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Although geographically very confined, the Broadway theater industry is highly lucrative, with annual gross ticket revenue of $1.3 billion from 13.1 million attendees (Broadway League, 2016a). While smaller than other branches of the entertainment industry (e.g. the film industry), these numbers are remarkable for a local entertainment community and an important part of the New York City economy, contributing a total of $12.57 billion to the local economy (Broadway League, 2016a).
Broadway resembles other parts of the entertainment industry in the way most products fail to recoup their investment. Indeed, from 1994 to 2014, only 21 percent of Broadway musicals earned a profit (Davenport, n.d.). This makes such investing in a Broadway play or musical an inherently risky business proposition. A typical Broadway play costs $3.1 million in upfront costs to mount, with additional operating expenses of $468,000 per week. The average musical has $9 million in upfront costs and $665,000 per week to continue operating (Broadway League, 2016a). Costs can occasionally reach even higher levels, with Spider-Man: Turn Off the Dark costing $75 million to mount (Flynn and Healy, 2011). With so much money at stake – and costs increasing annually (Gates, 2013) – investors are eager to find ways to reduce investors’ risk.
Conventional wisdom in the theatrical world is that the Tony Awards are often an important component of financial success of a Broadway show (Boyle and Chiou, 2009). An example of this prevailing opinion in the Broadway industry is shown in the documentary Show Business: The Road to Broadway (Berinstein, 2007), when Chris Boneau, a Broadway marketer, stated, “Frankly, you talk about the Tony Awards, there are a lot of them. The one that really counts is the one for Best Musical.”
There is some data to support this belief. Davenport’s (n.d.) analysis of musicals that recouped their investment showed that 44 percent won the Tony Award for Best Musical. However, exceptions abound to the commonly perceived wisdom. For example, the 1994 winner of the Tony Award for Best Musical, Passion, closed nearly seven months after winning, with a loss of about $3.15 million (Gerard, 1994). One of the “losers” for the same award, Beauty and the Beast, ran for 13 more years, and closed as the sixth longest...