Freakonomics Radio - 630. On Broadway, Nobody Knows Nothing

Episode Date: April 18, 2025

A hit like Hamilton can come from nowhere while a sure bet can lose $20 million in a flash. We speak with some of the biggest producers in the game — Sonia Friedman, Jeffrey Seller, Hal Luftig — and learn that there is only one guarantee: the theater owners always win. (Part two of a three-part series.) SOURCES:Debby Buchholz, managing director of La Jolla Playhouse.Sonia Friedman, Broadway producer.Rocco Landesman, Broadway producer, former owner of Jujamcyn Theaters, former chairman of the National Endowment for the Arts.Hal Luftig, Broadway producer.Luis Miranda Jr., political strategist, founding president of the Hispanic Federation, the Northern Manhattan Arts Alliance, Viva Broadway, and The Public Theater.Michael Rushton, professor of arts administration at Indiana University.Jeffrey Seller, Broadway producer.Richard Winkler, Broadway producer.Stacy Wolf, professor of theater at Princeton University. RESOURCES:Theater Kid: A Broadway Memoir, by Jeffrey Seller (2025).Relentless: My Story of the Latino Spirit That Is Transforming America, by Luis Miranda Jr. (2024).Beyond Broadway: The Pleasure and Promise of Musical Theatre Across America, by Stacy Wolf (2019)."‘Hamilton’ Inc.: The Path to a Billion-Dollar Broadway Show," by Michael Paulson and David Gelles (New York Times, 2016)."On the Performing Arts: The Anatomy of Their Economic Problems," by W.J. Baumol and W.G. Bowen (The American Economic Review, 1965). EXTRAS:“How to Make the Coolest Show on Broadway,” by Freakonomics Radio (2024).“You Can Make a Killing, but Not a Living,” by Freakonomics Radio (2024).

The people who make theater exist in a sort of parallel universe. From inside this universe, it can seem vast. There are so many projects, the work itself is so immersive, and let's be honest, there is a lot of gossip to keep up with. But in reality, theater is a tiny universe when you compare it to all the other flashier forms of entertainment like TV and film, live music and sports, video gaming. The theater universe looks like a distant and dimming star. And yet, believers still believe.

And every now and then, someone takes a shot that is so unlikely, so audacious, and if that shot lands, it rejuvenates the whole enterprise and makes the larger world take notice. In other words, this tiny universe really can produce one singular sensation. one singular sensation. I'll start from a personal note. My son had been on vacation and he came back and we're 15 blocks apart. So usually he comes for breakfast and says, well, my next show, it's Hamilton. And I'm like, the secretary of the Treasury of the United States of America. It's like, yes, I just read this amazing, and as I'm reading it... This is the Ron Chernow biography of Hamilton, correct?

Of Hamilton. Correct. He's telling the story to my wife and I. I see hip hop singers jumping off the pages. In my head I was like, he went crazy. That is Luis Miranda Jr. His son is Lin-Manuel Miranda. I tell my wife, you got to read this book because you understand that this is a journey. We're all going to be in for a long time and in my family, it doesn't matter if you disagree. We all have to work together. Hamilton wound up becoming one of the most compelling successes in any form of entertainment

at any time in history. It made the dimming, distant star of Broadway shine very bright, and it gave Luis Miranda a new full-time job. I do all of the philanthropy for the Miranda family. I oversee all of Lin-Manuel's companies and argue with him about what he should or should not do. He usually ignores me. Everyone knows that Lin-Manuel Miranda became a major player because of Hamilton,

but his father was the original player. He's a longtime political operative and activist in New York City who has worked with mayors, senators, and many others. The theater of politics and the theater on a stage are very very similar. Lee Manuel says all the time that I go through the world collecting money for candidates and probably half of them never have a chance but they're fights that you must fight. Theater is a bit the

same way you go and collect lots of money and most of the shows don't make it the same way that many candidates won't make it but there is art that needs to be made some shows I always wonder why did they do that? But hey, someone had a dream. Luis Miranda himself had a dream for his son. I wanted him to be president of the United States, the first Puerto Rican president of the United States of America.

And I know he could have done it. He is so good at it. I see him meeting with elected officials. He's so charming. But faithful to his beliefs, you're not going to convince him to say something he doesn't believe in. But Lin-Manuel wanted to do something different. When he was an undergrad at Wesleyan, he started writing a musical called In the Heights, a boisterous story about the spirit of community set in Washington Heights, a New York neighborhood close to where the Mirandas lived. L'Emmanuel and his friends, all very arrogant young people, they needed money to hire the actors and really further develop.

I asked how much do you need and say 40,000. I'm like, no, they're going to give you $40,000. This is 2005, 2006. I said, but I know what I'll do. I'll ask my friend who's the artistic director of Repertorio Español, Spanish repertoire, to lend me the theater. You guys do a reading, we'll invite people and we'll ask them a thousand bucks a pop.

A backers audition this is. Correct. Friends coming together because you're telling them that your kid is good. In the Heights eventually made it to Broadway where it won four Tony Awards and ran for nearly three years. Not long after that came Hamilton which turned out to be a billion-dollar franchise. There's an old cliche about Broadway. You can make a killing but not a living. There is an occasional smash hit like Hamilton but

much more common are the failures and the flops, which don't cost any less to produce than the hits and leave behind a trail of regret. And yet there is no shortage of producers, investors, writers, and composers willing to give it a try. Why? Because almost no one gets into the theater just to have a career. Like I said, the believers believe. I believe that producing more art makes a society healthier.

