Bailout

How to monetize a Broadway show

By Felix Salmon

Catherine Rampell has an interesting post today on the economics of Spider-Man, the most expensive musical that Broadway has ever seen. Even assuming it’s a massive hit, she says, it’ll make its producers no more than $313,489.80 a week?which means it will be “about 4 years before the show even begins to make up its initial investment.”

But this calculation misses the elephant in the room: the absolutely enormous upside tail risk for a hit musical. Remember, after all, Taymor’s last foray onto Broadway:

If your reference point is The Lion King, all bets are off. Mounted at a cost of about $25 million in 1997, it has so far grossed $4.2 billion worldwide.

Of course, you can’t do that on Broadway alone: at $313,489.80 a week it would take over 250 years to gross $4.2 billion. But a global franchise can make money in dozens of cities around the world simultaneously: once you’ve done all the initial work of putting the Broadway production together, it can become a license to print money?just ask Andrew Lloyd Webber. What’s more, Spider-Man already has a lot of the global reputation needed to get to that stage, as we’ve seen with the success of the movies.

It’s easy to see how a Spider-Man musical, especially if it has music by Bono and The Edge, could more or less sell itself in just about any global market — which means that the possible profit, here, is in the billions. Broadway is just a place to develop the concept: it’s not where the real money is made.

Full post as published by Macroprudential on December 15, 2010 (boomark / email).