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- [00:00]
John Davids
The Lion King is the biggest moneymaker in Broadway history, closing in on $2 billion in ticket sales. Wicked is at 1.7 billion. Hamilton smashed through a billion dollars. But this got me thinking, who's actually getting rich? And how does money move around on Broadway? Where is it going? Show me the dollars. You know, I was curious, so I did some digging, and the answer is kind of nuts. But also I realized there are so many business lessons we can all take away from from the business of Broadway, because a Broadway show really is like a startup. You're running a business. You're building a business. The writers and the producers, they're the founders, the cast and the crew. That's your team. And if you do it right, everyone can make a whole lot of money. And when I put the story out on Instagram a little while ago, a guy named Adam Levowitz, who currently is producing a show Off Broadway, got in touch and asked if he could join me on the podcast and tell me all about it. So I'm gonna give you my broad business breakdown now, and then Adam's gonna join me in a minute to tell you what it's like running a show inside the trenches. That's coming up in just a second. First, welcome to Making it with John Davids. You can call me J.D. if you're a fan of this podcast, leave a rating and a review wherever you're listening. But there's something else you can do, too. Take a picture of yourself listening to the show or grab a screenshot of it and tag me in it on Instagram, LinkedIn, Facebook, TikTok. I will repost it. Let's get the word out. Get my best stuff to your inbox@johndavids.com and now let's get to the show.
- [01:39]
Adam Levowitz
You're listening to, Making it with John Davids.
- [01:48]
John Davids
Let's start with a simple question. What does it cost to make a Broadway show? Now, startup costs can range from 3 to 5 million dollars for plays and 10 to 20 million for musicals. And once it's in production, you're looking at 200,000 to 500,000 per week in operating costs, maybe a lot more. So you better have some deep pockets if you want to get started. Now, how do the shows make money? Simple ticket sales. Shows can have one to two performances per day, and theaters can hold 500 to 1700 people. The average ticket price might be 125 bucks, although it's gone up a lot post pandemic, so it could be a lot more than that. And that's how you make money. Now, there's also ancillary sales like merchandise and food and beverage and other things. And some shows do make quite a bit of money from selling merch. But in general, ticket sales are 80 to 90% of all the money that comes in. So who's getting the profits? Well, first off, most shows have no profits. 80% never recoup their initial investment. And assuming you're in the other 20%, here's how it works. Profits are divided up with 65% going to the investors and 35% going, going to the production team. And then when a certain threshold is hit, the production team starts to get a piece of the investor's action up to 50%. So it can go 50, 50. So basically it's exactly like a private equity fund, just with more singing and dancing and a lot more fun. So what's the best case scenario of a Broadway show? One word, Hamilton. You see, first off, the show launched with unproven, cheap intellectual property and no big name stars. Now, I know some people are going to come at me because Lin Manuel Miranda technically was on the come up, so maybe he might have been considered a bigger star, but he wasn't like a giant star like he is today. So you had cheaper cast and crew charges, very little IP cost because there's no intellectual property to license. And so you have low startup costs. And these are two huge money savers when you're starting out. And it was an instant hit blockbuster, grossing one and a half million per week right away, with an operating budget of, of just $640,000. That's a cool 42% profit off the bat. So if you're gonna make a Broadway show, make it Hamilton, my friends. So who is getting rich on Broadway? That is my question as a purebred capitalist. That's what I wanna know. So let's get to it. Are the performers getting rich? Not really. If you're a big star, I'm sure you can get somewhat of a payday, but you're probably gonna get a bigger payday just, just doing your own show or being in a movie or releasing an album or something like that. So are the show's creators getting rich? Sometimes if you do really well, you're a producer, a composer, and you can get that 35 or 50% cut of the action, you can do really well. How about the investors? Yes, when a show does well, the investors are definitely making money. In fact, Adam's gonna tell us about that in a few minutes. If you do really well, you can make More than you can in the s and P500. It's kind of like a venture capital investing type scenario where you have a bunch of flops, but then your winners can clean up the whole fund and make you very, very rich. But the biggest money makers on