with producers, my key take-away is that BroadwayHD’s single-largest value proposition may be to raise the profile of Broadway as a whole, rather than promote a single production.
The Show Must Go On
BroadwayHD has enormous potential. But fundamental questions remain over how to use this newfound technology to be of maximum benefit to the industry’s long-term future, rather to any one party.
Given how nascent the platform is, the industry is in a prime position to work cohesively to answer these questions. Indeed, some of the most contentious issues center on BroadwayHD working with producers and unions to formulate new contracts and cost/revenue-sharing agreements. These issues are difficult to resolve without industry-wide input.
Unfortunately, the Broadway production market is highly fragmented, with dozens of producers vying to maximize individual profits.[xii] In this disjointed environment, why would one company bite the bullet and pay $1-1.5 million to publish a production while others reap the benefits of this outlay?[xiii]
My recommendation for BroadwayHD is to instigate this conversation. Producers have shown reluctance to stream shows until after their Broadway close. Rather than pushing on this point, I find that BroadwayHD should focus on building their catalogue through streaming limited-run productions, near or after their closing date. Similar to She Loves Me, transforming the stream into an event is likely to progressively build viewership. Once BroadwayHD has a more substantial track-record, I believe that it will be the only credible entity to launch and lead the conversation surrounding the long-term deal structure of theatre streaming. Successful execution could ensure its monopoly in a potentially global market.
(Picture credit: National Theatre)
[i] Variety, “Disney’s Broadway Musical ‘The Lion King’ Becomes Top Earning Title,” http://variety.com/2014/legit/news/broadways-lion-king-box-office-top-title-1201310676/, accessed November 17, 2016. $6.2 billion is a figure from 2014, which has been adjusted for two years of worldwide productions’ weekly grosses.
[ii] New York Times, “The Staggering Cost of Broadway,” http://artsbeat.blogs.nytimes.com/2011/07/21/the-staggering-cost-of-broadway/, accessed November 17, 2016.
[iii] Unless otherwise indicated, the details described in this portion of the post are from unpublished sources, i.e., personal contacts in production firms in London and New York.
[iv] Ken Davenport, “What’s the average cost of putting on a Broadway Show?” https://www.theproducersperspective.com/my_weblog/2012/06/whats-the-average-cost-of-putting-on-a-broadway-show.html, accessed November 16, 2016.
[v] This refers to musicals only; plays typically run for 15-20 weeks. See also Howard Sherman, “Why Are There So Few Long Running Plays On Broadway?” http://www.hesherman.com/2014/08/18/why-are-there-so-few-long-running-plays-on-broadway/, accessed November 17, 2016.
[vi] “Sit-downs” are rooted in a theatre or location for an extended period of time, as opposed to tours which are expected to “come and go.”
[vii] BroadwayHD, “Subscribe,” https://www.broadwayhd.com/index.php/user/subscribe, accessed November 17, 2016. Monthly subscriptions to unlimited content are ~$15 while single-title broadcasts are ~$8.
[viii] Vox, “New theater streaming service Broadway HD has a small selection but big potential,” http://www.vox.com/2015/10/27/9621668/broadway-streaming-service/, accessed November 15, 2016.
[ix] Stewart F. Lane and Bonnie Comley.
[x] Unless otherwise indicated, the factual details described from here until the end of the post are from unpublished sources, i.e., personal contacts in production firms in London and New York.
[xi] Crains, “Startup BroadwayHD to stream the Roundabout Theatre’s She Loves Me,” http://www.crainsnewyork.com/article/20160630/ENTERTAINMENT/160639991/broadwayhd-to-stream-the-roundabout-theatres-she-loves-me-on-thursday-a-broadway-first/, accessed November 17, 2016.
[xii] The London market is more focused on four key organizations (National Theatre, Cameron Mackintosh, Really Useful Group and Sonia Freedman), all of whom work together in friendly competition. This has led to systematically lower theatre tickets prices over time as well as a viable group of alternatives to the BroadwayHD model.
[xiii] Crains, “Startup BroadwayHD to stream…”