Theater Business Model
Any theater company can’t begin earning income until a production is ready to take the stage and ticket sales can begin. But with a new theater company, you’ll need to depend on the personal reputation of directors and actors running the workshops to attract enough people to be successful.
Movie theaters receive approximately 40% of each ticket sold. They also make money from concessions, which help pay for overhead. Such as employee salaries, rent, maintenance and cleaning.
Concession sales assist with defraying the business’ operating costs. The number of people who bought tickets (and income from membership if it applies) is the most important in terms of significance.
Many fringe theater productions, particularly in London, are produced under what is known as ‘profit sharing’. This usually means that no one gets a proper salary, and any "profit" made at the end is shared among the company.
Nonprofit Theaters
Revenue for Nonprofit Theaters
How do nonprofit Theatres make money? A nonprofit theater may be in an old building with historical value and use its ticket sales and donations for the restoration and preservation of the building. The theatre owner provides box office services and turns over net ticket sales revenue. If ticket sales are good and the show makes a profit, the producer may get 50% of the net profit, the other 50% going to the investors.
Nature and Challenges of Nonprofit Companies
What is a Nonprofit Company and Why Start One? Before starting a nonprofit theatre company, it’s important to understand why it matters so much. In short, operational funding comes from donations, memberships and federal and municipal grants. Yes, it is almost always the case in nonprofit theatre that ticket sales are subsidized by grants and individual fundraising.
You can view the form 990 of any nonprofit company to get a better understanding of their financials. A financially healthy company has a variety of income streams and doesn’t put all its eggs in one basket, so to speak.
Any profit must be used to further the charitable purposes of the organization. Grants and donations are seen as typical ways for nonprofits to make money. Selling products or services that is linked to a specific program create additional revenue. Nonprofits make money by having different revenue streams.
Education and Adaptation in Theatrical Business
While both Hahn and Burnette studied theater in college, they lamented that theater programs don’t typically offer courses in how to run an actual theater business.
As money has become increasingly scarce, the enhancement system, in which a commercial producer pays money to a nonprofit theater to help subsidize a production, is all but essential.
On the other hand, a for profit company (whether or not it makes a profit) is in business to make money for its owners (or stockholders) and has a fiduciary or legal responsibility to do so.
Broadway Theaters
Are Broadway theaters for profit?
Broadway theaters are in business to make money for producers and investors. Most successful original work comes from nonprofits like The Public, where Hamilton debuted.
The COVID-19 pandemic forced Broadway theaters to close in March 2020. They gradually reopened in 2021, but many productions were canceled. Attendance had peaked at 14.7 million the prior season. Broadway contributes significantly to New York City’s economy.
Historical Background
Theater became popular in New York City in 1750. They did Shakespeare and ballad operas. The first Broadway musical came later in the 19th century.
A 1849 riot showed the class divide in theater audiences.
LORT and Broadway
LORT administers key not-for-profit theater contracts. Its 72 members include major regional theaters and 5 Broadway houses. These Broadway theaters pay actors less but are still eligible for Tonys. Their nonprofit status leaves them open to manipulation.