Do you have evidence? Yes. I'm a poor kid from a small town in Puerto Rico that somehow felt that musicals were fantastic. I didn't know what they were singing. Do you understand that I'm listening to sh** and I have no clue what they are singing. But there was something attractive, magnetic, magical about the form arts can can create wealth, but it speaks to a different part of who we are as humans and as a society. Luis Miranda recently published a memoir about his work in politics and beyond.

It's called Relentless. "'As nice as I seem,' he writes, "'I was and continue to be relentless. "'I don't back down. "'I try to work with people, but if I can't, As nice as I seem, he writes, I was and continue to be relentless. I don't back down. I try to work with people, but if I can't, I throw an elbow and see where it lands. Today on Freakonomics Radio, part two of our three-part series on the economics of the theater industry.

Last week, we started following a musical called Three Summers of Lincoln as it was being built from scratch. We will get back to that story later, but today's episode is mostly about something else. Today's episode is about how to be relentless. This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner. Someone took a chance only Manuel, and for me, you never finish paying for that. Who was it that took a chance on him? Jeffrey Seller.

Good afternoon. Jeffrey Seller here. I am the producer of Hamilton on Broadway and all over the world. When Seller and I spoke, he had two shows running on Broadway, Hamilton, which is about to celebrate its 10th season, and a revival of Stephen Sondheim's Sweeney Todd. His past credits include Rent and Avenue Q. Seller is also about to publish a memoir called Theater Kid. He grew up in a chaotic working-class family in a Detroit suburb.

I came to New York with my bar mitzvah money. I had maybe 1,100 bucks, $10,000 of student debt, and my first job netted me $205 a week in 1986. So I had no money. I had no family money. There was no one in my family I could ever call to say, could you put 20,000 or 10,000? I mean, that would be a joke.

But Seller kept at it and defied the odds to become one of the most successful Broadway producers of his generation. We should say here that the word producer can mean a few different things in live theater. It can mean that you originate a project, whether financially, creatively, or both. That's what Seller calls a holistic producer. Or it could mean that you are primarily just a cash contributor. Those are investors who we rely on. And by we, I mean the audience relies upon them.

Us holistic producers rely upon them. Historically, they were called dilettantes. And it wasn't necessarily a pejorative. It was just a description of an arts lover and an arts supporter. Is there a relatively infinite supply of the people formerly known as dilettantes? There's an interesting pattern, which is that by the late 70s and the 80s, there were very few investors on Broadway.

If you look back to the 1980s, if you remove the four British mega hits, Cats, Les Mis, Phantom, and Miss Saigon, all produced by Cameron McIntosh, we had very little musical theater or legitimate play theater going on on Broadway. People with money had not yet discovered Broadway. Maybe they discovered the world of visual art first. But a lot of people with money started to discover Broadway, enjoy going to Broadway, and enjoy

investing in Broadway. We are producing more musicals every year as a result of that activity. What Jeffrey Seller didn't say there was that a modern Broadway producer needs all those outside investors because it has become so much more expensive to create and run a show. We'll get into that as we go. I asked Seller to tell me how he came to take a chance on Lin-Manuel Miranda. Lin and his colleagues, Tommy Kail, who's his director, they walked in my office in the summer of 2003. None of them were 30.

They weren't even close to 30. They were courageous and adorable and fun. And the next thing I did is I went and watched them do Freestyle Love Supreme, their hip hop improvisation show. Your last word is fracking. The last word is fracking and I am attacking this beat cause it's sweet to be back on the street. pop improvisation show. And I thought, oh, Lin is a genius.

How is he making these wraps up on his feet? So I knew I was in the presence of sheer brilliance. When I experience a new musical, I want the music to prick my ear in a different way. And we created a reading of In The Heights with a small band. And this was my first experience of it. When Lin came out and started that warm, enveloping rap, Lights Up On Washington Heights, up at the break of day. Lights up on Washington Heights, up at the break of day.

I wake up and I got this little punk I gotta chase away. Pop the gray, get the crack of dawn, sing while I wipe down the awning. Hey y'all, good morning. And then this gorgeous chorus joined behind him singing In The Heights. We're just enough. In the heights, I flip the lights and start my day.

There are fights and endless deaths and bills to pay. In the heights, the height has started. I thought, I've never heard rap and Broadway choral music married together so beautifully. It made the hair on my arms stand up and I was in. So, Jeffrey Seller produced In the Heights on Broadway, where Lin-Manuel Miranda announced himself as a rare double threat, a theatrical writer who starred in his own shows. And while performing in the Heights, eight shows a week, he began developing Hamilton. Seller first read the Hamilton script in 2014. I'm an atheist, but it felt like there was divine intervention. I mean, if God was over Michelangelo's shoulders, then he was over Lin's shoulders as well.

Hamilton had its opening run at the nonprofit Public Theater, a downtown institution known for producing Shakespeare in the Park and for having originated a number of Broadway hits, including A Chorus Line. After a few months at the Public, Hamilton moved uptown to Broadway and quickly became a monster hit with premium tickets selling for over $1,000. And the world's gonna know your name, what's your name, man? Alexander Hamilton.

