I wrote a blog in November which stumped for the concept that Producers should receive a portion of Author's subsidiary rights on shows that have not recouped on Broadway, since it was the Producer's production that branded the show for subsidiary production in the first place.
I got tremendous positive response from the industry from that blog, including several Producers who said they would be willing to take more risks on Broadway if they knew they would have a guaranteed revenue stream to help keep funding their projects in the future.
I also got a lot of questions from readers wanting to know exactly how Producers were compensated for producing shows on and Off-Broadway, so here's a blog that breaks downs the bucks (or lack thereof).
There are three main forms of traditional Producer compensation. They are:
1. Producer Office Fee
The Office Fee is a flat weekly amount paid to the Producer designed to cover costs associated with maintaining an office needed to run a Broadway show. If you were the CEO of a company, then your rent, your assistant(s), your copy machine, etc. and all of things that you need on a daily basis would be taken care of under the company's overall operating budget. A Producer's overhead is not covered by the show's operating budget, therefore the Office Fee was designed to help offset some of those expenses. For an Off-Broadway show, the average Producer Office Fee is $1,000/week, but it can range anywhere between $500 - $1,500 week. On a Broadway show, the average Producer Office Fee is approximately $2,000, but this can vary as well depending on the size of the production. The Producer Office Fee is usually paid to the Producers two weeks prior to the start of rehearsals. Before that, you're on your own.
The Producer Office Fee is traditionally split between the Lead Producers of the production. If there are three Leads, then divide the numbers I've specified above by three, etc. At times, secondary Producers (or other "above-the-title" Producers) also share in a portion of this fee. In that case, the Producer Office Fee can sometimes be split many, many, ways. I've been on shows where some Producers were getting $62.50/week.
If a show is in trouble, this Office Fee is usually one of the first to be waived.
2. Producer Royalty
The Producer Royalty is similar to the royalty paid to the Authors or the Designers of the production. It starts off as a percentage of the gross (customarily about 3%), but usually ends up converting to a percentage of profit through a royalty pool. There are traditionally minimum royalties paid to everyone in the pool, and a 3% Producer Royalty would usually mean about $702 Off-Broadway and about $3,000 to $4,500 on Broadway per week. The hope, of course, is that the show is constantly in profit, and that everyone in that pool is paid more than the minimums.
The Producer Royalty is split between Lead Producers as well, just like the Office Fee. Three Lead Producers who are treated evenly on a $3,000 royalty would get $1k each. And, usually on the bigger musicals, a portion of that Producer Royalty is split between a bunch of those other names above the title as well.
Unlike the other creatives, however, there is no advance paid on a Producer Royalty and the royalty begins with the first performance.
If the show is in trouble, creative royalties to all participants, including Authors, etc. are usually reduced, waived or deferred pretty quickly.
3. Profit after Recoupment
This is the proverbial pot at the end of the rainbow for Producers. Before a show has recouped, 100% of its profit (after the royalties specified above) goes to its investors. After a show pays back its investors in full, profit is treated differently. First, some folks usually take a sliver off the top (some General Managers, Stars, Authors, etc.), and then the remaining profit is split in two . . . half of which goes to the investors, and half of which gets paid to the Producers. However, once again, this profit that gets paid to Producers once again gets divvied up, first to the Lead Producers, and then each Lead Producer pays a portion of his or her profit to all of the other big money raisers on the show. Because the cost of producing Broadway shows is so great, Lead Producers usually "sub-contract" some of their financing, and in exchange for that, they have to give up some of their profit. But this is the profit that all Producers are praying for, because if you can get a show to recoup, and run for years and years, and spin-off tours and subsidiary companies for years and years, this profit can help provide a financial foundation for your office and help you get future shows off the ground.
In all of the above, you can see how quickly Producer compensation can get diluted, especially if you've got a bunch of Producers helping you get your show up (which is becoming more and more the norm). Now you know why so many Producer's offices are smaller than the offices of their own vendors!
This dilution has caused the creation of a sometimes utilized fourth income stream known as the Executive Producer Fee and/or Royalty.
The EP Fee is a lump sum payment paid in production to cover the work on a project before it opens. It can be $10k or $25k on a Broadway show, or whatever is appropriate and "budgetarily" responsible. The argument for the EP Fee is that every other person on the production team is paid up front, from the Authors to the Director to the Production Assistant . . . so why shouldn't the Producer be paid? A CEO is paid, right? A Managing Director?
The EP Royalty is usually a fixed amount that is paid directly to the Producer during operating weeks that was created in response to the fact that so many Producers had to give up their standard Producer Royalty to their major investors or other above-the-title Producers on the show.
It's becoming more and more challenging to make money on Broadway as a Producer, as it gets harder and harder to recoup because of escalating costs, and because the traditional compensation streams are being tributized to so many other players.
But it still is possible.
But seriously, I don't know a single Producer that is in it for the money, and you shouldn't be either.
I laugh whenever people say that Producers are greedy, and money grubbing, etc. That is an old stereotype that just doesn't apply anymore. Sure, there have always been a few bad eggs in any chicken coop, but if we were really in it for the money . . . we'd be in movies.