A New Business Model for American Theater

 

What is the way forward?  A recent spate of theater company closings, cutbacks, and revenue shortfalls has led to a moment of noisy introspection for many regional theater practitioners.  The New York Times and American Theatre report that costs are up and subscription sales are down.  And a survey by the National Endowment for the Arts found that just 4.5 percent of American adults attended a straight play in 2022, down from the already paltry 9.4 percent in 2008.

 

What are we doing wrong?  Why don’t people like us?  Are we ready to be something other than a theater for rich people?

 

The purpose of this article is to ground us in an understanding of the current business models underlying our existing American theater and to offer a proposal for a new, artist-led, financially sustainable alternative.

 

 

Theater’s Prevailing Business Models: All Dressed Up and Ready to Fail

 

For theater at the professional level, there are three dominant business models at work in the United States today, and all of them are at least 50 years old: Broadway, Regional, and Indie Theater.

 

Broadway productions are still largely for-profit enterprises, although there are now four non-profit companies producing on Broadway.  Even for a straight play, producers must raise on the order of $3 million to $5 million to capitalize just one show.  This means enough money to secure a Broadway theater and pay every other expense right up to opening night.  After that, the goal is to sell enough tickets to not only meet the weekly operating expenses of the show, but to also begin paying back the investors their original $5 million, and then ultimately to earn them profits.  Some 80 percent of Broadway shows never achieve profitability.  Four times out of five, Broadway productions lose money, the investors never get their investment back, and the actors and crew are laid off, sometimes only a few weeks after opening.  Theater artists are paid well in salary and benefits while the show is running, but they have absolutely no job security. 

 

Broadway has bounced back from the pandemic more briskly than the regional theater companies cited earlier.  In the 2022-2023 season, Broadway grosses, attendance, and number of performances were all up over the 2019-2020 season, though still about 15 percent under their levels for 2018-2019.  Of course most Americans will never see these shows.  For this past season, straight plays on Broadway drew fewer than 2.5 million people with an average ticket price of $102.96.  (The average for all shows was $128.43.)  In 2018-2019, the last year for which the Broadway League provides audience demographic data, the average annual household income of Broadway theatre goers was $261,000 – roughly four times the U.S. median.

 

While some Broadway touring companies still go all over the country, the Regional Theater movement, beginning in the 1960s, aimed to give people in other large cities their own theater companies.  Pledging to make a clean break with the hit-or-miss commercialism of Broadway, the regionals chose the non-profit model, betting that they could supplement ticket sales with contributions from local businesses and government to build local pride, i.e. “a great theater for a great city.”  In many (though not all) places, they sought to give professional actors stability by hiring them for at least a full season.  In order to get corporate and foundation support, attract local donations, and justify their tax-exempt status, the regional theaters took on the added responsibility of establishing boards of directors, something Broadway producers don’t have to do.  To the consternation of many underpaid actors and playwrights, this has resulted in the regionals having to beef up their administrative staffs and devote substantial time and dollars to fundraising, capital campaigns, expensive new buildings, and annual galas.

 

The core group of best-known regional theaters are the 80 companies that comprise the League of Regional Theatres, or LORT.  The League is a bargaining unit that negotiates contracts with Actors’ Equity Association, the Society of Directors and Choreographers, and United Scenic Artists.  AEA actors working in LORT theaters earn between $739 and $1,778 per week, based on the theater’s past box office revenues. This is lower than the Broadway minimum of $2,439, but in most LORT theater cities, living expenses are somewhat lower than they are in New York.  Aggregate financial information for the LORT companies are not easily obtained, but as part of its Theatre Facts 2019 publication, Theatre Communications Group (TCG) presents a very detailed picture of 84 “Trend Theatres” which have a substantial overlap with LORT members.  For 2019, the last full year before the pandemic, these Trend Theatres had average total expenses of $8.3 million.  But artistic salaries were only $1.5 million.  The administrative payroll was $1.9 million and the production/tech payroll was $1.3 million.  Even with an average ticket price of about $41, ticket income was only able to pay for 36.4% of total expenses, on average.  Grants and contributed income paid for nearly half, with the rest coming from royalties, concessions, rentals, etc.  At the dawn of the regional theatre movement, institutional funders, including the Ford Foundation, advised these non-profits to earn 60% of their revenue from ticket sales so that only 40% needed to come from contributed income.  But with stagnant ticket sales, this has proven to be difficult or impossible.  Over the 2015-2019 period, total attendance at these theaters went up by 1.9% while total expenses, adjusted for inflation, went up by 11.9%.

