140 CHAPTER 6: PRICING —— Hanson Production: Pricing for Opening Day ——— By Peter Famigllett, under the supervision of Professor June Cotte Hanson Productions Formed in the mid-1950s by a husband and wife team, Hanson Productions had eamed acclaim with its off-Broadway shows. The company’s goal was to further the advancement of the arts in New York City. Hanson's first show had been a small production of Cat on a Hot Tin Roof, which had played of-off Broadway to an audience of 50 people, most of whom were friends and relatives of the cast. Over time, the quality and scope of Hanson Productions’ shows outgrew the off-off Broadway mode, and the company began opening at some respected off Broadway venues. “The company achieved is first major success in the 19705, when a well-known ‘Avard= winner had fallen io love with a script that the Hansons had under option. The script was a musical ad made ole pce sp bee bt Hansons, recognizing his pasion forthe material (ad hoping to entice him into the show), offered him a role as an executive producer. Their bet paid ‘off and the high-profile star helped the Hansons to secure a major theaer on Broadway This move was the beginning ofa succesful production that opened to remarkable reviews and a healthy advance, The show went on to win a Tony for Best Musica. From that moment forward the Hansons grew theie name and reach as a production company, ‘They continued to option material and to commis- sion new work. At any one time, the company was in development on up to a dozen projects in the United States and in the West End (in London). ‘With shows in Chicago, San Francisco, and London, the company had grown to become a global pro- duction free. though the company grew consis- tently each yea, the work force had expanded at a ‘much slower pace, George Hanson recounted: Cth ©2010, Richard trey Schoo of Buies Foundation ‘The company goal was simple; comtinue to develop the Arts in urban locations. We wanted quality, not quantity, so we were deliberately rigorous about developing the material. We would tolerate some of the more temperamental writers or eccentric directors because of their good work, Our sense of material was the key and there were countless story meetings where we locked hhorns over even the smallest of details in the end, I think that’s what set us apart. We weren't the easiest place but we certainly displayed a work ethic that showed we cared. Artists atthe end ofthe day appreci- ated that and so it was not so difficult to work with them again on future shows. Some of my best friends in the theater are people I've screamed at and who've screamed right back at me, Current Production She's biggest concern was what to do with her current production a J musical with a cast of 20 (see Exhibit 1 fora ist of all the shows con Broadway at the time of the case), Set in 1967 Dettoit, this rarely seen revival boasted some ofthe most beloved songs in the show-tunes canon. The rusical was in development, end opening night was sated or fist week in the coming March. In the meantime, a considerable amount of wotk still needed to be done to finalize the show: the com- poser had agreed to contribute two new numbers but they werest working yet; some rewrites to the book required additional massaging, marketing iuterials had to be reconceived after research showed the initial materials did not succesfully sell the show as a “fun night at the theater" the costumes needed to be ovethauled because the Versions (A) 2010-05-20(panunwoa) ez-€0-6002 6002 “sz Azenuef sz-10-6007 Sie a Re 14Wale Keir Theatie tunt-Fontanne Theatre 1.010 2007-12-04 December 4. 