Broadway are actually not any of those people. It's not the creators. It's not the cast and crew. It's not even the investors. It's the theater owners. The Broadway theater owners. Check this out. These numbers are crazy. There are only 41 Broadway theaters, extremely limited supply, and they're not. They charge 10 to 20 thousand dollars in rent per week flat, and then they take 5% of the box office gross or more. So in addition to the rent, they're getting a cut of the action themselves. And this is pure profit. All juice, no pulp. Even shows that lose money for the investors can make a ton of money for the theater owners. Again, they're getting a stake of the box office action. That's the revenue, not the profit. If you sell a ticket for 200 bucks, I want my 5%. Regardless of whether you're making a profit on that 200 bucks. If a show bombs, theaters can pull the plug with just two weeks notice. So the downside is pretty limited. So if you want to get rich on Broadway, forget the singing, forget the dancing. Don't write a show. Just own the Broadway theater. And good luck with that, because again, there's only 41. And I'd imagine they're not selling anytime soon. So this kind of reminds me of the whole story of how in the gold rush, the people making most of the money were the guys selling the wheelbarrows. Of course, you can make money digging up gold and hitting the jackpot. But if a business is running on full steam and there's a lot of winners and a lot of losers, and maybe more losers than winners, if you just sell the foundation, the fundamentals, the picks and shovels that keep the business running, you will for sure do well. Of course, there's no glory in that. It's not as sexy as being a Broadway star or being Lin Manuel Miranda or having a show like Les Mis or Wicked on Broadway. But if we're just talking about pure money, real estate is where it's at. The other big business lesson that I pull from Broadway is the idea of doing one thing really, really well. You know, I saw the Lion King back in the early 2000s, when it first came out. 2005 or 2008, whatever year it was, I can't remember. And Then I've seen the show a number of times since. In fact, I saw the show just a couple years ago now. And it's the exact same show every single time. The music is the same, the cast can change, of course, the theater can change, but the fundamental show doesn't change. And the business lesson there is actually really applicable to everybody. If you can figure out one product that really works well and just keep doing it over and over again and optimize it and sell more tickets and bring your cost down and just keep recycling it more and more, you can do really, really well. But us founders, us visionaries want to do something totally different. We want to reinvent the wheel. Do this on Monday, try something else on Tuesday. And the people who do really well, certainly the ones who do well on Broadway, figure out the formula and just keep repeating it over and over again. All right, now we're going to go to Adam Levowitz, who is in the trenches kicking off his off Broadway career right now. He'll explain what off Broadway means in a second. His show is called Mozart's Don Giovanni, a rock opera. It's a reimagining of a clip classic work by Mozart, one of the most famous operas of all time. And y'all are going to notice a lot of parallels between what Adam's doing right now and running any business at any time. Here we go. Business owners and marketers. Honest question for you. Is the money you spend on social media worth it? Can you point to sales you've made from Instagram or TikTok or LinkedIn? If the answer is no, I've got something for you. It's a playbook I wrote called how to Build a Social Media Selling Machine. It's a nine step formula designed to turn your social media into a true sales channel, one that produces revenue at scale. Get it now@johndavids.com playbook. If you're spending more than $100,000 a year on marketing, you can't afford to miss this. Grab it now@johndavids.com playbook. So, Adam, what does it mean when a show is off Broadway?
- [09:18]
Adam Levowitz
Well, so there's two distinctions. There's off Broadway and there's Broadway. So Broadway is kind of easier to define. It's theaters that are 500 seats or over within a specific geographic location, sort of around the theater district in Manhattan. There's a couple of outliers in the theaters, but really that's where what makes the Broadway show the budgets are tremendously bigger. Broadway shows are eligible for the Tony Awards and Off Broadway is anything between like 100 to 499. And that the seat number is kind of relevant because of the actors union, the actors contracts. Actors equity is based on the number of seats in the theater. So Off Broadway, its own beast. And the theaters have spread everywhere. And in fact, the theater we're gonna be using, we might be the first official off Broadway show in that theater. So it's specific to the kind of contract and the size of the theater that we're using.
