Spiderman invites you to part with your money: Either $100 or $65,000,000--which should it be?

Are you any good at predicting the commercial success of a Broadway play?

A lot of people in and out of business are laying odds on the commercial success of the new--maybe in financial trouble--Broadway production of Spiderman Turn Off The Dark.  And that's after just one performance, which follows a troubled production leading up to it's opening last week.  It is a special effects experience, with musical numbers written and produced by Bono and--here's the expensive part--a complicated set up of aerial contraptions that let Spiderman appear to fly inside the theatre above the audience; it's supposed to be an event to be viewed by the audience almost as by-standers, sort of first-hand observers of Spiderman in action!  It should be cool to take in; will it be profitable is the question.  

What's at issue is the fixed costs associated with the preparation of the production in the first place:  total costs are reported at $65M--an unprecedented amount for a Broadway play.  So the question to test your skill at judging the commercial success of this is this:  Would being an investor be a good deal?  In other words, will the backers first make their money back?  If yes, will they stand a chance to make a profit?

You can't just flip a coin.

Well, you can't flip a coin to figure it out, so let's do a few calculations to see that how long the show will need to run--just to breakeven!  First, a few useful pieces of information:  The theater seats 1,930 people, but the average audience for a Broadway play is only 70%; thus, the typical Spiderman audience will likely be about 1,350.  Next, the average Broadway ticket price is roughly $100.  If 50% of the ticket price went to cover direct expenses of the production [e.g., theater staff, rent, marketing, payroll for actors, etc.], that would leave $50 that would go toward contribution, first to pay-down start up costs and then--if there is a "then" then--toward return to the investors.  

Thus, if one were to divide $65M by $50, there'd have to be a total of 1.3M tickets sold, or a "run" of approximately three years--precisely 963 days to be exact--just to breakeven.  Any positive return on their $65M investment to the initial backers will begin on theoretical day 964.  If contribution from a ticket price is only $25--then the the breakeven date is six years out!  

Oh, yes, there will be souvenirs as well.

Now I admit, my calculations are clearly back of the envelope ones.  There could be money made from sales of the DVDs of the sound-track; likely there'll be souvenirs.  However, I wouldn't expect these kinds of income to "move the needle" a great deal.  

Steady success for three years is feasible [six years is not likely], but I'd not like to bet on that occuring--just so I could get my initial investment back.  That I'd stand to make a lot of money from the investment beyond that...well, I'm skeptical.  But who knows--these kind of "products" can be very lucrative, but they are very unpredictable as well.  In business, a pay-back period of less than three years is much to be desired, especially when the chances of continuous, very long-term success are not really likely.  

Let's face it there's not much opportunity for economies of scale here.  How does one take a theater filled with wire contraptions and swings and aerial cables on the road?  You can't very easily and still duplicate the effects.  

Okay, I'd be willing to "invest" $200, but for only one evening!

Come to think of it, I actually might be willing to invest in Spiderman Turn Off the Dark--but only to the tune of about $200.  And that would be for a ticket or two some evening, to see for myself what it's all about.  As to the economics of it all, I'll let others see for themselves what's in store from them--but their "show" won't be over for a few years--if they're lucky!  

[Note:  In case you didn't see the 60 Minutes segment last week on Spiderman Turn Off the Dark, I'll post that link on the blog's Facebook Page shown below.]
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Comments

[Kathy]

I would jump, fly, or swing at the chance to see this!