2007 Open-ended (UNAER oss..o rch 2002 Openlended LTAT 2006-11-16 November 16.2006 Open-ended RG Wesrssth Suet 1368 20080309 March 9, 2008 SEARS FS TERI (ORR hs, 2000 250.West S2nd Steet 1.297 1513 2001-10-18 October 18, 2001 Open-ended Seace wen envipediacpikiBroaduay. thet, 3 of Decerber 18, 200.director wanted a wind machine and real rain forthe Act | finale. Shen had to revise the budget and pull funds from other areas without dipping too deeply into the contingency fund, She had decided that the natural target audience was baby boomers not only because of the familia music from the 1960s but also because the female lead hal been a child star fon the Disney Channel; Shen wisely had the aude ence inher erosshai ‘Abi question remained of whether this play ‘would appeal to the tourist croisd because the subject matter presented its fair share of chal- lenges. Shen wanted to attract the widest possible audience to the show, but she could not afford to alienate parents, the typical the ticket buyers, due tothe relative high prices for Broadway shows. The highest weekly grossing shows in New York are included in Exhibit 2. Typical ticket prices for New York on Broadway plays and musicals is included in Exhibits 3 and 4 ‘Shen always conducted market research with test audiences, despite her extremely hectic daily activities. Shen stated Shuck the Musical eames ct Ny “mas Jersey Boys, The Brovdvay These ‘August Wilson Theatie Nonson Production. Phceng for Opening Day 143 A typical day during development would start atthe office around 7 .sjsts0 1 could sgetsome work done before the phone rang. By about 8 at, | would start getting calls about the state ofthe set design andl the ‘orchestra selection or (would need to] deal with a “crisis” regarding an actor who as photographed in an undesirable environ ‘ment that may hurt the draw of the shows Then fd be off o the venue to sit throug a tech rehearsals meet with the director, con- ductor, union stewards and_give them updates on ticket projections or critic con- cerns withthe script. In the afternoon ¥ would meet with my boss and explain where we were in relation to the budget. By the time the evening rolled around I would have o follow up onthe eight other projects ether in development or pro: dluction or go see other shoves that we might have investmentsin. I wasalays satisfying to Junch a show, but the nextday it was back to the drawing board to make sure my show was sill on course. $268.342 loLiss $1,248,236 bien aioe Mateo ig Al) SRR Pal aT 8 The Phantom of the Opera Majestic Theatre 100.4% $1,188,823 ED ie ie ei a i ese NAS mA (SSAA [0 Inthe Heights Richerd Rodgers Theatre 92.4% $1,136,062 Seare: wi onda comibucefbveudway gtr, ceed Dscembe 18 2008 te: Some verwes weadered ss vcantin Gah fr ae isbn cay144 CHAPTER 6: PRICING [EERIE] ew vous city average ichet rics or Pays) ice ORCHESTRA 20+ ° ‘MEZZ A-J 20+ o RCH 0-P 20+ 0.90 4950-0 STUDENTISENIOR ONLY MEZ2 K-L 20 1650 49.50 0 _STUDENTISENIOR ONLY come 20 00 0.00 «0 ONE PER 20PRID ORCHESTRA 10% ° MEZZ Ae} 10+ ° MEZZ KL 106 ° ‘ike cble 9) 5 ORCHESTRA 20+ 110.00 69.500 Ezz A} 20+ 110.00 69.50 COMP 1/20 0.00 110.00 12085 0 _-NODISCOUNT SERVicE FEE APPLES 110.00 120.85 = 9 -—_NO DISCOUNT SERVICE FEE APPLIES 7650 84.00 0 _ NO DISCOUNT SERVICE FEE APPLIES Source: www broadway.comishowsfaugustosage-county/, ticket prices for August Osage County, accessed December 18, 2008. eee Silas ase LOGE AA-EE U5, i 46 : FRONT Meza not tui2s 100s a9 enw eezt-c 1623 nas 104 feAR MEZZH- Sias | aeas ORCHESTRA STUDENT) 11125 562310. STUDENTS ONL ROWS ¥-2z REAR MEZZ (STUDENT) 762541 206 STUDENTS ONLY: BEST AVAIL IN RMEZZHanson Production: Pricing for Opening Day 145 a Price Cade: B FRIDAY ORCHESTRA 12625 113.15 LOGE AA-tE 12625 FRONT MEZZ A-E 12625 REAR MEZZ F-G 9125 REAR MEZZ Ht-M 25 saa Price Code: € ‘ORCHESTRA 12625 