Money Talks: There’s no business like it

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Despite its fast paced reputation, some things in New York are meant to stay the same. The Met, the bagels, and until 2023, there being Andrew Lloyd Webber musicals on Broadway. But his new show, Bad Cinderella, was a flop. It closed after just 10 weeks. Almost $20 million had been invested into the show. But before its closure was announced, only half of the seats were full. And after 35 years on Broadway, Phantom of the Opera also closed. It was the longest running show in Broadway history. But since the pandemic weekly costs had gone up by 15%. With audience numbers not coming back fast enough, the show could not go on. That means, for the first time since the 1970s, there are no Andrew Lloyd Webber musicals on Broadway. It's a sign of just how challenging times have become for new and old shows on Broadway. You're listening to Money Talks from the Economist, our weekly podcast on the markets, the economy and the world of business. In London, I'm Alice Fulwood.

Also in London, I'm Tom Lee Devlin.

In London as well, I'm Mike Bird.

And in today's show, the Business of.

Broadway, we hear from the chorus, the.

Best way to get an actor to complain is to give them a job.

Then a solo from one of the producers in the wings.

You can't make a living, but you can make a killing.

And for the finale, why anyone would invest in this industry.

We'd never had so much fun losing money.

Tom, Mike, I am just trying to figure out if this is the first time we have actually all been in the same studio together, like, ever.

I think it might be, yeah.

I'm waiting for a listener to tell us that we did this last year and have just forgotten about it, but I don't recall doing it last year.

We did have a Tommily Devlin cameo at the end of our episode, in which case it was about 15 seconds of communal time. But this is the first prolonged session.

Yeah, that sounds right.

We can continue this prolonged session in the pub later.

Yeah, well, tis the season. Well, I have to say, I hope you all brought something to change into, because the last time we had this many people in the studio was when I interviewed Michael Lewis. We had a couple of our colleagues filming it and one of them nearly passed out because it got so hot in here.

I was told that the AC was out in this room today. I don't know whether it's usually working, but, yeah, it's gonna get hot.

Having been in this building in London, I would like to ask what.

Well, the big question of this show is not will we all survive it without passing out, but are you theatre people?

No. No, I'm not. I'm a huge philistine, I'm afraid, because there's, like, TV and films and stuff, and you can do this at home. I don't know whether you guys have heard about it, but, yeah, that's big for me.

Well, unlike Mike, I'm actually quite cultured and I do like a show. I used to go quite a lot with my parents when I was living in Australia. I've only been a couple of times in London, though. Usually when people come to visit.

When an Australian is ribbing you for being uncultured, I'm just gonna get that on record. I'm a theatre person. I did, in fact, go to musical theatre school as a child. I've been to many Broadway shows, many West End shows. Yeah, I absolutely love it. But I understand. I am joined in my enthusiasm by our resident theatre person, who is our US Audio correspondent, Stevie Hertz. She lives in Manhattan usually, but she is, in fact in London with us now, and she is the fourth person in the studio with us. So, Stevie, hello.

Hello.

So I obviously love Broadway, but why are we talking about it? What's the story here? Why does it matter?

So it's interesting because it's an iconic American industry with a global brand, but it's also, in a lot of ways, a local industry. It's a collection of theaters in Manhattan, but it's also a much bigger industry than I think a lot of people think. And it's also an excellent bellwether for the health of New York City tourism. It's a really interesting economic indicator. So just to throw some stats at you, because I know you guys really love your stats. In 2018-19, which was the last full Broadway season before COVID almost 15 million tickets were sold. The season grossed $1.83 billion, and it contributed almost $15 billion to New York's economy and supported 100,000 jobs and those 50 million tickets. That attendance was higher than all the professional New York City sports teams combined. That's the Yankees, the Mets, the jets, the Nets, the Rangers, the Knicks, the Islanders, Liberty, the Giants and the Devils.

That's quite impressive that you managed to.

Rattle all of those off.

Sorry, it almost sounded like a musical theatre song.

When you interview for A job in consulting, you get asked to solve a business problem, usually involving some kind of mental mass. And in my previous job at Bain, there was a few years where we asked applicants to estimate the revenues of the West End in London. So, Mike, I don't think you would have gotten a job, unfortunately, but I do remember the answer being a lot smaller than $1.8 billion. So good for New York, I suppose. Certainly some big figures there.

Yeah. And the figures, I think, get even more surprising when you can break it down to the individual shows, especially the hits. So the Lion King, which has been running on Broadway since 1997, in total, it's grossed almost $1.9 billion. And the average ticket for someone who went last week to a show that's been running for almost as long as I've been alive, they paid $200 to see it.

