The Catch-22 of Theater Economics in the U.S.
by Ashley Griffin, Stage Directions
A few weeks ago Times Union published an article titled: “Why Williamstown Theatre Fest has no full shows this summer”. There are several reasons given, but the one that has drawn the most attention is the issue of addressing longstanding, but recently reaching boiling point level concerns about the treatment of staff and company members. The article says:
“The entire sound crew for ’Row’ (a 2021 musical put on by the festival) walked out of a July rehearsal, citing a punishing schedule and unsafe working conditions outdoors during thunderstorms. Investigative reporting by The Los Angeles Times later revealed trouble began before the season started. In February 2021, 75 festival alumni signed an eight-page letter to the festival board alleging dangerous working condition (sic), abusive conduct and exploitation of apprentices and interns, who were unpaid and in some cases were charged tuition for their training, the LA Times reported. It said its interviews with 25 alumni revealed ‘not a professional springboard but a development program that exposes artists-in-training to repeated safety hazards and a toxic work culture under the guise of prestige.’”
The article goes on to say that “The operational model for the Williamstown Theatre Festival for decades was to offer audiences big-budget productions with big-name casts…and sumptuous sets and costumes, made possible by huge crews of low- or unpaid trainees…the company at full strength numbered more than 300, with as many as 180 as interns or apprentices.”
The rallying cry in response to this article (as well as with other instances of festivals or companies relying on unpaid internships to get their shows up) has been along the lines of: “Start paying everyone who works for you a living wage.”
I 100% agree. Every single person in every single industry, no matter their job, deserves to earn a living wage.
But the problem at the heart of these kinds of stories is much more insidious and complex. It would be easy if this were simply a case of some folks at the top being greedy and trying to get unpaid labor. While I’m sure that is the case in some instances, it’s far from the actual story going on within the machinery of the economics of theater in the United States that is making this a problem at large. I don’t know the ins and outs of the Williamstown situation, and this article is not meant to comment on it precisely – I’m merely using it as a springboard to start a larger conversation.
I know both performers and sound, very well-meaning producers who have been devastated by the current state of things and few are talking about the deeper economic issues that are rotting the future of the theater industry from the inside out.
For anyone new to the conversation surrounding the economics of theater, let me give a fundamental breakdown.
There are two kinds of producers who work on any given project: a “lead” producer and a financial producer. The lead producer is the person “running the show” as it were. They sign an option agreement with the writer(s) or secure the rights to a show; they help put the team together (director, designers, etc.) And put a plan in motion to get a given project to the stage – if this is a new work, that often includes putting up developmental readings where they invite backers who might want to get “in” on the project. They continue this process until they’ve raised enough money to put on the show.
Financial producers are just what the term implies, folks who put a significant amount of money into a show. They’re not making artistic decisions, but they’re financially supporting a project intending to earn a profit.
Festivals and theater companies can also function as “lead” producers (and that specific title would most closely line up with whoever the artistic director of a company is). They, too, are trying to raise money for a given project, but they go about it in a slightly different way. Many festivals and companies apply for grants and receive investments from interested parties or their subscriber base. If they are a non-profit, they are also allowed to collect tax-deductible donations (though they cannot turn a profit from an artistic venture.)
But the main idea behind all of this is that whoever is putting up a show needs to have a financial plan that will allow them to make a profit (or, in the case of a nonprofit, earn their expenses back). And this is where the economics have gotten worse and worse over the past decades (and especially in the past few years).
One of the reasons the “Golden Age” of Broadway was a Golden Age is because the economics allowed for it to happen. Back in the day, it was more cost-effective to run more shows each season for less time (so, for example, it would make more financial sense to have multiple shows go into the same theater in a year – different offerings would bring in the same crowd multiple times). It allowed producers to take chances on new writers or unusual pieces – they needed more projects to fill slots, and if one wasn’t a hit, the financial repercussions weren’t dire.
Then along came the one-two punch in the ’90s/’00s with the advent of “McMusicals” which were now SO expensive to put up they had to run for years, or even decades, to make a profit, and the response to scalped tickets where producers upped their ticket prices to match what the scalpers were asking for (figuring if the scalpers could get that much for a ticket the producers should be getting it too). It’s easy to chalk all our economic woes up to these elements, but it really only explains what’s happening at the largest level… and it does nothing to explain why other countries, who are also creating “McMusical” level offerings are not in the same situation as the U.S.
Inflation has a lot to do with it, greed has something to do with it (though in this instance, I’m not talking about from producers), and good old capitalism has its effect too.
Let’s break it down:
Let’s say I’m a lead producer. I have a great new play by a wonderful new playwright, and I’m excited to get it up. Here’s how it works when I go and talk to potential investors:
I present them with what’s known as an investor’s packet – this basically explains what the budget is, how much money needs to be raised, and how many “points” a certain amount of investment capital is worth. That means, if you put in X dollars, what percentage of royalties do you get?