 

Indie Theater, our third category, is not as well defined.  Generally, it means theater on a non-profit basis in houses of 100 seats or fewer for very limited runs, usually in venues that were not originally designed as theaters.  Most famously, it includes New York’s downtown theater scene (originally referred to as Off-Off Broadway), Chicago’s storefront theaters, and what was once referred to as the Equity Waiver theaters in Los Angeles.  It also includes theater in many smaller cities as well as all the fringe festivals held around the country and internationally.  Indie Theater can mean experimental, immersive, or site-specific theater, but it doesn’t have to.  Aside from small houses, short runs, and cheaper (if not cheap) tickets, Indie Theater usually means productions that pay their actors and playwrights little or nothing, even though they are experienced professionals.

 

Indie Theater is most often labelled as such by the special provisions that are made to accommodate Actors’ Equity Association member actors.  Currently, the Equity Showcase Code for New York still limits productions to 16 performances, no more than 99 seats, and a $35,000 budget. And there are strict limits on rehearsal hours.  Since actors are not paid anything other than travel reimbursements, a showcase is not a contract for employment, and actors are free to leave those productions at will if they get offers for more lucrative employment.  The Los Angeles 99-seat Equity agreement is a contract, barely, with actors receiving minimum wage employment.

 

Historically, the Equity Showcase Code was written with the idea that Indie productions, once they proved to be successful, would transfer to Broadway (or at least Off-Broadway) so their members would ultimately get legitimate employment contracts at living wages or better.  But this happens very rarely.  AEA members participate in showcases because they are offered an interesting role, because they have no contract work at the moment, or because they think the showcase will be an opportunity to be seen by industry professionals.

 

It would be hard not to conclude that the non-profit theater business model is failing on its own terms – fewer companies, fewer performances, and fewer choices for a shrinking audience that doesn’t see any unique attributes to the medium that aren’t better presented through TV or film.  And of course most Americans are priced out of both Broadway and regional theater, with Indie Theater being unknown to them or too esoteric to pique their interest.

 

But how do these existing business models work for actors and playwrights?  Even before the pandemic, it was “normal” for most of the 51,000 Equity actors to be out of work most of the time.  But what about playwrights?  Until the 2009 release of the Theater Development Fund’s Outrageous Fortune, The Life and Times of the New American Play, written by Todd London with Ben Pesner and Zannie Giraud Voss, the economic life of the nation’s 10,000 plus playwrights was largely a mystery.  The TDF study concluded that playwrights had no artistic home and they could not write bigger, broader-canvass plays for large casts and hope to get them produced.  And even the most award-winning of the lot could not make a living writing for the stage.

 

As Todd London put it at the time:

 

“On one hand, we have a playwriting profession that is larger, better trained and more vital than at any time in our history. On the other hand, we have a profound rift between our most accomplished playwrights and the theaters who would produce them, an increasingly corporate theater culture, dire economics for not-for-profits, dwindling audiences for non-musical work and perhaps most troubling of all, a system of compensation that makes it nearly impossible for playwrights to earn anything resembling a living.”

 

As recently as 2018, an evaluation of the National Playwright Residency Program published by HowlRound concluded that the structural-financial problems with non-profit theater described in Outrageous Fortune were all still very much in force.

 

If the current model isn’t working for actors and playwrights, if the vast majority of working people can’t afford to attend, and if non-profit theater companies are failing on even their own terms, does that mean we’re actually ready to try something different?  If we are, what is the way forward?  The process has to begin with a business model: a financially sustainable way for us to produce theater we’re proud of for a diverse, multi-racial, working class America. 

 

So What’s the Plan?

 

The accompanying spreadsheet is a proposed annual budget for a new theater company that would be a permanent acting ensemble providing full-time salaried employment to actors and other theater artists.  Because of the model’s underlying artistic and business choices, we’re calling it Bigger Plays, Bigger Audiences.

