Investing in a Broadway show production

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phatkev
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Investing in a Broadway show production

Post by phatkev » Fri Aug 24, 2018 8:28 pm

My wife and I are considering investing in a new Broadway show. Before you say it, we are very aware that this is a very risky investment and I'm sure that many Bogleheads will probably just say "forget it." I completely understand it if you feel that way, and I may also feel that way, too. However, we are interested in learning more about this type of alternative investment. We have been very frugal with spending, make a decent income that is reliable, save a lot, invest wisely and max out all the tax sheltered accounts and save generously to our taxable accounts, save for our kids college, have little debt in our mortgage. I'm wondering if anyone has had any experience with this type of investment, or another type of non-traditional investment similar to this, and what sort of advice you would give someone who is interested in learning more about them.

This is a huge passion of my wife and mine, and we have a good grasp on shows that will do well and those that don't. However, there's a huge difference between being fans of something and being successful investors. I'm sure there are many other factors to consider. But we are interested in investing in something that we are very passionate about and want to learn more about the field. I'm not sure if this is the right way to do so, but I'm really curious to hear your thoughts. Can anyone recommend any good resources to learn more about this type of investment? I would appreciate any advice. I'd like to research this fully before making any first steps, so I figured that the forum might be a good spot to start.

Thanks

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whodidntante
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Re: Investing in a Broadway show production

Post by whodidntante » Fri Aug 24, 2018 8:31 pm

My suggestion is to keep is small due to your lack of experience. Can you invest 10k, or some amount that is not large in relation to your portfolio?

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arcticpineapplecorp.
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Re: Investing in a Broadway show production

Post by arcticpineapplecorp. » Fri Aug 24, 2018 8:48 pm

read more:
https://www.theproducersperspective.com ... sting.html
https://www.barrons.com/articles/buying ... 1529123224
https://money.cnn.com/2016/06/11/invest ... index.html
https://www.stevepomeranz.com/radio/gue ... dway-show/
https://www.stevepomeranz.com/radio/gue ... dway-show/
https://www.wsj.com/articles/new-invest ... 1532014644
https://www.marketwatch.com/story/how-t ... 2013-06-07
http://42nd.club/

seems to say the entry point is around $25,000 usually. You willing to put that much (or more up) only to lose it all?
talks about similar to silicon valley start ups in that most fail but those that don't might do well. You've got to be willing to lose your money, because the odds are that you will.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

DC3509
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Re: Investing in a Broadway show production

Post by DC3509 » Sat Aug 25, 2018 9:05 am

I actually know of someone who did this. On the plus side -- he got to attend the opening night preview, wear a tux, mix and mingle with the actors and actresses, directors, etc. He was also a big Broadway person, and I imagine this had some long-lasting, bucket list type value that is hard to put a price tag on. On the down side -- the musical was a total flop, got a bad review in the NYT, and closed shortly thereafter. He definitely lost all of his investment. I can't remember the specifics now, but I also think the way the shows are financed -- there was some disconnect between the producers who invested money in it and the people who decided to pull the plug. My friend thought if the show could have survived a few more weeks that things may have turned around, and he said that he and other producers were quite upset when the plug was pulled so quickly. I can't remember all of the details, but I think you are a passive investor and have little say so in how things play out.

I don't think my friend really regretted it though. He is well-off and this was playing around money. The whole experience was probably worth it to him.

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Will do good
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Re: Investing in a Broadway show production

Post by Will do good » Sat Aug 25, 2018 9:08 am

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skepticalobserver
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Re: Investing in a Broadway show production

Post by skepticalobserver » Sat Aug 25, 2018 9:48 am

Having done some securities work in the business (the offerings are called "theatricals") and related matters I will say with much certainty that you won't even get a return of capital. Back in the day there was some hope of breaking even, but the production costs these day are sky-high so a show would have to run,at full house, for years and years just to recoup the initial investment. Of course performers get paid and creators, producers and theater owners get a piece of the gross regardless of how well the show is doing.

There is a set number of "first class" (Broadway ) houses in NYC. When it comes down to it show business in the city is a real estate thing. Theater owners rule.

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Index Fan
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Re: Investing in a Broadway show production

Post by Index Fan » Sat Aug 25, 2018 10:05 am

Assume that you could lose 100% of your investment. Good luck.
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Re: Investing in a Broadway show production

Post by rotorhead » Sat Aug 25, 2018 10:09 am

Interesting post.

Op, if you have never seen it, I suggest you find a copy of the movie, The Producers, and watch it. It was produced by Mel Brooks; and stars Zero Mostel and Gene Wilder. One of the funniest ever. Might not help you with your investment decision; but it's truly well worth watching for the entertainment value.

Chaconne
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Re: Investing in a Broadway show production

Post by Chaconne » Sat Aug 25, 2018 10:24 am

I don't know whether this will be more valuable as entertainment or instruction, but...