I like the idea, by the way, that I can't estimate how much Broadway makes because I don't like going to musicals. I am a little bit fascinated by the numbers. They're very high. And it's like people don't know that there's a film of the Lion King, and it's on all of the streaming platforms. You can watch it whenever. I think we've got an old VHS somewhere. Stevie, more seriously, why did you want to look into this?

Now, I think Broadway is a really interesting proxy or an indicator for a lot of things. For the return of tourism to an expensive city, consumer sentiment, because these tickets are so expensive, and it's about how much people are willing to pay, and also for the end of COVID and people willing to spend that much time in a very big room with several thousand other people. So I think it's interesting because of all of those reasons. It's also interesting because we just have a tremendous amount of data. So thinking about the Lion King, you can, in fact, track the growth of the Fear of COVID back in February and March 2020, watching their sales tank week on week on week. So it's a really interesting and unusual business on its own, but it is also really interest and how it relates to the wider economy.

So today's show is a little different. Like every great production, it is in two acts. This was our overture. We have set the scene, developed the characters. You're all hopefully deeply invested in the story. And for the rest of act one, we'll do a bit more exposition how Broadway works. We'll have our intermission chance to stretch your legs and get an overpriced drink. And then in Our second act. We will try to tackle these challenges all in time for our curtain call.

So.

So, Stevie, for the rest of act one, let's find out what you learned when you went backstage on Broadway.

In the name of journalism, I have done something that no one should have to do. And I have come to Times Square on a Friday night, and I'm here to come to the TKTS line, which is a place where people can buy last minute discounts and tickets and see what shows they're going to, why and how they think about Broadway. What show did you guys just buy tickets for?

Shucked.

How did you decide Shucked?

It was the cheapest. Well, and they were available.

And are you guys locals? Are you visiting from out of town?

We were visiting from South Carolina.

Why was this a thing that you wanted to do on your Friday night in New York?

Well, I'm graduating, so this is kind.

Of a graduation treat for me.

Congratulations. Is it your first Broadway show or is it.

No, we've actually seen Hamilton and Juliet.

All right, so you guys are theatre people?

A little bit, I would say.

And you said that it was the cheapest one, so kind of budget was something you were thinking about with this.

For this one, just because it was the third show that we were seeing.

Oh, you've seen three shows already this trip?

Yeah, this is our first trip, yeah.

Wow, you guys are definitely theatre people. So what show did you guys just buy tickets for? We bought tickets to see Chucked at the Nederlander Theatre. And so my story is whether Broadway is making money these days.

What do you think?

The price? How did that factor into your decision about what you were doing this evening? We were going to come no matter what. We actually bought tickets for tomorrow night at full price and we paid them. And I think that people deserve them. I mean, they got hit so hard in the tourism crush with COVID and if we can get us, we'll buy one full price, and then we come here to get a second one for half price. And it feels like that's fair. You're out here, you're in Times Square, which is an intense place to be at the best of times.

Yes, it is.

What are you doing here?

I promote for shows. I talk about shows and say, hey, you should go see this, see that, see that? Having to know about all of them, but steering them towards the ones that I work for. I work for the producers of the shows.

How's Broadway doing these days?

You know, honestly, I think there's a lot of people walking around Times Square, looking at signs. I don't think they're going to Broadway shows. I've worked out here for 14 years, and if there was one theater empty during the holidays, it was the talk of the town. This holiday, there are eight to 11 theaters empty. That's not good.

Why do you think that is?

Money? I don't think people can afford to come in. Or maybe people are afraid to put money into shows because it's really the same shows that are doing well. Wicked, Lion King, Aladdin, six. I don't think Broadway's doing well at all.

I'm really lucky. Our theater, the Hudson Theater, is on the east side of Broadway, so I don't really have to walk through Times Square because that is, like, probably the hardest thing about being on Broadway.

Liana Rae Concepcion is a singer, actor, and, as she puts it, occasional dancer. She's currently in the ensemble of Merrily We Roll along, which is one of the hottest tickets on Broadway right now, which makes it a weird kind of job because it is her Broadway debut and that's really exciting, but it is still work.

Someone made the joke to me the other day that the best way to get an actor to complain is to give them a job. But I think it's easy. I think it's easy to complain. I think it's easy to be upset about whatever it is. But then it's a really good reminder that, like, it also is really good. And it really is a dream that we've all wanted. And it also is a job. We are doing the same show eight times a week.

And like with any job, how much you get paid and when is all part of it. And with Broadway, the paycheck starts well before anyone sees you on stage. But they are precarious.

