TeleCourse Raw Notes
Budgeting for the New off-Broadway
March 3, 1998
Notes Taken by Tara Greenway Leibowitz
Guest Speaker: Roger Gindi, general manager of shows including OUR COUNTRY'S GOOD, A SMALL FAMILY BUSINESS, NUNSENSE and producer of SHAKESPEARE'S R&J
Topic: Budgeting for the New Off-Broadway: Royalty Pools
1. A brief history of royalties:
a. Originally royalties were paid only to authors, then to directors, choreographers, orchestrators, and producers b. Started out as a straight percentage of the gross weekly box office receipts
c. In the late 60's, production costs started outrunning inflation investors could be losing money even while show was breaking even or amd royalty participants getting rich.
2. Producers needed a plan to make process fairer and more equitable, so royalty pools" were invented
a. Royalty pool: in lieu of percentage of GROSS BOX OFFICE RECEIPTS ("GWBOR"),people receiving royalties take a percentage of WEEKLY OPERATING PROFIT -- i.e., that amount of GWBOR in excess of salaries, rent, advertising, and all other production costs of the show that week
i. Everyone participating in the royalties must agree to royalty pool
ii. Royalty pools allow participants to get a much lower percentage at the low end but also allows them to make more money than their standard percentange of GWBOR at the high end. Of if show is successful, they share more in its success
iii. Participants are usually amenable to royalty pools if you tell them "When we're not making money, we'll pay you less, but when we are making money we'll pay you more"
iv. example: If Author at 5% of GWBOR, Director at 2%, and Producers at 3% (total 10% royalty) then in a pool-In lieu of 10% of the gross, a royally pool may take 40% of the operating profit -- the remaining 60% goes to the investors. The pool is then divided by the number of points in the pool (eg=10) therefore in this example Author gets 5/10 of 40%, director 2/10 of 40%, producers 3/10 of 40% of the total weekly operation profit. If a show's break-even is $40,000 and it grosses $50,000 one week, $4000 of the $10,000 profit would go to royalty participants, $6000 to investors. The Author would get 5X400 or $2000 per week instead of 5% of the Gross of $50,000 or $2,500.
3. The SSDC, the directors' union has royalty pool standards
i. They can set a standard of 60-40: 40% of operating profit until production has double-recouped (paid back investors and returned 100% profit) then increasing to 50%
ii. Royalty participants want a minimum weekly guarantee: of at least $200/point (eg Author 5X$200=$1,000 per week)
iii. Once you declare a royalty pool, you must stay in it for at least 12 weeks; you can't change your mind just because your show starts succeeding
4. You need to give royalty pool participants a line item breakdown of your weekly expenses as soon as you can; often they'll call and ask questions about the budget and you'll have to justify your expenses to them as well as the investors
5. If a play is in the public domain (not under copyright), you don't have to pay the author a royalty
i. Then the royalty pool is split between the remaining parties (like director, choreographer, etc.); in this case it's better not to use a pool
6. You need an experienced general manager who can figure all this out and show you different formulae for doing royalties.
a. Don't do a royalty pool if you have a show that will probably do very well financially
Next week's teleclass: Fred Schnitzer on "Building an Audience for Your Show"
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