Years ago, my father knew a well-established Broadway producer. He asked my dad to invest in his upcoming show about a rock-and-roll star who was enlisting in the Army and who wanted to give a female fan one last kiss on the Ed Sullivan Show. My dad thought that was the dumbest thing he ever heard of and declined to invest. Of course, it turned out to be "Bye, Bye, Birdie." A huge hit.

Fast-forward a couple of years: The same producer asked dad to invest in his next show, and dad jumped in with both feet. The show closed within a week. FWIW.

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arcticpineapplecorp.
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Re: Investing in a Broadway show production

Post by arcticpineapplecorp. » Sat Aug 25, 2018 10:34 am

phatkev wrote:
Fri Aug 24, 2018 8:28 pm
This is a huge passion of my wife and mine, and we have a good grasp on shows that will do well and those that don't. However, there's a huge difference between being fans of something and being successful investors. I'm sure there are many other factors to consider. But we are interested in investing in something that we are very passionate about and want to learn more about the field. I'm not sure if this is the right way to do so, but I'm really curious to hear your thoughts. Can anyone recommend any good resources to learn more about this type of investment? I would appreciate any advice. I'd like to research this fully before making any first steps, so I figured that the forum might be a good spot to start.

Thanks
couple additional thoughts:

1. just because something "does well" doesn't mean it's profitable. There are businesses that seem to be doing well, but until you look at the books you don't really know where the money's going, if there's even profit or not, etc. While Amazon now may deliever a high proft for shareholders there were many years where they didn't. The company was growing but that tells you nothing about the earnings (which is the money left over after all expenses are paid). Look at the chart of the earnings for Amazon: https://tradingeconomics.com/amzn:us:eps (click on 15 year chart)

13 years of low/declining earnings. The growth in profitability started 4th quarter 2015. That's just the last couple of years. You'd have had to hang on for 13 years to start getting decent earnings. Yeah, the stock price is high now but you're not even planning on getting stock. So you get no shares, only a part of earnings. See how long/how difficult it can be even for huge publicly traded companies, let alone small non-publicly traded companies producing plays?

Sometimes a business can do well for a while but then all it takes is one thing to end it all. There was a local company I used to buy sneakers from. I assume they were profitable enough to have stayed in business for more than a decade. But then an employee embezzled and the company went out of business.

you're really taking idiosyncratic risk and risk you're not likely to be compensated for. I'm not sure why you'd want to do that. I understand you want to support the arts. Perhaps a donation would be better. Not only could it be tax deductible (need to make sure it's to a charitable organization that supports the arts) but you wouldn't have any angst over whether the money would ever be returned, let alone whether a profit would be obtained. William Sharpe said the three rules of investing are "Diversify, Diversify and Diversify". You won't be doing that investing in individual plays. It's no different than individual stocks (other than your individual plays are not publicly traded so information is not readily available you need to know to make a sound financial decision).

2. If you want to learn more about the field, wouldn't the best way to do that to be directly involved in looking under the hood? Do you have any financial background? Could you volunteer to be the bookkeeper for a local company that puts on community plays to examine the books and see how much is spent and on what and whether and how much profit might be left over. Then you would have a small idea of how hard it is to profit in this area and what the rate of return might be.

This is the same type of advice I give to people wanting to invest in franchises. If you want to franchise a dippin' dots for instance, go actually work at one to see the ups and downs and ins and outs look at the books before you put your own hard earned money down. You might think twice.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

jminv
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Re: Investing in a Broadway show production

Post by jminv » Sat Aug 25, 2018 10:40 am

The articles posted above state that only between a quarter and a third of productions manage to cover their costs. Even if your selection ability is somewhat above average and you’re not bringing emotion into it, you’re still likely to pick a dud. I would expect to lose everything going into this. If it’s 10 or 25k, which seems to be the absolute minimum, and it’s a small percentage of your net worth/play money then go for it for fun and a learning experience. The risks in this seem asymmetric according to the articles: you can lose everything but the creators, producers, and performers will get paid. Even if it’s not a commercial success it could be considered an artistic one , furthering the careers of those involved. I’d want to see some monetary skin in the game before investing.

Make sure it’s not an outright scam, too. I remember reading about various broadway investment scams from time to time.

WildBill
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Re: Investing in a Broadway show production

Post by WildBill » Sat Aug 25, 2018 10:47 am

Howdy

Investing in a Broadway show is like buying stuff for an interesting hobby, purchasing some knowledge and experience, plus a certain amount of “fun” on opening night and etc. It also comes with some lottery tickets attached, unlikely to win.

If you go into it with your eyes open and the experience and knowledge is worth the money, go for it and have fun. As you yourself say, do not confuse it with an investment. It is more like a charitable contribution.

