I had the great pleasure of speaking at the NAMT conference this week on the subject of enhancement deals and how they work, and more importantly how they can work better.  (By the way, if you’re a Producer or Theater or well, anyone interested in the development of new musicals, you should join NAMT.  It’s a terrific org and, well, there just aren’t many out there for people interested in developing and producing new musical work.)

Less than half of the theaters in the room who attended the panel had actually had an enhanced show at their theater, so the question came up about what Broadway Producers look for when choosing a place to try out a show.

It’s a timely question for me, as I’m involved in one right now (and tickets are going as quickly as you’d imagine with this team), and I am looking for about half a dozen other regional tryouts for our current development slate.

And, I’ll be as honest here, as I was from my seat on the panel . . . from the Broadway Producers’ perspective (wink, wink) – and I don’t mean just mine because I know a lot of my peers feel the same way – the regional enhancement model has gotten a little out of whack over the years.

In its purest form, it’s a brilliant concept.  It works like this:

A Broadway Producer needs a real audience to try out a show away from the bright lights of Broadway.  That Producer gives a regional theater some cash to add to its budget so it can afford the artists, physical production and more that the Producer wants for that first production.  The regional theater gets an ongoing participation in the future of the show for helping to birth it.

Acclaimed Broadway Director Des Mcanuff was a pioneer of this concept when he was the Artistic Director of La Jolla Playhouse (one of the premiere tryout spots in the country).  So why on his podcast with me did Des call the current enhancement environment “dangerous”?

You’ll have to listen to the podcast to find out.  But as you can imagine it has to do with money.

See, whenever anything is successful when it starts, costs have a way of creeping up over time.

And oh, have they.

Now, that upfront cash payment that Broadway Producers are asked to pay isn’t just a few hundred thousand dollars.  It can be close to 3 million dollars! (And now we see one of the reasons Broadway musicals are getting more expensive . . . because the R&D is becoming more expensive.)

And guess what?  That upfront money is the hardest for us Broadway Producers to raise, because it’s development capital, with no promise that the show will ever even get to Broadway, never mind make money there.  (It’s why I’ve been putting together an investment development fund to help mitigate that risk.)

So if we have to raise more of it, that means, it takes more time, more effort, and we’ve got more on the line.

That’s why so many of my peers are looking at this model and saying, “Hey . . . we’re providing these theaters with a ton of cash, an ongoing royalty, artists who they might not be able to get to work at their theater, actors who may not go there without the possibility of Broadway after it, a world premiere for their subscribers to see, a production bigger than they would build on their own, etc, etc.  Am I getting the same value I got before?”

In fact . . . at the opening night party I was at LAST NIGHT, one Producer just said to me, “Ken, I was just quoted an enhancement figure so high . . . I realized I could do SIX three week workshops IN the city for the same cost!  And my team could stay at home. And I could bring in real theatergoers to see it. Why wouldn’t I do that instead?”

Good question.

The other alternative is simply to do a big commercial tryout in a city like Boston or Chicago or DC.  Sure, those are more expensive up front . . . but less expensive in the long run, because there is no ongoing royalty attached.  A bullish Producer will opt for that every time.

Alternatives are popping up like crazy.  Which is why if you’re a regional theater and you want a show that could go to Broadway at your theater, I believe you have to look at providing more value to those of us raising the capital to make it happen.

Here are three ideas I came up with at the panel . . .

1. Give us a piece of your upside. 

All the institutions I know project their income down to the dollar (and if you’re not, you should).  They have to pass their budgets by their board. So they know what they need to do to come out for the year. If we exceed your own projections, and you are “in the money,” then give us a piece of that upside.  You want a piece of our upside if we go to Broadway, right? Why wouldn’t you say, “Hey, Broadway Producer, we expect your title to deliver $X dollars in ticket sales. And if we do better, that’s because of your show . . . you deserve to walk away with some of that.” Whether or not the show actually gets to this breakeven isn’t the point.  It’s the concept of saying, “Hey, we’re in this together,” and I can say to my investors, “Yes, the cost of enhancing shows has gone up, but there’s the possibility that we could decrease that cost should we do well enough.” Oh, and newsflash . . . if I participate in the possible upside, I just might be more willing to throw some of my own marketing energy behind your production.