- [10:07]
John Davids
And is Off Broadway thought of as a theater funnel, like any show that makes it to Broadway. Did it always start off Broadway?
- [10:15]
Adam Levowitz
Almost never. It's actually a pretty common misconception. People think it's like minor leagues and major leagues and baseball.
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John Davids
Exactly what I thought.
- [10:22]
Adam Levowitz
Yeah, yeah, yeah. It's a completely different animal. I mean, Off Broadway tends to be, this is a very broad generalization, a little bit more experimental. The shows are smaller, the theaters are smaller. So the shows themselves are smaller in scope. By definition, you can't put like a classic Broadway musical. Let's talk.
- [10:42]
John Davids
You couldn't put the Lion King off Broadway.
- [10:44]
Adam Levowitz
No, it's just not big enough. Right. So what's interesting is that what I've done with this, Mozart's Don Giovanni operas are usually in a tremendous space, like at the Metropolitan Opera, any of these big opera houses. But I've put it in this small venue. So it changes a lot of ways that the show changes the vibe, but it changes the vibe right off the bat because it's in a small, more intimate space. And it's really, you don't have the room or the necess, the necessity for enormous sets and, you know, big broad strokes like that.
- [11:14]
John Davids
It's not going to be a spectacle. It's going to be a much more intimate experience. And so do people aspire to create Off Broadway shows or is that just the natural path they take if they're more experimental and intimate?
- [11:28]
Adam Levowitz
Well, I don't know that I can speak for people. For me, it was always, you know, Broadway was always sort of the goal. And this show may ultimately get to Broadway, but in this iteration, it's an Off Broadway size show. So it's a good question. I think people just create theater and then you find the right spot for it.
- [11:48]
John Davids
So what does it cost to mount a show like this?
- [11:51]
Adam Levowitz
Well, that's an interesting question. So typically, in a 250 seat theater, less than 299, 399, somewhere between 2 and 3 million dollars. But we're a sort of a typical Off Broadway show. There's nothing really typical about this. So our budget is much, much lower, mostly because part of the expense of a. Of a typical off Broadway or Broadway show is you have to buy out the theater completely. And so the theater is counting on that revenue for their entire period. It could be several months.
- [12:19]
John Davids
When you say buy out the theater completely, you mean they can't put anything else on in the theater during that period?
- [12:25]
Adam Levowitz
That's right. And so typically then what you do is you run eight shows a week and, you know, a Broadway theater, 500 to 1500 seats or more, or even a 499 or 399 off Broadway theater, multiply that by eight. You can do the math. That's how many seats you're trying to fill per week. So what we're doing initially is we're going to be in the place called the Cutting Room, which sort of a cabaret place. You sit down, you have tables, you can eat and drink. It's not dinner theater, but it's like going to a live music venue, sort of like a Hard Rock Cafe or something like that. So we're going to run two nights a week over the summer. And what that does is that eliminates the need for me to buy out the whole theater and tie up all of that capital, hoping to bring in eight shows a week. So what we're doing is we're running, you know, over six weeks, period. So two shows a week over six weeks. Give me more time to build word of mouth and a small production like this without, you know, a million dollar or $2 million or more Broadway marketing budget. I'm really counting on word of mouth. So it's two, you know, it's 500 seats a week. And then let people go out and talk about it and let the show sort of organically find an audience rather than just trying to, you know, the old marketing technique is seven touches before people know who you are having, you know, trying to find those seven touches. We're going to really focus on word of mouth as much as possible.