Good luck

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

michaeljc70
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Re: Investing in a Broadway show production

Post by michaeljc70 » Sat Aug 25, 2018 10:56 am

Given the OPs description (huge passion, etc), I would consider this a hobby/donation rather than an investment. Maybe like when you donate to the arts, a museum, etc. I would have a very low expectation of getting the money back.

Ragnoth
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Re: Investing in a Broadway show production

Post by Ragnoth » Sat Aug 25, 2018 10:56 am

It’s not the kind of thing that you should expect to see a return on. Based on the articles listed before, even if *enough* shows turn a profit to make up for the losers, you are not in a good position to diversify the investment (e.g., by investing 25-50k across a dozen productions).

I had a friend that dabbled in funding productions for a non-profit theater troupe. It’s not directly related, but the goal was always to break even and become self-sustaining. They had some good reviews and bad reviews over the years, but the financial goal was met only 1 year out of 5. The reality of it is a social club for wealthy old New Yorkers who like to talk about theater and wear nice suits at group gatherings.

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Re: Investing in a Broadway show production

Post by Minty » Sat Aug 25, 2018 11:21 am

Index Fan wrote:
Sat Aug 25, 2018 10:05 am
Assume that you could lose 100% of your investment. Good luck.
OP, I'd say assume that you WILL lose 100% of your investment. Go to Joe Allen's on 46th Street and have a drink while you think about it. (Their decor is a collection of posters from flops).
Core Four with nominal bonds and TIPS.

maddogio
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Re: Investing in a Broadway show production

Post by maddogio » Sat Aug 25, 2018 12:04 pm

Ruined the Red Sox for a century.

HIinvestor
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Re: Investing in a Broadway show production

Post by HIinvestor » Sat Aug 25, 2018 12:10 pm

My friends invested in Allegiance—i think they lost every penny but did get a deduction, I believe for the loss.

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Phineas J. Whoopee
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Re: Investing in a Broadway show production

Post by Phineas J. Whoopee » Sat Aug 25, 2018 12:11 pm

There's a George S. Kaufman play about it: The Butter and Egg Man.
PJW

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Re: Investing in a Broadway show production

Post by skepticalobserver » Sat Aug 25, 2018 2:00 pm

The thing about The Producers is that was based on real people, who charmed widows, trust-funders and dreamers. Line items like “flowers for the star” bloated production budgets. The west coast learned good from the east, thus “Hollywood accounting.” (https://en.wikipedia.org/wiki/Hollywood_accounting)

Mad sire? Mad indeed. But do look how they light up the sky!

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Re: Investing in a Broadway show production

Post by carguyny » Sat Aug 25, 2018 3:26 pm

Friends of mine invested in a show a couple of years ago (Executive Producer I think) - show was successful, critics loved it, nominated for a tony. They got to attend the Tonys as well as opening night. Total money recovered is still $0.

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phatkev
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Re: Investing in a Broadway show production

Post by phatkev » Fri Aug 31, 2018 10:19 pm

Thank you all for the advice. None of it is too surprising, as this is the bogleheads forum and I expect nothing less than common sense investing advice. I agree with pretty much what the general attitude has been, mainly, this is a very risky investment and if I choose to go into it, I need to be prepared to lose everything.
arcticpineapplecorp. wrote:
Sat Aug 25, 2018 10:34 am

1. just because something "does well" doesn't mean it's profitable.
This is a very true point which is one of the main reasons why I wanted to post this on the forum. This really is more of an adventure for my wife and I to enter a new realm of this passion we have. There are many perks that go along with investing, like going to opening night, going to the Tony's if it gets nominated, mingling with the cast members, and becoming part of the inner broadway scene. Everyone has their things that they love and this is it for us.

A lot of people have said "be prepared to lose everything". While this may ultimately be true, there have to be some level of preparation and education one can take in making an investment like this. I will have the opportunity to speak with producers of some shows looking for investors. I'm trying to figure out what I should ask them that could give me a better idea of how to make a more educated decision. What are some good things to ask about with these producers that would give me more info about this adventure? I'm interested in knowing the basics (i.e. expenses with the show - rent, salaries, insurance, and income like ticket sale prices). Also interested in knowing how soon investors start getting paid, how frequent, typical time it takes to get money back for a successful show. In other words, as an investor (in general), what sort of information should I be privy to and what is reasonable to ask for? The only investing I've ever done is with mutual funds, so I'm not sure what should be typical knowledge for private investors in adventures like this.

I know that many of you would not do this type of investment, but if you were, what sort of information would you seek from the producers trying to get you to invest before proceeding?

Thanks!

HIinvestor
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Re: Investing in a Broadway show production

Post by HIinvestor » Fri Aug 31, 2018 11:00 pm

I would definitely want to know what successful other shows the principals have been in previously—Director, main cast members, etc.

