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Angels take centre stage in high-risk theatre investments

Theatre production is one of the highest risks an investor can take, with only one Broadway show in five recouping its original investment. But for many investors, it's not about the money.
Actors singing in the finale in Mamma Mia on Broadway. Joan Marcus / AP Photo
Actors singing in the finale in Mamma Mia on Broadway. Joan Marcus / AP Photo

There can be few higher-risk investments than a theatre production. For this reason, investors putting up money for a show are referred to as "angels" in the business.

While investors in a hit show can recoup their original investment many times over, few shows are hits. For every hit on New York's Broadway or in London's West End, there are several flops.

The Broadway League, the United States industry's trade organisation, said only one out of five Broadway productions recoups its original investment. The Broadway League believes that this figure has held true for the past 60 years.

This ratio also holds roughly true for theatre industries in other countries. In the United Kingdom, the Angels List, which is administered by the Society of London Theatre, puts private individuals who have expressed an interest in investing in London theatre in touch with producers who are seeking investors for new productions.

Louisa Bell, a Society of London Theatre spokeswoman, says: "Why do people invest in theatre productions? They can make money if the show is a hit but any investment in a show should be seen as high risk."

Ms Bell said financial considerations are often secondary to those "angels" with a love of theatre. Some investors are willing to take a risk on their cash in exchange for the opportunity to become involved in the excitement of putting on a show. Being an "angel" can also offer an opportunity to get to become involved with the production and be invited to exclusive performances.

"Some of our investors are big and others small but all are drawn by an interest in the theatre that goes beyond the financial considerations," adds Ms Bell. "Being an angel can bring with it certain advantages such as meeting the cast or attending a special show put on for producers and investors."

Funding an entire Broadway or West End show could, however, prove an expensive way of socialising with the cast. Unsure of an eventual return on their money, many investors prefer to join a consortium of "angels" brought together for the purpose of funding a particular show.

It is not cheap to produce a show, particularly a top Broadway show. For example, Spider-Man: Turn off the Dark cost US$75 million (Dh275.5m) to stage, according to The New York Times. Although that would make it one of the most expensive shows ever staged, production costs of US$10m to US$15m are now seen as standard for major Broadway shows.

But the commercial returns can also be high. The Broadway League's 2010-2011 Broadway's Economic Contribution to New York City report measures the full economic impact of spending by Broadway production companies, theatre operators and those visitors drawn to New York by Broadway.

As the official source for statistical information about Broadway theatre productions in the United States, The Broadway League's report states that during the 2010-2011 season, Broadway as an industry contributed $11.2 billion to the economy of New York.

West End shows in London tend to be less extravagant. Many London hits also go on to perform on Broadway. A 2008 production of Noel Coward's play Brief Encounter toured the UK before opening in London at a West End cinema that had been converted into a theatre for the purpose of putting on the show, which was also in part adapted from the 1945 British film of the same name.

After a poor start with the Bristol Old Vic and lukewarm responses at other provincial UK theatres, the adaptation's author, Emma Rice, and its producer, David Pugh, decided to look for an unusual venue to do the adaptation justice. After being offered a number of major West End theatres, they decided to convert the Haymarket cinema in the heart of London's West End theatre land. The venue suited the hybrid adaptation perfectly and the show was a hit that went on to tour in the US and perform at Studio 54 on Broadway.

Mr Pugh, who has also produced other West End hits such as Equus and Calendar Girls, relies on an investor base of more than 80 "angels" who are prepared to put anything from £500 (Dh2,963) to £20,000 into a production.

The amount typically invested in a Broadway show tends to be higher, ranging from a few thousand dollars to half a million.

Of course, not all theatre productions cost the same as a Broadway or even West End production. Typically, regional theatres have lower overheads. It is also possible to invest in productions taking place in any country.

The only major barrier to this is the linguistic and cultural one. For example, anyone making an informed investment in a theatre production in Paris would need to have a fairly extensive knowledge not only of the French language but also of that country's literature.

There are also smaller venues, often converted from old warehouses or music halls or other unused spaces, that specialise in putting on shows on a shoestring. "Off-Broadway" is a term that New York theatregoers use to describe more modest theatres located outside Broadway. London's equivalent are "fringe theatres", generally located on the periphery of London's West End.

While the odds of becoming a headline-grabbing hit are stacked against a production beginning life "Off-Broadway" or on the "Fringe", there is always the possibility of it recouping many times original investment if it transfers to a more mainstream venue.

For many "angels", such low-level productions offer an opportunity to become involved in newer and more experimental works at a time when Broadway and West End shows are becoming increasingly formulaic in their efforts to have the maximum appeal to theatregoers. But whatever the scale of an investment in a particular production, theatre "angels" should ask themselves several questions. The first is whether they have the bulk of their assets in safer vehicles such as property and stocks.

The second is whether they can realistically afford to lose their entire investment.

The third is if they value the experience at least as much as they would value a financial return.



Updated: January 5, 2013 04:00 AM

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