"Producer's Corner"
by Bruce Lazarus

Negotiating Theatre Licenses – Part I

Recently, our guest was Albert Poland, General Manager of  Wait Until Dark starring Marisa Tomei and Quentin Tarantino and last year’s Tony Award-winning Best Play The Last Night of Ballyhoo on Broadway, and Marc Salem’s Mindgames off-Broadway.  Albert’s additional general managing credits include Little Shop of Horrors, Steel Magnolias, Only Kidding, Steve Martin’s Picasso at the Lapin Agile and Sam Shepard’s A Lie of the Mind.  Albert also manages the Astor Place Theatre, where Blue Man Group/Tubes has been playing for eight years.  As a producer, general manager and theatre manager, he was uniquely qualified to speak to the TeleCourse about negotiating theatre licenses.

Their uncle’s barn may have been good enough for Mickey Rooney and Judy Garland, but chances are if you have a show you want to produce, you want to license a theatre.  According to Albert, the licensing arrangements for Broadway and off-Broadway theatres vary, but in general the production pays the theatre three different fees.  One is a straight weekly rent, which today off-Broadway runs approximately $5,500 to $6,600 per week for a 299-seat house, $7,000 for a 399-seat house, and $8,000 for a 499-seat house.  The second is a “service package” fee that covers the salaries of the house staff and box office staff.  This can run anywhere from $1,500 to over $5,000 per week, once again depending upon the size of the theatre.  This “service package” fee usually includes an administrative fee of anywhere from $500 to $1,000 per week for processing the house staff payroll every week and the taxes at the end of the year (really just padding!).  Thirdly, the theatre will receive a percentage of the gross weekly box office receipts, usually 5% of the total Gross Weekly Box Office Receipts (“GWBOR”) or 10% of the GWBOR above the weekly “break even” point (the total of the production’s fixed weekly operating costs) depending upon the show and the theatre.  State laws require that all the box office receipts remain in the possession of the theatre, so at the end of each week, the theatre presents the production with a “settlement,” which consists of a breakdown of the GWBOR and an explanation of all the deductions for the previous week (rent, “service package”, utilities, credit card deductions, taxes, etc.), and a “settlement check” for the amount that is left over.

As an example of a theatre licensing agreement, Albert explained the arrangement the Blue Man Group has at the Astor Place.    As I represented the producers of Blue Man Group/Tubes, Albert and I negotiated the license.  As that theatre had been dark for a few months, and the previous 5 years had been slow.  the licensing arrangement for Blue Man Group/Tubes was a $4,000 per week rent plus, rather than 5% of the gross weekly box office receipts, 10% of any box office receipts above the “break even” point, which in their case was about $40,000 per week.  This arrangement is better for a show during slow weeks, because they don’t have to pay the percentage if they do not reach that “break even” point, and better for the theatre during stronger week.  I thought I had made a great deal, but as it turns out, the show now does 9 performances (instead of the usual 8), is always sold out, and has consistently grossed about $120,000 per week, in which case the theatre gets an extra $8,000 per week (a better deal for the theatre than had it been 5% of the GWBOR).  In addition, Albert prefers not to do the payroll, so the staff of the theatre is on the payroll of the show rather than the theatre.  Therefore, the production does not pay the theatre an administrative fee, and the show saves approximately $25,000 a year in those fees.

The Astor Place Theatre also has an arrangement wherein operators at the theatre sell the tickets over the phone.  The producer pays the salaries of the operators and the theatre keeps the commissions of $3.25 per ticket (nice work if you can get it!)

Also in all theatre licenses there is a provision known as a “stop clause.”  Under one kind of stop clause, if a show’s box offices grosses fall beneath a certain set figure for two weeks in a row, the theatre can evict the production.  Albert suggests this figure should be about $10,000 below the production’s “beak even” point.  Albert stressed that the off-Broadway community is a close one and most theatre managers do all they can to avoid throwing a show out, however, it has happened occasionally.  Under the second kind of stop clause, a production may not give notice that it is closing and leaving the theatre unless its box office grosses fall below a certain point for two weeks in a row.  As a general manager, Albert said that he understands that a producer may want to close a show to take it on the road or open another production while it is still selling well in New York, before ticket sales start to fall, and therefore he is not a fan of this kind of stop clause  He once convinced another theatre manager to eliminate this kind of stop clause from his licensing agreements.  As it turned out his show was a hit and packed up and left for a San Francisco production while it was still doing good business.  The manager promptly reinserted the clause in his contracts so that could not happen again.

Albert also clarified that the arrangement a producer has with a theatre is a “license” (not a “lease”) to use the theatre at certain days and times for a certain purpose.  Although the fee is commonly called “rent,” New York State and city landlord/tenant laws do not apply.  Most of these agreements explicitly state that the producer and the theatre are not entering into a landlord/tenant relationship.

Finally, Albert mused that there are major differences in negotiating a theatre license on and off-Broadway.  Although Broadway producers and theatre managers are more focused on money than those off-Broadway, who appear more interested in the creative content of their shows, it is often easier to get a better deal on Broadway if your show is attractive to the theatre owner.  Therefore, although ticket prices and rents are both lower off-Broadway, the negotiating process can be more competitive, with many productions clamoring to get into the relatively few quality off-Broadway theatres.  This has been a very busy season both on Broadway and off, and so the availability of theatres are limited and therefore so is the producer’s ability to strike a good deal.

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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