A 13% price cut can take 86% off a show’s weekly profit
Unpacked · No. 01 · Recoupment math, not gross
This week's Pulse found the average paid ticket on Broadway down 13% on last year. That reads like a pricing story. For the people who financed the shows, it is a recoupment story: most of the costs between a show's gross and its investors don't move when the price does, so a small cut in price becomes a large cut in the profit that pays them back.
Where the money goes
The trades report what a show grossed. Investors are paid from what's left after fees and taxes, royalties, the theatre and the weekly running costs. The running costs, the biggest slice, barely change whether the house sells at full price or at a discount. That is operating leverage: a small move in gross becomes a large move in profit.
Where $1 of gross goes · illustrative mid-size musical at $1.0M a week
Fees, taxes, royalties and the theatre
Running costs: cast, crew, band, marketing, insurance
Weekly profit toward recoupment
Same seats, different price, different decade
| Average ticket | Weekly gross | Weekly profit | To recoup $20M |
|---|---|---|---|
| −13% (vs. last year) | $870K | $15K | 25+ years |
| Base case | $1.00M | $110K | ~3.5 years |
| +10% | $1.10M | $183K | ~2 years |
At $1.0M a week the show is 18% above its break-even and recoups in about three and a half years. Cut the average ticket 13% on the same attendance and it is 2% above break-even: weekly profit falls 86%, and recoupment moves out past 25 years. In practice, never.
Winning it back with attendance is harder than it looks. To make up a 13% price cut, a show needs 15% more people just to hold its gross. At this week's 87% average capacity, that is every empty seat in the house.
The number to watch: recoupment velocity
Weeks to recoup = unrecouped capital ÷ weekly operating profit
It tells you whether a show is on track, and you can estimate it yourself. The offering documents usually give you the capitalization, the weekly running costs and the royalty and theatre terms; the public grosses give you the gross, every Monday.
Track these, not gross
01
Margin over break-even.
Weekly gross ÷ break-even gross. The closer to 1.0, the more a small price move matters.
02
Average paid ticket.
Week over week and year over year. A price cut has to be won back with attendance, and a 13% cut takes 15% more people just to stand still.
03
Yield ratio.
Average paid ÷ top ticket: a rough public read on discounting. Premium top prices pull it down too, so watch one show's trend.
04
Recoupment velocity.
Weeks to recoup at the current run rate. Recompute it monthly from the Monday grosses; it can move a long way between investor statements.
Notes
Illustrative: round-number estimates for a hypothetical mid-size musical ($20M capitalization, $620K weekly running costs, 27% of gross to fees, taxes, royalties and the theatre), not any specific show. Many shows pay royalties from a pool tied to profit, which softens the swing. Educational only; not an offer to sell, or a solicitation of an offer to buy, any security.
Next week in Unpacked: inside the paperwork. Royalty pools, office charges and who gets paid first.
Investing Unpacked takes one mechanism of the Broadway business apart each week, alongside The Pulse, OFFSCRIPT's weekly read on the grosses. How we read them: our methodology.