My name is Alexander Hamilton. And there's a million things I haven't done. But just you wait, just you wait. Today, Hamilton tickets go for an average of around $190. And what about the other show that Jeffrey Seller had on Broadway when we spoke? A full price ticket, Sweeney Todd, $229. Okay. So of all- Why? Why does that ticket have to be 229 bucks?

Correct. Because I employ to do that show every night, almost 100 people. The good news is that every single one of those people is making well over $2,000 a week, and because they have a great union they are making benefits that drive their salary closer to three thousand dollars a week. And as a producer, not as a human, but as a producer, how do you feel about that? I am

concerned today that we're losing the ability to hit in baseball terms a double. When I did Avenue Q, the show cost three and a half million dollars to put on Broadway. Same capitalization as Rent did six years before that. We could operate the show, that means how much it costs every single week to run, for about $325,000. So if we were grossing $500,000 a week, we making a nice little profit and by the way Avenue Q won the Tony Ran on Broadway for six years and was what I call a solid double same exact formula

For in the Heights which came five years after that. However, it was more expensive There were 30 people on stage more musicians more scenery more costumes But it still was able to break even on Broadway every week for only $450,000, which means that if I'm grossing $700 a week, I'm still making a little profit. Today, shows like Avenue Q or In the Heights are costing $10, $12 million. That's more money I have to earn back. And the operating costs instead of being 300, 400, 500 are 700, 800. In my case for Sweeney Todd, over 900.

And that massive inflation is being driven primarily by what? It's being driven by higher labor costs, higher rental costs for equipment, higher production costs for building sets, higher production costs for building costumes, higher rent from the landlords, advertising costs. It is also true that there is nothing I can do to become more efficient. I need those 26 to 35 actors. I cannot do it with less. In the case of Sweeney Todd, I need those 26 musicians.

That's what I signed up for. That's what it takes. Okay, if we're talking production costs and efficiency and inflation, it's probably time to bring in an economist. I'm Michael Rushton. I'm a professor in the O'Neill School of Public and Environmental Affairs at Indiana University, and I teach in our Arts Administration program. How would you describe the major areas of your research and interest? I'm one of that small group of people known as cultural economists who apply economic

methods to looking at the arts and different issues in the arts. I have to say, you are a small group, because even you weren't easy for us to find. Yes. So why are you trafficking in this area that seemingly few people care about? What I have found is that many of the cultural economists began their careers like I did, being an ordinary mainstream muggle economist studying public finance and labor economics and so on. And then you discover, oh, there's a group that does this. And actually, the questions are really interesting around the film industry, performing arts and paintings and auctions. This has been an active field, I would

say since the 1960s when William Bommel and William Bowen first came up with their theory of cost disease. Okay, we need to slow down here for a second because this theory that Rushton just mentioned, cost disease, can explain a lot about the theater industry and some other much larger industries. The theory is famous among economists, but not as widely known as it ought to be. The original paper by Baumol and Bowen was called On the Performing Arts, the Anatomy of Their Economic Problems. on the performing arts, the anatomy of their economic problems. Their insight was regarding technical change, and in particular,

in what sectors can you have labor-saving technological change, and in what sectors is that going to be very difficult to achieve? When they looked at the live performing arts, they said, well, here is an area where labor-saving technological change is going to be really rare. You can't reduce the number of players in your orchestra. You can't reduce the number of cast you need to put on a performance of Macbeth.

And wages have to rise with the rest of the economy, which means constantly your costs are going to be rising. And in theaters right now, we see that. If you speak to any theater producer who is saying, well, we're struggling to get by, one of the first things they say is, our costs keep going up. And the main cost that they face is labor. You have to pay your performers, you've got to pay your crew, you've got to pay your back office staff. And it's just really hard to save on those kinds of numbers. So here's their foundational paper. This is from the American Economic Review of 1965.

They wrote, in order to join the ranks of the rising productivity industries, the arts would somehow have to learn not only to increase output per man hour, but to continue to do so into the indefinite future. Otherwise, they must at some juncture fall behind the technologically progressive industries and experience increases in costs which stem not from their own decisions but from the

inexorable march of technological change in other parts of the economy. On a scale of zero to 10, how true did that prediction become? Ten out of ten. We see the pressures of cost disease in all of the sectors that Bommel and Bowen mentioned where you can't really save on labor. Education would be one example. A teacher can only handle so many students at a time. And teachers' wages have to rise with the rest of the economy or nobody's going to

want to be a teacher anymore. Health care is another example and it's an interesting one because we think, well, there's been lots of technological change in health care. We have all these machines now. we have all these new pharmaceuticals. That's very, very true. But a large part of your health care costs are labor. Paying nurses, paying technicians. You can't just say, well, one nurse can handle 200 patients at once now because of technological change. So I don't mean to insult your profession, but here's a question. So I don't mean to insult your profession, but here's a question. This was a paper written, you know, nearly 60 years ago that laid out exactly the problem that we're seeing not only in theater and the other performing arts, but in, as you said, health care and education, which are much, much bigger sectors.

It strikes me that a lot of people are still flabbergasted that costs in things like education and health care have risen so much relative to other things. In other words, Bommel's cost disease has been around and understood and preached by economists for nearly 60 years, but it seems that no solution has arisen to actually combat the problem. Why do you think that is? Is that a failure of economists to communicate the problem? Is it a failure of economists and others to come up with viable solutions? Is it a failure of policymakers or is this just the way things are and humankind has to figure out different ways to do things?

