Broadway Investors Set To Lose $100 Million As A Dozen Shows Close

Pretty Woman on Broadway
Broadway fans received grim news this week as two more shows announced their final curtains. Pretty Woman will be ending its run August 18, and the revival of Frankie and Johnny in the Clair de Lune is bowing July 28, a month ahead of schedule.

They're the latest in a deluge of notices from struggling ventures. By Labor Day, nine shows will have closed deep in the red, with three others wrapping in the black. That leaves 12 theaters vacant over a matter of weeks—one of the fastest, harshest turnovers in recent Rialto memory.

What the Hello Dolly is going on?

It seems that after last year's record-breaking boom, the Great White Way is experiencing a classic market correction: Prices are plunging as an over-saturated field sloughs excess product.

But the jargon brushes over deep cuts. The real fallout is that investors cumulatively are set to lose up to $111 million, according to documents filed with the SEC, with hundreds of artists, managers and musicians dropped back into the industry's meat grinder of a job market.

Here's the breakdown, with the capitalizations for each:

Musicals:

  • King Kong ($35m)
  • The Cher Show ($19m)
  • Pretty Woman ($17m)
  • The Prom ($13.5m)
  • Be More Chill ($9m)

Plays:

  • King Lear ($4.9m)
  • Gary ($4.9m)
  • Hillary and Clinton ($4.2m)
  • Frankie and Johnny ($4.1m)

Three limited-run plays have recouped their costs, or are on the brink, according to their investors:

  • The Ferryman ($6.7m)
  • Burn This ($4m)
  • What the Constitution Means to Me ($2.4m)

And four non-profit shows are wrapping as well, dampening industry tallies until their successors move in:

  • Ink
  • My Fair Lady
  • All My Sons
  • Kiss Me, Kate

That's 16 shows gone between the Tony Awards and Labor Day. How did it happen? And what does the recovery look like?

To begin, of Broadway's 40 working theaters (one is under renovation), 14 are filled by long-running hits like Wicked and The Lion King. Add the non-profit venues like Lincoln Center, and commercial producers are left with 22 houses to scrabble for, owned by just three companies.

It's a seller's market, as the trio of landlords often have multiple shows vying for each of their plots at any given time. And even if you snag one, with the crunch, there's no guarantee it will be the right size for your product; many a chamber piece has withered in a cavernous 1,400-seat house.

So if space is always tight, and stakes are always high, what made this summer bloodbath so much more extreme than its predecessors?

First, the industry is coming off a staggering, multi-year box office boom. It started in 2016 when Hamilton became the first show to gross over $3 million in a single eight-show week. Then came a glut of heavy hitters: Hamilton, Harry Potter, Hello Dolly!, Frozen and Bruce Springsteen were all running at once, making 2018 Broadway's highest-grossing year, with $1.8 billion in sales.

More importantly, even the non-mega-hits were still selling well. A few closed here and there, but most commercial shows turned in solid box office receipts despite the crowded market.

Then came the most recent wave of hopefuls. There were scattered hits (notably To Kill a Mockingbird and Hadestown), but many were outright duds, or received such mixed reviews that no one expected them to make a lasting impression. And when the Tony nominators snubbed most would-be contenders, triage was swift.

Here's a telling snapshot: during the week of last year's Tonys, all but four shows grossed 60% of their potential or more. This year? Fifteenfailed to hit that threshold. That's an enormous amount of money left on the table.

And that's the main driver of this summer's culling. Yes, when Springsteen finished his gig the industry's average ticket price dropped almost 10%, but the real culprit was a slate of new shows that failed to entice buyers at any sustainable pricepoint.

It is important to remember that not all these productions are total washes. Producers tend to only announce full recoupments, creating a false narrative that Broadway is an all-or-nothing game. The Cher Show, for example, has been bleeding money, but not hemorrhaging - its investors will likely see at least a partial return.

If that sounds like cold comfort, it is. With open-ended runs, Broadway ventures have potentially infinite profit margins (Wicked is famously the most lucrative property in Universal's catalog), but rare is the show that survives long enough to realize them, and many do lose everything. Even assuming partial returns of 10% across the board, this summer's closures will still amount to $100 million in losses.

What happens next? Given the backlog of properties waiting in the wings, these theaters won't remain empty for long. Still, 2019's box office numbers are unlikely to break any records - few announced shows are building the kind of buzz needed to make up for the summer's deficit.

Alanis Morissette's Jagged Little Pill is one of them, as is The Inheritance, a two-part epic getting hyped as the year's Big Event, with the incendiary Off-Broadway smash Slave Play just announced today for its Rialto transfer. And Moulin Rouge is already selling like hotcakes. But most of the commercial roster is a wait-and-see affair, dotted with several oh-God-not-this-again revivals.

And you know what? That's okay. The industry is in fine health even if it isn't constantly breaking records. Hits like Hadestown and Mockingbird prove demand remains high for live theater. The summer turnover is simply a vivid reminder that quality matters, too. Buyers aren't willing to shell out just because a show's got a Broadway marquee.

Even at its best it's still risky. Frankie and Johnny got glowing reviews and stars six-time Tony winner Audra McDonald. Be More Chill had enough buzz for fans to stream its cast album over 200 million times. The Prom nabbed seven Tony nominations, including Best Musical.

There are no guarantees. The Great White Way is paved with headstones of critical darlings and junky jukeboxes alike.

via: Forbes

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