These Producers Want to Make Investing in Theater like Investing in a Startup – Will it Work?
The proposed new theater investment model offers perpetual IP rights to investors, but questions remain.
It’s no secret that investing in shows is riskier than ever. Many longtime investors are turning away from the industry. So when a release promising a new, more profitable investment model arrives, it warrants investigation. Producers Jeremiah James, Frank Licari, and Ashley Clark, through their company SLC Holdings, believe they have found a way to entice both investors and talent to their projects. It involves giving early investors rights in perpetuity.
“If you invest in Starbucks as a new startup company, you have a certain level of ownership in that company,” James explained. “When more coffee shops open, you have a certain stake in the company. With IP, you don't. Every time we start anew.”
James referenced investors in the original stage production not generally having an automatic stake in future tours, but simply a right to invest in the tour. The SLC Holdings vision is people invest in the IP as a whole and then those same people will get a percentage of everything. The same with actors and creators–if you are involved with developing a piece, you will have a stake in it forever.
“We're combining a more corporate structure to make it more equitable and less of a risk for investors, because they will have pieces of every aspect of the IP,” he said. “You know, if it was Rock of Ages, and obviously that movie didn't do great, but you have a piece of the Tom Cruise movie, as well as the Broadway show, as well as the off-Broadway piece, as well as the tour. It's a better deal for investors. Yes, that means Frank, myself, and Ashley take a financial hit, and we don't have 50% of the pot anymore.”
If you’re still lost, basically what this means in theater terms is the following: Typically after recoupment, ongoing profits (meaning what is left after after all expenses, royalties, net profit participants, etc.) are often split 50% to investors in that particular production and 50% to producers. SLC Holdings is promising actors and investors an unspecified portion of the 50% that is typically known as the producers’ half. Those folks will also have some stake in any other projects, such as films or action figures. The team isn’t sure the technical aspects of how this will all work yet—they are still meeting with the lawyers.
When it comes to major complaints from investors, not having subsequent rights pales in comparison to, let’s say, producer fees and ballooning budgets. But SLC Holdings has said they will be structuring the projects in a way that is fiscally responsible, so even if a project does not recoup, investors won’t be miserable. Though that is something I hear from most producers.
“If you're structuring it for the betterment of the project and not for the betterment of your pocket, then yes, it works for everybody,” said Licari, whose background is in film production. “I think we're looking at it as a holistic approach. Very much like we did in film, where Hollywood budgets are now sort of being stripped away. There was a big problem in that slush funds that were happening in Hollywood budgets. We're trying to rectify that as well.”
The team is currently working on producing a film version of It Happened in Key West, the musical based on the true story of Carl von Cosel. The show was already in London and the investors in that production will benefit from this structure when the details are worked out.
The cast will also benefit. Part of what SLC Holdings is offering is cast participation in these percentage points. Additionally, the cast who helped develop the piece will be guaranteed some part in the film.
This structure will not just be used for It Happened in Key West, but all the SLC Holdings properties. Another one currently being developed is The Last Match: A Pro-Wrestling Rock Experience. The live event is currently heading to London, but they are also planning a docuseries, comic books, and action figures. Investors in the stage mounting, and the actors who helped develop it (which include Ramin Karimloo, who has appeared on the cast recording and in a prior live mounting), will benefit from this profit participation structure. The actors will also be offered the opportunity to appear in a film version if that materializes.
“Instead of saying, you have to invest in Apple, and then you have to invest in Tesla, and then you have to invest in SpaceX, and then you have to invest in whatever company, we say, ‘Hey, you're going to invest with us, and when you do that, we automatically diversify your portfolio from the beginning so that you're not tied into one revenue streams, you're tied into all of them,” explained Clark.
Now, how this will all work in practice remains to be seen. Announcing the structure before the particulars are set is a bizarre choice. And when I ran this by some investors they felt it was “better than nothing” but didn’t seem particularly excited. I don’t blame them. We’re talking about an unknown amount of percentage points spread among all actors and investors involved in developing a show, and this unknown amount will only be offered if the show is profitable. With a show like Hamilton or Wicked, that might be a lot of money, even if it’s a very very small percentage, but with the vast majority of shows it won’t be. (This is omitting the film, action figure, and cast recording part, the exact mechanics of which were unclear, even to the team. James said it had yet to be worked out.) It is nice to have a stake in everything–certainly better than not–but whether it will truly entice investors will necessarily depend on the percentage and the property.
I am all for trying new things, however. We need new ways to shake up the industry. Any possible incremental benefit for investors is welcome. I will be staying tuned.
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