By Todd Beamon
June 16, 2003
The production, based on Baltimorean John Waters' 1988 cult movie, focuses on a tubby teenager who wins her way onto a local TV show in 1962 and integrates the city's airwaves in the process.
Since opening last August, "Hairspray" has played to sold-out audiences -- and its advance sales, into March 2004, are at $20 million. The musical won eight Tony Awards, Broadway's highest honor, on June 8, including honors for best musical.
But "Hairspray" will go down in Broadway lore for another reason: It is a financial success.
The musical, whose lead producer is Baltimore native Margo Lion, returned its full $10.5 million budget -- or "initial capitalization" -- to its more than 300 investors just days before the Tonys.
"All the capital has been returned," said Lion, whose first Broadway production was "Jelly's Last Jam" in 1992. "From here on in is profit."
The checks were mailed to investors about six weeks under a year since "Hairspray" began its previews last July in New York, she said.
"I'm obviously delighted," said Lion, 58. "That's their goal, and now we have to give them a profit."
Steven Baruch, whose Baruch-Viertel-Routh-Frankel Group put up a quarter of the musical's initial budget, also is pleased. The group brought in 230 investors, each putting up at least $10,000. Other investors included the Houston-based Clear Channel Communications Inc. and New Line Cinema, which holds the movie rights.
Investments ranged from $10,000 to $1.2 million.
"We're thrilled to death," Baruch said. "It's been a great ride and a great opportunity."
With the nation's economy still experiencing sluggish growth and unemployment, that a Broadway musical has recouped its investment provides great hope, industry observers say. Broadway, like New York City overall, continues its slow recovery from the Sept. 11 attacks -- and the industry experienced a brief musicians' strike earlier this year that threatened to halt what progress had been made since the World Trade Center was demolished. It also continues to grapple with high ticket prices -- top price for "Hairspray" is $100 -- ever-changing theatergoer tastes and fewer new buyers.
"In today's climate, if you get your investment, recoup it and go into making a profit, that's great," said Frederic B. Vogel, a longtime Broadway producer who established the Commercial Theater Institute in 1982 as a training ground for those with serious interest in theater. "Investing in the theater is always a gamble. There are many wonderful plays that have not made back their investment."
In fact, "La Boheme," an opulent version of Puccini's opera, will close on June 29 after a disappointing seven-month run and losses of about $6 million. While the production, set updated to Paris in 1957, won two Tony Awards -- and received a special honor for its cast of 10 members -- it has only earned back about $2.5 million of its nearly $8.5 million in production costs.
"It's an enormous crapshoot," said David Sheward, managing editor of the industry publication Back Stage. "It is a great risk. You have to be a good judge of material because you don't know whether it is going to be a hit or not."
The "Hairspray" saga began as early as 1998. The story is familar: Lion was recovering from a head cold that spring in her Upper West Side apartment in Manhattan. She watched the video and instantly saw how it could work on the stage. "The show always had a good feeling about it," she said.
She optioned the musical rights from New Line for a "very minimal" cost -- and that's when the production's money quest began. "We needed development money from the very beginning -- a couple hundred thousand," Lion said.
Those monies, used to assemble the key "Hairspray" creative team and cover other start-up costs, came from an initial group of partners. Besides Lion, they included Clear Channel -- "they were in it with me," she said -- as well as Richard Frankel, a member of the Baruch group. The play's first reading was in May 2000.
The overwhelmingly positive response generated fast talk within the theater community.
"In the workshop, everyone flipped out," said Vogel, who did not invest in the musical. "But you never know that it will turn out the same way on Broadway.
"It's all hand-crafted," he explained. "The same thing you see in a workshop might not be the same thing you see on opening night. It's not like making widgets.
"That's why it's always a gamble," Vogel said. "But people who are going to invest -- most basically, and ultimately -- are going to do so based on the skills of the producer."
The buzz brought out other producers, but the money quest began in earnest in December 2001, Lion said. "That's when we got the commitments for the large money," she said.