138.75 LOGE AA-EE 12525 138.75 FRONT MEZZ AcE 12625 138.15 REAR MEZzZ F-C 9225 100.25 REAR MEZZ HoM ors Tas 1176 46 ns 104 0 SATURDAY, SUNDAY MATINEE 1176 NO DISCOUNT / SERVICE FEE APPLES 46 NO DISCOUNT / SERVICE FEE APPLIES 229 NO DISCOUNT / SERVICE FEE APPLES {04 NO DISCOUNT / SERVICE FEE APPLIES 138 NO DISCOUNT / SERVICE FEE APPLIES Source: ew broxdwaycomishowswichdl ticket pices fr Wicked, accessed December 18,2008 ‘The story was centered on the riots in Detroit in 1967 and shared a common racial thread with the upcoming 2008 American presidential election, The script had been purchased several years but the announcement of the Democratic nonin tion had created a new relevance to the subject ‘matter, Timing, after all, was everything: according to the talk if the Democrats should win the November 2008 election, Shen's show was poised to be a hot ticket. Should the Republicans En kano win, however, the undertones would still exist but they would not be nearly as loud, The east sas a coup for Hanson Productions. The lad actors were splashed all over the tabloids ‘but they hadn't yet flamed out from over-exposure. ‘The rest of the ensemble was played by solid per- formers, some of whom had television experience. Their worth to the shows was indicative of their projected weekly salaries, as presented in Exhibit 5. The venue had still not been secured, which was fof “THE DETROIT RIOTS” Estimated Production Budget ~ Draft For Discussion Only - Subject to Change October 4, 2008 ee ae scenery 750,000 ecutive producer rmotorshardwae! bier pale 105,000 choreographer sutomation 120,000 scene design 30,000 principals a 225,000 50.000 ensemble 2 225,900 30,000 swings 6 98.000 25,000 standbys 4 25,000 (Continued)146 Ets using props costumeslhoes barmateu ching seteleeies special fleets projectinshideo sound production reserve sia! inatuments thea elubished audionfcheasl halls scenery costumes sesipt Blueprints models stage manager ceasing expense CHAPTER 6: PRICING (Continued) 25,000 20,000 ‘00 20.000 aaais 2150 12,000 9656 5,000 $102,801 $2,917.81 comtume design lighting design sound design poectontaten devin tamakeup design special lfc design pene managsr technical supervisor production superar casting director rusia supervisor rusia deetoe rusia eoodinator corchestation vocal arangemeats dance arangerents vocal each press agent smateting dtector internet matiting 20.000. stage managers 30.000 company marages 30.009 sstocite dtector 20000 PALothe diecor 25.000 design assistants 40,000 design asistants 40.000 design assistants 60900 design assistants 5.000 design assistans 25.000 tutorskhaperones 7500 production ciew 12,000 wardrobe 5.000 prod, assistants 200,000 musical rector 10.000 sehearal musions 40,000 orchestra 2.500 asians 10,000 seed budget Fes.000° Subtotal cried foxward seenie-4 costume 6 Aighting +2 sound -2 siK2 140,000 120,000 44.000 50,000 0.000 44.500 527650 217525 0,000 52,500 63.000 42.000 2,120 5,703,056 Se ee Eien nevarapeifoutdoor telessionadio commercial photography! pritinesins produce alice GM oce lew Immigationatomey secounting theater expenses focal musicinas ‘EA per diems 15,000 per diems ~ crew 12.000 —_vansportatonHanson Production Pocing fer Opening Day 147 retin Macketng Pub Jt Adainstration G General Cee artwork smedhanicals dice nai group slestowism ‘tucson proyams makeing websitelinernet maketiaglemit bast ress agent expense press video tony award show eampugn post opening adveitising mizcelinecus yo tes (13%) pensiontwellae (20%) sacatlonsick pay transportation ssoeation fees star hovsing star expenses auing feat payol sevice ‘eephonelfaero ‘opening eight tiltsete “$1500.00 215619 225,000 424030 45,000 snisas 7300 27000 32900 on.sar 1aats 25,000 175,000 51,508,616 pry adventsing $3,000,000 Rn en ee eee AER last ara ar toca 764 Theat 49.000 losing costs fs patel 15.000 contingencies 40.000 13 1250,000. 