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Re: Investing in a Broadway show production

Post by PhilosophyAndrew » Fri Aug 31, 2018 11:08 pm

michaeljc70 wrote:
Sat Aug 25, 2018 10:56 am
Given the OPs description (huge passion, etc), I would consider this a hobby/donation rather than an investment. Maybe like when you donate to the arts, a museum, etc. I would have a very low expectation of getting the money back.
+1

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arcticpineapplecorp.
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Re: Investing in a Broadway show production

Post by arcticpineapplecorp. » Sat Sep 01, 2018 10:05 am

phatkev wrote:
Fri Aug 31, 2018 10:19 pm
Thank you all for the advice. None of it is too surprising, as this is the bogleheads forum and I expect nothing less than common sense investing advice. I agree with pretty much what the general attitude has been, mainly, this is a very risky investment and if I choose to go into it, I need to be prepared to lose everything.
arcticpineapplecorp. wrote:
Sat Aug 25, 2018 10:34 am

1. just because something "does well" doesn't mean it's profitable.
A lot of people have said "be prepared to lose everything". While this may ultimately be true, there have to be some level of preparation and education one can take in making an investment like this. I will have the opportunity to speak with producers of some shows looking for investors. I'm trying to figure out what I should ask them that could give me a better idea of how to make a more educated decision. What are some good things to ask about with these producers that would give me more info about this adventure? I'm interested in knowing the basics (i.e. expenses with the show - rent, salaries, insurance, and income like ticket sale prices). Also interested in knowing how soon investors start getting paid, how frequent, typical time it takes to get money back for a successful show. In other words, as an investor (in general), what sort of information should I be privy to and what is reasonable to ask for? The only investing I've ever done is with mutual funds, so I'm not sure what should be typical knowledge for private investors in adventures like this.

I know that many of you would not do this type of investment, but if you were, what sort of information would you seek from the producers trying to get you to invest before proceeding?

Thanks!
Here's a couple more thoughts:

Just because you ask the producers doesn't mean you're going to get the answers you're looking for. The producers could be overly optimistic. That doesn't tell you what you want to know. Also, things can change. Let's say the play "would" do well, but then we go into a recession and now people are not going out as much as they "would have". What if the play would have done well, but then another play comes along and gets all the customer's money? You never saw this coming. Do you see how things can change very quickly? You're looking at risk which means there's unknown. Unknown how the play will do. Unknown what might happen in the economy. You can't really get the info you want by talking with the producers or learning about the industry. You just don't know what you don't know.

Also, here are two answers two different CEOs give to the question: "How is the business going?

1. "Profits are up, sales are up. We couldn't possibly do any better."
2. "Profits are down, sales are down. We couldn't possibly do any worse."

Which company would you rather invest in? Think carefully before you answer. It may not be the one you think. If you don't understand why you'd want to invest in #2 and not #1 I think you should be careful how you assess the potential for returns.
Last edited by arcticpineapplecorp. on Sat Sep 01, 2018 3:39 pm, edited 1 time in total.
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Re: Investing in a Broadway show production

Post by nisiprius » Sat Sep 01, 2018 10:28 am

A Broadway answer to your Broadway question:

"There's no people like show people, they don't run out of dough:
Angels* come from everywhere with lots of jack,
And when you lose it, there's no attack;
Where could you get money that you don't give back?
Let's go!
On with the show!"

--Irving Berlin, "There's No Business like Show Business," from Annie Get Your Gun

https://youtu.be/880SKHZReEc?t=90

*That is to say, you
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

3funder
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Re: Investing in a Broadway show production

Post by 3funder » Sun Sep 02, 2018 7:38 am

Don’t do it.

MStrambolo
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Re: Investing in a Broadway show production

Post by MStrambolo » Sun Sep 02, 2018 8:30 am

I'd say that the way to approach putting money into a Broadway show is to see it as spending, not as investment.

How much are you willing to spend in order to have the experience of rubbing shoulders with the show people: producers, directors, actors etc?

If the roulette wheel happens to turn and your number comes in, then maybe you spend a little less. Most likely your spend your allotment, have your experience, and go on with your life.

Well directed spending can be very rewarding and well worth the cost, if the experience is valuable to you.

Enjoy!

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Re: Investing in a Broadway show production

Post by MandyT » Sun Sep 02, 2018 4:31 pm

Huge Broadway buff here.

My two biggest concerns would be

(1) I have the impression that the wizards in entertainment finance are good at making a successful show look as if it's losing money on paper.

(2) You should at least consider the possibility that a bad experience with this will sap your passion for theatre and make it harder for you to enjoy it as a patron. That would be very unfortunate.

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Re: Investing in a Broadway show production

Post by bertilak » Sun Sep 02, 2018 6:30 pm

First, go see The Producers!
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

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