2. Give us another developmental option as part of a package.

Many of the regional institutions I know have budgets for 29-hour readings or one-day readings or some form of development work for new shows.  Offer that to me as an “added value” for bringing the bigger enhancement deal to you. “Hey Ken, we’ll throw in a reading.” Or even, “We’ll put your writers up for a week at our theater six months before they come down to have a writer’s retreat.”Give me a ‘bonus’ that reduces some of my other developmental costs, or just helps make my show better, and the enhancement immediately has more value.  And I think I’ve got a real partner rather than a non-profit who is just looking to pay for some of its overhead.

3. Give us an opportunity to raise some money.

We’re all guilty of this one.  Broadway Producers and Institutions and any org who raises money, guards its investor/donor list like Trump guards his tax returns.  But here’s the thing, Broadway Producers need even more money than ever to get their shows all the way to the Great White Way (partly because of the increased costs of tryouts at regional theaters).  And what one of my esteemed panelists reminded everyone at the conference was that most donors look at their donation to the non-profit very differently from an investment in a Broadway show. In other words, many would be happy to do both! Give us Broadway Producers an opportunity to speak to your board or your attendees at your theater about how Broadway Investing works and yes, even solicit directly for some investment, and you’ll find that we’ll be much more interested in spending time and money with you.  (Because guess who is most likely to invest in your show – people who have SEEN your show!) Don’t be so afraid that you’ll lose folks to us Broadway Producers. Because you won’t. In fact, most likely it will enhance their experience. And since YOU benefit tremendously if the Producer gets the show to Broadway, don’t you want to do everything to make that happen?

And . . . here’s a BONUS 4th way to get Broadway Producers to Enhance a Show At Your Theater.

4. Give Their Investors a Donation Option.

Because of tax reasons, or just the simplicity of not wanting to get another K1, some Broadway Investors actually prefer just making a donation early on in the show’s process.  No, they don’t get an “equity stake” in the show (but there is a way to give them other perks), but if it’s what they prefer, why not let them!  Some non-profits I’ve worked with have had trouble taking a donation earmarked for specific shows. If this policy would conflict with your non-profit by laws, talk to your board about changing them.  Because the more options I have to raise money, the more attractive your institution is.

Right or wrong, the opinion of Broadway Producers is that the scales have tipped too far in the favor of the regional theaters for these enhancement deals, which is why so many Producers are looking for other options.  I know I still love the concept of going to one of the many theaters out there looking to get into this game (and I’m always looking for theaters who have NOT done it before – so if you are one, get in touch with me).

But we have to do something to balance the deals.

The above are just a few ways to create an even better partnership.  And I’m eager to hear from regionals on what we can do to make it more valuable for YOU.

Because our “missions” are the same.  Both Broadway Producers and Regional Theaters want to create new musicals.  Just because we both have to hire lawyers now to hammer out these contracts, doesn’t mean we’re not on the same team.

(Oh, PS . . . enhancements come in ALL sizes. Not every show was designed for Broadway, and I know tons of shows looking to get a start somewhere in this country.  So if you can’t house a Broadway sized show, don’t think you’re out of the game. Off Broadway musicals, one person shows, new children’s plays . . . all need a place to try out.  No matter what the size of your stage, you can find artists and producers willing to share the costs with you.)

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We’ll be talking about enhancement deals at my Super Conference on November 16th and 17th.  So if you’re a writer, producer or regional theater looking to learn more about this, come. Click here for more details.

And if you want to watch a webinar that explains what an Enhancement deal is, there’s one in here.