Lights, Camera, Cannibalization? The NetFlix-ication of Broadway
Given high costs of Broadway and relatively short runs, it is common that Broadway productions do not break even until they leave The Great White Way and are part-way through their first national tour. Will online delivery of theatre help or hinder the quest for profit?
Fun fact: what is the most financially successful arts-entertainment product at box office of all time? A Beyoncé album? A Disney movie? Disney is right, the medium is not.
At $7.3 billion since launching in 1997, Disney’s The Lion King stage musical is the highest-grossing product in the field.[i]
The Quest to Break Even
The Lion King is not the norm; reality is that turning a profit in theatre is challenging. One in ten shows breaks even; fewer are profitable. Today’s funding requirements are staggering: most musicals cost $10-20 million before Broadway opening night; outliers include the Spiderman and Shrek musicals which cost $75 million and $25 million respectively.[ii] A Broadway musical typically requires a year to break even; stylized profits are as follows:[iii]
$45.8m: annual revenue ($110 average ticket price, 1000 seats, 8 shows/week, 52 weeks/year)
($31.2m): annual operating costs ($600k/week)[iv]
($14.5m): upfront costs
$60k: net profit after year one
However, the average Broadway show runs for far less than a year,[v] begging the question: how do Broadway shows try to make money?
Modern sources of theatre revenue are as follows:
- Original Broadway
- London and other “sit-downs”[vi]
- Touring productions
- Merchandise including soundtrack sales and royalties
- Royalties from regional and amateur productions
Given high costs of Broadway and relatively short runs, it is common that production firms enter into a Broadway engagement knowing that they are unlikely to break even until part-way through their first national tour.
Over the past few years, the growth in digital dissemination of recorded theatre raises some fundamental questions: will fewer people attend Broadway/touring productions if they are able to see expertly-filmed recordings of the same production in the comfort of a cinema or their own home for one tenth of the cost?[vii]
BroadwayHD: Friend or Foe?
BroadwayHD launched gradually over 2013-2015, laying the ground-work to stream recorded theatre to your TV /computer, à la Netflix.[viii] In June 2016, it became the first company to live-stream a Broadway show: Roundabout Theatre’s She Loves Me revival.
Conceived by Broadway producers,[ix] BroadwayHD has a troubling existential conflict: BroadwayHD’s owners are often unaffiliated with the show they are filming. This leads to a mis-match of incentives: BroadwayHD can minimize advertising costs by streaming during an ongoing Broadway run, while producers are concerned by potential cannibalization and subsequent lost ticket sales. Given that the producers hold power over broadcast rights, non-current productions form the majority of BroadwayHD’s content library.
Does Streaming Harm Live Ticket Sales?[x]
BroadwayHD’s owners have been pressuring producers to film and stream productions which are currently playing on Broadway. Rather than harming sales, BroadwayHD has pitched that streams would act as advertising for the live shows, boosting sales.
She Loves Me remains the only Broadway data point, although the off-Broadway show, Daddy Long Legs, was live-streamed in 2015. Audience surveys were carried out after both streams.[xi] The critical new data-point is that ~75% of those who had seen a stream and had never seen a live show were now “likely” to pay for a live show. However, anecdotal feedback was received that consumers may not see the same streamed show on Broadway or on tour.
Following discussion with producers, my key take-away is that BroadwayHD’s single-largest value proposition may be to raise the profile of Broadway as a whole, rather than promote a single production.
The Show Must Go On
BroadwayHD has enormous potential. But fundamental questions remain over how to use this newfound technology to be of maximum benefit to the industry’s long-term future, rather to any one party.
Given how nascent the platform is, the industry is in a prime position to work cohesively to answer these questions. Indeed, some of the most contentious issues center on BroadwayHD working with producers and unions to formulate new contracts and cost/revenue-sharing agreements. These issues are difficult to resolve without industry-wide input.
