PART ONE OF A SERIES: Nearly three years after storming Broadway, Hamilton remains unrivaled in its moneymaking.
The original production, which began previews at the Richard Rodgers Theatre in July 2015, distributed more than $102 million of profit through November 2017, according to documents filed with New York State. A Chicago engagement and tour that started in San Francisco paid out another $62 million through July 2017.
“Even after adjusting for inflation, it’s hard to imagine a show churning out profits the way this one is,” said Jeffrey Eric Jenkins, a producer and theater professor at the University of Illinois at Urbana-Champaign.
We estimate that profits to-date for the Hamilton empire, which now has outposts in London and a second tour in Salt Lake City, exceed $250 million. Lead producer Jeffrey Seller declined to comment for this series through a spokesman, Sam Rudy.
As of November, a $100,000 investor in the Broadway production earned $350,000, plus return of capital. Since the show began previews, its investors have done better than shareholders of most public companies, including Amazon. “Investors call me and thank me on a regular basis,” Seller told Freakonomics Radio. Seller himself receives profits, along with co-producers Jill Furman and Sander Jacobs. So does the Public Theater, where the show premiered, and members of the creative team. (Details in the next story.)
The two-part Harry Potter play and Bruce Springsteen’s story-filled concert are Broadway’s most-sought-after tickets. Yet Lin-Manuel Miranda’s musical about the first U.S. Treasury Secretary continues to post record sales and remains the most lucrative musical week to week. To learn about its over-the-top profitability and compensation, we obtained annual statements for Hamilton on Broadway and offering papers for the four other productions, all filed with the office of New York State Attorney General Eric Schneiderman.
Elsewhere, we received initial profit reports for the Chicago Hamilton and the first tour, which began performances this week in Houston. Results for older hit shows, consulted for comparison, were also filed with the state.
Hamilton has had a big impact. It’s increased interest in American history and Broadway, buoyed the subscriptions of venues that present it and created thousands of jobs, especially for actors. Its success has helped to sell theater as an investment — by attracting new backers to the industry and enriching existing ones stung by past flops.
But in setting price records, it’s hastened ticket inflation and muddied the inclusiveness implicit in its diverse cast and varied score, which includes hip-hop and rap.
Managing the blockbuster hasn’t been easy. Ticket brokers initially thrived, as seats were underpriced relative to the secondary market. To circumvent automated “bots” that some resellers use, the show was early to adopt Ticketmaster’s Verified Fan service, which aims to corroborate that every buyer is a person rather than a robot. “Hamilton helped change how Broadway sells tickets,” said consultant Mike Rafael of Nexus Ticketing Solutions.
And following complaints by original cast members that they weren’t paid adequately for their contributions, Seller agreed three weeks before the 2016 Tony Award nominations to grant modest profit share. It would be another 14 months before 32 actors and six stage managers began receiving proceeds. Each stands to earn roughly $30,000 this year.
Musicals take years to write, and are often done on spec. Few make it to Broadway, fewer still succeed. To create art, the story, music, lyrics, choreography and other disparate elements must excel and fit together. “It’s like pitching a no-hitter for the Yankees,” said Patrick Cook, who oversees the BMI Lehman Engel Musical Theatre Workshop, an incubator for composers and lyricists. “Any big success like Hamilton is a shot in the arm for everybody. It’s an inspiration to do what you want and write from your heart.”
The Broadway production raised $12.5 million from investors. Six months after opening night at the Richard Rodgers, it had recouped production costs and made its first profit distribution.
A year later, in February 2017, revenue surged as it began to reflect big blocks of $849 seats. Seller has said that he raised prices, eventually to as much as $1,150, in response to the exorbitant prices that brokers were charging. He thus reduced opportunities for resellers while increasing rewards for the creators and producers. (New York State decriminalized reselling tickets for financial gain in 2007.)
