The play's the thing for investing
Should you put your money on the stage? Joia Shillingford reports on the angel investors who finance theatre productions
Sunday 11 September 2011
With the current volatile state of the stock market, some investors are turning to other forms of investment. For example, most West End theatre productions are funded by angel investors, often investing relatively small amounts such as £500 to £10,000.
A successful production can pay the investor back many times. Judy Craymer, producer of Mamma Mia!, is now the 38th richest music millionaire in the UK, according to the Sunday Times Rich List. She is worth £62m since remortgaging her home to finance her idea of a musical based around Abba's hits.
A long-running show will pay out year after year. People who invested a couple of thousand in The Woman in Black will still be receiving a few hundred pounds a year.
How does it work?
The producer works out what the production will cost, taking into account theatre rental, wages of performers and musicians, licences for the play or musical used and so on. A successful production which has good advance box-office sales will soon start to pay for itself, but some upfront capital is always needed.
A typical play costs in the region of £300,000, while a musical can cost between £2.5m and £4.5m. However, in the US, Spider-Man ($75m) and Shrek (£15m) cost considerably more. Much of the cost is for advertising. The producer will put together a budget for investors, showing what the return on investment will be at different levels of occupancy.
According to Anthony Field, the chairman of Anthony Field Associates, most producers have a list of 50 to 60 private investors who usually invest in their shows and the producer will give them the chance to invest in all his or her productions, usually on a first-come first-served basis.
Investment unit sizes for angels are small but, provided the production is not oversubscribed, the investor could invest more. Kenny Wax, a well-established West End producer, says: "Several investors have invested £100,000 in Top Hat, the musical version of the Fred Astaire and Ginger Rogers film, currently touring the UK. One has put in £165,000."
Increasingly, some of the finance for a show is raised by co-producers. This practice started 15 to 20 years ago on Broadway in New York, where a show can cost $7.5m to put on. Typically a co-producer will raise 5 to 10 per cent of the cost of the show, some of which may be their own money.
What are the risks?
"Less than 20 per cent of all efforts recoup original investment," says angel investor Daniel Nordby, who has invested in projects on both sides of the Atlantic. "A majority lose a significant portion of original investment. My wife and I have been involved in about five productions to date. We remain active but have certainly been humbled and educated. Two of the shows we co-produced lost their entire capitalisation, despite experienced producers, famous casts, brilliant directors.
"Two others, where we were investors, not co-producers, returned a profit – one just slightly and the other returned about 50 per cent over initial investment. The business makes little economic sense. Even veterans cannot predict which shows will work and which shows will not. You have to be passionate about each venture and accept the fact you may lose all."
Another possible risk is that a production will return investors' original investment but not make a profit. In the case of a successful production, it may still be some time before profits are returned to the investor.
Field says: "It can take weeks, months or even years before a successful production goes into profit."
However, there are exceptions. Julian Bird, chief executive of the Society of London Theatre, says: "Yes Minister paid back after about eight weeks."
What are the perks?
You will usually get complimentary tickets to the production and may be able to meet the stars of the show. For people who love the theatre and have spare money, this can be worth the investment alone. Wax says: "Investing in a show also has a certain dinner-party cachet. And it may be possible to come along to a rehearsal before the show opens."
How do you find out about investment opportunities?
You can add your name to the Society of London Theatre's investor list for free. Producers are charged a fee to send out information about their shows to this list. But if you hear about a project you're interested in, you can Google the producer and contact them directly.
Top Hat, which plans to transfer to the West End, has raised all but 10 per cent of its £1.25m touring costs. The unit size is £10,000. If it transfers to the West End, it will need to raise another £1.25m, though most of this will be from existing investors.
Some of the productions that Anthony Field Associates is keen to canvas investment for include Weedon Grossmith's Diary of a Nobody and Accolade, which had tremendous success in Toronto. Field says: "A show, however, can take up to 10 years until everything falls into place."
How do you spread your risk?
Kenny Wax says: "You can spread your risk by investing in two or three shows, but you need to do your homework and ask yourself would I go and see this show, would my friends? If the answer is no, steer clear of it. Choose carefully, look at the numbers and go with your gut feeling.
"There is often a correlation between how easy it is to raise money for a show and how easy it is to get people to buy tickets for it. In terms of speed and the amount of money people have invested, Top Hat has been unusual." Enthusiasm for the show, which has never previously been made into a musical, has been mirrored at the box office. "We've taken £496,000 in Milton Keynes and £650,000 in Birmingham," he says.
Ideally, someone new to theatre investing should have a mixed portfolio of investments. Also, some theatre investment schemes are open only to high net worth individuals who are likely to understand the risks they are taking.
Bird warns: "Investors need to understand that theatre is a very high-risk investment and should consider everything carefully as they could lose all their money."
Nordby remains undeterred. He says: "We are now supporting our fifth production (in the UK) because we believe strongly in the playwright and the play. Our participation reflects our passion."
- 1 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 2 Russian girl takes her own life after parents find pornography on her computer
- 3 Kim Kardashian on Bruce Jenner's 'story': 'We support him no matter what, and I think when the time is right, he'll talk'
- 4 Ball pool for adults opens in London
- 5 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Greece elections: Syriza and EU on collision course after election win for left-wing party
Have we reached 'peak food'? Shortages loom as global production rates slow
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
iJobs Money & Business
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village