Two "backers' auditions" for potential investors were held that month. They were led by Marc Shaiman, an Academy Award-nominated composer whom Lion immediately brought to the project, and his partner, Scott Wittman. By the end of the year, New Line had exercised its own option to become a major "Hairspray" producer -- and the Baruch Group came aboard after seeing just one act. "The idea for the show was fabulous," Steven Baruch said.
The investor group, which began investing in theater with the 1985 production of "Penn & Teller," brought in 230 investors. Each had to put up at least $10,000. "Nobody commits suicide if the show fails -- and you're not beholden to one large investor," he said.
Other backers coming aboard, each putting up at least $1 million, included SEL-GFO, a partnership that will produce an Australian "Hairspray" tour.
By late spring, "Hairspray" had 14 producers and more than 300 investors.
"It's pretty unique that they would have such a huge body of investors," said Robert Hofler, Variety's theater reporter. "Most producers would go to 30 different investors. A number of them are independently wealthy, so it may be all of their own money."
Seattle's 'calculated risk'
David Armstrong, producing artistic director of the 5th Avenue Theatre in Seattle, also attended one of the December readings. He immediately began talks with producers about "Hairspray" making its out-of-town debut in Seattle.
In a unique arrangement, the theater company agreed to put up $1.2 million for the musical's out-of-town tryout. Musicals easily can spend $500,000 on such a tryout.
"The $10.5 million they needed to spend and take it out of town, $1.2 million of it they didn't have to worry about," said Armstrong, who's been at 5th Avenue's helm for almost three years. "They didn't have to raise it."
While it was a risk-free deal for the "Hairspray" producers, it wasn't the case for 5th Avenue, Armstrong said.
"It had very little name recognition," he said. "It was based on a cult movie with a cult star [Divine] and a cult audience."
During the musical's first week in Seattle in May 2002, 5th Avenue's 2,100-seat theater played at 30 percent capacity, Armstrong said. But not for long.
The word got out. "By the fourth week, we were turning away people in droves," Armstrong said. "The audience built steadily each week."
The bet paid off for 5th Avenue, too. The company sold $1.4 million in tickets -- recouping its initial investment plus a profit -- and increased its subscription sales, which now stand at 26,500.
In addition, the company receives a weekly cut from "Hairspray" Broadway ticket sales, and it will get a return from any national tour. It also will receive a portion should the musical tour in London. "Hairspray" also will play 5th Avenue in the fall of 2005.
"You have to take risks, but you have to take calculated risks," Armstrong said. "It was quite a risky proposition, but we felt pretty confident in taking it."
Playing Seattle also helped "Hairspray" develop artistically. The producers could work through the production before it got to New York.
"Once you're in New York, there's a different kind of pressure, a different kind of scrutiny, such that you're not able to work on it fully," Armstrong said. "With the New York audience, and the New York press -- it's not healthy for the creative process."
Lion was more diplomatic. "You want to be able to do your work quietly without ... generating opinions before you're ready for that judgment to occur."
Ticket sales swell
Back in New York, the Seattle run was creating excitement. Preview performances of "Hairspray" began at the Neil Simon Theater on July 18. By opening night, Aug. 15, advance ticket sales had swollen to $9 million, from $2 million. Rave reviews brought $2 million in sales on opening day, with advanced sales rising to $17 million by October.
Despite reaching this milestone, no time was left for rest, Lion said.
"Never," she said. "You have a pause on opening night, hope that the audience received it well and that it's going to run.
"It's a living thing," she added. "It's not a repeated experience -- frozen in time, like a movie. There are a lot of issues -- marketing issues, [performance] rights issues -- that come up all the time."
For the week ending June 8, "Hairspray" grossed $981,570 according to the League of American Theaters and Producers, which co-sponsors the Vogel's CTI project with the Theater Development Fund.
The musical's receipts that week -- the most recent available -- were based on the Neil Simon Theater (with more than 1,400 seats) being sold beyond capacity, which includes standing room slots. In fact, the Nederlander Organization, which owns the theater on West 52nd Street, squeezed in 100 more seats for the production.
'A good little kick'
Financing a Broadway musical generally works like this: A musical has an initial capitalization of, say, $10 million. It grosses $1 million a week in ticket sales.