There is an agreed upon salary that you get on a weekly basis for doing eight shows. There's also a difference between your rehearsal salary and your performance salary. Typically, a rehearsal salary is lower than a performance salary. And if for some reason you call out of a show, for whatever reason, you're docked based on the amount of shows that you.

Ms. Liana is also an understudy in her show, so she gets a bit of a bump for that, but the uncertainty is still there.

At the moment, I only have a job until July 7th. You know, knock on one. Hopefully I have a job afterwards, but it's not guaranteed, no matter who you are.

So.

So I'm actually putting away, like, basically all the money that I'm making with Merilee so that when the show does end. And if for some reason I don't have anything, I will be comfortable and good. But I am still working at a coffee shop at the moment. That is kind of like my spending money because yeah, you just gotta be a little bit more responsible these days.

New York is expansive.

Of course, it's not just actors who are trying to make sure they actually do make money doing this for Broadway as a whole. That's what producers are for.

Of course we're responsible for the capitalization of a show.

Megan o' Keefe is a producer with the aptly named production company no Guarantees. It's put on Broadway shows like Fat Ham, which was nominated for the Tony in theatre. Capitalization is raising that initial investment to get shows going. Shows begin their life a long way from Broadway. It starts with fundraising and maybe a trial run somewhere fun like Boston.

If we're going to partner with someone and do an out of town tryout or even have some longer sort of workshop like a lab, that can be anywhere from 2 to 4 million dollars for a musical. And that's a combination of lead producers investing and also raising funds themselves. And that's the initial seed money that will let us give advances to the artists who will eventually be paid on royalty, as well as any sort of sets, rehearsal spaces, rehearsal time for actors that are involved. Whether it's a reading or a longer stint out of town at a commercial.

Or nonprofit theater, that money really doesn't get far. If the show is coming to Broadway, which in the industry is one of the 40ish big theaters in midtown Manhattan, then the amount of money that producers need to raise goes up considerably.

For a play, I would expect to see a capitalization between about 4 and 6 million for a musical. Especially in the last few years, the prices have really gone up. It is not uncommon now to see musicals coming in at 20 or even more than $20 million. That's just to get the curtain up for the first preview. That's advances for the artist, designing and building the set, teching the show, loading it in all the rehearsals. You still haven't actually put it in front of a single person yet.

And unlike films and tv, there are no big studios churning out show after show, covering losses and reinvesting profits. Instead, other than for Disney, each new production is a start up with its own LLC having to compete to rent space at theatres. Productions could fall apart at any moment. There's no guarantee shows will ever make it to opening night. So risky that not just anyone can invest in a Broadway show. You have to Be an accredited investor, essentially prove you're rich enough to be able to lose the investment completely and not go broke, because there's a really high chance you'll lose your investment completely, as Meghan told me.

So, first of all, bring it home can mean simply recoup your initial investment. And the figure is pretty steady at about 20% of Broadway shows earning back that capitalization on Broadway. Some of them might see more if they go out on a national tour or through licensing and other regional productions. But it's slim.

Why is it so slim?

And how.

How do we still have a theater industry if only one in five shows make it back?

I'll answer that in reverse one. Fortunately, people like me, we all love it. And it's where people want to invest and participate and spend their time. I would also say when I first joined the industry, what I heard often was, you can't make a living, but you can make a killing. Which is absolutely true. And the shows that have broken through, and not just the 20% or so that managed to recoup their initial investment, but the ones that have done well, it's the best type of individual investment you can make. The Lion King musical, just the theatrical production and its various productions and offshoots has made more than any other individual movie, TV show, you name it, right? It's been around for over two decades in multiple cities, it's a hit like no other.

So most shows don't make back their startup costs. But for those shows that are hits running for years, like Wicked or Hamilton or Phantom of the Opera, they'll return it many times over. But it's getting harder and harder to make money doing this.

So the margins have gotten increasingly hard. It's always been difficult because, as I said, it's expensive both to capitalize a show up front and so to recoup, you need to earn back that now $20 million. And unlike a movie or a book, you have to keep employing the many people that it takes to keep a show running week after week and hopefully year after year running costs, especially for a musical, they can be anywhere from $650,000 a week to upwards of 850,000. So you really want to be clearing a million dollars a week because you also have to account for percentage royalties to theater owners, royalty pool participants, many of the artists. That's how they make their money too, right? And you have to keep advertising your show to keep it top of mind and be reaching the right audiences.

Given all of that, it's perhaps surprising that anyone invests in Broadway, especially if they understand financial markets and can see just how risky it is.

