LONDON – With big productions always needing big money, one theater expert explains how investment in the sector works and how London’s West End is used as a testing ground for his group in New York.
Live events took a big hit during the Covid-19 pandemic but now audiences are flocking back to sporting events, concerts and live theatre. The latest figures, from the London Theater Association, show that more than 16 million people attended a theater performance in London last year – which was up 7.21% from around 15 million in 2019 .
As investing in traditional asset classes has been challenging in recent months as the market grapples with higher interest rates and growing geopolitical risks, it could be – now is a strong time to invest in other assets such as theatre.
Non-profit vs commercial
In London, there are two main theater models: non-profit institutions like the National Theatre, Shakespeare’s Globe, and The Old Vic, and commercial theater like in the famous West End.
Eleanor Lloyd, an investor and theater producer, explains that commercial theaters work on a model that is all about private investment.
“So each show raises money for that show from a group, [a] a group of private investors, who are doing it partly for the fun and art of it, but partly because they hope the show will make a profit.”
When thinking about investing in theater, it’s important to understand how the economics of a particular show work.
Even if a show is successful from a ticket point of view, it will not be successful financially if it is too expensive to run, if it is too small or if the run is too short.
So investors have to think about whether your show can make money.
Going higher in New York
The bar for financial success is much lower in London than on Broadway in New York.
In London, investors can put in as little as a couple of thousand pounds to buy into a play. But as productions get bigger, they get more expensive to finance and produce. Budgets for shows in the West End can reach millions and on Broadway in New York, the stakes are even higher.
Producers often run productions in London first and if they do well, move to New York.
Lloyd said, “London feels somewhat safer. New York feels that if it fails, it’s probably going to fail big. But if it succeeds, it’s going to ‘ have a lot of success so it’s just kind of a higher risk game.”
She says a general rule of thumb for investing in the Big Apple theater scene is to convert a pound to a dollar sign and add a zero at the end.
“So if it costs £500,000, it’s going to cost $5 million. That’s the general rule. So the model is much tighter on Broadway, but because the stages are bigger and the prices are higher tickets, if it works on Broadway.” , the potential for profit is much higher as well.”
How to choose a winning presentation
It is very difficult to know whether a product will be successful or not.
It’s often a reliable way for a big-name actor or writer to drum up interest before a show opens. Then once a show opens, reviews and word of mouth will be key to a product becoming popular.
“What about the show on Tuesday night, someone is going to want to spend 30, 40, 50, 60 pounds, at least, to buy a couple of tickets and go see the show. Something about it has to make them decide that,” Lloyd said.
But investing in the arts is not for the faint of heart. “You can have shows that are artistically amazing, that no one wants to see and you can have shows that you’re not sure are good, but everyone wants to see. work,” Lloyd said.
She said: “Anyone who thinks they can predict what’s going to happen is wrong. But that’s part of the excitement that keeps you going because the next one might be the a big hit.”