 

What would be the purpose of a company like this?

 

1. To restore theater as a popular entertainment playhouse that gives all Americans an enlightening, thrilling, and affordable experience that they can’t get from any other medium.

2. ​To provide living wage employment, job security, and an artistic home for actors who have chosen, at least at this point in their careers, to be actors on stage.

3. To enable playwrights to write with a broader canvass, for larger casts, and for a more diverse universal audience, and at the same time to give them an artistic home with living wage employment.

4. To establish an artist-led theater, responsible to its audience, but free of the institutional burdens of fundraising.

 

Is this even possible?  Is it financially doable?  If it wasn’t, why would I be writing this?  Yes.  The answer is Yes. 

 

Here’s the broad outline:

 

The company borrows $1.5 million from a non-profit source at favorable terms: 5% a year interest for 30 years.  This is to build out a theater in an existing space and to have some working capital.  This loan will require an annual debt service payment of $97,577, which is included in the budget.

 

The company leases 5,000 square feet of raw space in a warehouse or industrial building at $25 per square foot per year.  (Space is available at this rate in New York City, which means it is likely to be available at similar or lower rates in other less expensive cities.)

 

Based on 7 square feet per audience member, seating (including aisle space) would require 3,500 square feet.  We would have a modest stage or playing area of 600 square feet.  The remainder would be available for dressing rooms, restrooms, and lobby space.

 

The company hires 21 theater artists who will work full-time for the company only; they will be paid $50,000 per year plus benefits (including health and pension contribution).  Everyone would be guaranteed a full year of employment, and in later years, they would be eligible for two- or three-year contracts with a modest step-up in pay.  All of the work of the company, including production, administrative, and marketing work would be included in the responsibilities of the 21 artists.  There are no other staff.

 

The personnel would be:

 

12 Actors

3 Playwrights

2 Directors

2 Stage Managers

1 Designer

1 Tech Director

 

The company will produce 6 shows per year running 8 weeks each.  Four or five days will be available between shows for tech.  While a show is running, the playing space will be available during the day for rehearsals for the next show.

 

It is assumed that each of the actors will be cast in at least 4 shows per year and each of the playwrights will contribute at least 2 plays per year.

 

The average ticket price will be $15.  This will allow almost everybody to afford to see 6 plays a year.  The revenue projection in the budget calls for the theater to be filled to 70% of capacity on average.  This would mean selling each show to 19,600 people.  In New York City, that would be less than 0.3% of the general population.

 

In addition to their artistic contribution, all artists will be required to take on administrative, production, and/or marketing responsibilities.  Artists will be expected to fill leadership roles – producing artistic director, administrative manager, production manager, and marketing manager – for fixed terms on a rotating basis with no additional compensation.

 

The company's marketing will be primarily through community outreach by the artists: presenting excerpts from current plays at workplaces, colleges, libraries, churches, street fairs, and community centers. The company will also offer its shows to be used as fundraisers for non-profit organizations.  (The NPOs would be reselling our $15 tickets at a premium price to their community to raise funds.)  There is a budget line of $50,000 for marketing, and this would include posters and/or postcards for each show.  But the bulk of this budget line is to pay for staff travel to community sites so artists can present and sell the show to community members person-to-person.

 

The production budget is limited to $10,000 per show.  This would be more than enough for costumes for a cast of 8 to 12, a small number of flexible set pieces, and/or a backdrop.  It would not be enough for the type of elaborate sets that are seen commonly on Broadway or in major regional theaters.

 

There are no fundraising expenses listed in the budget because there is no fundraising.  This company will be producing plays, not galas.  The entire income of the company comes from ticket sales.  Theater-goers will be asked to enjoy the show and to bring their friends, but they will never be asked to make donations.  Because artists will not be asking for donations and will be running the company themselves, there will be no outside board of directors.  (Raising money, dealing with a board, and satisfying funding sources is a major burden on the staffs of our existing non-profit theaters.)

 

Since we’re doing drama here, it’s time for some conflict.  So let’s look at the obvious questions that we anticipate theater-makers would ask about this kind of theater ensemble.

 

1. Is this model right for all kinds of theater?

 

Absolutely not. 