My background, I actually trained as a musician. Started at university seeking to be a music major, then decided that I like food and shelter. Wasn't sure that I was going to have either as an artist, so pivoted into law and finance. And so now I'm very fortunate to be able to be involved in the arts the way that I am.

Ken Willman spent his career in the very top echelons of the financial services world. Now he's found an even more adrenaline rich environment. Ken and his wife Rosemary invest in theatre. The smallest amount you can invest in a Broadway show is about $25,000. If you're co producing a show, which means you get a higher billing and a closer relationship with the production, it starts at about $250,000. Ken and Rosemary first got involved in Broadway after being on the board of a theater in Seattle. When another board member said they were taking a show to New York, the Wilmans got an offer to invest.

My wife and I talked about it and we thought, you just don't know if you're going to be asked to do something like this more than once. And so we invested in that show and we learned a ton. The show didn't do well commercially, but as we said at the end, we'd never had so much fun losing money.

And the next Broadway show they invested in, also out of Seattle, was a hit. Come From Away tells the story of the planes grounded in Newfoundland after 9 11. By the end of its Broadway run in 2022, it had grossed over $200 million, a huge multiple of the 12 million it cost to get it off the ground. That kind of success was unexpected, but it speaks to how the Wilmans think about investing.

You know, at the time that was getting onto its feet, nobody really knew. Would audiences accept a story that was based out of the horrific events of 9 11? But we thought it was a very important one to be told. Other times there may be opportunities that come where we think it's a good show, but sort of the impact of the story may not be as big, but it's entertaining. We think it's well done and then we may put commercial considerations first, but it still has to be a story that we're happy to be associated with.

The number of shows the Wilmans are involved in changes a lot, but last season they were part of six at one level or another, which is a lot of exposure to a deeply uncertain industry.

As somebody who spent my Career in the financial services world. I look at it when I'm looking at it from a commercial investment perspective, sort of like putting together a venture capital portfolio where if you do 10 shows, you're hoping that two or three do really well, knowing that they make up or hopefully make up for some or all the losses you have on others. The reality probably for most people involved in this business is that if you wanted to, you know, invest in a pool of high risk assets, there are other ways of investing your money that are going to give you a better return over time. Now, the people who may have put money into something like Jersey Boys or Wicked, and that's their one show, I mean, that's terrific. Their return rates have got to be huge. But obviously that's not the case for most of us who are involved in this business. It becomes something that if you like the art form, if you care about the art form, you want to continue to be involved.

So, Alice, Tom and Mike, that's the Act 1. The safety curtain is down on the stage. What do you think? Will you stay for act two?

You know, I really enjoyed the whole package, but particularly the bit where you were describing accredited investors, because that's like one of the crunchiest, most boring parts of my day job is like what accredited investors can and can not do in America combined with, as I have revealed, what is one of my favorite hobbies. And you know, it's wonderful to see these worlds collide. It's probably bad for my personal portfolio that I know that you could do this. Now, I don't have a quarter of a million dollars lying around, but you believe me, if I did, this is regardless of the returns, it does seem like quite a fun thing to be doing.

Yeah, yeah, it's fascinating. And the economics of this is really interesting. I mean, you also see this kind of power curve dynamic in other sorts of creative businesses like music and art, where really only a very small number of acts make it big. But I suppose one difference between those and theater is just the size of the investment. You know, it doesn't cost $20 million to record an album or put together an art exhibition at a gallery. So I suppose it's probably a bit closer to film. And in that world you have these kind of big studios that effectively invest in a portfolio of bets and in the knowledge that some will probably flop, but others hopefully pay off big time.

I guess one of the things I find interesting here is there's a lot of doubling down on intellectual property that already exists. So I was joking about the Lion King, but that's already intellectual and property, it's already an outstanding intangible asset. And some of the most successful ones that we were talking about there, Wicked Aladdin, they're also existing intellectual property being sweated, for want of a better word. You're turning something that, you know, people like into a musical, and clearly people enjoy that. And there's a reliability to some of the ones that already exist as, you know, films or books or other pieces of media. Clearly people enjoy turning that sort of content that they already liked into these sort of experiences, even if I don't enjoy it enormously. And I think it's interesting listening to people from the investment side there because you're getting people who clearly, a little bit like the actors and the singers and the staff who are doing this for the love of the game, to be honest. Like, you know, even if you make a loss making musical, you get to go to the musical and see it. It is really not quite like pumping your money into some company that then collapses unspectacularly. You got to make a musical, which I think for most people doing this, that's the main reason that they're doing it. And it's really nice if they make lots of money, but they wanted to make a musical. I'm guessing you don't have that many investors in this industry who are totally dispassionate and, like me, simply do not want to spend their time going to musicals.

