Focus on: Deals

Deals are all about balancing risk.

Deals are the core economic process at the heart of every theatre’s business and are the most important financial arrangements a theatre makes. Since box office income & programming expenditure should be the largest cost-centre in any theatre’s budget, the deals which influence this need to be calculated exactly. Even small errors can have serious financial consequences. In fact, so serious are the consequences of poorly calculated or negotiated deals – theatres have gone bust over bad deals – that it’s no wonder that deals need to be complicated to ensure that risk is apportioned in a way that makes both parties (fairly) happy.

As CEO & Artistic Director of The Maltings Theatre in Berwick-upon-Tweed, I negotiated around 200 bespoke deals every year. Some were negotiated quickly during a telephone call and others took weeks – even months – of negotiation. We used every kind of deal structure we could to share or mitigate the financial risks we took, while always seeking to increase the artistic risk in our programming. It was great fun, and we did good deals.

Deals are a natural consequence of the material process of ‘making’ and ‘selling’ a product – in this case, performance. Indeed, it is common in theatres – perhaps sadly – to refer to programming as ‘product’.

If the artist (the theatre company, band, group of artists etc) is the manufacturer, then the theatre is the retailer and the audience is the consumer.

The manufacturer needs to cover the costs of production and make a surplus to invest in future productions.

The theatre needs to retail the product to the consumer and make enough of a margin to ensure their survival and continue to invest in the ‘shop’.

The consumer must purchase the product, paying both the ‘retailer’ and the ‘manufacturer’. The consumer ideally must enjoy both the product and the context in which it is consumed (the theatre), making it more likely they will return in the future to buy more.

As the retailer, a theatre needs to ensure that the quality of the product they sell is high and that there is a good supply of product. This normally involves building partnerships, sometimes over many years, with good ‘manufacturers’. Theatres should also seek to work to develop new quality product with new manufacturers – young or newly-formed production companies – to ensure supply for the future. This is perhaps the most significant investment in programming that a good management can make.

It goes without saying that a good theatre management needs to understand fully the types of deals that are commonly used as well as understanding which kind of deal is appropriate for the artistic product under negotiation.

All deals result in a contract. The deal itself is usually done by telephone, in person or via email, and the contract follows. When doing the deal, it is critical to cover every point of the arrangement so there are no misunderstandings.

Make copious notes during the telephone conversation – having a photocopied page with set headings for discussion is a good idea and acts as an aide memoire.I used to have an email template set up with all the different headings and make notes straight into it. At the conclusion of the telephone call I’d fire off the email as a record of the conversation and it would form the basis of the contract.

All deals are about risk. A good deal will make both parties happy with the level of risk the deal involves. It should also mean that both parties share in success in some way. It will not necessarily share risk evenly, nor will it result in an equal or proportionate payment to both parties.

Deals also reflect desire: where the venue has a very great desire to present the product, or a company is strongly motivated to present their product at a given venue, the deal may need to reflect this. It is here that a skilled negotiator on either side can make a real difference to the final deal. A good negotiator will make the other party feel that they have been successful in their negotiations, while ensuring that their side are even happier! As Harvey Robbins put it, “Place a higher priority on discovering what a win looks like for the other person.”

I’m going to cover the most common types of deal in subsequent posts, but here’s a quick list in rough order of risk going from most risk held by the venue to most risk held by the company.

  • Guaranteed Fee / Guarantee / Box Office Guarantee
  • Lower Guaranteed Call to the company followed by a split
  • Lower Guarantee versus a Box Office split
  • Higher calls to both the Venue and the Company including some kind of split
  • Straight Box Office Split
  • Lower Hire Charge versus a Box Office split
  • Hire Charge

Depending on the levels of the guarantees or hire charges, as well as the percentage terms of the splits, the risks change, of course.

Good deals – in my view – generally avoid any party taking all the risk and are about partnership. Given that live performance is a small world, it’s likely that the parties will be working together again in the future, so it’s important to keep the deal as fair as possible and as polite as possible. A lack of transparency over contra-ing is the most common cause of breakdowns in the relationships between companies and venues.

Whatever the deal you do is, stick to it with good grace. You’ll never get it 100% right, and every deal you do is a learning experience for the future.

Remember also that its most important to be hospitable and welcoming to artists particularly when sales are are low and things look like they’re going to go pear shaped. When the going gets tough, a good venue steps up their friendly communication and ensures that on the night the visiting company is made extremely welcome in person. If you can’t offer a full house, at least offer a very welcoming one.

There are, of course, no hard and fast rules for doing deals, and every venue will have their own ways of doing things. In subsequent posts I’m going to take a look at the different types of deal available and consider the pros and cons of each. Comments as ever are welcome.

2 responses to “Focus on: Deals

  1. An interesting and focussed article as usual. I hope plenty of people in the business are making use of these.

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