 

If you’re interested in doing devised theater, then this is not a good financial model for you. Ensemble-created pieces take more time to develop – sometimes months or even years.  In the Bigger Plays, Bigger Audiences (BPBA) model, the script has to be absolutely ready on day one of rehearsal.

 

If you’re interested in doing site-specific theater, then BPBA isn’t appropriate for you either, because it envisions investing our time and money in a permanent space that will become a more and more comfortable venue for our audiences.  That won’t work if your purpose is to do one show in a steel mill and the next one in a submarine or a slaughterhouse. 

 

BPBA will not work for you if what you really want to do is a development program, a training program, or a conservatory.  All those things are worthwhile endeavors, but BPBA is focused on producing new plays written exclusively by the three playwright-members of the company and featuring the company’s actors only. 

 

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2. Your $1.5 million loan to build the theater sounds like a made-up number.  What is it based on?

 

You’re right.  This number is a place-holder.  Until we identify a specific raw space, it will be impossible for us to come up with a theater design or a solid estimate of our capital improvement costs.  Our objective will be to choose space that does not require structural improvements and that has its electrical, plumbing, and HVAC systems in working order.  Based on that assumption, we are estimating that $600,000 would be enough for us to: engage an architect/theater consultant; build a modest stage, two dressing rooms, restrooms, and lighting and sound systems; and purchase 500 comfortable, moveable auditorium seats.  The other $900,000 would be for working capital, enough to cover the first three months of expenses.  But even if the leasehold improvements cost twice as much and require a bigger loan, the rest of the budget (including the surplus) remains about the same.

 

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3. $10K per show?  Seriously?  How can you possibly expect to mount a show with a production budget of only $10,000 to cover sets, lights, costumes, and sound?  And how can you make it work with only one designer?

 

We’ve all been part of independent or fringe theater productions that spend $10,000 or less with great results.  But this is a question about more than just the budget.  So let’s take a moment to really get clear on what we’re doing here.

 

We said earlier that our aim is to give audiences a thrilling experience that they can’t get from any other medium.  We all tell each other that we don’t want our scripts or our acting or our designs to look like film or television.  Most of us say that we’re not going for photographic reality, naturalism, or what is generally referred to as kitchen sink realism.  But most of the time audiences walk into a regional theater for a straight play, naturalism is exactly what they get. 

 

So if we’re finally departing from naturalism, what are we doing instead?  And how is this alternative woven into our scripts, our acting, and our physical production?  In this regard, BPBA is looking to classic theater as its model, even though we’re doing new plays.  The American Shakespeare Center in Staunton, Virginia, which produces Shakespeare and his contemporaries, describes its physical production this way:

 

“We do it with the lights on.  Shakespeare’s actors could see their audience; our actors can see you. You play the roles that Shakespeare wrote for you — Cleopatra’s court, Henry V’s army, or the butt of many jokes.

 

“Shakespeare’s company performed on a large wooden platform unadorned by fixed sets or scenery. A few large pieces — thrones, tombs, tables — were occasionally used to ornament a scene. Just as the Chorus of Henry V says, ‘piece out our imperfections with your thoughts.’

 

“Costuming was important to the theater companies of Shakespeare’s day for three reasons:

 

• Costumes provided fresh color and design for the theaters.

• Costumes made it easy for one actor to play a variety of roles.

• Costumes helped an audience “read” the play quickly by showing at a glance who was rich or poor, royalty or peasantry, ready to work or party.”

 

In practice, this means we are embracing a theater that is centered on the acting and the text, not on special effects or physical production.  The singular designer will likely be a costume designer who has enough experience with other design elements to be able to “dress” the stage, to work with the tech director to build or buy flexible set pieces as needed, and to light the actors with a pre-existing house plot, no specials required.

 

As we said before, this model is not right for all theater artists or all kinds of theater.  But we are not conceding that shows under this model would be inferior or less than professional just because we are not employing the usual four designers.  That would be like saying that a show with a wig designer, a fight coordinator, or a dramaturg must automatically be better than a show without one.  All artistic directors recognize the limitations of their space and budget and they have no problem rejecting plays that would require them to have a helicopter, a live polar bear, or a nuclear explosion on stage.  In this model, we are drawing the line in a different place.  But we would fully expect that place to be broad and deep enough to give us thrilling, entertaining, popular theater.