25.000 120000 1,620,000, Subtotal caved forward (page ()) $5.703.056 Advertising $1,500,000 Union bonds $120,000 Administration $1,508,616 Out of town $3,000,000 Reserves $1,250,000 TOTALCAPITALREQUIRED $13,081,672 Seat: Case Wee’ Etna. seas rsa asta SX Then Sage Employes: fet: GM = pent PAN = Axes of Testes Pes REA fara ATM Fey Assocation: IATSE = etenaion! Alan rtianFedeaton of Mo140 CHAPTER 6: PRICING ‘not a catastrophe because Shen was in talks with three possible theaters: the Longacre Theater, the Si, James Theater, andthe Hilton Theater. Regard- less of the theater, revenue expectations were expected tobe between $830,000 and $1.03 million perweek The weekly costs incurred by the produc- tion are included in Exhibit 6 the royalty schedule in Exhibit 7 [EEE verity pert Cast ora crate) roditgh (Misia) “THE DETROIT RIOTS” Estimated Weekly Operating Sudget For Discussion Only ~ Subject to Change October 4, 2008 Peed Fixed Fees! Cr Expenses Royalties EYniae pringpals (90.000 general ceeeutve producers ensemble 12 18.000 managers 500 producer 3500 oie Ls ‘sings © 12,000 carpenter 450 makeing Molle srs standbys 48.000. props 41S consulig 1.200 egal 900, itd ecties 1750. hair cou 1500 standbys 22000. projections 300. design 500 payolimes 1.47 tutor 1100. special makeup finance 1500 stage elles 175 design 200 pension! manages 4000. wardobel speci lees well rusia eaing, 2750 design 300401 20sr2 deci: 3,000. physio 1500 cichestator 900. vation poy) 134 company music = dance sor ew 8 14400. reheat ells 4009 ranger 500. expenses 4.750 wardrobe costume veal per ho super «23,350 000 acanger 500 diems sr closing cost music ise 4900 ‘isses 1.800. aceral 51900 rights 400 59,695 tndmakeup $14;700 music suet 2 3270 contactor es sist 2 2880) th sie plorommes 250 decoe 100, casting decor 1250 ene Advertising technical manager 4000 [eianst supervision has company, frinoutdoor ectcan 300 ‘aiisiation’ "7660 smanapet 2,000. televisioniadio rise ees 4.500. cecties 9525 ply 2035 lent polecions 1100 ress agent payments ‘musicnighs 2.000 maleting layl sound 11.000, acter 1550 websie instore 750 5170055 $13,160,Hanson Production: Pacing for Opening Day 149 Eo tony award sect ress agent expenses nateting expenses production prope 15 specaleiods 900 ise 300 $32,900 $115,000 Sure: Case Wits sites, Lighting Designer sical (based on prof) EERE aN Scare: Cose Wits Cximaes. Recent Developments Hanson Productions had been in extensive talks with the three theaters and had handshake deals—conditional offers—that followed the ‘customary provision that the theater owner could ‘enact an early termination clause if theater revenue (based on 6 percent of gross) fell to less than {$50,000 per week, Each theater presented its own uunigue values and drawbacks. Shen's choice of venue would influence the pricing strategy for the show, Shem commented:150 CHAPTER 6: PRICING ‘The great balancing act is to find a venue that perfectly suits the audience and the pro- duction. We could save money witha smaller theater, but fewer seats makeit much tougher «timely manner. Conversely isin too large a theater ‘woul also be less 1 wanted to be careful not to be forced into offering hefty ticket discounts during the first six months from opening, Crites are not the only ones who hate to see empty seats and the actors don't draw the same energy from a hal-illed house. The three venues that could accommodate the production were the Hilton ‘Theater, the Longacre ‘Theater, and the St. James Theater (see Exhibit 8). The owners of these theaters demanded the EE ease industry standard 6 percent rental fee, based