It usually takes some kind of a priest to charm angels, but for Steve Baruch, it just takes investor relations. He is a Broadway producer, one of the profession immortalized by Zero Mostel in the movie The Producers, who rely on investors known as ‘angels’ in the trade.
Baruch’s choir includes over 500 angels often willing to hazard at least the minimum $10,000 investment. He says feelingly, ‘In some ways it’s easier – if you have a flop, you don’t have a quarter of a million dollar investor who’ll never come back.’
As it is, he says ‘Some investors who picked specific shows lost their whole stake, while others have made nine to ten times their original investment.’ In fact, anyone who had backed every show from Scorpio or Richard Frankel Productions would have averaged a 41 percent annual return over the last 13 years, considerably outperforming the Dow. It is a spirited angel’s share.
Happily Baruch hears no complaints from those who lost the lot. To begin with, the producers don’t take any profits until the angels have earned back their investment, and then they go halves. So Baruch has every incentive to make sure their money is fruitfully employed. Among his hits have been Angels in America, Driving Miss Daisy, A Funny Thing Happened on the Way to the Forum and, currently, Smokey Joe’s Cafe and Forever Tango. Some 250 angels sounded the first trumpet by blowing a $10,000 note, or even higher, for Baruch’s current revival of The Sound of Music.
Last year’s productions grossed $113 mn worldwide. These are not, of course, long-term investments for angels, although some people have put IRA retirement accounts into them. But what other kind of investment can give the warm glow of being a part of the two Pulitzers, eleven Tonies, six Obies and all the other awards – as well as making lots of money? So Baruch’s IR strategy, he claims, is absolute candor: ‘Stress the downside, and never predict success. Be dour and negative, and offer abundant communication.’
And yet the glamor of the Broadway brand will still keep the investors coming. For major new productions, they get to see it in workshop, which is where the producers also decide whether to throw the dice and run the show. This is not a cheap process. In June, a three-week workshop of Irving Berlin’s Easter Parade, with no scenery or costumes in an off-Broadway theater, cost $300,000. That’s as close as Baruch gets to a group meeting with his investors.
The real IR effort begins after the checks are signed, with what he calls ‘assiduous efforts to keep investors informed, entertained, and having fun. We communicate with 4-500 people on a regular basis. Administratively it’s burdensome, but it’s worth it.’ This is a business where the analysts’ role is played by the critics, who speak only once and rarely hedge their bets with a ‘hold.’ Their advice is more likely to be binary in character – must-see or must-miss.
Baruch stresses the fun part of investing in Broadway. ‘I want the angels to feel as much a part of it as possible. We send press releases alerting them to TV appearances or press clippings, and over the course of a run, T-shirts, souvenir books, and always a framed poster.’ In place of plant tours these investors get to look back stage, and instead of shareholder discounts, a block of seats is reserved.
However, while helping the angels carouse, the producers don’t lose sight of the margins. ‘The amount of information the general manager provides to the producers is absolutely astonishing; between the wraps, the grosses and the advances, we have every conceivable fact at our fingertips to help us make sensible decisions,’ says Baruch. He adds, with a candor unlikely to be met lower down on Broadway where it meets Wall Street, ‘which leaves us with no excuses for bad ones.’
Anyone who wants a flutter on Broadway can call Steve Baruch at +1 914 948 1300.
