Production Costs

Production costs cover all expenses before performances start. For major commercial musicals, these include fees for creative and production teams, workshop expenses, physical production items such as scenery and costumes, advertising, promotion, and administrative costs like legal and insurance. A reserve is also set aside for unexpected expenses.

Weekly Operating Costs

The weekly operating costs, or running costs, are the expenses accumulated during each week of performances. These include fixed expenses like wages for theater, box office staff, and musicians. The theater also charges rent based on a percentage of the weekly box office receipts.

Royalties

The show also pays weekly royalties to participants such as authors, directors, choreographers, designers, and the lead producer. These royalties are calculated as a percentage of the weekly operating profits after deducting operating costs from the gross box office receipts, before any repayment to investors.

Gross Weekly Box Office Receipts (GWBOR)

 The primary source of revenue for a new Broadway show is the GWBOR, or the gross, which consists of ticket revenues less certain customary deductions like credit card fees and remote box office fees.

Merchandise

A show also will receive some income from merchandise and (possibly) cast album sales, but these revenues are usually quite small compared with GWBOR. 

Licensing of Subsidiary Rights

Revenue is also generated from licensing subsidiary rights of the show. These rights are granted by the author(s) after the producer's commercial rights expire, typically when the show is no longer in production. They are licensed to entities like schools, community theaters, and professional theaters in the U.S. and abroad. Income from subsidiary rights licensing is shared with the company that financed the Broadway show and its investors, though it may take several years for this revenue to materialize.

The lead producer of a Broadway show raises financing from investors to pay for production costs and to establish a reserve. 

Once the show starts performances, box office and other revenues are first used to pay the show’s weekly operating costs and royalties. 

What’s left are the weekly profits, which are distributed 100% to the investors until the investors are fully paid back, a point known as “recoupment.” 

When a show achieves recoupment, there is a change in how the show’s profits are allocated. 

Upon recoupment, the show’s weekly profits are referred to as “net profits,” and after a share is paid to certain customary creative and production team members, the remaining net profits are referred to as “adjusted net profits” (ANP). ANP is split evenly—50% to the investors and 50% to the lead producer.

Producers finance shows through private securities offerings under Regulation D, avoiding public offering requirements.

For commercial productions, an LLC is the typical financing vehicle. Producers provide investors with key documents, including an operating agreement, subscription agreement, budgets, and a projected recoupment schedule based on box office performance.

Traditionally, commercial musicals aim to repay investors in 52-60 weeks at 80% of maximum Gross Weekly Box Office Receipts (GWBOR). This production estimates 44 weeks.

Investors must be accredited under Securities Act regulations to bypass a private placement memorandum and reduce securities law risks.

Lead Producer

The lead producer, also often referred to as the General Partner, or simply “the producer,” is responsible for raising the financing for the show and has final authority over all producer decisions. On the title page of a Playbill, the lead producers are listed on the top line of all the names above the title.

Co-Producer

A co-producer is someone who introduces a number of smaller investors to the show. On the title page of the Playbill, the co-producers are all the names listed above the title but below the top producer line reserved for the lead producer. The co-producers typically do not have approval over producer decisions.

Investor

An investor is anyone who directly invests in a show. The minimum investment for most commercial shows is $25,000. Investors do not receive billing.