on ‘gross ticket sales. The owners of the Hilton The- ater were willing to invest 10 percent of total costs, in the production, which would entitle them to 6 percent of the gross revenue in addition to LWpercent ofthe profitsafter tax (pre-recoupment) and 10 percent of 50 percent of the adjusted net profits post-recoupment. Regardless ofthe theater chosen, Hanson Pro- ductions would need to enter into agreernent with the theater owner regarding a termination clause. ‘Typically, ifthe gross below the weekly operating costs (including rent) for two consecutive weeks, the theater owner had the option to cancel the contract. If the contract canceled, the show's chances of launching a national tour would be seriously impinged. Shen appreciated the potential for a national tour, but ee “THE DETROIT RIOTS” Theater Budget ~ Weekly October 4, 2008 a opening budgst $414,308 operating budget $414,908 operating budget $414,208 “Theater Expenses Theater Expenses “Theater Expenses fixed expense 11,500 fined expense 21500 xed expense 31.250 fixed ent (sof goss | fined ent 6h of gross red vent (65 of poss House Payroll House Payroll House Payroll a 15 Local One Crew 52605 15 ocalOne Crew 52605 LéLocalOneCiew 56.112 13 musicians 49.257 IT musicians 64413 U7 musicians 40 house manager house manager house manager box office soars Poxelice sorop Pxalie ae ushers ushers shes ‘cleaners cleanets. cleaners cer (taxes other (anes other (taxes, energy, ete) ‘eneigy, ec.) Src: Case Waters Estimatesthis possibilty was secondary to her desice for along run on Broadway, Ticket Pricing Setting the price correctly could influence the success ‘of a production. Setting the price too ow left mor (on the table and forestall recoupment, which eas the goal of any show. On the other hand, setting the price too high risked alienating large portion of the paying audience and offending theall-powerfal crit- ‘cs who could he unforgiving if the on-stage perfor- mance was not commensurate withthe ticket price. Rolling prices back, after setting the inital ticket price, vas often interpreted as admitting fire and, Seats? 530 Orchesta Mezzanine (8-K) Mezzanine 300 Mezzanine (L-P) fear fear Mezzanine 266 Medzanine a aera 1096 Balcony EH foxes Suc: wrath cominytheailcarwefpa fn hin aed weeny Hanson Production’ Pricing for Opening Day 15t thus, created negative publicity for the shove, Worse, lropping the ticket price meant the road to recoup- ment would be that much longer. After a show started to discount its ticket prices, climbing back up to fullprice tickets was almost impossible unless a major change in casting created a surge in the demand at the box office. ‘Shen was weighing the potential rate of return, con the basis of an average ticket price. If Shen charged at the average show price ($79.10)! and demand was intense, she would have let too much money on the table. If, however, she priced too ind demand was low, audience perceptions lovsered ifthe show later had to lower its prices, See Exhibit 9 for alist of typical seating for a New York show. 212 Orchestia 325, 208 Mezzanine (A-K) 04 58 Mezzanine (L-P) 2 Rear 23 Mezzanine 259 4 Baleony A-D 169 14 Bakeony E-H 2 Boxes icnthete cmithenes/jmestheateeningha ph ant ‘wwltomeate coment php accessed Decenbe 18 2008, a wel as Case Wik sats, ‘Nee: Seat layouts oy eqiemodifations de to placement ad site feces, ighing, st desig, curtain astmens. Some eumbes fave been noid or ce purges,182 CHAPTER 6: PRICING ‘Shen knew she had to consider the financial final pricing decision, Se needed to do make these situation of The Detroit Riots production (see decisions fast—opening day was only eight weeks Exhibits 5, 6,7 and 8), choose a theater and make a away, and the pay still had no home!