Yeah. Something people brought up to me again and again was how visceral an investment it was that unlike having a portfolio, you get to go see it and also you get to go to the parties, which seem to be very important to a lot of them.

Deep down, everything is just about the parties. And you don't get that many parties for putting your money in an S&P 500 tracking fund. So. So that's the end of Act 1. We've set up the challenges facing our heroes, or I guess in Mike's eyes, people who make terrible things that he has no interest in.

I didn't say they were terrible. I said they weren't for me.

At this point, we're going to have a quick intermission, so run to the bar to grab an overpriced glass of wine and we'll be back for our grand finale.

And you can leave before the acting if you're not enjoying it. You know, you should always keep that option open to yourself. But here at Money Talks, we'd rather you kept coming back again and again. We've made this episode of Money Talks available to listen to for free. But if you want to listen every week, you will need to be an.

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Plus on this week's episode we're diving into the business of Broadway. But before we get to our curtain call, this story might be one of those that has to get worse before it gets better. So over to our leading lady.

So the maths on Broadway has always been hard to make add up. Shows are expensive to open, expensive to run, and audiences are unpredictable. That stat, about one in five shows recouping their investment has been around for decades. But Covid has made the business of investing in Broadway even more uncertain. Last season, which starts in the middle of the year, was the first full one since COVID and over 12 million tickets were sold to Broadway shows. That's a lot, but it's a 17% decrease from before the pandemic. And that decrease in ticket sales has not hit all shows equally. According to Oliver Roth, who's been producing shows on Broadway for over a decade.

Now.

The best show is doing about as good as it was and the worst show is doing about as badly as it was. But if you look at the interquartile range, which is sort of a statistical measure of the middle 50% of shows, the gap has widened. So it used to be sort of this nice curve of shows that performed at the bottom and shows performed at the top. Now there is like a pretty decent gap. Things are either making money now or they're losing money, and it seems to be easier to identify those than it used to be.

In 2023, only one new show has announced that it's recouped its initial investment, and that show was Prima Facie with Jody Comer, which is the advantage of being a one woman show. So it's cheap to put on. And to be fair, she did also win the Tony. So Oliver sees a pattern with shows that are doing well, well right now.

And I laugh because I don't know how great this is for the industry. Identifiable titles and identifiable stars are selling and those are honestly really working right now. The problem for our industry is that there's little that doesn't fit that model that is also working. Not none, but little. Right? There are other things being created. Those are the ones that are struggling the most to find audience.

It's not just starry shows. Shows based on existing IP are also doing well. Whether that's back to the the Music or MJ About Michael Jackson tickets are generally easier to get now. So shows that would be hard to get into before COVID like Hamilton these days, you can get a ticket to that pretty easily. So people can go to their first choice rather than their second or third choice show. And that means that the second or third choice is selling less. Well, that's because fewer people as a whole are coming to see shows. Attendance from every group is down, whether it's people from the city and the suburbs, or tourists international and domestic. None of them are back to their pre pandemic numbers as of yet.

The reality is, I think Covid taught us to be comfortable not doing things. We've just all become a little bit more comfortable with a meal at home. Not to also mention the fact that more people, especially families, moved out of the city and fewer people are commuting into the city to go to the office, which means that they are not four blocks away from the theater. There's tourism that's still not quite back. It's sort of not a shock that that is why the industry is not quite recovered.

And it's not just that audiences are down. Costs have gone up a lot since COVID One producer who brought a Tony winning show to Broadway in 2019 told me that back then it was capitalized for about 11 million. These days they reckon it would cost 18 million. And it's not just the initial investment. Running costs are up too.

It's no surprise to anyone that there is a total rise in labor organization. The film and TV industry just suffered for six months because of it. We have 20 plus unions that put on our shows and we are in constant negotiations. And that is honestly more and more expensive for producers.

The 40ish theatres on Broadway are closed shops, so the producers have to employ union actors, stage managers and musicians. Those unions are powerful. But it's not just labor driving up costs.

Shipping costs are up, materials are up and out of stock. There are all these other things that are making the world more expensive than it was pre pandemic. Truly, the cost crisis is a sum of its parts. We have to capture revenue while spending, and the second we stop spending, the show's closed. And there's zero revenue as well for.

Those actors and musicians in the wings or in the pit. A lot of what's driving those higher running costs is very, very understandable. Kate Shindle is the president of Actors Equity, the union for live theatre performers and stage managers. And she was also Vivienne in the original Broadway cast of Legally Blonde.