I think there is a communication issue. The first thing is actually calling it cost disease. What is it resulting from? It's resulting from our getting richer. You only have cost disease because the economy as a whole is becoming more productive and real incomes are rising. So that seems like an odd disease where you say, yes, we're all getting richer. What cost disease is referring to is that productivity changes are going to be different across sectors. Over time, manufactured goods have become far, far cheaper. Raw food production has become cheaper, transportation has become cheaper.

Other things that involve personal services are going to get more expensive. Haircuts, teaching, massages, live theater. Agatha Christie famously remarked that when she was young, she never thought she would be so rich as to be able to own her own motor car, and so poor that she wouldn't be able to have servants. So, Michael, I guess if you wanted to put a positive spin on this, you could say that we as an economy, as a culture, as a civilization, are rich enough to spend an ever larger portion of our income

on important things like education and healthcare? Yes, we are getting richer and we have more income to be able to spend on education, healthcare, personal services, and the arts, because other things in our economy have become so much cheaper. things in our economy have become so much cheaper. Once you know how cost disease works, you see it in a variety of places, including Hollywood. The economics of the movie industry is easily as weird and interesting as the economics of live theater. Maybe we'll do a series on that someday. It used to be that successful films would generate a lot of money for their creators, but that is no longer necessarily the case, especially for

independent filmmakers. Two of the most acclaimed films from last year were Anura and The Brutalist. The filmmakers behind them, Sean Baker and Brady Corbett, have both described how the costs of making the film were so extreme that they were barely able to pay themselves. So what do you do if you are making theater and losing money? Here's the producer, Jeffrey Seller, again. I have two choices, close my show

or put more money in the bank so I can finance the losses every week. So now you've just gotten to the second most important decision a producer has to make. After what show will I do? When do I close? When the amount of money I bring in every week is less than the amount of money I need

to operate my business, I close. What happened with Funny Girl? Can you explain that? Where it looked like it was destined for an early and huge loss, and then it ended up recouping, like, the week before it closed. What happened? Right. Well, what happened is that a young, talented star named Lea Michele came and completely

180 degrees turned that show around. Now why would it then not extend? Was the theater already spoken for? I think they had her for a year, and stars like Lea Michele or Josh Groban, to get them to come to Broadway for a year is a wonderful thing. And it's very rare that you would get someone of that caliber to extend. Many stars when they come to Broadway to do a play will come to do like a 12 week run and they're gone.

Asking a star to play 52 weeks is an enormous lift and only special stars who love musicals, Hugh Jackman, Lea Michele, Josh Groban, are willing to do that because of their deep love for the form. Coming up after the break, yes, paying all those performers and backstage personnel is a huge cost center for a theatrical producer, but you also have to rent a theater. And the economics of that are particularly tricky. There's only so many blocks that make up Broadway. I'm Stephen Dubner. This is Freakonomics Radio.

We'll be right back. As we started putting together this series on the economics of live theater, we spoke with all sorts of people. Producers, writers, performers, economists, historians. There are a lot of people in this ecosystem, and we wanted to hear from all of them. But there was one group of people that would not speak, the big theater owners, the landlords. They are the ones who own the buildings and decide which shows are coming in.

They employ ticket takers and ushers, bartenders and security guards. The landlords are thought of as members of the Broadway community, but that's a bit like saying that the royal family are members of the British community. Their position comes with a guaranteed level of wealth and leverage. There's only so many blocks that make up Broadway, per se, and there's only so much land. Like Will Rogers said, buy land because they're not making any more of it. My name is Hal Luftig and I'm a Broadway producer. Some of my credits include Here Lies Love, The Life of Pi, Legally Blonde, The Revival of Evita, Thoroughly Modern Millie, Kinky Boots. And it goes on and I've been doing this

for 30 something years. To this day, I still get excited like a little butterfly effect in my stomach when I walk into a theater. The smell of it, the dinner of it, being walked to your seat, getting a handing a playbill, sitting there knowing a curtain's gonna go up and you, with all the people sitting around you, are going to be watching and laughing or crying at the same thing.

There are 41 theaters in New York that qualify as Broadway houses. 33 of them are owned or operated by one of three groups, the Schubert Organization, the Nederlander Organization, and ATG Entertainment, formerly known as the Ambassador Theatre Group. The Schubert's and Nederlanders have been around for generations. ATG is a British newcomer that is majority owned by a Rhode Island private equity firm. All of them declined our interview requests. I mentioned this to Hal Luftig. The landlords don't want to talk. The theater owners have no interest in talking. Schubert, Nederlander, Disney, ATG, none of them want to talk.

Gee, I wonder why that is. Maybe you can tell me. I don't know why. Yes, I will. All right, tell me. Theater owners now are a very big profit participant. By profit, I don't mean after the show makes money. First, they get all of their expenses. It's called weekly rental,

and that includes everything from payroll to toilet paper. On top of that, they get a weekly royalty, which could be three, four, five, six percent. It depends on the theater, the theater owner, the show. If the show is doing well, like a million dollars a week, do the math. So that is a chunk right there, and their costs have gone up, insurance, mortgage payments,

interest rates, things like that. So they pass that right on to the show that has changed over the years. How did it used to be? It used to be you paid a rent. There wasn't really a royalty attached to it. It was in the 70s, 80s where they realized they could make a whole lot more money. They also realized, why don't you bump the tickets up $2 here and then $5 there? This is all before dynamic pricing.

