Investing In Professional Theatre Productions

High-end gay and lesbian investors with a passion for the theatre and some money they can afford to lose are the perfect investors for theatrical productions. Others may be scared away by high minimum investments and high risk, according to experts.

“Most investors in the theatre today are large investors and are sophisticated investors. By that I means they have substantial capital and experience,” says Benjamin Mordecai, a theatre producer. He produces what he calls “serious American plays,” including some gay-themed works. He was the executive producer for a run of Angels in America and was the marketing director for Love! Valour! Compassion! He has also produced all the works of August Wilson and last season produced Golden Child.

Mordecai considers himself a successful producer, but of the five or six plays he has produced in the last five years, he says only two have made a profit.

“Don’t invest anything you’re not prepared to lose totally,” he says. “It is very high risk.”

How It Works

There are few rules regarding what kinds of business arrangements are be used to finance theatrical productions, but most productions in New York and elsewhere are produced by limited partnerships.

The investor in charge of the production, called the general partner, solicits a limited number of other investors to help fund the project. For legal purposes, the number of people offered a chance to invest is very limited. For practical purposes, general partners want to keep the partnership small because few investors mean few people who have to be kept informed.

The investors who join with the general partner are called limited partners. The limited partners are kept informed of the progress of the show and are invited to opening night, but they have no creative input and little other involvement.

Others ways of funding productions are sometimes used. Non-profit groups who depend on grants and donations put on some productions, especially ones staged outside of New York City. But in Broadway, off-Broadway and other New York playhouses, most producers are out to make a profit.

“Theatre productions are, generally speaking, limited partnerships put together on a project-by-project basis,” says Nicolas Paleologos, another New York producer. “Most producers have a stable of interested investors on their mailing list.”

Minimums And Risk

Producing Golden Child cost about a million dollars, Mordecai says. The smallest investor in the project, aside from a friend he let in at a low level, was $35,000. But most investors put up much more.

Mordecai says he recommends that if investors have, for example, $500,000 to invest in theatre, they should divide it among three or four shows. “I don’t know if that is limiting your risk, but it’s spreading your risk,” he said.

Some opportunities exist to get in at a lower level, but most require a high investment. Fred Vogel, a New York producer who ran a three-day seminar called the Commercial Theater Institute that brought together producers, investors and other theatre professionals, produced a play called Shakespeare’s “R&J” for $120,000 and was able to allow minimum investments of $3,000. He latest project, Marlene, a play based on the life of Marlene Dietrich, will cost $1.6 million to produce, so higher minimums will be required. Some musicals, he says, can cost $10 to $12 million.

Vogel adds that knowing about the general partner with whom you are getting involved and knowing his or her work is important in deciding if you will let them use your money. “It’s a high risk gamble. What you want to find out is all the factors that reduce the risk,” he says.

Vogel can often break even on a show if he fills the theatre to 42 percent capacity every night, but other producers often require 50 to 60 percent of capacity to break even, according to Vogel. That can rise as high as 75 percent capacity to keep from losing money for a grand musical.

For investors who are not already turned off by the big numbers and high risks, there is a bit of good news.

“Out of the small group of shows that are profitable, the ones that are tend to do fairly well,” Mordecai says. If a show recovers its investment, profits of 25 to 100 percent are “reasonable,” he says, although he would not give a typical profit level because he contends that there are no typical productions.

To fill the theatre, audiences must have a strong, positive reaction to the production. “If there is no strong reaction, the show will close, and there are few assets to sell off,” Mordecai says.

Finding Shows To Take Your Money

No formal process or service exists to help investors interested in theatre find a place to put their money. Finding the right producers in which to place their faith and their money requires a lot of research by the investor and a lot of passion for that producer’s work.

The only tool to which our experts could point for any help is a publication called Theatrical Index. Vogel says it lists every commercial Broadway play running, in rehearsals, in development and planned. And it lists the people involved in the productions. Investors can pick shows that interests them for whatever reason, Vogel says, and find out how to contact the listed producer. Then, he recommends, contact that producer, find out the minimum investment and get on their mailing list if still interested.

“The most obvious way for investors to find producers is through personal connections,” says producer Roy Gaday. “Theatre groups won’t help. The William Morris Agency won’t help.”

Investors should contact anyone they know that is involved in theatre, Gaday says, and look for an in-road.

Paleologos agrees. “As an investor, what you have is a universe of producers,” he says.

While there is no one path that will lead to big-time earnings for those who have the available resources to invest in theatre, the producers contacted agree on one thing. If someone with money to invest calls them up, they will return the call.