- [13:39]
John Davids
And it sounds like you really hacked the pricing model here. So if I put my startup hat on, you said, well, I don't have $2 million. Maybe I have $500,000. What can I do here to make this a $500,000 cost as opposed to a $2 million cost? I'm just making that number up, by the way. But was that your idea or did you have other producers that were like, hey, here's the playbook. If you only have a third of the money is this playbook or did you invent this?
- [14:03]
Adam Levowitz
I invented it and, you know, to be seen if it works. I think it will, and my team is convinced that it will. It's unusual and it's funny you use the word startup because that's exactly how I'm approaching this as a startup company. I've got a product, it's been vetted, it's tested, it's ready to go to market. And, you know, the typical business model for a Broadway or off Broadway show, one of the barometers, if you will, is recoupment, when the investors can recoup their investment. And so you're always looking at how many weeks to, you know, based on ticket sales and whatever. Weeks to recoupment. I'm thinking about it more in terms of, well, a startup company, it's not profitable for a year or two, so I don't want it to take a year or two. But I'm sort of keeping it that model that whatever ticket revenue we bring in, we're going to reinvest into the show just to keep it going. And at two shows a week with a flexible theater like this, we can continue to do that. And then as we, we grow, we'll build, we'll add seats, I mean, add performances and sell more tickets, all for the same sort of startup costs. So we're going to grow that way.
- [15:03]
John Davids
Do you have flexibility? Because in startups you can do things like equity share, profit share. I'll give you, you know, 5% of the company for the first bunch of employees. Do you do things like that? Like do actors take profit share in that kind of case, or can you not get that flexible?
- [15:19]
Adam Levowitz
Well, the actors don't and the musicians don't. And I believe, and somebody watching this will quote me if I'm wrong or right. I think it's specifically forbidden in the musicians union contract to give them equity in the show. They have to just be straight salaried. The investors in a typical Broadway show, as revenue comes in and profits are made, the investors get their, their investment back until they've recouped. And at that point, the investors and the producers split 50% of the profits. So in terms of revenue sharing, that's kind of how it works in a, in a Broadway show, an off Broadway show. And we're, we're going to use that same sort of business model there because I can't totally break all the rules on everything.
- [16:02]
John Davids
We, we always try, but if you're dealing with unions, I mean, like you just said, the word union. So, like the music, the people, the guy playing the piano or the woman playing the trumpet, she's got a union fee. And so like, you can't negotiate at that level, can you?
- [16:15]
Adam Levowitz
Well, you can. There's minimums, okay. And then, you know, it's, you know, the sky's the limit on the maximum. The musicians, this show actually is not. It's going to be an equity show with the actors will be union and. But the musicians are not. Because of the two week, two show a week commitment. There's no real union contract from the musicians. So I'm going to pay them fairly. I'm a musician. I wanted to join the union and pay my dues and sort of in solidarity be part of that. But I think when we go to four shows, maybe six shows a week, then we'll make it a union contract.
- [16:44]
John Davids
Were there lots of times you've been at this for five years with this particular show, or I'll call it, I'm sure you hate this word, but you've had one product now for five years that you've been just building and building. Were there times where it fell apart or where you thought, I just can't do this anymore? Never really.
- [17:00]
Adam Levowitz
I mean, my whole career has been that way. And this particular show, it's really. I've loved every minute. There was one sort of, I won't go into the details of it. One brief moment in time where there was a major, let's just call it a snafu, which could have completely killed the whole thing for me. It was like, it was reasonable. What happened for me, just say, forget it. But, you know, I licked my wounds for about 45 seconds and I had a conversation with a good friend of mine. I'm like, oh, no, no. And so actually that snafu was the catalyst for then going to the next level by doing it all professional on myself.
- [17:35]
John Davids
Wow. And it's amazing how often I hear that, that I've said this, like the biggest victories come out of the biggest catastrophes. Because if you can just get past that one point, you're ahead of now the 99% who, who have, who have stopped. What's the kind of let's do best case, worst case, most likely outcome? What's the best case for this show in the next, let's say three years, worst case. And then what do you actually think is likely three years?