Unfortunately, the Broadway production market is highly fragmented, with dozens of producers vying to maximize individual profits.[xii] In this disjointed environment, why would one company bite the bullet and pay $1-1.5 million to publish a production while others reap the benefits of this outlay?[xiii]
My recommendation for BroadwayHD is to instigate this conversation. Producers have shown reluctance to stream shows until after their Broadway close. Rather than pushing on this point, I find that BroadwayHD should focus on building their catalogue through streaming limited-run productions, near or after their closing date. Similar to She Loves Me, transforming the stream into an event is likely to progressively build viewership. Once BroadwayHD has a more substantial track-record, I believe that it will be the only credible entity to launch and lead the conversation surrounding the long-term deal structure of theatre streaming. Successful execution could ensure its monopoly in a potentially global market.
(Picture credit: National Theatre)
[i] Variety, “Disney’s Broadway Musical ‘The Lion King’ Becomes Top Earning Title,” http://variety.com/2014/legit/news/broadways-lion-king-box-office-top-title-1201310676/, accessed November 17, 2016. $6.2 billion is a figure from 2014, which has been adjusted for two years of worldwide productions’ weekly grosses.
[ii] New York Times, “The Staggering Cost of Broadway,” http://artsbeat.blogs.nytimes.com/2011/07/21/the-staggering-cost-of-broadway/, accessed November 17, 2016.
[iii] Unless otherwise indicated, the details described in this portion of the post are from unpublished sources, i.e., personal contacts in production firms in London and New York.
[iv] Ken Davenport, “What’s the average cost of putting on a Broadway Show?” https://www.theproducersperspective.com/my_weblog/2012/06/whats-the-average-cost-of-putting-on-a-broadway-show.html, accessed November 16, 2016.
[v] This refers to musicals only; plays typically run for 15-20 weeks. See also Howard Sherman, “Why Are There So Few Long Running Plays On Broadway?” http://www.hesherman.com/2014/08/18/why-are-there-so-few-long-running-plays-on-broadway/, accessed November 17, 2016.
[vi] “Sit-downs” are rooted in a theatre or location for an extended period of time, as opposed to tours which are expected to “come and go.”
[vii] BroadwayHD, “Subscribe,” https://www.broadwayhd.com/index.php/user/subscribe, accessed November 17, 2016. Monthly subscriptions to unlimited content are ~$15 while single-title broadcasts are ~$8.
[viii] Vox, “New theater streaming service Broadway HD has a small selection but big potential,” http://www.vox.com/2015/10/27/9621668/broadway-streaming-service/, accessed November 15, 2016.
[ix] Stewart F. Lane and Bonnie Comley.
[x] Unless otherwise indicated, the factual details described from here until the end of the post are from unpublished sources, i.e., personal contacts in production firms in London and New York.
[xi] Crains, “Startup BroadwayHD to stream the Roundabout Theatre’s She Loves Me,” http://www.crainsnewyork.com/article/20160630/ENTERTAINMENT/160639991/broadwayhd-to-stream-the-roundabout-theatres-she-loves-me-on-thursday-a-broadway-first/, accessed November 17, 2016.
[xii] The London market is more focused on four key organizations (National Theatre, Cameron Mackintosh, Really Useful Group and Sonia Freedman), all of whom work together in friendly competition. This has led to systematically lower theatre tickets prices over time as well as a viable group of alternatives to the BroadwayHD model.
[xiii] Crains, “Startup BroadwayHD to stream…”
Student comments on Lights, Camera, Cannibalization? The NetFlix-ication of Broadway
Interesting post! This reminded me of the struggles of other art & entertainment groups to keep thin margins in the face of changing customer demographics and tastes. I wonder if there’s a way for a creative content provider like HBO to team up with Broadway productions? After stripping away some of the special effects, many of the most successful dramas now streaming across HBOGO look and feel like what one might find on Broadway. One of the benefits of BroadwayHD seems to be that it increases potential access to theater for those who might not otherwise be able to afford it. If BroadwayHD can catch on and scale, Broadway theater may indeed find a whole new audience that it never was able to to tap before.
