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What Do Stocks And Broadway Shows Have In Common?

Let’s play with our imaginations for a bit!  Don’t worry, the fact that you’re here reading a blog called “Creative Finance” signals that you’re probably in the right place, and I’m willing to bet that imagination might be a kind of forte you already possess.  Today’s question is: what do stocks and Broadway shows have in common?

The answer is a lot more than you think.

There’s No Business Like Show Business!  Well…

First and foremost, stocks represent companies and businesses

A business is an organization or entity engaged in commercial, industrial, or professional activities. 

Commercial shows are also businesses.  Every show that runs on Broadway is operated as an LLC, a limited liability company.  They are full of investors, managers, and stakeholders.  They have CEOs aka lead producers.  Broadway shows employ people that work on marketing, general management, press, and many other positions that a traditional brick & mortar business will also need.

In thinking about what do stocks and Broadway shows have in common, it’s also helpful to identify exactly what a stock is.

A reminder that a stock or stock are ownership shares in an individual company.  When you own stock, you are an owner of that company.

So a unit of stock and a Broadway show aren’t exactly the same thing.  But for our intents and purposes, let’s think about the similarities across different kinds of businesses in very different industries.

The underlying value of a stock is the value of that company the stock represents.  Investors are constantly assessing profit reports, projected growth, debt, and much more when considering which stocks to buy and trade. 

When it comes to Broadway shows, it’s not that much different.  Shows aren’t publicly traded entities, but the underlying value of any given show is the value of the intellectual property itself.

What do Hamilton and Amazon have in common?  They are both tremendously valuable companies with gigantic underlying value, and all that value has generated an incredibly healthy return for their respective investors.

How Can You See What Your Show Is Worth?  Or Where It’s Value Lies?

Remember all that craziness last year in the stock market around companies like GameStop and AMC?

The basic overview is the stock prices of these few companies with relatively poor outlook and underlying value actually went up- like, a lot.  In a completely irrational way.

Why?  How is that possible?

Well reader, the stock price itself is still a function of people, and the actions of people.

A stock price goes up because people buy that company.

About a year ago, a really interesting thing happened in the stock market where a group of incredibly enthusiastic retail investors banded together and bought stock in those companies and drove the price sky high.  It was “Meme Stock” mania.  Tons of people across the world were rallying around this frenzy of being a part of this unique stock market “event”. 

Stocks And Broadway Shows Have In Common

What do stocks and Broadway shows have in common?  Well, this can happen on Broadway also.

In 2018 a little-show-that-could called Be More Chill opened Off-Broadway and enjoyed a smash summer run.  Full disclosure: I was a Co-Producer on that run, and the subsequent Broadway transfer the following year.

The Off-Broadway run was a smash success, and fresh off the heels of a triumphant Dear Evan Hansen Broadway transfer, there were a lot of people in the entertainment industry that thought Be More Chill was going to be the next big thing.

It was considered a hot investment for the moment, and investors were clamoring to be a part of the action- not wanting to miss out on a potentially big fish.

Unfortunately for all involved Be More Chill only ran on Broadway for a few months, only rarely netting ticket sales above its operating cost.  The show eventually closed at a loss in August 2019.

Broadway had its own “meme stock moment” with Be More Chill, but ultimately the Broadway audiences showed us what the underlying value of the company was. 

Finale Thoughts

So what can we learn from this?

Well creative financiers, if stocks and Broadway shows have more in common than we thought…then what about what works really well in the stock market for investors?

Funds are the future.

Broadway historically lags behind nearly other major industry in terms of how we operate.

As we’ve discussed before, in financial services investors have access to funds and ETFs, which are bundles of investments which might track a specific index or sector of the stock market.  This helps mitigate risk because you’re not just putting all your eggs in one basket but investing in multiple things all at once.

A Broadway show is undoubtedly a risky business to invest in.  Any producer who would try to tell you otherwise is probably a bit disingenuous in my humble opinion.

So to continue to encourage investment in the arts, we need to continue to find ways to mitigate that risk.

And some folks are already doing it!  There are a select number of theatrical funds in operation, and more and more being created every year.  The investors invest in the fund and not an individual show, and then that fund manager can go off and invest the fund money into multiple commercial productions. 

There’s less reward with this model, but also undeniably there is less risk also.

I have a hunch we’ll see more and more funds in theatrical investing going forward.  It’s a smart and efficient way to continue to support artistic creation, while protecting the fiduciary responsibility producers have to their investors by spreading out the risk.

What do stocks and Broadway shows have in a common?  A lot more than we think.  And we should continue to learn from the comparisons.

PS – And in case you were wondering, I can indeed confirm that Cryptocurrency is House Of Yes at 2am on a Saturday night.

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