This was just, hey, if the show is successful, why sell a ticket for $25? That's how far back we're going. Liza Minnelli in the act was $25, and people were outraged. I remember people thinking, what the hell, $25? When it opened and became sort of a hit, they bumped it up to $27.50. You shared in some of that, sure, as the show, but they got the lion's share because of their royalty. So that's how theater owners kind of work. I mean, it sounds like what most economists

would think of as a monopoly. They have pretty total control over a limited capacity of places where people like you can do your work. Is that the way it seems from your end? Yes, it totally does. But they would say, and there's part of me that does understand this, that when a theater is dark, they're receiving no income and they do have all of these bills to pay. You know, if a show is in trouble, they'll reduce the rent or they'll waive the fee. So yeah, they do help. Of the three major Broadway landlords,

ATG is both the newest and the smallest. They bought out a firm called Jujamsen, which had been run for years by Rocco Landesman. He's one of the producers we heard from in part one of this series. You will remember he got his start by producing a musical called Big River, the Adventures of Huckleberry Finn.

I asked him what it was like to compete against the bigger and more established landlords, the Schubert's and the Nederlanders. We had to find some way to make a name for ourselves, a way to get recognized because we were the third wheel there. We were the smallest. We didn't have the most desirable theaters. We had to find a way to create a profile for ourselves, a way to be identified. One way of doing it was to do plays that maybe were more normally done in regional theaters because they were not obvious commercial plays. Our first successful show was M. Butterfly by

David Henry Wong, which you wouldn't think of as necessarily a conventional Broadway show, but it turned out to be very successful. The big turning point for us was Angels in America. We were in a fierce competition with Schubert for that show, and we were able to convince Tony Kushner, the author, that he should go with us, that we'd be more committed to him as a playwright, to his career. I remember telling Tony that, you know, everyone wants Angels in America, but you're going

to write the next play or the one after it that's not as commercial, but we're going to do it. We're going to be there for you and we're committing to your career, not just to the one play. A couple years ago, Jude Jampson was sold to ATG in a deal valuing their theaters at around $300 million. ATG is thought of as a comer in large part because of this woman. I was headhunted to be the producer of Ambassador Thich Group, ATG, as they were called, in

1999, 2000. I was really young. That's Sonia Friedman. She is the most prolific theatrical producer of our generation on Broadway, in London's West End and beyond. She's produced more than 200 shows. She's won dozens of awards. It was Friedman, by the way, who brought in Lea Michele to save Funny Girl.

By the time ATG headhunted her, she'd already had a good bit of success. Yeah, I'd had my own theater company and I'd done quite a lot of West End work. I left the subsidized sector, the not-for-profit as we call it here, to see if it is possible to do the same sort of work, but make it commercially viable. I mean if we jump to the end you kind of have done it, have you not? I'm not going to ever think I've sort of cracked it because I haven't. I'm always chastising myself for thinking I'm not working hard enough to find the new

voices and not being brave enough. I want to be as fearless as I was when I first started producing. But back to ATG. Same model, bringing the fearless model into the commercial world. Yeah, being the fearless and they were absolutely fantastic. This was two people, Howard Pantone and Rosemary Squire, who founded ATG. They supported me and they let me get on with it. Over the years, ATG got bigger and bigger and at one point I

separated from them directly and formed my company Sonia Friedman Productions. Totally separate or were they an investor? The official world is subsidiary, I'm a subsidiary, but in terms of the running of the company I'm completely 100% creatively independent and raise the vast majority of the company, I'm completely 100% creatively independent and raise the vast majority of the finance myself. It's like a first-look deal with them. I absolutely have a partnership with them, but they basically leave me alone. As an essentially independent producer though, you have access to their real estate. Well, yes. So as I was growing up in the business, they were growing too.

When I joined them, they had two was growing up in the business, they were growing too. When I joined them, they had two theaters and then they were building and they were building by the time Howard and Rosemary left. They had pretty much an empire in London and across the regions and a few across the world. And then they sold it. So it's still ATG that runs it, but in partnership with a private equity company. And they, as you know, they've just bought Jude Jampson. Which owns five theaters in New York, I believe.

That's right. And they want to be a force for good. Not that I disbelieve you, but what makes you say a force for good because, you know, private equity. Because I know the people involved. And here's the key thing. They know the only way any of their operational work is to do with what's on the stages. They know that what's on the stage is the only thing that matters and everything around it is there to support that. I think where ATG will, I really hope, make a difference is in the ticketing. That sounds really boring, doesn't it?

It does. That's okay. But I believe that theatre is a little bit behind the times in how we find our audiences, how we talk to our audiences, the data modelling and who our audiences are and where they're coming from and what they like and how we capture their imagination and I think ATG are very, very forward thinking. So Sonja Friedman professes optimism for a more corporate form of theater ownership, but not everyone feels that way. Theaters are best operated when it's a mom and pop business.

That again is the producer, Jeffrey Seller. We're not a real business. To expect a theater to have earnings growth every quarter is crazy. We go up and we go down. We have hits, but in between those hits we have four flops in a row. One cannot guarantee shareholders or banks or whoever those people are consistent earnings. The danger is that they're going to contribute to inflation by needing to take more of that box office pie to share with those money people. Nat Fisk If you could wake up tomorrow and be magically turned into a landlord, a Broadway theater owner, or you could be you, which means having to reinvent the wheel every time

to come up with a show that you then rent space from them to try to put on and maybe, maybe make a bonanza the way you did with Rent and the way you did with Hamilton. Which do you choose? Oh, I choose to be a producer seven days a week, 365 days a year. I didn't come to New York to be a producer seven days a week, 365 days a year. I didn't come to New York to be a landlord. I'm a poor kid from Detroit who likes musicals.