This sounds like a really cool option to watch Broadway shows! I do agree with your concerns that streaming Broadway shows at the same time runs a very high risk of cannibalizing the ticket sales for the show itself, but I think what it does is give people who normally are apprehensive about paying to watch Broadway shows a chance to watch. I believe that people who really enjoy the show will still buy tickets to see the live performance in order to get the whole experience.
What I’m interesting in seeing is more of a partnership between BroadwayHD and Broadway shows themselves. It would be interesting to see if BroadwayHD could not only track which shows people stream, but also which shows people attend live. With this data, it could create a recommendation of what show a person should stream or watch live similar to Netflix. I would also be interested in seeing a higher recording quality so that viewers at home could watch the show using virtual reality. This would give the home consumer the closest theater like experience they could get without leaving the comfort of home.
Very interesting post! I would hope that BroadwayHD increases the love for and appreciation of Broadway theater, rather than cannibalize it. It will be interesting to see how the role of BroadwayHD evolves over time. In the future, I wonder if there is a potential for two other developments: (1) development of virtual reality technology to give viewers the full feel of being in the theater and (2) applications of this technology for other art forms such as classical music and dance. As a former ballet dancer, I’ve seen a declining interest in dance and in ballet because it’s an art form that is so traditional. The ballet world has not done a great job of keeping up with pop culture and new technology. An HD experience for ballet may help attract more attention around and love for the art form.
Similar to the comments above – very interesting post! I also think that BroadwayHD can increase the love for an appreciation for Broadway theater by increasing the “trial-ability”. I thought I’d hate broadway, but watched Le Miserable and really enjoyed it. That experience drove me to purchase a lion king broadway ticket to go with my girlfriend. I don’t think this story is unique – the more people can “try” broadway, especially at a lower cost, the more people will be into it. And for those already going to Broadway shows, I think they mostly go for the experience, so having BroadwayHD available is not necessarily an “alternative”. As such, I think BroadwayHD will help rather than hurt Broadway.
Really interesting Raphael. There is also a service that does this for classical music performances, and digitization is also disrupting the live music industry as well. My comment would be that they also think about expanding the product offering from just recorded performances to live streams of shows with value-added enhancements – for example, integrating Virtual Reality so it actually feels like you’re there. I think the sell to the producers is that they are currently limited by the capacity and locations of the theaters. This allows the performance to reach an incremental audience that otherwise wouldn’t have attended, and thus is not cannabalistic.
Very excited to see how BroadwayHD unfolds its future steps in digitizing live theatrical performances. On a personal level, I still see significant value of attending theaters and enjoying the performances live – performances are not a solo affair by the actors. It is a conversation with the audience and the vibe that transcends throughout the theater is what makes it so special. Therefore, I am looking forward to ways in which technology could transfer not only the visual and sounds, but also the atmosphere to remote locations – maybe through virtual reality.
I find this to be an extremely interesting topic, and I really appreciate your thoughtful consideration of the next steps BroadwayHD should take. I wonder what your thoughts are on how viewing current shows through BroadwayHD will spur social media buzz. One of the ways I get introduced to a new TV show is through my friends posting about it on FB or Twitter. This could be a powerful tool to drive more people to go see the show in person if the buzz is positive. It could, however, decrease ticket sales dramatically if the buzz is negative and spreads much quicker.
Rapha, great read. I was also curious about the push advertising for broadway vs BroadwayHD…specifically what do you think is the non-social strategy? Is this a convenience / impulse product purchase that means you’re likely to buy from a YouTube ad on your phone or is this a platform product that engages people the same way Netflix might and thus requires a more comprehensive marketing strategy?
Great post Raphael! It boggles my mind how this product has taken so long to officially enter the market. I think there is so much money being left on the table and although there would be some minor cannibalization the upside is just infinitely more lucrative. As a Broadway lover, I too often felt restricted from watching shows due to availability & access (read: Hamilton). The nature of Broadway is witnessing the live performance but in being so restrictive I think there is a massive opportunity missed with geographies that don’t have Broadway present or in international markets. I think the hardest part will be what you mentioned regarding the politics of determining cost-sharing agreements and getting the industry on the same page as a whole.
