With Ken Davenport, Tony Award-winning Broadway & Off-Broadway Producer
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It’s been said that investing in Broadway is like putting a match to your money. Tony Award-winning and Off-Broadway producer Ken Davenport joins Steve to set the record straight when it comes to investing in a Broadway show.
Investing in Broadway is higher risk, similar to an investment in so-called alternative strategies, like private equity and venture capital. Broadway Shows are considered to be small businesses and statistics show investing in small businesses have a 1 in 10 chance of succeeding. In the words of Davenport, “It’s a very fine line between art and commerce, and that’s what Broadway is. I’m trying to create something that I could put on the street right now that people want to buy.”
Davenport goes on to say “The great thing that’s happening right now is we are actually in a golden age of Broadway in that it’s never been this successful, it’s never had this much of a spotlight on it.”
How To Invest In A Broadway Show
So how does one go about investing in Broadway? Turns out it doesn’t require as much money as most people think since it’s much like investing in any small business. Davenport explains, “Just like small businesses that raise money, the average investment is probably about $25,000. So, it’s not just for people with yachts and top hats and tails. It’s actually funded in the same way that most small businesses in this country are funded.”
The investments break up into what Ken calls “units”. You are able to purchase fractional or full units depending on the size of your investment.
Davenport has also tried alternative fundraising methods. In 2011, he raised $700,000 for a new production of Godspell using crowdfunding. Click here for the article about this featured in The New York Times.
Broadway Investing Rules:
Have A Passion For The Project
Just as Steve advises doing your research before buying stock in a company, Ken advises doing your research on the show before investing. He recommends having a passion for the producer, the writers, or someone involved in the show. Invest in a show that you believe in or are a personal fan of because, after all, you are investing in a form of art.
Examine The Lay Of The Land
Before deciding to invest your hard-earned money, research everyone involved in the show. Since you’re going to be helping to produce the show, it’s important to be on board with the cast and crew. Ken explains that this can also be a great networking opportunity for you and your company, so you want to be sure this is the right fit for you.
For more of Ken and Steve’s insight, click below to read the transcript or check out Ken’s blog here.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: In this great country of ours, I’m so fascinated by the way people figure out successful niches for themselves in a seemingly infinite variety of ways, and one such person is Ken Davenport. Ken is a Tony award-winning Broadway and off-Broadway producer. Now, it’s often said that investing in Broadway is like putting a match to your money. There’s no question that it’s high risk. But Ken has definitely bucked that trend. His productions have grossed more than $500 million worldwide and are being produced internationally in over 25 countries. So, I’ve asked him to join us today and give us some insight into this business of investing in Broadway. Hey, Ken, welcome to the show.
Ken Davenport: Thanks for having me, Steve, it’s a pleasure.
Steve Pomeranz: So how did you get started, and how long did it take you to get your first financially successful show?
Ken Davenport: Well, look, I’m going to give you the real scoop here, Steve. I could say my very first show was financially successful, which actually is correct. The first show that I produced that went to off-Broadway was a small show called The Awesome 80s Prom. And it made money in about five months, and then ran for ten years off-Broadway and has been seen all over the country and all over the world.
Steve Pomeranz: Wow.
Ken Davenport: So, the very surface answer would be, my first time out of the box I was a big hit.
Steve Pomeranz: Okay.
Ken Davenport: But the real truth of it—and I think if you asked all entrepreneurs and business people—is that that may seem like I was an overnight sensation if you will, but I had been tinkering with lots and lots of shows before that. They had just never actually gotten all the way to production. And it reminds me of the story of Joy Mangano, who is the subject of the movie, Joy, who went on to sell millions and millions and millions of products on QVC. I’m actually doing a musical about her life. Before she produced her first product that was a big success, she was tinkering at all sorts of stuff, it just never went the full distance.
Steve Pomeranz: Yeah.
Ken Davenport: So, my first run out of the box technically was a success, but entrepreneurs, business owners, we’re all doing lots of stuff before we, quote-un-quote, make it.
Steve Pomeranz: Yeah, so your first one, as you said, was successful but, how many shows did you have after that kind of broke even or didn’t do well, maybe you were profitable, until you really kind of got your sense of how to do this thing and you started to be able to create and innovate on your own? What was your very first, let’s say, big success?
Ken Davenport: Well, that first one was actually pretty big, and, actually, my first three shows were all financially successful. So I took the learnings, and still take the learnings from that first show, but I take every show that I do I take the learnings from that one a little forward and try to change, and innovate. And unfortunately, success is not a straight uphill trajectory in any industry. It hopefully should run like the stock market, right? That it eventually will always go up. But you’re going to have dips along the way. Everyone who is successful has those dips. It’s how you manage those dips, that really tell the tale of someone’s overall career.