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4. What about Actors’ Equity Association?

 

We will not presume to know what AEA’s reaction would be to a company seeking to employ union actors and stage managers on this basis.  We would have to negotiate a letter of agreement.  But the current Off Broadway AEA rate for companies with a budget of under $4.25 million is $949 per week, which comes to $49,348 per year. (LORT C and D weekly salaries are lower; LORT A and B are higher.). Our budget calls for paying actors $50,000 per year, and the allocation for benefits would certainly be enough to pay into the AEA health and pension funds.  Furthermore, no Off-Broadway producer is going to guarantee an actor 52 weeks of employment per year. But in this model, that's exactly what we would be doing. So we would hope that in our negotiations with AEA we would get some credit for offering job security; that’s something no producer, commercial or non-profit, does currently.

 

Some critics will argue that $50K is still too low.  Based on the MIT Living Wage Calculator, we would maintain that it is pretty close to being a living wage for small households, i.e. a single person or a working couple with one child.  But we acknowledge that for bigger families or people who have uncovered medical expenses, $50,000 won’t work.  In future versions of this narrative, it would certainly be worthwhile to explore how much we could raise salaries if we were committed to filling a larger sized house.

 

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5. If you’re asking for a year-long commitment, aren’t you locking up an actor’s schedule for a whole year?  Wouldn’t they want to be free to take other roles or to do more lucrative film and TV work?  And why would they be willing to do all that other labor – the administrative, production, and marketing tasks?

 

An actor who is able to piece together a good living (i.e. better than $50,000 a year) exclusively from their acting assignments would probably not be interested in joining up with the BPBA company.  But that’s not the situation for most actors, even those with great training and professional credits.  Most actors are not doing acting most of the time.  So many young actors take food server and bartender jobs or temp office jobs, all with low wages and uncertain schedules, just so they can be available for auditions or to do background work.  Very few regional theaters are true acting ensembles; most of them shop in their actors for one show at a time.  Who in the industry is offering actors any job security whatsoever?  For an actor a few years out of school, or even a more mature actor who is not getting steady work, this company could be a huge step up.

 

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6. Isn’t 70% of capacity crazy?  Nobody projects that kind of box office success.

 

Percentages can be misleading.  A lot of people would be more comfortable with 50% because they’ve been associated with productions that drew at that level and it sounds more doable.  But it’s the number of tickets sold and the price per ticket that counts when you’re trying to balance the budget.  We could bring the percent of capacity down to 50% (to appease the skeptics) and enlarge the house to 700 seats to get the exact same revenue projection.  But it wouldn’t change the sales benchmark.  Our space rental costs would be higher and we would still have to sell tickets to 19,600 people, 6 times a year.

 

But this raises a more fundamental question for all my theater-maker friends:

 

Why do we think our plays aren’t good enough to be able to sell 19,600 tickets at $15 a ticket six times a year?  Because we’ve never done it before.  For most of us, the thing we’re selling and the way we’re selling it has never earned box office results at that level.

 

So to give our self-confidence a boost, here are seven BPBA marketing tactics that most of us have never done before:

 

Choose playwrights who value entertainment and whose plays employ heightened language, spectacle, and subtext.  We are show people.  We need to give the people a show.  Of course we playwrights would like to do more than entertain.  We would like our plays to challenge, to enlighten, or to change the way the audience sees their world and their own lives.  But at a minimum, each of our productions has to entertain.  The obvious entertainment categories we usually think of are comedies and musicals.  But there are a bunch of others: horror, sci-fi, noir, or almost any other form of genre fiction.  (Changing this model to accommodate musicals will have to be the subject of a separate narrative.) 

 

Stick to the $15 ticket price.  Some theater-makers will look at the spreadsheet, decide that selling that many tickets is impossible, and will immediately conclude that if they triple the ticket price to $45, they will only have to sell one third as many tickets.  This is the wrong way to think about the problem.  $45 is out of reach for most working class people, and it’s higher than what middle class people are used to spending for an evening out (e.g. two drinks at a bar or a meal at a casual restaurant).  And it’s considerably higher than what people pay for an evening in with Netflix.  If our objective is to make theater a popular entertainment venue, then we are not trying for a small share of today’s wealthy and shrinking theater audience base.  We want ticket prices that almost everybody can afford so they have no reason not to attend regularly.