- [18:03]
Adam Levowitz
It'll be all over the world. It'll be touring all over the world. It will be playing in like the trajectory. Let me Kind of give you what I think is going to happen. The trajectory. We'll start in the cutting room at 2:52 shows a week. Pretty soon we'll add two more shows. We'll go to four shows, six shows a week. Most shows do eight. Most do eight shows a week. I don't want to do that because it's a burden on everybody. So I'm hoping we can make enough money in six shows a week that it keeps everybody happy. Then we'll run this in New York and then we'll spin up tours and other houses around the country that are similar because we're not a Broadway show. We're not competing with, you know, the Kennedy center or the Hobby center in Houston or these Broadway shows that tour around the country. We're not competing with them because we're going into very specific houses. We can go into a 400 seat, let's use the word hard rock sort of as a brand like Band Aid, but a place like a Hard Rock Cafe that has the same vibe to it. And then we can go to bigger. We can go around the country sort of growing and growing and growing, and eventually we'll hit, you know, either go to Broadway or the West End or the opera. Companies will start bringing it into their houses specifically. So three years, I'm hoping that this thing is, you know, maxing out theater size, and it's running pretty much continuously around the world and one or more locations and in multiple languages.
- [19:21]
John Davids
Do you have certain benchmarks? I mean, I guess it's all. It's all about cash. At the end of the day, if this thing makes. If you sell no tickets, that's the worst case scenario. But do you have certain benchmarks where it's like, listen, we want to sell two shows a week. If we sell one show a week for the first month, that's fine. Have you Excel cheat that out?
- [19:37]
Adam Levowitz
My team has. I haven't really looked at it right this summer. The summer is set. We've got the money for the summer. And then the real question is, how quickly do we add shows? You know, how. How quickly does demand overcome the supply?
- [19:53]
John Davids
And you mentioned investors who. Who are. You don't to say your investors, but like, who are the investors for this? Is it. Is it rich people? Is it institutions?
- [20:01]
Adam Levowitz
Generally speaking, it's people with. Well, it's a couple different kinds of people. Some people are just fans of the performing arts. They're the same people that will donate to the symphony or the opera or the local, you know, theater group. The difference is, is those are all non profit and those are just when people invest or they, they donate so they get a tax deduction. An off Broadway show is a commercial entity. So it's an investment because there's an expectation or a hope that you'll make a return. Most people do it because it's fun and they're supporting the arts. So there it's, it's money they're, they're able to and willing to lose because it's a lot of fun. Now on the other side, Broadway, actually I believe this is true. It was true. If it's still true, someone will fact check me. But what I've been told is that Broadway investments over the long term outperform the Dow. It's feast for famine. So there's an old saying on Broadway. You can't make a living, but you can make a killing.
- [20:58]
John Davids
It's a venture capital model. You put money in, eight or nine of the 10 are going to lose everything but the one you'll make. You'll have a Hamilton, you'll have a Cats, you'll have a Les. Mischievous. And that, that feeds you for your whole life.
- [21:10]
Adam Levowitz
Yes, yes. And there are some producers in town that if you have invested with them over the entire career, you'll be up like 30, 35%. I mean it really is for people that have just sort of cash to burn. It's a fun way to make some money. But I suspect people like that, you know, $25,000 investment, even if it triples compared to their entire net worth, probably, you know, it's just still play money, Monopoly money.
- [21:34]
John Davids
Well Adam, three years. Let's see what happens. We'll be following along and excited to see how this goes for you.
- [21:40]
Adam Levowitz
I appreciate that. Thanks very much.
- [21:42]
John Davids
That was awesome. Thank you, Adam. Best of luck Off Broadway. Thank you guys for listening. Get my best stuff to your inbox@johndavids.com Talk to you all next time.