Steve Pomeranz: Yeah, there was a saying, I often say this, that the problem with investors is they don’t see stocks like other things. If you go and you buy a can of tuna fish, and it goes on sale you don’t go, “my God, I have to sell it.” You buy more, and someone said the other day that one of the keys is if you go into the grocery store and everything’s on sale, you don’t run for the exits. You have to stay in the store. And I think the analogy to what you’re saying is, failure or success, you have to stay in the game, is that right?
Ken Davenport: That’s exactly right, in fact, one of my favorite mentor stories is I was lucky enough to work with Hal Prince, the director and, originally, producer that has about 20 Tony awards, and he very famously, back in the day, used to always have a production meeting for his next show the morning after he opened a show. So, he would open a show, and then he would start the next one the next day, and he did so for two reasons. One, he said, “if it was a hit, I couldn’t get a big head because I had to go to work on my next one. If it was a flop, I couldn’t really sulk too long because I had to go to work on my next one.” And I think that’s what it’s about. It’s just about continuing to do stuff and learning along the way, and applying those learnings.
Steve Pomeranz: There’s a lot going on against the investor. The staggering cost of theater rentals and rising labor costs and marketing expenses. And it’s said that four out of five shows fail, so it’s only like a 20% success rate. Now you’ve managed to break that cycle. How did you break that cycle?
Ken Davenport: Well, first of all, I don’t like to say four out of five shows fail. I like to say one out of five shows succeed.
Steve Pomeranz: Okay. [LAUGH]
Ken Davenport: And because look, there’s no question that getting involved with Broadway shows is a lot like other higher-risk or alternative- investment strategies. It’s private equity, it’s venture capital, it’s small businesses in this country only have about a one out of ten shot of succeeding. So, it’s about measuring that risk. And what I do is like—look it’s about the product right, it’s about developing shows that people want to see. It’s a very fine line between art and commerce, and that’s what Broadway is, right? I’m not a painter sitting in a room painting something that in the hopes 100 years after I die, someone’s going to pay $100 million for it. I’m trying to create something that I could put on the street right now that people want to buy and at the same time, satisfy a great theatrical tradition. So I have to—and the Broadway audience is a very specific audience. So, one of my strengths, frankly, I believe I know what the Broadway audience wants to see. That Broadway audience is about 61 to 65% tourists, 18 to 20% international, etc. So, I have to create shows in order to be financially successful on Broadway, that will resonate with that crowd.
Steve Pomeranz: Yeah, I get it. But doesn’t that lend towards kind of an aggregation of a type of product, and it leaves aside true innovation?
Ken Davenport: It’s a great question and that’s where the art of producing comes in because my job is to deliver something that the audience will enjoy, will love, will want to go see but, at the same time, challenge them. One of the great things that Hamilton has done, one of the great things that Rent did, was give them something that they love, but they didn’t exactly know they wanted. Steve Jobs says this, that you can’t ask the consumer what they want because they don’t actually know. You have to deliver something that they can’t articulate but that they’ll salivate for when it’s right in front of them.
Steve Pomeranz: Are there little tricks, things that you must put in a show in order to grab the attention and make it resonate with audiences?
Ken Davenport: Well, look there’s no question that Broadway audiences that are coming and spending $150 a ticket or more do have some built-in expectation levels. If you’re spending $500-1000 on a meal, you probably expect the china to be nice, to get great service, to be in very well established or well-decorated restaurant. Same thing for Broadway. A lot of audience members do see, do look for big spectacle, costumes, big dance numbers, things that they believe Broadway is. The great thing that’s happening right now is we are actually in a golden age of Broadway in that it’s never been this successful, it’s never had this much of a spotlight on it. And we’re able to produce now shows that audiences…may not fit those traditional roles, but are doing very, very well. You and I were talking offline about a show called The Band’s Visit, which is doing very, very well, which is not necessarily the from column A, column B Broadway musical.
Steve Pomeranz: I know that’s why I liked it.
Ken Davenport: Yeah, Hamilton is really like that, Dear Evan Hansen is like that, Come From Away is like that, my Once on This Island, that’s on Broadway right now is like that. So, original musicals are all of a sudden coming into play. I’m doing a musical this summer called Gettin’ the Band Back Together, which is a real commercially digestible idea. It’s about a 40-year-old investment banker that loses his job and has to move back in with his mom in New Jersey and puts his high school garage band back together, right? That’s a commercial idea that I think audiences want to see. But it’s original and different and, actually, created through improv. So, we’re expecting audiences to want to see that because it’s so original.