An interesting phenomenon! I’m aware of how difficult it is to distribute streaming and other royalties in other kinds of intellectual property. I’m curious if you think there can be a suitable arrangement where all parties involved in a Broadway production feel compensated fairly. The number of claims on a Broadway show seem particularly difficult, as there are many parties involved that receive contracts only on the premise that shows are done live. A bit selfishly, I hope the streaming show becomes real. I’m tired of only listening to the live soundtrack without any video.
Thanks for the post, about a subject you know so well. If I’m understanding the situation correctly, you believe that BroadwayHD and other similar products are great advertising FOR THE INDUSTRY but unlikely to boost any particular show. As we’ve discussed in marketing, industry-wide advertising can make sense when one company dominates (most of the profits will flow to them); but in a fragmented market like this, no one is incentivized to do these general investments.
Is there a trade association or other type of group that can play this role? My favorite example is the Milk association in the US, which aggregates money from all the dairy farmers to run pro-milk ads. No one company would ever invest in this, but the association provides the coordination that enables them to act together. Could something similar work for BroadwayHD?
Any form of entertainment that can go digital probably will. Broadway shows are no different. The question for me is not whether Broadway will go digital, but will it remain competitive with the numerous cheaper and convenient forms of entertainment that exist? Today we have network TV, premium channel content, sports, streaming movies, video games, virtual and augmented reality and much more. How does Broadway attract theatergoers in a future where content is easily and cheaply accessible? Also, when everyone can have the “best seat in the house,” (presumably when theater goes digital) why would anyone without a front seat buy tickets?
Very interesting, Raphael! This reminded me a lot of the National Theatre Live shows in London, but I think Broadway HD takes it further by bringing the show to your living room (vs the cinema). While I agree that it increases accessibility, and may be a good way to introduce theatre to a larger audience, I wonder it simply makes the industry even more competitive. For example, wouldn’t people be more likely to test a new show via BroadwayHD? In that scenario, people will be less inclined to watch the new shows in person, putting further pressure on new shows?
I would love to understand whether the industry is exploring in alternative ways such as VR to attract a new audience or whether they can enhance the theatre experience to make it essential for the audience to go to the physical theatre despite watching BroadwayHD!
Great post! I can see your point about cannibalization of the market but at the same time, I think there is a huge potential with segments of the market for whom travelling to a big city for a show and staying in town for a night just to attend the show is simply too expensive.
Curious what you think about the drive to do the same with theatre, classical music and opera?
While the idea is an interesting one, I’m not sure that the art of Broadway translates to screen-based viewing. As a Broadway investor, I’m often sent videos of production “workshops” before investment rounds open, and the experience is far inferior to a live performance. To most people, the true value in Broadway is the experience of dressing up to go to the theater, reading the Playbill, seeing the actors in-person, witnessing the amazing sets & decorations, and giving a standing ovation for a fine performance. For home-based viewing, most people would much prefer to just watch a movie. Nevertheless, I do think the idea has legs when applied to shows that everyone wants to see but can’t, such as Hamilton. I’m just not sure that the idea is commercially viable for only a couple of shows.
I could not be less surprised at your choice of topic but could not be more excited that you have introduced me to a major disruption in Western Civilizations most cherished past time. I was with a friend who was an actor all of her life this weekend and she said something that resonated with me and I believe it complements your post: “My religion is humanity, and the theater is humanities church.” It was at once both a profound and somber statement given your argument. In a world that has become imprisoned in artificiality and the digitization of the human experience, the theater has the power to re-teach a generation how to feel passion and be enveloped by reality rather than passively observe it. My feeling about advancements such as BraodwayHD are less focused on the damage that they can do but rather the value they can create. While I hope they find an equitable way of dividing up the profits to the correct parties, I hope that the digital junkies of our generation will be using this as a trial medium, and hope that we are pushed to discover new shows that can ask us to examine the quintessential human questions in the way only theater can.