The Deal: Calls

Deals should leave all parties happy – or at least feeling happy at the point negotiations conclude.

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.

Calls

Example: “The theatre will pay the visiting company a first call of £2000, followed by a second call to the theatre of £2000, followed by a third call to the company of £500 followed by a 70/30% in favour of the company”

A call is similar to a guarantee, except that it is not guaranteed. In the example above, the theatre has agreed to pay the company the first £2000 taken at box office. If box office receipts for the run total less than this amount, then that is all the company are paid. So if total receipts are £1900, then the theatre hands this over to the company.

If the box office receipts in the example above totaled £4300, then this would be split as follows: £2000 to the company, £2000 to the theatre, £300 to the company. Any amount taken over £4500 would be split between the theatre and the company on a 70/30% in the company’s favour.

In essence, calls are anchored to the reality of box office receipts. Neither side is obligated to pay the other money which has not been taken at box office. This has a significant impact on the risks taken on either side.

To my mind, calls represent the fairest method of deal available, and I use them widely and with ever-increasing invention in order to mitigate the inevitable risk of presenting theatre and share the risk and rewards more equitably between producing partners.

Calls can be used very simply in place of or alongside a guarantee.

Here’s another example:

“The theatre will pay the visiting company a guaranteed first call of £400, followed by a second call of £400, versus a 70/30 split.”

This deal looks like the kind of deal a theatre might use for a one night studio production by a small visiting theatre company. The company probably wanted an £800 guarantee, but the theatre management are clearly concerned that there may not be an audience for the show, so they’ve offered a guaranteed first call of £400 followed by a second call of £400, both to the company. This means that in the event of very few ticket sales, the theatre is not liable for the level of loss implied by an £800 guarantee. On the other hand, if the show sells well, the visiting company will receive 70% of the takings. The box office receipts would need to be around £1100 for the deal to pay on the split not the calls.

I use the term ‘guaranteed first call’ above which is technically just a guarantee. But I think it’s clearer to call it a guaranteed first call where there is a second call involved – if there is no second call, then it is clearly a guarantee.

Calls can also be used to create more complex deals which benefit both parties. Some years ago I renegotiated the second year of a co-produced pantomime. The deal we did with the producers – who we had developed a close and happy relationship with – was carefully worked out to ensure that both parties had the best chance possible of hitting their respective targets. It was a relatively simple system of calls, but it made everyone happy. I’ll make up the figures so that there’s no breach of confidentiality!

In the first year of the co-production, with heavy snow affecting attendance, we took £75,000 in box office receipts. When it came time to renegotiate, we knew that we would take more in the second year since the previous year’s show had been a real hit.

So we put together a deal that meant that both the company and  the theatre would benefit in the increase in receipts:

1st Call – to the company – £35,000 (This paid for most of the company’s fixed overheads)

2nd Call – to the theatre – £25,000 (This paid for part of the theatre’s overheads)

3rd Call – to the company – £10,000

4th Call – to the theatre – £5,000

At this point, for the first four calls to pay out, the receipts would total £75,000 – the amount we’d taken in the previous year when there was all that snow.

5th Call – £15,000 split between the two parties on a 50/50% basis.

This fifth call was the sweet spot where both the visiting company and the theatre benefitted from the predicted rise in receipts from £75,000 to £90,000. Once £90,000 in receipts were taken, the company would have received £52,500 and the theatre £37,500 – around a 60/40% split in the company’s favour – but with the promise of the first £35,000 to them, meaning that their costs were almost certain to be covered at the theatre’s risk, and an excellent split to them on any remainder.

6th Call – the remainder split between the two parties on an 84/16% split in the company’s favour.

It was unlikely that in this second year we’d get much beyond £90,000 so any remainder was done on a generous split to the company. As I recall, we just made it into the 6th call by the end of the run.

You may wonder why a company would accept a deal based on calls rather than guarantees or simple splits. There are three reasons.

Firstly, the theatre may not offer the engagement if the risk is not mitigated by the use of a call, particularly if there is uncertainty regarding the product – if the programmer does not know the company’s work well, or it is of an experimental nature. In a theatre which needs to operate commercially – and in the current funding environment almost all subsidised theatres must keep an eye on the bottom line – guarantees mean increased risk.

Secondly, a first call to the company means that the company can be assured that any monies taken up to the limit of the first call will go straight to them, without the theatre taking any cut. This is preferable to a split.

Thirdly, if the company is confident that their show will sell well, but the theatre is wavering, the company can suggest a call-based deal to the theatre to swing the deal – reducing the theatre’s risk and showing the theatre that the company has confidence in their product.

Calls are much more complex than other kinds of deal, but I think they are much fairer and mitigate the risks of either party making huge losses, particularly if they are carefully calculated at the start.

They are particularly suitable for co-productions, where there can be honesty between the two parties as regards costs. It’s my opinion that they should be used far more widely, combined with a guaranteed call and calls that contain splits, to help share risk and reward fairly.

As ever, comments or anecdotes are welcome.

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