The Deal: Guarantees vs Splits

Good deals are all about give and take.

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 vs a Split

Example: “The theatre will pay the visiting company a guaranteed box office of £2000 + VAT per performance versus 75% of the gross Box Office”

In a presenting theatre, this – or variations upon it – is frequently the most common deal done. The theatre guarantees to pay the company a set amount OR the specified percentage of box office (gross, or net), whichever is greater.

The actual percentage paid to the company is part of the negotiation. In my experience it would be between 65% – 80% but it is not uncommon for the percentage to fall outside of these parameters. It is invariably the case that the theatre retains the smaller percentage.

The advantage of this deal for the visiting company is obviously that they benefit from higher ticket sales, while ensuring a minimum level of income.

However, on a show that should prove popular, the venue has the opportunity to reduce the guarantee in favour of a higher split for the company. A competent theatre programmer will almost always seek to reduce the guaranteed amount, because this reduces the theatre’s exposure to risk.

Splits are a good way to distribute risk evenly between the venue and the visiting artist: A split ensures that both parties have the most to gain from high ticket sales. The percentage of the split is naturally a focus of negotiations.

As a venue programmer, I was always happy when I secured a 70/30% split. This was our target. As with all deals, the terms of the deal were determined by supply and demand. Where we very much wished to secure the show, I was prepared to go down to an 80/20%. This was infrequent.

As ever, part of the negotiation was about what could be deducted by the theatre from the top of the deal, i.e. before the split or deducted off the guarantee in the same percentage as the split.

We had a small standard marketing contra that we usually insisted should be deducted from gross box office or off the guarantee in the same percentage. I.e. if our marketing contra was £100, this amount would be taken off gross box office before the split was calculated, or if the show did not sell well enough to go into the split the visiting company would have 75% of £100 deducted from their guarantee. These points were all negotiated in some detail!

Where negotiating a guarantee versus a split, I was always prepared to lose a point or two on the split in favour of reducing the guarantee, particularly where the chance of getting into the split was marginal. After all, the guarantee must be paid regardless of ticket sales, so there was always the risk of losing money on the guarantee – while losing a point or two on the split would not result in the theatre losing money directly, just not retaining as much as we would have done.

A guarantee versus a split is a better deal for the visiting company, but not for the theatre, unless the theatre can negotiate down the level of the guarantee with the promise of a better payoff from the split. This is the purpose of this kind of deal for the theatre – to reduce the level of the amount guaranteed to the visiting company by using the promise of the company earning more in the event that sales go well.

For example, if the visiting company have asked for a £4000 straight guarantee, they should be prepared to reduce this to say £3000 vs a 70/30% split, or £2500 versus an 80/20% split. Of course in practice, nothing is quite this simple – much depends on the capacity of the venue and the programmers honest view about the likely box office take – and a good programmer or tour booker should have a calculator or spreadsheet to hand to work out these variations and their consequences on the hoof…

What’s your experience? Comments, questions and anecdotes are welcome.

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