So we tried to push very hard to negotiate some additional provisions to make sure that there were more bodies there. There were just more people to cover if somebody got sick or injured. Which, by the way, happened before COVID all the time.

Right.

Kate also argues that it's just better financially that it's cheaper to have two extra bodies able to sub in than to cancel a week of shows when stars get sick, which is still happening in August. Both leads of Sweeney Todd got Covid at the same time. Their covers went on and the show did go on, but box office grosses fell by $370,000 compared to the week before. And it's not just more cover that Equity is pushing for after Covid.

From the worker perspective, the idea that we're just going to have unlimited five show weekends and constantly shifting schedules that really don't give people time for rest and recovery, those things are things that are more in focus and sort of front burner now. There's no way around the fact that we tend to work during most people's leisure time, but trying to work within the parameters of our industry to make it more humane and more of a place where people can make a living, have a family, if they want to afford to live near where they work, those things are pretty important.

But how to make Broadway more sustainable for workers at a time when it appears unsustainable financially is going to be a challenge.

Financially speaking, it's really deep in recovery. I don't think there's a way to sugarcoat this. This season to date, it's 28% down gross wise from 2019. Just this week, it was down 35% from the same week in 2019.

Lee Seymour is a theater producer. He helped bring the Tony Winning the Inheritance to Broadway, but he's also written about the structure of the industry for Forbes and the Wall Street Journal, among others. I spoke to him about how unusual this moment is. And what could be done about is not back.

It is not in crisis. It is deep in recovery. And when I say it's not back, I mean that it's not back to 2019, where it was still risky to produce shows. It's a high risk, high reward industry. But plenty of shows had a fighting chance, especially shows like Newark. Original musicals, original plays that weren't based on anything. They had a fighting chance. Now, almost none. And I say this as one of the producers of the Inheritance, which was an insane risk.

The Inheritance came to Broadway in 2019 and it told the stories of generations of gay men in New York City.

But it was a risk that was worth contemplating, then I would. If somebody pitched me the inheritance a day, I'd say, good luck and Godspeed. There is no way that that show would have even a hope of working on Broadway.

Now, just to kind of put this.

In perspective, Broadway has never been an industry that you got into, whether as an artist or on the back end as a producer, to make money. Is this moment different, or is it just a continuation of a uncertain, insecure investment industry?

It will be back. The trouble is for it to get back. We're in this almost paradox moment because we need to move through this moment where many people are simply burning money to keep the lights on. We're just burning money to keep shows in theaters. Certain shows don't have audiences that are coming to them, which, again, has always been the case. There are always flops, there are always hits, but there's a lot of churn. And the goal, I mean, this is such a bleak way of putting it, but I think it's accurate, is to keep on one level the illusion of a recovered Broadway alive until it's no longer an illusion. Because if we don't, we lose theaters, we lose audience, we lose engagement, and that can't happen.

So the economics of Broadway have always been hard and the margins have been thin and success hard to predict, but it's worse now. So that leaves the question of what can be done about it.

You really don't have too many levers to pull if the question is, like, what can we do about this On Broadway, you've got seats, you've got weekly operating costs, and you've got ticket prices. And like, those are the three things that you're trying to right size around each other. And until you can charge the same amount for like a VR experience at home versus being in the theater, you're really stuck working with those margins around costs, around number of seats, around ticket prices. And so that, for me, is where ideas like streaming, like co productions, like resource sharing, that's where those come into play. And we're seeing that. We're especially seeing that in the nonprofit sphere so far, of different companies sharing production workshops, sharing costs, sharing costume archives, doing all of the resource sharing to help each other out, to share audiences, to expand their reach. In that way, streaming, I think, is going to be huge. And I think that that will help because one of the challenges with Broadway, which also adds to its cool cache, is the reason to come to New York, is that you can't get it anywhere else. But eventually, if we're talking about making this A sustainable business that isn't going to collapse under its own weight. You are going to have to find ways to rebuild and broaden your audience, because a lot of them haven't come back.

So it's really making use of ideas of scale, both behind the scenes with sharing resources, tapping into economies of scale in that sense, but also scaling up the possible market. That's kind of what the internal market can do to kind of help itself. Is there anything external forces should be doing? We've seen a great success in tax credits for film and tv. Does something similar exist for Broadway? Should it be expanded?

It does.

