Cash flow

Published Monday 30 June 2008 at 18:20

Mark Shenton’s interesting article (Insight, page 6-7, June 5) states that ‘only one in ten West End productions actually makes a profit’ and that ‘only three in ten productions make any returns to their investors’.

This, of course, begs the question ‘what is a profit?’. Investment brochures include a budget of a production’s costs as well as an outline of what might be the weekly box office income and expenditure before the capitalisation is recovered, and also the figures after it has recouped that capitalisation - if ever.

These costs vary enormously from producer to producer and from production to production. Some capital costs include a sum for the producer as an “arrangement fee” to set up the production. Certainly it will include a weekly management fee, as well as a royalty to the management.

If a producer has, say, five shows in the West End and five on tour, the total of all these fees can be a considerable income. Of course, the producer has his office costs to pay, but all this is usually covered out of the box office income before an investor sees a penny back of the money he has put into the production.

Thus, a production can run for many months, or even years, not making a “profit” but certainly covering everyone’s wages and expenses out of the income.

Terence Earley

Elm Park Gardens

London SW10