So the stagehands strike on Broadway is going so poorly, the producers canceled the entire next week of shows because they don’t believe there will be a resolution any time soon. I read somewhere that the folks who own and manage the theatres had been building up a war chest for a number of years so they could weather the next big strike.

Unfortunately, none of that hoarded money will go toward paying off the investors in the shows that have shut down. As far as they are concerned, everything is going to hell.

But investing in Broadway shows has always been a risky proposition. The expectation is that you will lose all your money and it is a shock when you actually see some return whereas most investments operate on the opposite assumption. The only thing you are generally guaranteed as an investor are tickets to opening night and an invitation to the opening night party. (Unless things go south before the show opens.)

If you have ever wondered about the mechanics of investing in a Broadway show, the Franklin Weinrib Rudell & Vassallo law firm website has an article on the subject. While the law doesn’t protect you from losing your shirt, it does limit losing ones shirt to those who won’t be left destitute by the loss. New York State has very stringent laws regulating investments in Broadway shows. If the total investment being solicited is in excess of $5 million, which most are these days, the show is subject to Federal Securities law. Since compliance with NY State laws can be very expensive due to all the legal fees involved, it is preferable to be subject to the Federal statutes.

Even if the total investment sought is under $5 million, a production can avoid being subject to the stringent NY State laws if “potential investors must be furnished with a thorough disclosure document (unless all the investors are accredited, in which event no particular type of information is stipulated); and there may be no more than 35 unaccredited investors, all of whom must demonstrate that alone, or together with a purchaser representative, they have the financial knowledge and experience necessary to evaluate the merits and risks of the offering.”

An accredited investor is “defined as an individual with a net worth in excess of $1 million, or who, in each of the last two years, has earned income in excess of $200,000 per year (or $300,000 with spouse), with a reasonable expectation of reaching that amount in the current year.”

Investing in Broadway shows is not for the risk averse or financially insolvent. The article discusses many of the financing structures that are used when investing in productions. The more money one brings to the table, the better deal one can negotiate–including a percentage of the producers profits above the normal investor’s cut. So if you are interested in the intricacies of funding a Broadway show, give the piece a read.