Ok I did a quick search and didnt see anything. So I guess its safe to ask. I saw the musical a while back and seeing the movie on Saterday reminded me that I have no idea how there little plan could or would work. I know it doesnt really matter but how "could you make more money with a flop"?
If they raised 2 million dollars and the show succeeded then couldnt they just pay the investors back and run the show to collect the profits? And further more why would they end up in jail? Just for collecting too much money?
...and still you hold on, to every old song... - Adam Pascal
They could never pay the investors back because each investor was promised a certain SHARE (percentage) of the profits. If one of the little old ladies was told she was investing and producing 50% of the show, then when the show went into the black she would expect 50% of the profits. Max made the same promise to numerous people, so the total percentage was well over 100. But if the show was a hit, they could certainly expect their share. This would ultimately cost Max and Leo millions of dollars.
On the other hand, if the show flopped each investor would write off the investment and Max and Leo could keep the money the investors fronted them.
They would go to jail because they were only putting down in their books that they collected a much lower amount of money so they could keep the excess. Like in the beginning, Bloom was looking at the books and said that $2,000 was missing somewhere from the books. So let's say that $10,000 had been collected for the production and only $8,000 used, Lane's character then kept that other $2,000 for himself, which would be illegal. I am not sure if those are the right amounts, but you get the idea. I guess Bloom thought that the IRS wouldn't really pay much attention to the books of a play that had flopped (because it didn't raise any money), so they could just "hide money" here and there in their books and then keep all the extra for themselves without anyone knowing about it. If the show was successful, the IRS would care about the books and then would notice all the money missing.
Of course, there is a HUGE flaw in the whole plot of THE PRODUCERS: A Broadway musical would never open without a few week of Previews. Word would get out how good, bad, offensive, or hysterically funny the show was long before Opening Night.