Remember, you can’t have more than 100% of royalties, so every percentage point is very valuable and, as the producer, I don’t even have 100 royalty “points” (or percentages) to offer my investors the writer(s) automatically get a certain number of points…as, often, does the director, choreographer and, depending on your contract, the cast, and I get some as the lead producer. Keep in mind, that’s really the main way some of your team members are getting paid f I’m directing a Broadway show I will get a stipend (meant to get me through all of preproduction, out-of-town, rehearsals, and opening) but when you really divide it up in terms of what I’m making per hour over a very long period of time, it’s not as much as you think.
No, I’m hoping that the show is successful so I can actually make money when my royalty checks start coming in (and those don’t really start showing up until the initial expenses on a show have been recouped). So for every royalty point already accounted for, that’s less value an investor gets for any money they put into a show. The “pot” is now no longer 100% it’s, let’s say, 90%. So even if I singlehandedly finance the entire show, I’m only getting 90% of the royalties – and it may take years to get any royalties at all since, at first, I’m just waiting to recoup my initial investment.
The budget is also broken down into:
- How much money do we need to get the show up (i.e., for rehearsals, further development, to get the show into the theater and keep it running for a few weeks)
- What are the weekly operating costs? (How much does the show cost per week to stay open… this includes the weekly fee for the theater rental, salary for all relevant parties, costume maintenance, etc.) Ideally, your weekly operating cost will be covered by your weekly box office, so the show will become self-sustaining.
Basically, all this comes down to a simple formula:
(Number of seats in the theater) X (Ticket price) – (Weekly operating cost) = Profit amount.
The number of seats in a theater is rarely negotiable (though it is in some spaces), ticket cost is usually pretty consistent within a certain range… the only thing you can really actively mess with (at least when a show’s first going up) is your weekly operating costs. This is one of the reasons so many Broadway shows have been “paired down” as discussed in the recent New York Post article: “Broadway shows are becoming embarrassingly cheap-looking.” (https://nypost.com/2023/03/21/broadway-shows-are-becoming-embarrassingly-cheap-looking/) (Note how many of the shows that go against this trend originated in the UK. More on this in a bit…)
Well, you may think, doing this show on Broadway would be great, but that’s going to cost a LOT of money. Let’s look at doing this great new show in a smaller venue where our costs won’t be so high.
And that’s where the ratio of operating costs to max ticketing capacity actually starts to get WAY worse. In fact, right now, it’s basically impossible to make a profit off of an off-Broadway or off-off-Broadway show. It’s actually way more financially sound to do a show on Broadway than off-off-off Broadway (which is why more and more commercial producers are needing to partner with nonprofits).
Here’s an example:
One of the most popular Actors Equity agreements for young artists or new work in development is the Showcase code (which, keep in mind, is only able to be used in NYC). As of writing this, it basically says you can pay your performers a stipend of whatever you and the performers agree to, but you are limited to 12 performances total over a max of 4 consecutive weeks and must be in a theater under 99 seats. Producers must have an annual gross income of less than $200,000, and the budget cannot exceed $35,000 (exclusive of AEA stipends). Each cast member gets two free tickets, industry professionals (as specified by AEA) must be comped, and all AEA members must be offered comp tickets on a standby basis. (There are other requirements as well).
Right now, a VERY good weekly rate for a reputable off-off Broadway space with around 73 seats is about $2,500. A normal performance week is 8 shows a week, so for 12 performances you’ll need the theater for two weeks. But wait a minute, don’t forget you need to tech in the space, so you’re either going to have to lose a couple of performance days or rent the theater for a few extra days (the same space runs $1,500 for a single day – yeah, that weekly rate is looking pretty good), or you rent it for an extra week. (I’m using the rental numbers for Theater For The New City as a reference). So, let’s say you rent out the theater for three weeks. That’s $6,500.
You’re off-off-Broadway, so you don’t really want to go over around $20/ticket. A few things to keep in mind:
- People will often wait to come to see a show later in its run, and word of mouth means that people will usually hear about your show later rather than sooner. That means that often for off-off Broadway shows the first few performances have the lightest attendance. You want your show to stretch over the most time possible, but you legally only have max four weeks to spread them out, and every week you add is an additional cost.
- Most of the people who will be coming to see your show are industry members and AEA members… so a lot of your tickets will end up having to be comped.
But let’s take a really good scenario. Let’s say, on average, at every performance, out of your 73 available seats 15 are comped and 10 are empty. You sell out the rest of the house at the max price of $20 per ticket. You do 12 performances. That means the most amount of money you can possibly make is $11,520. Well, $6,500 is automatically gone for the theater rental, so you’re down to $5,020.