I don't like buildings. How good a business is the Broadway theater landlord business, however? I wouldn't turn it down. It's a fantastic business. It's heads I win, tails you lose. Period. End of discussion. I'll say that to their faces and they know it. And no one's going to say, how dare you say that, Jeffrey. They know it. I know it. We all know it. There's one more factor that makes New York a particularly expensive place to produce theater.

Labor unions. There are 13 separate unions involved in Broadway productions with three additional contracts that govern how people are paid. Every producer I spoke with for this series named unions as a major driver of production inflation. I asked Hal Luftig for his take on the Broadway unions. Are you trying to get me killed? Steve, I will tell you this.

I understand that every rule that exists in every union is there because at some point somebody tried to screw them over in that specific area. And so next time the contract was negotiated, the union said, okay, we're going to deal with this. What's a, for instance, what's a way that a producer might have been either taking advantage or not looking out for the safety of someone that became codified in a union contract? For example, stage managers.

A producer who was not being very careful, not being very forthright might say, oh, we could do this show with two stage managers. And meanwhile, it's the most complicated set in the world. It's dangerous to not have enough stage managers who can watch the show and make sure everybody is where they're supposed to be, when they're supposed to be.

Things like if a trap door opens during the show, a stage manager has to say it's okay to continue, they're all on headsets so the audience never hears this, to continue because the trap has been closed and the stage is now safe. Of all the potential problems faced by a Broadway producer, the most severe by far is that their show will simply be a flop. I was very devastated. I didn't understand it. Coming up after the break, how to salvage a flop and what do you do when the star of

your brand new musical suddenly drops out? I'm Stephen Dubner. This is Freakonomics Radio. We will be right back. If you choose to produce the kind of high-stakes, high-dollar theater we've been talking about, you just have to deal with the vagaries and vicissitudes of the industry. A huge hit can come out of nowhere, and what looks to be like a sure thing can cave in on itself and burn $20 million.

Of course, the vast majority of new shows live somewhere in the middle of these extremes, but it's the extremes that come to define the industry. Consider one highly anticipated show from last season, a revival of The Who's Tommy with music and lyrics by Pete Townsend. The first Broadway production, which was based on the Who's 1969 rock opera, played for more than two years in the early 1990s. This new revival was capitalized at around $15 million, but it lasted only a few months. I don't generally like to raise a half a million dollars and have it go down the tubes. That is Richard Winkler. He's one of the lead producers on Three Summers of Lincoln, the new show we're following

in this series. He was also a co-producer, one of many, on The Who's Tommy. I thought that the production was an absolutely first-class piece of musical theater. I do not understand why it did not work. I thought every single baby boomer who saw the show would want to come back and see it again. I was very devastated. I didn't understand it, and I don't like stuff that I don't understand.

It's hard to predict, isn't it? There's so much alchemy that's involved in a successful Broadway musical or a successful Broadway play. I'm going to see O'Mary this evening. You're gonna laugh a lot. I understand I'm gonna laugh a lot. Everybody tells me I'm gonna laugh a lot. But who in the world would ever think that a show that opened off-Broadway with two unknowns in it would become the big Broadway sensation of the season.

So what does that say about just the, I don't want to say risk, but the unpredictability of what you do, what would seem to be the can't fail project like Tommy fails on Broadway and Oh Mary which comes from nowhere from nobody relatively speaking. It just proves nobody knows nothing. So that was William Goldman talking about Hollywood but it applies here too I guess. Oh it applies here too 100% 100%. Oh Mary is an absurdist slapsticky comedy created by Cole Escola.

The New York Times called it an unhinged historical fantasia that imagines its protagonist as an alcoholic cabaret singer married to a gay guy. The protagonist, by the way, is Mary Todd Lincoln, and her husband, the gay guy in O'Mary, is Abraham Lincoln. If Three Summers of Lincoln does make it to Broadway, it's hard to imagine there could ever be two shows on two stages about the same historical figures that bear such little resemblance to each other. O'Mary was a small and simple show to mount, capitalized at just $4.5 million. It was also the first show of the season to recoup its investment after just four months,

and it's still going strong. Like Richard Winkler said, nobody knows nothing. In 2007, the producer Hal Luftig opened Legally Blonde on Broadway. It was a musical adaptation of the movie starring Reese Witherspoon. It ran for a year and a half, but as Luftig told us, it made back only around 60% of its $11 million capitalization. Shows don't work on Broadway for a whole host of reasons. It doesn't have to be that the show is awful.

You come to Broadway, let's just say you have 30 other choices. What people choose can be a byproduct of where they are at that moment. We learned this on Linguely Blonde. If you are coming into the city and you have two kids, a boy and a girl, invariably the boy said, oh, I don't want to see that. That's a girl's story. So they choose another show that everyone's happy with. There are people who feel like I don't need to see that on Broadway. I saw the movie.