 

Sell the show to the community, onstage and off.  The leaders of most institutional theater companies don’t talk to their customers one-on-one.  They leave that task to their lowly box office and house staff, the people who have to ask for money and listen to complaints.  Theater artists need to go out and find their customers and talk to them about what they like.  BPBA will only work if we go out into the community, bringing live excerpts from the current show to colleges, churches, community centers, workplaces, libraries, and street fairs.  This serves three useful purposes.  We find out who our people are and what they like.  We get the chance to sell our shows to people directly, taking orders for individual tickets on the spot and/or creating leads for group sales.  And finally, we build a relationship between the actors and the prospective audience.  We know from our own experience that people are much more likely to buy tickets if they have a friend in the show.  If you, the theater artist, visit the places where your prospective theater-goers spend their time, shake their hands, and give them a brilliant (and free) on-the-spot preview, then congratulations.  You are now their friend.  And they just have to see your show, don’t they?

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Fundraisers for Local Non-Profits.  Instead of competing with local non-profit organizations for donor dollars (as most Indie Theater groups do), the BPBA company will offer its shows to be used as fundraisers.  We sell the non-profit tickets at our regular rate of $15, and the charity can then offer premium priced tickets (and a partial tax deduction) to its supporters for $25, $50, or whatever they think is fair.  Even if they only sell half of our house at $50, the non-profit will still earn $8,750, with a lot less work than having to organize a dinner-dance or a Las Vegas night.

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Group Sales for Membership Organizations.  There are also non-profit groups that don't have meeting space for our preview excerpts, and who aren't interested in doing a fundraiser, but would be happy to offer a night at the theater as a service to their members.  Alumni associations, fraternal organizations, or block clubs could be given a special price of $12 or $13 a ticket for groups of 25 or more.

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Co-Presenting and Post-Show Talkbacks for Social Issue Plays.  There are plenty of good plays that are not about social issues, i.e. mental illness, war and peace, racial injustice, etc.  But for those shows that are issue plays, there are almost always organizations that would be happy to use our production to build support and awareness for the issue.  We could offer to make them a credited "co-presenter" of the production and give them a post-show talkback on one evening with a panel of speakers of their own choosing.  As with all these marketing strategies, co-presenting builds our name recognition, brings people to the playhouse who aren't normally theater-goers, and helps to enlarge our mailing list.

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100 Box Offices.  In many places, especially ethnic communities, it is common for local retailers -- grocers, dry cleaners, dress shops, etc. -- to sell tickets to local shows: concerts, comedy nights, music or dance events.  The storeowner displays a poster for the show and collects a commission from the producer (10% is common in many New York City neighborhoods.). Why is this better than selling through our box office alone?  More people will see our poster, including people who don't usually walk by our theater.  Local merchants will become our advocates.  And the stores will be open during hours when it would not be convenient for our artistic staff to be out front sitting at the ticket desk.  Yes, we could decide to sell 24 hours a day through one of the national online ticketing services.  But then the $1.50 commission goes to a non-local profit-maker, not to the shopkeepers who are our neighbors.

 

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7. No offense, but who the hell are you?  And why do you think you can tell the rest of us what to do? 

 

I’m just another playwright / theater guy.  I was the business manager/CFO for an Off-Broadway company for seven years in the 1990s.  I have produced three of my own plays.  And I was an accountant for non-profit organizations for half of my working life.  So I feel some confidence in presenting these numbers.  But that doesn’t mean I have a plan for everyone’s life.  I am not auditioning to be the theater czar who tells everybody what they should be doing.

 

As we’ve said in several ways, this model is not right for everybody.  But if you’re looking at the state of American theater today and you see the writing on the proverbial wall, this may be a way forward.

 

So let’s have more drama.  What have I not thought of?

 

These seven questions are the first ones that occurred to me.  But I’m sure you can think of others.  Take a look at the spreadsheet, respond with your comments, and hopefully Bigger Plays, Bigger Audiences 2.0 will become a new, forward-thinking venture that is actually worth trying.

 

 

 

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