It's a developmental tax credit and it's a New York State program where if you develop your show in a certain way and bring it to New York, you are eligible for a tax credit, which can be a sizable. I mean, it's multimillion dollar credits that can go such a long way. More federal relief. I mean, America, we don't have a Department of Culture. We don't have a minister of Arts like they do in other countries. Historically, we've been extremely small c conservative when it comes to supporting arts and culture on the federal or even the state level. Even though we know, and there's reams of data to support this, that arts centers, whether they're theaters, whether they're concert venues, whether they're arts education programs, are major economic drivers. They are catalysts for communities. That's restaurants nearby, that's hotels, that's after school programs. That's whole pieces of local economic networks. And I really don't want us to lose sight of that kind of value.

So, Tom, Alice, Mike. I think that point from Lee there about finding more or new revenue streams is probably the most important for keeping Broadway going. Because the thing that all these shows have in common, as you were saying, Mike, is a brand. And that's super valuable. Taking it on national tours or international tours, licensing to regional productions, maybe eventually making soundtracks. That's where more shows than that 20% can recoup some money. But what's really interesting is that this is a local industry. And one of the problems facing Broadway is that it's just really expensive to do business in New York. Staging the same production of Hamilton or Six or whatever is three to five times more expensive in New York than in London. And a big reason is just the cost of doing business. And so I think there are ways that they could probably cut costs if they were willing to.

Actually, that touches on an interesting point that came up from Lee there, around how governments think about supporting this and what the economic case is for that. I think traditionally support for the arts is maybe viewed as this kind of necessary, but not especially productive investment for governments to give the riff raff a bit of culture. But actually, I think you can make an argument that it is a helpful place building strategy. And it also creates lots of positive externalities around spending in restaurants and bars and hotels and so on. And so thinking more broadly about the potential spillovers from this, I think maybe changes a little bit how you think about the value of these investments.

Yeah, I thought the point that Oliver made at the top of that about the distribution of returns for shows having shifted was really interesting. I guess if rather than this sort of bell curve that he described, you now have this sort of barbell where you either lose a ton of money or make a ton of suggest that sort of risk in this business has gone up. And there will need to be some adaptation of, you know, the way people invest or how they do business to sort of help offset that in a way. We did an episode earlier this year about how AI and technology was going to change fame and potentially supercharge existing stars so people like Taylor Swift can take advantage of avatars and automation of herself to flog herself to even more people and become even more famous. And I think it's interesting that it seems to have come up in this episode as well. People that are already famous being leaned on more as the draw for Broadway shows to sort of guarantee, hopefully that will be in that sort of top 20% or that sort of high performing slice of shows rather than the ones that completely blow up. I understand why people in the industry feel some kind of disquiet about that though, because, you know, if you look at the sort of biggest historical stars of Broadway, people like Barbra Streisand, she eventually got her big break on Broadway after she'd been sort of working in nightclubs as a singer. And she got booked in one show that was a complete disaster and was closed on opening night. And then she eventually sort of managed to get booked in another, and, you know, she brought down the house. And if you're not gonna put unknown people in those sort of leading lady positions anymore and that path is closed, then you'll have to sort of find those extraordinarily talented people some other way. Maybe they'll come up through TV or movies or being a musician first. But the iconic story of Broadway, the sort of struggling star who gets cast in some sort of breakout show, you know, maybe. Maybe that doesn't really exist anymore, which is kind of sad.

Yeah, I'm sort of wondering whether that makes Broadway increasingly a sort of ancillary piece of media that's attached to the existing intellectual property that we were talking about, rather than something that starts off as like a Broadway only or primarily Broadway piece of intellectual property that things are then developed off of. When it comes to the government subsidy argument, I am going to play the philistine again, the positive externalities argument. It's an interesting one and I'd love to see it. It developed how much spending you might get in restaurants and other things. But it is what everyone that wants a government subsidy says, right? It's always what they say. This is fully triggering my sort of Gadsden flag, don't tread on me instinct. I refuse to pay for this. I mean, I'm not an American taxpayer anyway. But it seems that people who like the medium always think that there's a massive positive externality. I'm reminded a little bit as well of the time that the French government gave, I think all 18 year olds or all young people of a certain age a sort of arts only voucher. And they spent a very large portion of it on comic books, which I don't think was the intention. But I do wonder in terms of the economics of it, that maybe given that we're talking about valuable intellectual property and the way these things flow back and forward into each other, there's an argument that some other parts of the media ecosystem for a given piece of intellectual property need to cross subsidize the Broadway side. If we think that Broadway is, you know, really, really beneficial for that IP and keeping people interested in it and keeping it in the news and all of that. There might be an argument there that these things need to be sort of better balanced out.

