New filing suggests shortcut to becoming a Tony-nominated producer
There are troubles brewing in heaven.
Last week, the producers of the Broadway musical place of paradise has filed papers with the United States Securities and Exchange Commission to increase its initial capital costs from $13.5 million to $15 million. The move, which comes more than a month after the show opened at the Barrymore Theater, has industry insiders puzzled.
“I don’t know of any show that’s done that,” remarked John Breglio, an attorney who worked on hundreds of plays and musicals for nearly four decades before becoming a producer. Other lawyers and theater general managers with decades of experience also said they had never seen anything like it.
According to New York Attorney General’s rules, all money for a Broadway show must be in the bank no later than “at the theatrical production’s first public performance,” which would normally mean its first preview performance. . But, decades ago, the theater’s lawyers struck a deal with the government to extend the deadline for raising initial capital costs until opening night.
As a result, “it’s not uncommon for producers to accept investments during rehearsals and even previews,” observed Jordan Roth, president of Jujamcyn Theatres, which owns five Broadway theaters. Racing against the clock, Broadway producers sometimes scramble to find the last funds needed to cover the initial capital costs of their shows.
A group of investors, who provided the money to finish financing a musical at the last minute, even decided to name their production company “Under the Wire”.
Despite some cash flow problems during rehearsals, the producers of place of paradise reported that all of its initial capital costs of $13.5 million had been raised before opening night. According to a government file, 58 financiers had invested in the private offering.
However, after receiving mixed reviews, place of paradise struggled at the box office. The show has been unable to fill more than three-quarters of its seats or achieve more than $260,000 in ticket sales each week since its opening, well below the estimated $598,500 in weekly operating costs. in its original financial documents.
Running into the red since performances began, the musical has likely exhausted the $1.7 million set aside in its original budget to cover weekly losses.
But the team behind place of paradise don’t think paradise is lost yet.
The musical received 10 Tony Award nominations last week and demand for tickets to the show has increased on Broadway ticketing site TodayTix. “The show finds an audience,” said its creative and marketing producer, Garth Drabinsky.
In an effort to keep the show going at least until the Tony Awards next month, the producers are now upping their bid amount by another $1.5 million. The possibly unprecedented move could mean the show is looking for new outside investors, allowing people to become producers after the show opened, earning critical acclaim and garnering Tony Award nominations. .
Typically, when a Broadway show struggles to survive, its producers often ask members of the creative team to cut, defer, or waive their royalties in an effort to reduce weekly operating costs. The CEO will also often try to cut expenses that are not fixed in the budget, such as advertising costs.
In some cases, some Broadway producers will even invest more money in their shows, by making a senior loan, which would be repaid before the money is distributed to the original investors.
Some industry insiders suspect that the increase in upfront capital costs after the show opens could be linked to a so-called “overcall” clause, which allows producers to require investors to pay more. money sometimes equals up to 20% of their initial investments. The provision is hardly used anymore, because it is “a terrible idea”, wrote a lawyer.
If some of the investors do not provide the additional funding requested, then the producer will have to sue them for the money. But, in addition to the considerable costs of litigation, obtaining a judgment from the court can take years, and the producer needs the money now.
Moreover, the producer would probably cut ties with investors. “I wouldn’t want anyone coming back to me for more money, especially when a show is struggling, and, really, money rarely affects the outcome,” remarked the late producer, Hal Prince. .
Fortunately for investors of place of paradisethe limited partnership agreement for the show does not contain an override clause, and the explanation for this baffling decision could be found in another part of the complex legal document.
The deal states that once all the money for the show has been raised, “no other [co-producers] may be admitted without the consent of a majority in the interests of [all of the other co-producers].” But, if the show’s initial production expenses before it opens on Broadway are more than the amount of money the producers originally raised, then the lead producer can bring in new producers, and the new producers would only dilute the interests and rights of the main producer.
In other words, if the producers of place of paradise somehow botched their budget and the show ended up costing more money than originally planned, so they might be looking for new outside investors now. An industry insider felt the announced budget was “surprisingly low” for its size, commenting that the show is expected to cost between $18 million and $20 million.
While producers of place of paradise declined to discuss the financial aspects of the show, it’s clear they need more money. As well as paying weekly running costs and expenses related to a Tony Awards publicity campaign, the production was sued for failing to pay its former band sales manager last week.