In such a production, it is not uncommon for its weekly operating expenses -- theater costs, salaries, marketing -- to cost $500,000 to $700,000. These come after deductions are made for credit-card sales and union commissions.
The balance, called weekly operating profit, then is split between two groups: the investors and a "pool" consisting of a musical's key creative team -- the producer, writer, director, choreographer and designers. The split, generally, is 60 percent to 40 percent.
The investors' share is paid in equal percentage amounts until the initial $10 million is "recouped." After that, the operating profit is shared by the musical's investors and its producers.
"Hairspray" is financed this way, Lion said, only the investors get 62.5 percent of the operating profit, while the creative pool takes the rest.
In addition, investors continue to profit from licensing agreements for national and international tours, for school and community theater productions, as well as from sales of T-shirts and other merchandise.
"It's not enough to get rich on," Ben Mordecai, a Broadway producer and associate dean of the Yale School of Drama, said of the income from memorabilia sales. "But it's a good little kick."
Celebration at Tonys
The success of "Hairspray" only mushroomed. In May, the production is nominated for 12 Tony Awards -- ranging from Best Score for Shaiman and Wittman to Best Performances by its lead actress, newcomer Marissa Jaret Winokur, and its lead actor, Harvey Fierstein, who plays the cross-dressing role of Winokur's mother.
The Antoinette Perry "Tony" Awards were founded in 1947 and are the theater's highest honor. The winners were selected by 724 theater professionals and journalists. The honors are administered by the League of American Theaters and Producers and the American Theater Wing.
The Tony recognition generates more publicity -- hence, more ticket sales -- moving "Hairspray" closer to retiring the initial $10.5 million investment. By the end of the month it's done.
"We had just finished retiring the last of the investing money," Lion said. "It was a very fast return."
Baruch, of the 230-member investor group, agreed. "It was very quick. It opened in August, and by June, the investors had been fully repaid. Everyone got their full investment back. The actual checks went out."
Then, "Tony Night" arrives on June 8. The "Hairspray" onslaught starts early at Radio City Music Hall. By the end of the night, the musical has won eight awards. Shaiman and Wittman kissed onstage to celebrate their victory, Winokur beat out Broadway veteran Bernadette Peters ("Gypsy") and Fierstein picked up his fourth Tony.
For the "Best Musical" Tony, the last presentation of the night, Lion led a procession of "Hairspray" producers, cast members and backers onto the stage. The consensus among the jubilant throng, which included author Waters, was picked up by microphones as they gathered onstage: "Give it to Margo."
"It was an absolute thrill," Lion said, looking back. "It was one of the best nights of my life.
"It was just a point in the road -- a glorious vista on a, hopefully, longer road -- with a lot behind it and, Lord willing, a lot more ahead of it."
According to preliminary figures, the three-hour CBS telecast brought in 7.95 million viewers, slightly down from 7.98 million last year, but more younger viewers than in the past. About 30 percent more adults ages 25 to 54, and 19 percent more adults ages 18 to 49, watched the telecast, CBS and Tony officials said.
The overall viewer figures may have been down, but the Tony telecast only made things much better for "Hairspray."
"When a show wins a Tony, it gets national exposure," said Back Stage's Sheward. "If it was a dominant winner, that's the one that leads people to think that's the one they want to see."
A Tony telecast could boost a production's box-office receipts by as much as 15 percent, Sheward said.
It did just that, helping to raise advance "Hairspray" sales to $20 million into next March.
World tour envisioned
Now, Lion's attention is focused on planning "Hairspray" tours around the country and around the world.
The production will kick off a two-year national tour at the Mechanic Theater in Baltimore on Sept. 17. Plans also are being made final for a world tour, to include Australia.
Long term, "Hairspray" is expected to continue paying off for investors -- through local performances, observers say.
"High schools and community groups would be happy to do it," said Variety's Hofler. "It's not raunchy or anything like that. The general thinking is that this is an investment that will give back for a long time."
That's exactly what Lion is banking on. "We'll be in New York as long as people will come."