Steve Pomeranz: My guest is Ken Davenport. He’s a Tony award-winning Broadway and off-Broadway producer.
So let’s get into some of the nitty-gritty about actually investing. So, you’ve made a list of investment rumors—I guess we call them kind of myths—and I want to go through them. The first one is that investing in Broadway shows is only for the super-rich. Why is that not true?
Ken Davenport: Well, I talk to lots of people all over, and sometimes I say I’m a Broadway producer and they go, “Wow, that’s so cool, Broadway, I love Broadway, I’d love to get involved with that, I’d love to do something with that.” And this is where I get very focus groupy, and I will say to them, “Well, if you’ve thought about it, what do you think it takes to get in?” And a lot of people will say $100,000, $150,000, like these kinds of things and it’s actually not true. Broadway shows are medium-sized businesses. The plays are $2 to $3 to $4 million all the way up to big-scale musicals about $20 million, and somewhere and everything in between.
And just like small businesses that raise money, the average investment is probably about $25,000. So, it’s not just for people with yachts and top hats and tails and those things walking around. It’s actually funded in the same way that most small businesses in this country are funded.
Steve Pomeranz: So how do they break those investments up? Are they shares, how do they do that?
Ken Davenport: They’re units, they’re units, you’re investing in a LLC, usually, or a limited partnership.
Steve Pomeranz: So you’ll get $1,000 a unit, you can buy 25 units or something of that nature?
Ken Davenport: Yeah, usually we set the unit prices higher.
Steve Pomeranz: Okay, like what?
Ken Davenport: Well, usually they can be 25, 50, 100, etc, sometimes they’re split up. But we usually don’t set the unit price so small.
Steve Pomeranz: What if you go in and it’s $25,000 a unit or something and you say, well, that’s too much, can you ask them to split a unit?
Ken Davenport: Yeah, that’s actually one of the tips that I’ve taught in investing seminar, is that there is often, if you look deep into the operating agreements, a line that says that the general partner has the freedom to sell fractional units. So, I always advise investors, whatever unit there is listed there, to always say is it possible to purchase a half, a quarter.
Steve Pomeranz: I got you, I got you. All right.
Ken Davenport: Great little tip, I’m glad you asked.
Steve Pomeranz: Yeah, so do you think of this as a small business? If you kind of look at it from the point of view of the producer, producers got to raise money for the show and probably like a fair amount of small investors to spread the risk. As a matter of fact, you got involved in crowdsourcing for Godspell, didn’t you? And what did you do there?
Ken Davenport: Godspell which was a show I produced in 2011, was the first ever crowdfunded Broadway musical. I like to do things a little different, I like to do things in a very unique way and, actually, doing it that way we got on the cover, the front page A1 of The New York Times with that story.
Steve Pomeranz: Wonderful.
Ken Davenport: It’s a great article, your listeners should Google it. And what we did is we took investments for as little as a $1,000 a pop. And we got over 700 investors in that show to participate in the way that they’ve never been able to participate.
Steve Pomeranz: And if you are doing a show that’s costing $2.7 million is a meaningful figure for any producer, obviously.
Ken Davenport: Yeah, but you’re assuming actually that everyone only put $1,000. They didn’t, that’s the interesting thing, of course. It’s like when I do off-Broadway, we used to do these “pay what you can nights”, right? Minimum five bucks, but you pay what you can. You’d be surprised, people put in 20, 30, 50, ten, they do all sorts of numbers, and, of course, that’s what happens here.
Steve Pomeranz: Got you. So, let’s talk about Broadway investing rules. The first rule that you write is have passion for the project, but I think you also want to say have passion for the producer and/or the writers, so tell us more about that.
Ken Davenport: Yeah, look, there’s no question, you are investing in art. So, I tell people—especially since it is high risk and there the success rate is lower—you want to make sure that it’s something you really like, someone you really like, someone you want to support, or it’s a product or something that you want to see happen. It’s like when you hang a piece of art on the wall, you want to look at it every day. You want to be like, wow I love that piece.
Steve Pomeranz: Right.
Ken Davenport: You’re hanging a poster on the wall, you want to be able to say, “look what I helped produce.” And when you produce a Broadway show, these shows can often go all over the world. So, investors in the theater actually do create a ripple effect on theater and theater history, all over the world.
