How a Broadway “Flop” Can Still Make Big Money
One of the most important questions any prospective investor asks before backing a theatrical production is:
“How likely am I to make a profit?”
It doesn’t take a theatre expert to recognize that investing in theatre is inherently risky. Folks in the industry will usually tell you that about 1 in 5 Broadway shows fully recoup their initial capitalization from their Broadway runs alone (though that figure may be lower post-COVID). Even so, the appeal of seeing Broadway from behind the scenes and attending a starry red carpet opening continues to make theatrical investing an attractive opportunity, especially for theatre lovers.
But here’s the key point that this statistic doesn’t capture: the commercial promise of a show doesn’t necessarily end when its Broadway run closes.
How is this possible?
Through subsidiary rights income.
Launching a new commercial production on Broadway (or Off-Broadway, West End, etc.) can dramatically boost the show’s global brand awareness. fter a producer acquires the rights to an author’s intellectual property and forms an entity to hold those rights (often referred to as the “mother company”), the terms of that rights deal are outlined in an option agreement. Within this agreement, the author typically grants the mother company ongoing participation in the show’s future life—touring and international productions, professional and amateur licensing, cast recordings, merchandising, and sometimes even film or television adaptations. Whenever the author receives royalties from these uses, the investors in the mother company may also participate.
But how much do investors participate in subsidiary rights income? This usually depends on specific milestones achieved by the commercial production. For example: the mother company might be entitled to 10% of author subsidiary rights income after X performances; 20% after Y performances, etc. In many cases, the mother company may negotiate up to 40% of the author’s share as long-term participation—sometimes for as long as 15–20 years after the final performance produced by the original signatory producers under the option agreement.
All this means that a show “flopping” on Broadway (in the sense of not recouping the initial capitalization) doesn’t necessarily prevent it from becoming financially successful in the long run. The initial commercial production often provides the fastest path to recoupment through net profits, but many shows that underperformed in New York have gone on to thrive through touring, international, and educational or amateur licensing markets. You’ll probably recognize several of these titles: Seussical, Legally Blonde, The Addams Family, Mean Girls, and Shrek the Musical, among many others.
When advising clients on preparing investor materials, I always remind them to articulate their broader vision—not just for the commercial run, but for the full life of the property: touring, international markets, licensing, media adaptations, and beyond. Because the truth is, our shows can and should be thought of as much bigger than their initial commercial run in a major theatrical hub like New York or London - there are countless opportunities around the world for a show to find a successful second life!
Yes, Broadway investing is risky—there’s no way around the fact that the majority of productions do not recoup—but because a commercial launch provides the strongest platform for building a larger international presence, it also offers the potential for meaningful long-term upside beyond the initial run.
So the next time you’re raising money for your project, remember: you’re not just offering an investment opportunity in a single production... you’re inviting investors to participate in the launch of a global brand!
- Jonathan Hogue
