Investing Unpacked · No. 05 · Inside the paperwork
The Pulse for the week ending October 25 found the calendar paid for the week: two first weeks and two shows adding performances brought $817K more to the table, the 28 shows at the same performance count brought $815K less, and revenue per available seat fell $4 to $120.23, with the houses 93.1% full and the average paid ticket down to $129.18. When the running shows give a little back, the paperwork decides who gives up the difference, and it isn't shared equally. In our model, a cut of the same size, 1.4% off the average ticket with the house 93.1% full, takes 1.4% off the theatre's percentage, nothing off the running costs or the fees inside them, and about 4% off both the royalty pool and the investors' week. Of each dollar the cut removes, 51 cents would have gone to the investors. They are paid last, so they give up the most.
The weekly statement, in order
Take the illustrative musical this series runs its numbers on, the same one as Nos. 03 and 04: a 1,200-seat house playing eight performances a week, $1.25 million a week when full at budgeted prices, $625,000 of weekly running costs, and $15 million to pay back. Here is its week at 90% full, in the order the money leaves.
| Paid | To whom, for what | At 90% full |
|---|---|---|
| 1st | Off the top: the 4.5% union pension contribution every musical pays (a little less for plays), credit-card and group-sales commissions, ticketing fees | $107K |
| 2nd | The theatre, which holds the advance sales and staffs the box office: 6.5% of net receipts. Its flat rent and the house costs the show reimburses are in the next line | $66K |
| 3rd | Running costs: cast, crew, musicians and stage management; advertising; rentals and insurance; the theatre's rent and house charges; the office charges and management fees in the next section | $625K |
| 4th | The royalty pool: 40% of what is left, with weekly minimums paid even when nothing is left | $131K |
| Last | The investors: the rest, every week, until $15 million is repaid | $196K |
At that pace the investors are repaid in 76 weeks; with New York's $3 million production tax credit, in 61. At 70% full the same show sends them $69,000 a week and takes four years. At 60% full it sends them nothing: the week loses $13,000, and everyone above them is still paid.
Where each dollar of gross goes · the model at 90% full
Off the top, and the theatre's percentage and rent
Running costs: payroll, advertising, house charges and fees
The royalty pool
The investors, toward recoupment
Written as a formula, the line is short: the pool takes its share of the operating profit, or the minimums if they are larger, and the investors take what is left.
Operating profit = net receipts − theatre % − running costs
To investors = operating profit − max(40% of it, minimums)
17¢
Of each dollar grossed reaches the investors · 90% full
76 weeks
To repay $15 million at that pace · 61 with the tax credit
61%
Full: the week pays for itself, and the $15 million is still out
Break-even is not money back. At 61% full the gross covers the deductions, the theatre, the running costs and the royalty minimums, and the investors receive nothing that week. Everything they are repaid comes from the weeks above it.
Fees that don't wait
Inside the running costs sit fees that look like costs and work like compensation, and beside them sit the royalty minimums, paid whether or not the pool earns them. Both are paid every week the show plays, before the investors see anything. Offering papers filed with the SEC, and MJ's operating agreement as Broadway Journal reported it, put public numbers on them.
| Payment | What the public documents show | A week |
|---|---|---|
| Office charge | A flat weekly payment to the lead producers: $1,500 in a 2016 musical's offering, $2,000 in a 2010 revival's, $3,500 to MJ's lead producer and the Jackson estate | $1.5K–$3.5K |
| Producer royalty | "Customarily about 3%" of the gross, usually turned into a share of the pool, starting with the first performance; at MJ, a minimum of $3,000 a week | $3K min. |
| Producer and executive producer fees | A weekly producer's fee "of not more than $2,500" and a $50,000 executive producer fee in the 2016 offering; $1,000 a week for the executive producer in the 2010 one | $1K–$2.5K |
| General manager | $3,500 a week plus a $500 office charge and 1% to 2% of net profits (2010); $4,750 a week plus $550 a week for office expenses and 1% of net profits (2011) | $4K–$5.3K |
| Authors' minimums | Paid whether or not the pool pays: $4,500, $5,000 or $6,000 a week by house size in a 2020 authors' agreement filed with the SEC; $6,000, rising to $9,000 after 110% recoupment, in the 2010 revival | $4.5K–$9K |
| All royalty minimums | Every pool participant's weekly guarantee together: "not expected to exceed $20,000" in the 2010 revival's offering | Up to $20K |
Several of those filings are more than a decade old, and the numbers have moved; the point is the shape. Add up the weekly fees in each offering, before any royalty: $7,000 a week in the 2010 revival, and up to $9,300 in the 2016 musical. They are paid in weeks when the investors receive nothing.
