How to invest in a Broadway show

Winning a Tony Award is the dream of most every theatrical professional. But for another theater-connected group, it’s a dream that can be rooted more in hopes for financial reward than for glamour and acclaim. We’re talking the hundreds of individuals who are active as investors in Broadway shows — and they’re arguably the key element that keeps the commercial theatrical business running.

And it’s very much a business — and a thriving one at that. In the theatrical season that just concluded, which will be feted with the Tony Award ceremonies this Sunday, shows took in $1.14 billion. That’s about on par with the previous season, but it’s still 58% higher than a decade ago, when grosses totaled $720 million. And that’s not factoring in secondary sources of profit, from film rights (perhaps you heard of a certain Oscar-winning movie musical called “Les Miserables”?) to touring productions (road grosses have topped $800 million annually over the past few years). 

But for every megamillion-dollar Broadway hit, like “Phantom of the Opera,” “Wicked” or “The Lion King,” there are plenty of flops. In fact, most industry insiders say that only about one in every four Broadway productions turns a profit. “If you’re looking at this strictly as an investment, you might as well go to Las Vegas and throw the dice,” says Bill Hofstetter, who runs a New York-based advertising agency that specializes in theater. Even more troubling of late has been the potential for fraud: Consider the case of the musical “Rebecca,” which was slated to open this season —the producers lost $60,000 in fees and expenses to a former stockbroker, Mark Hotton, who was hired to raise some of the millions needed to mount the show. (Hotton was arrested on charges of fraud in 2012, but was granted bail earlier this week. Meanwhile, the producers are still working on bringing “Rebecca” to the stage.)  (more)

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