"Producer's Corner" by Bruce Lazarus The Rules of the Road How Box Office Receipts Are Distributed On Tour
The way in which box office receipts are distributed as the touring company of a show travels is complex, because there are more players and expenses involved in a touring production than are involved in a New York or regional production.
To understand the distribution system, it is helpful to look at how a tour is set up. First, a producer, who may be an individual entrepreneur, a conglomerate consisting of the show’s original New York producer and others, or any other of a myriad of combinations, will decide to produce a tour of a show. That producer will then hire a booking agency, such as Columbia Theatricals or The Booking Office, to offer the show to presenters around the country. These presenters, who again may be individual entrepreneurs, partnerships or performing arts organizations set up by municipalities, are looking to secure a season’s worth of shows into their theatres in the cities in which they are located. Because these presenters change often, and quickly, the booking agent is a critical player because he knows who and where they are when the producer may not know. The booking agent will usually work “on spec,” or without an upfront payment, in exchange for a fee and percentage once the show begins to run. Some producers, such as Dodger productions, have their own booking departments for tours, and the William Morris and ICM agencies have booking departments as well for tours in which their star clients may be involved.
If the producer is the “seller” of the show and the presenter is the “buyer,” what happens next is the setting of a “sale price,” or a weekly “guarantee,” that the booking agent will ask of the presenter on behalf of the producer. The producer and his or her booking agent look at the costs of mounting and running the production. Say they determine that the production will cost $400,000 to mount before the first performance is even given, and $100,000 per week to run (for salaries, travel and lodging expenses, etc.) A good rule of thumb is to make sure that the weekly running cost does not exceed the amount of money the show would take in if it played at 60% capacity at every performance in a given week. Then they divide the initial $400,000 by the number of weeks it is scheduled to be on the road, say 40 weeks to make the number an even $10,000, and add the $100,000 per week to that. From that they can determine that taking in $110,000 per week, they can break even. That is usually the number they will ask interested presenters to “guarantee,” or promise to pay every week, regardless of how many tickets are sold. It is usually in the contract between the producer and the presenter that the guarantee will be paid at a specific time during the business week, but along with almost everything else on the road, this may vary. For example, Pace Theatricals’ Florida division, which presents tours in that state, pays the guarantee at the intermission of the final performance of every week.
The weekly guarantee is only one of the producer’s three sources of income from a tour, the one on which he or she relies to make sure all the weekly expenses can be met. The following is an example of how a good deal of national tours are set up in terms of financial distribution, however, once again, the arrangements can vary to a great degree.
Say the box office sells $665,000 worth of tickets in a week. The presenter first deducts for any commissions he or she must pay to credit card companies, a percentage for commissions he may receive for selling and handling subscription tickets, depending upon his arrangement with the producer, and occasionally a percentage to a theatre restoration fund. Say these come to $74,000, leaving what is known as a net adjusted gross of $591,000. Next, the presenter deducts his local expenses. These include fixed expenses, such as the rental of the theatre, house and box office staff, locally hired crews and musicians, the local press agent, the opening night party, local performance license fees, group sales costs, administrative salaries, cleaning of the theatre, and cars or limos for the stars if necessary. They may also include estimated expenses that may may change every week, such as the advertising budget, insurance if it’s at a per ticket rate, and catering. Say these local expenses add up to $187,386, leaving $403,614. Of that, it may be in the producer’s contract that he or she gets a second income, 10% of that $403,614. This is usually referred to on the road as a “royalty,” although it is not a royalty as we know it - that is, a payment to a writer or director for their work. This leaves our hypothetical production with $366,922. Out of that, the producer gets his or her guarantee, which in this case we will set at $225,000, not an uncommon figure for a big budget musical. What is finally left, $141,922, is known as the overage. That overage is split between the producer and the presenter, in our case at a 65%-35% split. That 65% will be the third income for the producer.
The total of the producer’s three payments for the week, the “royalty,” the guarantee and the percentage of the overage, is known as the company share. It is out of the company share that the producer pays the royalties belonging to the writer, director, and anyone else who is entitled to a royalty, as well as the production expenses.
Because the expenses of taking a show on a tour are so great, and the arrangements so complex and varying, it is critical to use a good booking agent who can knowledgeably assess production and local expenses, and who knows who and where the presenters are. The presenters want to maintain a good relationship with the booking agents, who will give them the hot show next season, so they are more likely to be upfront with you and forthcoming and on time with your guarantees if you are working with a booking agent.
Bruce Lazarus the former Director of Business and Legal Affairs for Walt Disney Theatrical Productions and producer of the current off-Broadway show Shakespeare's "R&J."
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