Not really comprehending that a good adaptation has its own vocabulary. It's not just the movie on stage. If a movie is associated with a star, as was Legally Blonde with Reese Witherspoon, well, is Reese in it? No, I'll go see something else. So what do you do with a big musical

that loses millions on Broadway? You might take it on tour. Broadway may be the epicenter of live theater with the most attention and the highest ticket prices, but the theatrical touring economy is robust and global. After The Who's Tommy lost its $15 million Broadway investment, the producers announced they were raising

another $5 million to take it on the road. Here's Richard Winkler again. I think it's going to be very successful, but it also depends on what city you go to and how long you're there. The world is not the same as it used to be, and the appetite for what we do is not the same. There was an appetite for a tour of Legally Blonde. Here is producer Hal Luftig again. It went on the road, a several year US tour, which did recruit and made a profit. It went to London where it did make a small profit.

And that UK company then turned into a UK tour that went to Ireland and other countries. And that was very profitable too. So how can a middling Broadway show do so much better on the road? The houses are bigger. There are some tour houses that are over 2000 seats. When you come to New York, you have a choice of let's say 30 shows.

When you're in Cleveland, usually you're the only one or you're one of two. So it's more focused and you do pretty well and tours usually cost a whole lot less. In addition to costing less, producers usually get much better terms on road tours, a bigger cut of ticket sales, for instance, than they do in the Broadway hot house environment

where the landlords have so much leverage. And a show like Legally Blonde can also generate licensing fees from productions much further down the chain. That show is done so many times in so many different high schools and so many different languages. The year before the pandemic, and that's the last report I recall,

see it was three or 400 productions in one year. Oh my goodness. Yes. It was done everywhere. If you think about it, Stephen, the casting is very easy for a school. It has enough males, it has enough females. The songs aren't terribly difficult to sing. It speaks to high school kids and certainly younger women

because the message is you don't ever have to dumb yourself down. A lot of shows fail on Broadway financially and critically and then do extremely well once they get out into the rest of the country in amateur venues. That is Stacey Wolf. She is the author of a book called Beyond Broadway, the pleasure and promise of musical theater across America.

And she teaches theater and American studies at Princeton. Students like to take my classes because they are musical theater fans or kids and they think, oh, this is going to be fun. And then they realize that musicals are among the most important cultural artifact. So we treat musicals as seriously as we would treat Shakespeare or a symphony by Beethoven. We think about South Pacific in relation to gender relations and race relations and class relations in the 1940s. We look at Phantom of the Opera in conversation with a backlash against women in the late 1980s. Pretty much any musical that

you look at, even the ones that seem the silliest and most escapist and most not conversing with US culture and society really are in conversation with the society, especially if they were hits, they have to be. For many, many, many, many people, not all, but many to them, Broadway and the theater, or one and the same. To many others, they know many different parts

of the ecosystem, but in terms of public perception and in terms of size of know, size of industry and number of participants and so on, how do you see it? Broadway is to the whole ecosystem. Tiny. Tiny in terms of number and outsized in terms of symbolism. Just symbolism and not, let's say, profits since we're talking about an industry? Not in terms of profits. A lot of great things happen on Broadway. Broadway is the place where it begins. It's symbolically important. It creates the canon. It creates the version by which all other versions are compared. But the real lifeblood of the form, why musical theater is thriving and continues to thrive in spite of

all the odds against it in that it's face-to-face, it's slow, it's hands-on, it requires incredible collaboration, only a few people can see it at a time. All of those things that happen in high schools, community theaters, summer camps, that is really the lifeblood of the form. Persuade me that when you call the non-Broadway or even the non-commercial side of theater the lifeblood, that that's not an emotional description versus an empirical description. For example, in 2017-2018, the Educational Theater Association, which does a survey every year, found more than 37,000 high school productions

took place that year, with more than 46 million people in the audience. ["Spring Day in the Halls"] That compares to around 12 million people who see a Broadway show in a given year. So, yes, technically the audience for high school musicals is at least three times bigger than the Broadway audience, but without Broadway, high schools wouldn't necessarily have shows to produce.

Once the show has the As Seen on Broadway imprimatur, it then has a certain kind of stamp of approval that makes it legible to anyone. Another example of this, not of a show that didn't succeed, but a show that was never intended to succeed, was Newsies, Disney's Newsies. What do you mean it was never intended to succeed? Newsies from the beginning was answering the cry of fans who had seen the movie, who really wanted a stage musical of the movie. So they created Newsies to have just a super brief run on Broadway, and it was meant to go out and tour

and then become an amateur production. It did very well on Broadway, and because it was fairly cheap to run, because it had a set that was always meant to tour. It made back its money very quickly. Once it went out on the road, it did well. And once it went to schools, it was and continues to be very, very popular. What is it about that show that works in schools?

It has a very light romance between a feisty girl and a delightful boy that has a huge chorus that's endlessly expandable. And even though they're newsboys, they can also be played by girls. It doesn't have any bad words. The politics are kind of, I won't even say Marxism light, but kind of labor movement light. So it has a good uplifting message. There's nothing to offend anyone in Newsies. And also it can allow a completely multiracial cast. It has a character with a disability. So it has a lot of great stuff going on for a school and it's very entertaining. The music is super catchy, easy to sing. It can have a lot of dance or doesn't have to have a lot

of dance depending on what you have in your school because for high schools, the teacher or the director is always having to calculate who they have in their population. So it's never an arbitrary choice for them. It's a very calculated decision about what show can they do? Do they have enough parts for girls? can their kids sing the show, do they have musicians. Okay, so what does it cost if I'm a high school and I want to put on Newsies or Three Summers of Lincoln, let's say three years from now, what's it going to cost and how does that licensing work? Typically a full-length show costs somewhere around $3,000.