But that’s not really your profit. You have to rehearse… let’s say you have a short rehearsal period – two weeks, five hours per day, five days a week. A VERY inexpensive rehearsal studio that will give a manageable amount of space is around $35/hour. That means you’re spending $1,750 on rehearsal space. You now have $3,270 to cover pay for your actors, designers, and creative team members, build a set, buy costumes, market your show, etc. Let’s say you have seven actors, four designers, a casting director, a director, stage manager and a board op. Let’s say you pay them each a (non-living wage) stipend of $100/week. That’s the rest of your budget gone, forget about anything else – including a set, costumes and marketing (and no marketing means you’re probably not selling ANY tickets…)
And that’s a GOOD scenario.
There are some theaters in the city where the amount they charge for rental literally can’t be made up even if you sell out every seat at a high price. The numbers literally don’t add up. It’s not possible to make your money back let alone a profit even if you sell out every show. Even if you have the max budget AEA allows for a showcase code and you sell out every ticket at $25/each in a theater at the max capacity AEA will allow, the most you can make back is $21,900…that’s over $10,000 of your budget you’re not going to make back no matter how well your show does. That means you’re either paying for this out of pocket (and can lose thousands of dollars) or you’re trying to raise money telling people they will not even earn their money back, let alone make a profit. Who’s going to invest?
And the sad part of this equation is that the movable expense lands squarely on your cast, creative team and staff. It is possible to put up a show and pay creatives less than what they deserve. It’s not possible to put up a show and not pay the rental fee. So, guess what gets cut in the budget.
Now a lot of people respond to this with: “If you can’t afford to pay people what they’re worth, then you shouldn’t be putting up a show in the first place”. But the sad truth is that, if that were the policy everyone adopted, almost nothing would get put up. Ever. Because when the numbers don’t add up to even make your money back in the first place with a bare bones production, how are you going to raise all the money you need to do the show right? If the amount of seats times ticket price won’t allow you to earn back more than $21,900, what are theater makers supposed to do? Show business is a business and you have to at least be able to break even.
Festivals and non-profit theater companies are in an equally frustrating, albeit different situation…they are not raising money from investors looking for monetary gain from the production… they’re relying on people donating money (or sometimes working with producing partners, which goes back to the challenges listed above), with the only benefit being that the donations are tax-deductible. Raising money from people who know they’re never going to get it back is certainly possible, but it doesn’t make for the easiest business model (or the highest budgets).
Interestingly, this situation (while still difficult) isn’t nearly as challenging outside of the United States. You can put up a show on the West End for a fraction of what it costs to put up a show even off or off-off Broadway in NYC, meaning you can raise the same amount of money, pay everyone much better, and be far more likely to turn a profit.
So, what’s supposed to give?
As I said, EVERYONE needs to be earning a living wage. Company members should not take a hit simply because, technically, they are the easiest to trim in the budget. But if we commit to paying everyone what they’re worth, it means the cost of space (and other “non-negotiables”) are going to have to decrease…
Should ticket prices go up? Ticket prices are already extremely exclusionary...
Should theater owners charge less rent? Maybe? But keep in mind; they’re also dealing with property tax, electricity, maintenance costs, etc.
Should the arts be subsidized by the government? (My simple answer is, “yes”! We can see how well it works in the kinds of shows that are coming out of the UK…most of those projects would never get developed in the U.S. partially because most producers can’t afford to gamble on projects that might be a little experimental (my go-to is, there is no way “Matilda” the musical would have turned out like it did if it was created in the U.S. where risk-taking is financially dangerous.))
Almost every single new musical written by Broadway juggernaut Frank Wildhorn in the past fifteen years has been developed and produced overseas – namely in the Czech Republic, South Korea, and Japan – with many never coming to the States at all. They didn’t need to. They were very successful, and costs in the U.S. were prohibitive. (And keep in mind, these were first-class productions). And Wildhorn is just one example of this new paradigm.
We need a path forward that is not simply villainizing any one group in this equation. Should Williamstown be paying their team members a fair wage? Absolutely! If every theater company in America started doing that right now would most of them go out of business within six months? Probably. Is it the theater companies’ fault? Yeah, sometimes. But not every time.
The current economic system in the U.S. and NYC specifically is unsustainable. If things keep going on the way they are, we are going to have less theater produced in the U.S., and the theater that is produced is going to get more and more minimal. And keep in mind, the numbers I’ve used in the examples above are for plays – imagine adding musicians into the mix financially…that’s why far fewer new musicals are being developed in the States than even ten years ago. If we rely on the cry of “if you can’t pay everyone what they’re worth, don’t put on shows,” we’re, quite literally, not going to have shows. Does that mean we shouldn’t pay artists what they’re worth? Absolutely not.
But what we need is not to uniformly create easy black-and-white villains in this situation… we need to systemically change the underlying problems before it becomes too late to course correct.