Frequently Asked Questions
How does profit get returned to investors?
The amount of money it takes for a show to get from development all the way to opening night on Broadway is called the budget ("Budget"). A Budget for a Broadway production could be anywhere from $6-$20m, and in some cases $20m+. There is also a weekly running cost (the "Nut") that includes all of the weekly expenses (e.g., renting the theatre, paying the actors, royalties to the authors, etc.). The Net Profit is the total Gross amount that a show takes in (i.e., ticket sales) for the week minus the weekly Nut.
100% of Net Profit goes to the investors until they have received all of their investment back ("Recoupment"). After Recoupment, 50% of Net Profit goes to the investors and 50% goes to the lead producer and their delegates.
Example: If a Budget for a given show is $10m and the weekly Nut is $500,000, and if each week the show is consistently grossing $750,000, then the show is producing a Net Profit of $250,000 per week. In this example, each investor would recoup in 40 weeks ($250,000 x 40 weeks = the $10m Budget). After Recoupment, investors would then be entitled to 50% of the Net Profit.
In many cases the life of the Broadway investment does not stop after the show has closed on Broadway. The original Broadway investors also receive the benefits of subsequent licensing to national tours, subsequent productions, high schools, films, etc. Our club investors in a show that only recouped 70% of its investment on Broadway. Four years later it had recouped the remaining 30% from licensing. We now get to enjoy future profit through continued licensing.