If you were going to do a Broadway junior show, a 60-minute show, that would run you closer to $700 for the show. So, if I'm the originator of a show that played on Broadway, it succeeded, it failed, it was somewhere in the middle, whatever, I hear you say some high school wants to license it for somewhere It was a success, it was a success on Broadway, it succeeded, it failed, it was summer in the middle, whatever. I hear you say some high school wants to license it for somewhere between $700 and $3,000. How many productions might there be in a given year and how much money might that represent? There can be thousands of productions per year and it can be some millions of dollars per year.

Let me just tell you a little bit more about Three Summers of Lincoln. So it's a musical, it's got comic moments, it's got serious moments, it's got some gospel, it's got some kind of Broadway music, it's got some field music, it's got some jazzy-ish bluesy stuff. It's primarily about the relationship between Abraham Lincoln and Frederick Douglass and really how Douglass radicalized Lincoln, turned him into an abolitionist and how Lincoln, to his surprise, won re-election when he thought he was going to lose. What does that sound like to you as a high school musical? What do you think the prospects are? Honestly, it sounds challenging.

Because why? Because any musical that deals with something as overtly political as race relations could have a hard time in our country at this moment. There probably will be certain segments of the country that would be absolutely thrilled to do a show like that. It also sounds to me there's a great friendship in the center of this, which is always something welcome for high school shows. How have issues around free speech and hate speech and identity politics, how has all that affected which shows get chosen to be produced in high schools?

I can't overstate how much those issues have affected what's produced. It's so difficult for a high school teacher and students to get their show past a school board, a principal, and a community that finds problems with every single issue. Okay. So if Three Summers of Lincoln isn't going to make its money back on high school productions, it better hope it succeeds on Broadway, or at least hope it makes it there. When we last heard about Lincoln in part one of this series, they had just produced a successful workshop performance in New York. After that would come another round of revisions and then a world premiere at the non-profit La Jolla Playhouse in early 2025 with the hope of moving

to Broadway sometime in 2026. But if you remember, the actor playing Lincoln, Brian Stokes Mitchell, announced that he was dropping out of the production the day before tickets went on sale at La Jolla. You know, it's live theater, it happens. What can I say? That is Debbie Buchholz, managing director of the La Jolla Playhouse.

I'd called her up after I learned that Stokes was leaving the show. I'd heard all sorts of rumors about what his quitting meant, but the official line was simply that he withdrew for personal reasons and that the show must, you know, go on. I asked Buchholz if anyone involved had thought about postponing the La Jolla premiere. That was never on the table. The thing about a musical is, particularly in a musical where you have the seniority and caliber of the creative team that's on this, part of the magic game of Tetris

is lining up some really, really challenging schedules. And these schedules are lined up. I can recognize that for your theater, a postponement would probably be a big drag, right? You don't have something that could be slotted in right there, I assume? That's right. That's correct. On the other hand, if I think about the commercial producers, they are playing the long game.

And so, if they're hoping to get to Broadway in whatever, a year, 18 months, they might say, well, you know, this was a big step back and we need to reassess and or wait for Stokes and or find someone that we won't be able to find as quickly as this. So what if they came to you and said, hey, you know what, Debbie, we love La Jolla Playhouse, we love you, but we're pulling out of this production.

What would happen then? Look, there's all sorts of different things that could happen then. It just doesn't happen. Frankly, the agreement between all of us wasn't contingent on any one particular person in that role. This piece would be incredibly challenged if it tried to put itself off. It wouldn't be putting it off for 12 or 18 months, because they would need to find another developmental home for it as well, another regional theater that had a slot, and it would be putting it off for a

very long time. Do you have a dream replacement for Lincoln? No, I don't. It's like fantasy casting. No, I'm excited to see whoever comes in to do it. Coming up next time in the third and final part of our series, we will meet the new Lincoln. I felt like if I still want to be an actor, I have to do this. We'll hear from Mary Todd Lincoln, not the alcoholic cabaret singer from Oh Mary, but

the Mary from Three Summers of Lincoln, about losing her original Abraham. I was concerned. I was concerned. I was concerned. And we'll ask the commercial producers how they're feeling. I believe that after La Jolla, people will be throwing money at the project. That's next time. Until then, take care of yourself and, if you can, someone else too. Freakonomics Radio is produced by Stitcher and Renbud Radio.

You can find our entire archive on any podcast app also at Freakonomics.com where we publish transcripts and show notes. This episode was produced by Alina Kullman. It was mixed by Jasmine Klinger with help from Jeremy Johnston. The Freakonomics Radio network staff also includes Augusta Chapman, Dalvin Abouagie, Eleanor Osborne, Ellen Frankman, Elsa Hernandez, Gabriel Roth, Greg Rippon, John Schnars, Morgan Levy, Neil Carruth, Sarah Lilly, Teo Jacobs, and Zach Lipinski. Our theme song is Mr. Fortune by the Hitchhikers, and our composer is Luis Guerra. As always, thanks for listening.

You're the producer of a show you like apparent, and that's like asking you, do you ever stop working with your children? I don't think so. They could be 30 years old, just still going to be working. The Freakonomics Radio Network, the hidden side of everything. Stitcher.