March 12 started as a relatively normal Thursday for Valerie Novakoff, a Broadway producer whose credits include the Tony Award-winning revival of “Once On This Island,” and who has previously worked on “Wicked” and “Gettin' the Band Back Together,” as well as other shows. After a few meetings, she was having a late afternoon coffee with an investor to pitch her latest venture.
In January, Novakoff started the Broadway Women’s Fund, the first private equity fund focused specifically on investing in Broadway shows written, directed, or produced by women. She was in the thick of fundraising and hoped that her coffee meeting — with a Broadway enthusiast visiting from San Francisco — might result in more capital. But a novel coronavirus was spreading and they were both “getting a sense that something was happening,” Novakoff said.
Earlier that day, the Metropolitan Museum of Art, the Metropolitan Opera, Carnegie Hall, and the New York Philharmonic all closed due to concerns related to the virus. Health officials were discouraging large gatherings. If those things were intolerable health risks, how long before Broadway shows were considered the same? The answer: not long.
On March 12, the Broadway League, the industry trade group, announced all plays and musicals were suspended for 32 days. “Over the last 48 hours, watching everything escalate and the ground keep shifting, the Broadway League has done the responsible thing,” Sue Frost, a lead producer of the musical “Come From Away,” told The New York Times. “We’ve got to protect our employees and our audiences, and if this is what we have to do, this is what we have to do.”
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Novakoff agreed that the safety of Broadway’s workers and audiences was paramount. She also wasn’t worried about the implications for her new investment fund. After a one-month pause, shows would be back, she thought.
Instead, the worst happened.
Curtains have been down since March and they aren’t opening anytime soon. In June, the Broadway League said theaters would remain closed until at least 2021. Then, in October, it extended the suspension through May.
Without shows running, and production of new ones effectively paused, investments by the Broadway Women’s Fund have been delayed.
“If I was worried about a pandemic coming and wiping out Broadway, I don’t know if I would have moved forward. I don't think anyone was worried about that. I don't think anyone foresaw how long this would go on,” Novakoff told RIA Intel.
But Novakoff is glad she kept the fund alive. Social justice movements this year have heightened interest in impact investments, including the Broadway Women’s Fund, and investing in Broadway’s women is “not only the right thing to do, it’s also good for business,” she explains. (Women represent about 68% of Broadway’s audience and are more likely than male attendees to make decisions about tickets.)
And there are investment opportunities on the horizon.
Producers say the promise of Covid-19 vaccines, a backlog of creative ideas waiting to become reality, and pent-up demand for live theater, have set the stage for Broadway to bounce back stronger than ever.
It doesn’t happen often, but an investment in a hit show can be enriching and Broadway’s financiers say now is the time to start calling them.
Broadway is big business and it has grown steadily for decades.
The 2018-2019 season, the last full one, grossed $1.8 billion and attendance reached 14.8 million, both all-time highs. The total number of Broadway patrons tops the combined attendance of the professional sports teams in the New York City metro area, including the Yankees, Knicks, Nets, Rangers and Giants, according to the Broadway League.
Broadway’s customers are hard to beat; the audience is wealthy and dedicated. In the 2018-2019 season, the average annual household income of attendees was $261,000. Sixty-one percent of patrons attended at least two shows per season, and the average attended four shows. A small group (just 5% of attendees) went to 15 or more shows and accounted for 28% of all tickets sold, according to the Broadway League.
Broadway has realized that many of its fans can afford more expensive tickets. So, as attendance has grown, ticket prices have also climbed to an average of $145.60, helping Broadway’s 41 theaters collectively gross the record $1.8 billion.
The 2019-2020 season might have been another record year had it not been cut short by the Covid-19 pandemic. The season completed 41 weeks, including some of the busiest in early summer and December, and managed to gross $1.4 billion.
Still, most Broadway shows aren’t profitable. Even ones making hundreds of thousands of dollars a week might only break even, or worse, after covering the costs of their theater, cast, costumes, musicians, and supporting staff. Not to mention marketing and other expenses.
Broadway shows are risky investments akin to technology startups. They take years to produce and someone has to foot the bills while they are refined into hopeful money-making machines. Most are commercial flops.