Other producers followed his lead. Dear Evan Hansen gradually raised its top seat to $499 and Hello Dolly! with Bette Midler charged as much as $998. Yet Hamilton’s fixed expenses were little changed, averaging a relatively modest $643,000 a week in the year ended in July 2017, excluding royalties and “percentage rent,” which fluctuate with sales.
With revenue up and expenses flat, weekly operating profit doubled to $1.15 million. Operating profit reached an astonishing 48 cents of every $1 of Broadway box office income.
Hamilton achieved its 48 percent Broadway operating profit margins despite selling a total of 7 percent of its seats for $10 apiece via a ticket lottery and a public school education program. “Those margins would make many an executive jealous,” said Rita Gunther McGrath, a professor of management at Columbia Business School. Hamilton‘s profit margin is on par with Facebook, the embattled but lucrative social media behemoth. Hal Vogel, a veteran entertainment analyst, said margins tend to be 35 percent to 45 percent for healthy cable networks in a good year and 10 percent to 15 percent for diversified entertainment companies.
Many factors contribute to Hamilton‘s extraordinary profitability, including David Korins‘ spare set of exposed wood and ropes. It’s meant to evoke the scaffolding on which the country is built, rather than a literal rendering of the American Revolution. Scenes are differentiated partly by Paul Tazewell’s costumes, Howell Binkley’s lighting and Andy Blankenbuehler’s choreography. Korins told podcaster Patrick Hinds that “the running costs are so little because it’s such a technologically easy show.” (Korins declined to comment for this story.)
The set is relatively stationary except for two turntables, with actors moving onstage props and furniture themselves, reducing demand for labor. Hamilton on Broadway spent $2.4 million on stagehands last season. In contrast, the spectacle-heavy Wicked spent $5.2 million on stagehands in 2014-15, according to a recent financial statement.
Christopher Barreca, who heads scenic design at CalArts in Los Angeles and won a Tony for the 2014 musical Rocky, said good producers encourage designers to keep running costs low, when it serves the artistic goals. “We all want the shows to run.”
Free media also helped Hamilton minimize expenses. There were more than 500 newspaper articles and reviews concerning the show, including 87 in the New York Times, from the Broadway opening to the 2016 Tonys, according to Professor Jenkins. “You don’t need to advertise when the press does the job for you,” said Stacey Lieberman Prince, executive creative director at SpotCo, Hamilton‘s original ad agency, at this year’s BroadwayCon.
In that first year on Broadway, Hamilton spent $7.2 million on advertising, including promotion and initial production expenses. By comparison, Something Rotten, a new musical that opened four months earlier, spent 50 percent more in its first year. At Hamilton last season, with few tickets available and a golden brand, ad spending dropped to $1.3 million.
Instead of relying on costly stars to sell tickets, Hamilton largely created its own household names. Today, even with its newly-minted stars long gone, Hamilton is the top-rated musical on Show-Score, a fan review site. Demand has dropped slightly in Chicago, yet with Hamilton still a top tourist draw, Broadway grosses remain at records. Resale prices, after dipping early in 2018, rebounded to $678.50 in March, the highest in 11 months, according to SeatGeek. “You can’t go to a cocktail party and not have seen Hamilton,” said Laurence Maslon, an arts professor at New York University’s graduate acting program.
Maslon said he doesn’t know whether the score will be judged as timely or timeless. And if Alexander Hamilton came back to New York in 2018, would he like the show? He would be inclined to admire its success.
“He was a firm believer in the capitalist ethos,” Cornell government professor Isaac Kramnick said. “Especially when it is men of talent, like himself or Miranda, who succeed.”
Tomorrow: Who gets what.
(Box office income refers to grosses after taxes, credit card commissions, union pension contributions and other revenue that the production doesn’t keep. The series uses ‘profit’ as shorthand for ‘net profit’ and ‘adjusted net profit,’ both of which refer to what’s left over after a show repays investors and makes weekly expenses. Ticket price data is from the Broadway League data, compiled by BroadwayWorld.)
Editor: Alice Scovell