The last week of July 2019 was business as usual for Harry Potter and the Cursed Child on Broadway. Sales rose less than 2 percent to $1.4 million, according to data from the Broadway League, the trade association of producers and theater owners.
But there was a huge increase in a closely watched measure in those seven days. Harry Potter ‘s sales jumped from 84 percent of its “gross potential” to 101 percent, according to the same posting. What changed was the basis for comparison. After four months of claiming a weekly gross potential of $1.7 million, the production slashed the figure to $1.4 million.
Like average ticket prices, sales relative to gross potential is an important signifier of a show’s box office strength. But gross potential, which the League posts weekly with other box office figures, loses value as a benchmark of success when it fluctuates along with ticket prices.
“If you have dynamic ticket pricing, gross potential varies and in my opinion is irrelevant,” said a veteran producer and general manager who requested anonymity.
Dynamic pricing in theater dates back to 2001, when the blockbuster musical comedy The Producers introduced $480 “premium” tickets. The industry now mimics airlines, with ticket prices and gross potential rising and falling based on demand.
Premium prices haven’t been incorporated into calculating gross potential, distorting results. Madison Summers, a Broadway League spokeswoman, defined gross potential in an email as “the total gross possible if every ticket is sold at its regular price, excluding premium prices and standing room.”
The omission is one reason why some shows earn more than 100 percent of their gross potential, especially from Thanksgiving through New Year’s. Besides the apples-to-oranges issue of premium prices boosting grosses while absent from gross potential, the League doesn’t specify when regular prices should be set for gross potential, or whether the measure should be fixed or variable. “It’s very tricky without a common standard to put a lot of faith in that number,” said Mike Rafael, a ticketing consultant and analyst.
Other shows, including the The Book of Mormon and Disney’s Frozen, have also raised and lowered their gross potential as business strengthened and softened, though neither as abruptly as the onetime boy wizard.
The indicator isn’t entirely useless. In the week ending on Nov. 24, nearly a third of Broadway shows sold no more than half of their gross potential, a sign that they’re nowhere near peak earnings. And a half-dozen shows were at 90 percent or more of gross potential, and their potential had never been lowered. That’s an enviable position. “If an audience sees you as hot, everyone wants a ticket,” said Albert Poland, a retired general manager and producer and the author of the memoir Stages. “It becomes what I call a desperate ticket.”
Ticket prices and gross potential are determined by a producer and general manager in collaboration with a theater owner. The Ambassador Theatre Group owns the Lyric, Harry Potter’s home, as well as Sonia Friedman Productions, the lead producer of the two-part spectacle. A spokesman for ATG, which itself is owned by the private equity company Providence Equity Partners, declined to comment. Summers declined to make anyone from the League available for an interview.
The mid-summer trimming at Harry Potter was just a start. The gross potential was reduced further in nine of the next 16 weeks, and sales relative to gross potential never dipped below 97 percent. As Marc Hershberg reported in Forbes, were Potter ‘s 2018 gross potential still in effect, the current gross would be about half of its potential.
Potter ‘s day-to-day price changes are remarkable. As of Thanksgiving day, Ticketmaster offered seat C11, in the third row of the orchestra, to both parts on Nov. 29 for just $50 per performance. For both parts on Saturday, Dec. 7, the same seat cost $325 per performance.
The most expensively produced play in Broadway history is no disaster. Investors to-date have recouped 80 percent the $35.5 million capitalization, according to a person familiar with the production. Excluding royalties, Harry Potter ‘s weekly expenses were $1.1 million immediately after it opened on Broadway in April 2018, according to financial statements filed with the office of New York Attorney General Letitia James.
A decade ago, the League changed the methodology for reporting grosses, giving sales a roughly 10 percent boost by ending the practice of deducting credit card commissions and other components that productions don’t keep. There’s little incentive to improve the calculation for gross potential. Adding premiums would raise the bar and ultimately depict shows as less prosperous. Complicating matters is that there’s no standard number of premium tickets to incorporate into gross potential: a performance may include zero or hundreds of them.
Amid escalating production costs, premium prices are here to stay. Seats sold for hundreds of dollars can make the difference between success and failure, especially with a limited-run play. “If you don’t sell premium tickets, you’ll never get your money back,” said Martin Markinson, a former co-owner of the Helen Hayes Theater and author of his own memoir, My Life in Theatre.
As difficult as it may be, the League ought to set standards for calculating gross potential. Or at least improve disclosure, so it’s clearer how productions arrive at their numbers. Disseminating better quality data would further one of the League’s missions — helping people create profitable theater.