In this series we’re taking a look at some of the more common types of deal done between venues and visiting companies. Have a look here for more general information about deals.
Box Office Guarantees / Guarantees / Guaranteed Fees
Example: “The theatre will pay the visiting company a guaranteed box office of £2000 + VAT per performance”
Although this type of deal is sometimes referred to by different names, these all derive from the idea of guaranteeing the company a certain amount of box office income as payment for their performance.
This is not strictly speaking a fee, although some companies think that it is. It means simply that the theatre guarantees that revenue from ticket sales will be a certain amount, that this amount will be paid over to the company, and the theatre will make up the difference if this amount is not taken at box office. This can be an important distinction to make for VAT purposes.
In this deal, a straight guaranteed fee is paid to the company regardless of the box office income. Thus all risk in this kind of deal is borne by the theatre. Even if no tickets are sold, the same fee must be paid to the company.
There is an opportunity for the theatre to show a surplus on the deal, of course, as any box office receipts over the guaranteed amount are retained by the theatre.
Guarantees are favoured by some receiving theatres, often those administered by local authorities, which have a budget to spend on purchasing product to present. As they are not principally concerned with achieving surpluses, the guarantee system allows them to predict with some certainty what their expenditure will be for a given season.
Guarantees are also favoured by most companies. A guarantee allows them to budget for their tour or production and to ensure that they do not lose money on the deal.
Guarantees carry significant risk for venues, as the guaranteed box office amount is not related to attendance. In the event that ticket sales are poor, the guaranteed amount must still be paid. This can be serious, particularly if weather or other circumstances beyond the theatre’s control affects attendance.
However, there are many occasions where the theatre will gladly agree to a guarantee. If the company is a prestigious one and their inclusion in the programme will benefit the theatre’s reputation or advances the theatre’s artistic policies, then the guarantee is a necessary evil.
Equally, if the theatre management is absolutely certain that attendance will be high, then the guarantee can allow the theatre to make a significant surplus. This certainty is rare, and inherently risky.
Different artforms have different expectations of the kind of deal that will be done. Many bands, for example, are used to the guarantee system and are suspicious of any other kind of deal. Dance companies will normally only work on a guarantee basis, as will many subsidised theatre companies.
It would be a confident programmer – or one who is influenced by factors other than financial considerations – who offered a guarantee greater than thirty percent of the gross potential box office for a given performance or run of performances.
Offering a guarantee does usually allow the programmer freedom to set ticket prices, discounts etc at whatever level they choose. This can be very useful where there are plans to offer special discounts to encourage audience development, as the producer will not be concerned by the lost revenue.
As in all deals, the guarantee is part of a whole package. It may be affected by contras or other financial arrangements, and it needs to be considered in the light of all other parts of the deal. It is important to note whether other contras such as accommodation, hospitality etc will be charged back to the theatre by the company on top of the guarantee. Where possible, it is not a bad idea to ensure that the guarantee is all inclusive by ‘buying out’ the company’s accommodation costs etc if necessary. This avoids hidden extras later on.
In conclusion, a box office guarantee means that all risk is taken by the theatre. It is sometimes a necessary deal, and it can offer the opportunity for significant surpluses for the theatre as well as freedom with regard to setting ticket prices and discounts, but it is a risky approach for venues to take on a large number of different deals throughout a season of programming.
As ever, comments are welcome.