What the pool changed
Until the mid-1980s the creative team was paid on the gross: a share of every ticket sold, in losing weeks as well as winning ones. In one entertainment lawyer's worked example, the authors took 6% of the gross and the other participants 9%. A front-page story in The New York Times in 1981, on the money behind Woman of the Year, showed investors how far down the line they stood even in a long-running hit, and Breglio recalls them refusing to watch everyone else make millions before they saw their money back. The royalty pool followed: the participants agreed to share each week's operating profit with the investors instead, in a fixed proportion, with minimums as the floor. Producers' own pay moved the other way. John Breglio, the producer and former entertainment lawyer, has said that producers of the 1930s and 1940s lived on their share of the profits alone, and that adding one-time fees and royalties on top is not, in his word, appropriate.
The Dramatists Guild's model contract for musicals still starts from the gross: the authors take 4.5% of it, rising to 6% once the show has repaid 110% of its costs. Contracts that use a pool convert that share. In the 2010 revival's offering and in the 2020 authors' agreement, the authors take 15.56% of weekly operating profit, rising to 17.78% after 110% recoupment. By our arithmetic, those odd figures are four-ninths of a 35% pool and of a 40% one. Pools typically run 35% to 45% of weekly operating profit; one law firm puts the usual figure at about 40% before recoupment and 45% after.
Royalties on the gross vs. a pool · the model, same show, two deals
| 15% of the gross | 40% pool, $22.5K minimums | |
|---|---|---|
| The week pays for itself at | 72% full | 61% full |
| Royalties, a week at 90% full | $169K | $131K |
| Royalties, a week at 70% full | $131K | $46K |
| Investors, a week at 70% full | −$16K | $69K |
The pool moves the creative team from the front of the line to a seat beside the investors: when the week is thin, their royalty shrinks with it. The minimums mark where that stops. In the model the pool's 40% falls below the $22,500 floor at about 64% full, and below that every change in the week's profit lands on the investors: between there and break-even, 85 cents of each dollar of gross is theirs to gain or lose, against 51 cents above it. Their weekly take reaches zero at 61% full. Between 59% and 61% the show still covers its own running costs, and the minimums alone put the week in the red.
Amortization: the pool's loan to the investors
Many pool agreements take a fixed sum off each week's profit before the pool is calculated. It is called amortization: in the 2020 authors' agreement, 2% of the capitalization, capped at $250,000 a week. It is sold to investors as faster recoupment, and it is. It is also a loan. The royalties the pool gives up are deferred, tracked week by week and repaid after recoupment: in that agreement, out of 10% of each week's operating profit, with a bonus of 10% of what was deferred.
| The model at 90% full | No amortization | $250K a week off the top |
|---|---|---|
| The pool is paid | $131K | $31K |
| The investors receive | $196K | $296K |
| Weeks to repay $15M | 76 | 51 |
| Owed to the pool at recoupment | None | $5.1M, plus the bonus |
On that agreement's terms, the show in our model would owe the pool $5.6 million with the bonus, repaid at about $33,000 a week at 90% full: more than three years of payments after recoupment. In a 2018 example from the Commercial Theater Institute, a $15 million musical with $300,000 of weekly profit recoups in about 77 weeks without amortization and about 56 with it, while the participants defer $70,000 a week; in exchange they usually get a higher weekly minimum. Whether the trade suits the investors depends on what nobody knows in advance: how long the show runs after recoupment, and what the loan costs by the time it is repaid.
After recoupment, a second contract
Recoupment is not the end of the paperwork. It is where a second set of terms switches on. The pool steps up. The authors' royalty steps up at 110% of recoupment, the trigger in the Guild's model and in the filings above. Then come the net-profit participations: shares of the show's profit promised to the general manager, the authors and others, paid before the producers and the investors split what is left. In MJ, according to the operating agreement reported by Broadway Journal, 13% of net profits go to the Jackson estate, the playwright, the choreographer, the general manager and the executive producer once the company has recouped plus 10%, and the whole of the lead producers' half of adjusted net profits goes to the estate.
What is left is "adjusted net profits," split 50/50 between the investors and the producers. Co-producers who raised money are paid out of the producers' half, typically one point of adjusted net profits for every two or three points of the capitalization they raised. For the investors the arithmetic is plain: in our model at 90% full, their weekly take falls from $196,000 before recoupment to about $78,000 after it. Of each dollar grossed, 17 cents becomes 7.
Some deals never left the gross. Hamilton's author was reported in 2016 to receive 7% of the show's weekly adjusted gross (about $105,000 a week, by Fortune's estimate at the time) plus 3% of net profits after recoupment: a royalty on the gross, the structure the pool replaced, paid whatever the week earns.
What to ask for before you sign
01
The order of payments, before the budget.
Find the page that says what is paid whatever the week earns, what is paid out of profit, and where you stand. Read it as a line.
02
Every fee inside the running costs.
Office charge, producer fee, executive producer fee, general manager. Add them up by the week and by the year, and set them against the public figures above.
03
The pool's floor, in dollars and in capacity.
The minimums are what the pool costs in a thin week. Ask how full the house has to be before the pool's percentage beats them; in our model, 64%.
04
Who gets the deferred royalties back, and with what bonus.
Amortization brings recoupment closer, and the deferral is repaid later with a bonus that works like interest. Know the rate, and the share of profit it comes out of.
05
What sits between net profits and adjusted net profits.