Steve Pomeranz: Interesting. Well, also, you say you have to figure out, you have to know what you want out of a Broadway show. Is it to make money? Is it to go to opening night parties? I mean, are those kinds of things available to an investor, opening night parties?
Ken Davenport: Yeah, that’s one of the many perks that investing in Broadway shows offers. You can go to opening night, which sounds like it’s just a fun night, right? And, of course, it is. But for a lot of entrepreneurs out there, even people raising their own money frankly, opening nights are incredible networking opportunities. You have celebrities, you have other producers. You have other investors. You have all sorts of things.
Steve Pomeranz: Fun, sounds like fun. I guess you’re in New York right now, right?
Ken Davenport: I am, yes.
Steve Pomeranz: Okay.
Ken Davenport: You can hear the firetrucks in Times Square.
Steve Pomeranz: I do, yeah, your office is near Times Square?
Ken Davenport: Yeah, I literally can see the ball drop from my window.
Steve Pomeranz: Wow, okay. I kind of like the background noise, gives us some color because New York is that kind of place. It’s a pretty noisy place. So, don’t try to be a one-hit wonder. What does that mean?
Ken Davenport: Well, I’ve had investors come to me in the past and they try to find the perfect one, they’re looking for the one. Literally, someone said to me recently, “hey, well, when you have a Hamilton, let me know.
Steve Pomeranz: Okay, right.
Ken Davenport: It’s like an investment.
Steve Pomeranz: Yeah, people ask me, if you got a great investment, let me know. I mean come on, really.
Ken Davenport: It’s not like that, and actually, I said to that person, “you know what, investing in Broadway will never be for you. If that’s with the attitude and frankly, investing in just about anything is never for you.”
Steve Pomeranz: Yeah, good point.
Ken Davenport: Because there are no sure things. You got to get started. You got to do due diligence to get going. But you also have to be prepared to go along for the ride. One out of five shows makes money, right?
Steve Pomeranz: Yeah, gotcha.
Ken Davenport: So, you want to be prepared to keep going, manage your money appropriately. So when the Hamilton does come, that you’re in it.
Steve Pomeranz: All right, so let’s say there’s a show. You mentioned The Band’s Visit, and there are other shows that aren’t necessarily blockbusters but they’re doing very well. And you go and you say the writing is so good and the music is so good, I would like to see what the next project is for this producer slash writer etc. How do you then do that? I mean I’m in south Florida, this is New York. It’s not only New York, it’s the top of the line, it’s Broadway. How do I get in touch with these people?
Ken Davenport: Well, it’s a very good question because I find that there are actually a lot of people getting interested in getting involved in Broadway, especially right now because we’ve got Harry Potter, we’ve got Frozen, we’ve got Hamilton, we’ve got Dear Evan Hanson. We’ve got all these big, big hits. We are booming, so there’s a lot of spotlight on us. But they just don’t know how to do it. So, what I tell people is when you go to a show and you like the show—like you liked The Band’s Visit—is you open up that Playbill and you look at the top of the names above the title of the show. There’s a list of names up there. First, they’ll list the theaters Schubert, Niederlander, etc. And then, they’ll be a whole bunch of names.
Look at the names above the title and look at the top ones. And then Google them. Go to LinkedIn etc. Try to find him, write him a letter, send a email, place a call, say “hey, I saw this, I loved it, can you put me on your list for next time?” Most people are going to put you on their list.
Steve Pomeranz: Yeah, yeah. Yeah, because more money is not guaranteed. I mean, maybe if you have one huge hit. But, you’re always out there. I guess your job is always out there looking for money, right?
Ken Davenport: Well, listen, I think I say it a little differently in that we’re always looking to meet more people, passionate about the theater.
Steve Pomeranz: Beautiful.
Ken Davenport: That’s really what it is. So, that’s why we return those calls, is because if someone says, I love Broadway and this show so much that I’m willing to risk my hard earned money at the next one so I can be a part of it, and yes, hopefully, make some money at the same time because there is a way to do that. We like to talk to those people. We’re very thankful for them.
Steve Pomeranz: Ken Davenport, Tony award-winning Broadway and off-Broadway producer. And this is a niche that I think a lot of people have interest in, so that’s why I bring it to you today. If you have a question about what we just discussed, just ask us. Go to stevepomeranz.com, ask us anything you’d like. That’s stevepomeranz.com, and while you’re there, sign up for our weekly update where we will send you the weekly commentaries and interviews straight to your inbox.
Ken, hey, thank you so much for joining us. That was fun.
Ken Davenport: My pleasure, my pleasure.