Media spillovers does mean that, you know, it's possible maybe that some story I do about Goldman Sachs could be turned into a musical and I can live out my childhood dream.

I cannot wait to see you playing David so Solomon in the Goldman Sachs musical that you've also written and directed.

I mean, I'd definitely go and see Goldman Sachs musical. I don't know about you guys.

I'll tell you what, that is one musical I'd go and see. I'd go and see that.

Wait, but do you have any existing credits when you say you're a child actor before?

No. So I went to one of these academies on the weekend. Like I spent every Sunday of my childhood like learning how to dance, act and single and so I have been in a lot of shows, but not like, not that anyone other than my parents really came to see. But yeah, things like little tropical horrors. I was. Is it Daphne? I think.

Oh wow, she's the lead.

Yeah, yeah, you know I do.

You are better than all the other 11 year olds.

So when you were bemoaning Broadway's lost ability to identify up and coming stars.

You were really talking about your own deep disquiet with your personal experience.

It's me, guys. They didn't find me. No, no. So I did really love it and at one point I basically had to decide whether I was going to apply for grown up musical theatre school and go to that instead of university. And I decided instead to go to Cambridge, which, you know, was probably quite practical, but you know, I still yearn for the stage.

The West End's loss is money talks game.

Yeah, I guess so. Yeah, maybe. Well, before we head off to the pub where you can commiserate with me about my failed attempts to make it in the West End, I think it's probably time for our stats of the week. So Stevie, as our guest, why don't you kick us off?

Okay, so my stat of the week, or I guess of the year, because it's my first, last and only show of the year is $46,729.86. That's how much it would cost to buy all the presents in the 12 Days of Christmas song. Every year. PNC, the bank calculates how much it would cost to buy the three French hens, the two turtle doves, the partridge petri, the whole thing. And then they make an inflation index out of it, the cpi, the Christmas price index.

I feel like the gold rings are presumably doing a lot of the heavy lifting. Unless partridges are just a lot more expensive than I think they are.

It's really the labor costs of the 10 lords are leaping. Oh, yeah.

I was going to say, I don't know the last time you bought eight maids of milking, Mike, but I presume buying eight human beings is actually quite expensive.

I didn't get the impression you were buying the human beings. This isn't a horrifying story of modern slavery. I presumed it was a sort of services thing.

Well, my start of the week is also Christmas themed. It is 1.2 million, which is the world record for the number of LED lights in a Christmas display, which comes from an installation in a mall in Canberra in my home country of Australia, which was organised by a local lawyer to raise Money for a charity which feels very in line with the festive spirit.

That's a lot of LEDs. That's just the most in a Christmas display. Is that right?

Okay, I believe so.

I'm guessing Shenzhen somewhere can read that. Probably on like every street, but not as many Christmas displays.

Yeah, NAS into Christmas last I heard.

So my stat of the week is not a Christmas themed one. It's actually a news themed one. Just to remind people that things do still happen at this time of year. And it's $55 and that's the figure per share that Nippon Steel is buying US Steel for. I must admit I wasn't paying a huge amount of attention to potential acquirers of U.S. steel, but there's something incredibly late 1980s about this deal. I woke up the other day and I saw Nippon Steel buys U.S. steel for $14 billion. And it was a genuine what year am I? It feels very, very Japanese real estate company buys Rockefeller center sort of transaction.

Well, Japan is back, lost their checks, market's up, it has inflation, incredibly weak yen.

So I wouldn't buy huge stakes in a US company personally, but I'm not Nippon Steel. I'm sure they know what they're doing.

My start of the week is actually also a news themed one and it is 12%, which is the percentage of global shipping commerce that goes through the Red Sea and now will probably have to be routed around the Red Sea after some Houthi rebels started attacking ships. And it feels like we can't really get through a year now without having some sort of canal or shipping strait related crisis. And you know, right on the eve of the end of the year, we've got one in 2023 as well.

Yeah, I saw it was Evergreen saying they won't go through the Red Sea anymore. Right.

Maybe don't go through the shallow bit of the canal, guys. With that, all that's left to do is thank Stevie Hertz. Give her a standing ovation for all her work on this week's episode. So thank you so much for joining us, Stevie.

Thanks for having me.

And thank you all for listening to Money Talks.

You can always write to us@podcastseconomist.com Today's.

Show was produced by Stevie Hertz, Dan Asher and Marie Keyworth.

Our sound engineer is Ting Li Lim.

And the executive producer is Marguerite Howe.

I'm Alice Fulwood.

I'm Mike Bird.

I'm Tom Lee Devlin and this is the economist.