The participations taken off the top after recoupment, and the 110% triggers, decide what the investors' 50% is 50% of.
Checked against real budgets
Set the model beside the weekly operating budgets of Broadway musicals OFFSCRIPT has invested in or reviewed as an investor. The budgets break even at roughly 55% to 70% full, against the model's 61%. Their running costs come to about half of what a full house would gross, as the model's do. And in the musicals, royalties are mostly a share of weekly profit (a pool), so the royalty falls with profit and takes part of the hit, as it does in the model. A budget is the producers' estimate before opening, not a result.
Watch for it
01
The minimums' zone, in the Halloween week.
In our model a pool's minimums take over below about 64% full, and the investors' week reaches zero at 61%. No show played below 74% full in the weeks ending October 11 and 18. A year earlier one show played below 64% in the week ending October 19, 2025, and five did in the Halloween week that followed, the week ending November 2. We expect none below 64% in this year's Halloween week, the week ending November 1. Settles on that week's table, by count: the table shows capacity, not any show's costs or deal.
02
The tax credit's last window.
New York's production credit pays 25% of qualified costs, up to $3 million a Broadway show; in our model it brings recoupment at 90% full from 76 weeks to 61. Its funds ran out in the summer of 2025 and $150 million was added this year. A show must now apply before its first public performance and before June 30, 2027, and the program ends on September 30, 2027. A show whose ongoing revenues pass twice its ongoing costs contributes up to half of it to a state arts fund. Settles on the state budget for the year that starts April 1, 2027: does the credit go on past September 2027?
Notes
Illustrative figures for a hypothetical show, not any specific production: the musical this series runs its numbers on (Nos. 03 and 04 use it too; No. 01 used a different show), in a 1,200-seat house playing eight performances a week, grossing $1.25 million a week when full at budgeted prices (a $130 average); 9.5% of gross deducted to reach net receipts; the theatre paid 6.5% of net receipts plus a $15,000 flat rent; $625,000 of weekly running costs, the rent and house charges included; a royalty pool of 40% of weekly operating profit before recoupment and 45% after, with $22,500 of weekly minimums; $15 million to recoup, and New York's $3 million tax credit where stated; amortization, where shown, of $250,000 a week; after recoupment, participations of 13% of the company's profit after the pool, then a 50/50 split. The price cut in the opening paragraph is the street's change in the average paid ticket from the week ending October 18 to the week ending October 25 ($131.05 to $129.18), applied to the model at 93.1% full. The gross-royalty comparison pays 15% of the gross and no pool. Break-even means the week's gross covers its costs; the investors are repaid only from the profit above it. Weeks to recoup = $15 million ÷ the investors' weekly profit, at a constant run rate ($12 million where the credit is counted). Educational only; not an offer to sell, or a solicitation of an offer to buy, any security.
The comparison with real budgets uses the weekly operating budgets and royalty terms of six Broadway musicals OFFSCRIPT has invested in or reviewed as an investor, aggregated and rounded so that no single production's figures are shown or can be worked out. The typical figure is the median of the six, and each range is rounded outward to the nearest five points. Budgets are estimates made before opening, not results, and nothing here describes any production's actual performance or returns.
Sources: the order of payments, pool sizes, the 50/50 split and co-producers' shares, Loeb & Loeb, "The Basics of Investing on Broadway" (December 2023), and the offering circulars of Empire (2016) and the Godspell revival (2010) filed with the SEC; the theatre's payments, the New York City Department of Finance (2008), and who holds the advance, Ken Davenport (2008); deductions from the gross and the 4.5% pension contribution, the Commercial Theater Institute (2019) and Ken Davenport (2010); office charges and fees, the two offering circulars, the Empire general management agreement filed with the SEC (2011), Ken Davenport (2018), Brown and Wasser, "A Practical Guide to Theatrical Financing" (1998), and John Breglio's interview with Broadway Journal; MJ, Broadway Journal (February 2022), from the operating agreement; authors' terms, the Dramatists Guild's Approved Production Contract as described by Todd and Jeff Brabec (2020) and an authors' agreement filed with the SEC (2020); the history of the pool and its usual size, Gordon Firemark (2013), and John Breglio via TDF (2016), on The New York Times of November 22, 1981; amortization, that 2020 agreement, the Commercial Theater Institute (2018) and Scarinci Hollenbeck (2024); Hamilton, Fortune (April 2016), citing The Hollywood Reporter; the tax credit, Empire State Development, Lewis Brisbois (June 2026) and Broadway News (2025). Capacity this fall: the Broadway League's grosses for the weeks ending October 11 and 18, 2026; last year's, Playbill's tables of the League's figures for the weeks ending October 19 and November 2, 2025.
OFFSCRIPT invests in and co-produces shows under agreements like the ones described here.
Next week in Unpacked: new models. One show or a slate, and what a portfolio does to the odds.
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.
This issue on Instagram: the narrated reel. Every issue: @offscript.theatricals.
Revised October 30, 2026: the opening brought to this week's Pulse (week ending October 25); no other figure changed.