Yet the chance to strike theatrical gold in Midtown, the perks of investing in Broadway shows, and the direct support of an artform, keep producers and others investing in them.
“You can’t make a living but you can make a killing,” Brisa Trinchero, a Broadway producer and entrepreneur, said about investing in shows.
Like many, she’s had “complete losses” and smash successes. She invested in and helped produce “Moulin Rouge! The Musical,” which was nominated for best musical for the 2019-2020 season, “Beautiful: The Carole King Musical,” and others.
Trinchero was also one of only about 100 investors in “Hamilton,” the hip-hop musical that debuted in 2015 and won 11 Tony Awards. The show has been an unprecedented commercial success. After raising a collective $12.5 million to capitalize it (most musicals require as much) it has gone on to gross $650 million in ticket sales alone.
“Hamilton” was an outlier among outliers, producers say. Lin-Manuel Miranda’s musical was a cultural phenomenon that drew the attention of people who previously didn’t pay much or any attention to Broadway — including new investors.
“Hamilton was a real game changer in that suddenly there were shows being talked about. It opened up eyes,” said Wendy Federman, who has helped produce dozens of Broadway shows.
Federman was involved in all three shows nominated for best musical in the 2019-2020 season: “Jagged Little Pill,” inspired by Alanis Morissette’s 1995 album, “Tina — The Tina Turner Musical,” a life story of the Grammy Award-winning singer, and “Moulin Rouge! The Musical.”
The booming investor interest in Broadway fueled by “Hamilton” and others has softened during the shutdown. The pandemic, and all the uncertainty that comes with it, has made investors more cautious, Federman said.
But the producer is taking calls for a show in London she’s working on and welcomed all others. Eventually, “every theater will be filled” again and she’s ready. “I’m going to walk into every reopening with a box of tissues. I cannot wait to walk back in. It will be like time stood still.”
“It's only intermission. It's just been a way longer intermission than we anticipated...Once we’re back and open, it will be huge,” said Federman, who noted that the decade following the 1918 influenza pandemic — the Roaring ‘20s — produced some of the best live performers and shows in history.
The loss of the entire 2020-2021 season devastated shows already performing but it also gave ones in production more time to rewrite scripts, rethink choreography, and improve however else they can, according to Trinchero. What is in the pipeline could be even better than anticipated and the backlog of new shows will be circling Broadway’s limited number of theaters.
Often, the same producers, with the same pools of investors, are backing Broadway shows. But Broadway is not exclusive like venture capital. Almost anyone can invest in shows with as little as a few thousand dollars and the initiative to reach out to producers.
Federman has helped her hairdresser, fellow airline passengers, and others invest. In many cases, people become investors through friends or family members who are stakeholders already. Prospective investors then ask their financial advisors about it, who make calls to producers.
Anyone new to investing in Broadway should consider making those cold calls and researching during the shutdown. “Building the relationship now, it’s great timing for that,” Trinchero said.
When the Great White Way lights up again, Novakoff is worried that the world will change but an attribute of Broadway will remain the same.
Women represent about 68% of Broadway’s audience and are more likely than male attendees to make decisions about tickets, according to the Broadway League. But men are disproportionately the foremost producers of Broadway shows. A 2018 study led by Novakoff found that during the five previous years women were the lead producers of only 28% of commercial plays or musicals. The Broadway Women’s Fund can help remedy the disparity and achieving that mission is central to the fund’s investment thesis.
Unlike others, investments in Broadway are also “experiential.” In addition to the prospect of big returns, investors in Broadway enjoy unrivaled perks beyond good seats.
Novakoff dines with investors at Sardi’s, a storied restaurant and Broadway hangout, and points out who’s who. She takes them backstage after shows to gladhand performers and to mingle at cast parties — things all producers do with investors.
Along with opportunities to invest, she’s looking forward to evenings filled with those things again, too.
“This pandemic has hit the Broadway industry very hard. Most people that I know have lost their jobs. Many of them are moving home, to their parent’s homes, leaving New York,” Novakoff said. On top of ticket sales, the industry contributes $14.7 billion to New York City’s economy and supports 96,900 local jobs.
“But I also think there is sort of pent-up demand for shows, for live performance, so I’m bullish on Broadway.”
Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.