Inspiring Insights on Success and Investing in Theater Featuring Kevin McCollum
November 01, 2022
By Earl Clukies
EisnerAmper’s 7th Annual Alternative Investment Summit Raising the Curtain: The Next Act for Alternative Investments featured a fireside chat with Charly Weinstein, CEO of Eisner Advisory Group LLC, interviewing the award-winning Broadway producer and founder of Alchemation Kevin McCollum, highlighting life lessons for creating business as well as investor and talent opportunities for success.
Know Your Business and Work with Your Partners – Film vs. Theater: In the film business, if you buy a script or a story then you own the copyright to that script or story. In the theater, you do not own the copyright -- you pay for an option and own the exclusive license to produce while the author continues to hold the copyright. In other words, you are in partnership with the author. As long as you pay the author X amount, you can produce the story around the world. That means you have to keep producing, and if you stop producing it, you lose the rights after a certain time period. Therefore, it’s a business in which you have to constantly show up for each other and check in with each other.
Understand the Economics and Believe in What You Do: The economics of theater are pretty simple. First, the general partner (GP) would acquire the rights to a specific show. Once the rights are acquired, the GP would start putting together the show (find a writer, musicians, director, etc.). In Kevin’s case, these initial stages are usually self-funded. Once Kevin feels that he has a great show, he would then create an offering through which he intends to raise capital to fund the rest of the production. During this offering, investors may purchase equity in a production as well as negotiate other terms. The capital raised should pay for expenses until the show is ready to open on Broadway. Once the show is ready to open on Broadway, the show will then sell tickets. Of the ticket sales, costs to run the show and royalties are deducted. The remaining profit goes to the investors until they’ve recouped their investment. The GP will not be paid anything (aside from a small portion of the royalty as part of his salary) until the investors’ capital is recouped. However, unlike the typical 80/20 split in a venture capital deal structure, every dollar after the investor’s capital is recouped is a 50/50 split between the GP and limited partners. Also, the GP bears most of the risk as the GP is responsible for any overages above the capital raised. Therefore, Kevin believes that it is important the GP believes in what they are doing.
Hold Each Other Accountable and Support Your Talent: When asked about working with and managing talent, Kevin highlighted the importance of mutual accountability. When times get tough, there is no time to dwell on finding or being a victim. “We need to step up and move forward because we rely on each other,” he said. Kevin shared how Broadway was hit hard by the pandemic, so he worked with his network of politicians and the theater to protect the financial well-being of his employees. Once again, he reminded us of how we need to show up for one another.
An Important Plea for The Arts: Kevin concluded the interview with a plea to bring back the arts programs in schools. Many schools face funding cuts for programs supporting the arts while those schools keep funding other programs. He used sports as an example: Kevin believes that sports teach young people to come together to create rules and goals to do something, and then you have done your job. The theater teaches you to come together to share an idea and tell a story of possibilities. Kevin believes that this collaboration is vital because it changes the brain, helping people be open to creativity, to new ideas and to ways of imagining and thinking.
“Theater is about getting you out of your everyday skin and realizing ‘OH! I actually belong in this world, I do not just work in this world,” he concluded.