The self-described “world’s No. 1 live theater company” has taken a drubbing.
The parent company of U.K.-based Ambassador Theatre Group reported a pretax loss of $202 million for the 12 months ended in March 2021. The holding company attributed the results to Covid-19, which decimated rental income when its theaters shuttered in March 2020.
Ambassador owns or operates 58 venues in the U.K., U.S., and Germany, including the theaters presenting Harry Potter and the Cursed Child on Broadway, in San Francisco and Hamburg; and the West End homes of Wicked and The Lion King. Its empire comprises Sonia Friedman Productions, which is the lead producer of Harry Potter, as well as the U.K.’s largest theater ticketing operation.
International Entertainment Holdings Ltd., whose main holding is ATG, previously reported a $42 million pretax loss in 2019-20. The quarter-billion dollars in red ink over two years, disclosed in a U.K. government registry called Companies House, illustrates the pandemic’s financial toll on live theater at a time when hard numbers are in short supply. This season, the Broadway League, the trade association of producers and theater owners, suspended reporting grosses of individual shows. As in the past, Broadway’s largest landlords, all privately held, don’t disclose annual financial results.
ATG had “a programming schedule of highly successful shows supporting strong operational performance across all of its territories,” the holding company’s directors wrote in a report accompanying its latest numbers. “Unfortunately, the closure of our venues has resulted in a sharp drop in turnover [revenue]” — down 91 percent in 2020-21, to $57 million.
The holding company’s results were weighed down by interest payments associated with the 2013 leveraged buyout of ATG by Providence Equity Partners, a Rhode Island-based private equity firm. Excluding finance costs on International Entertainment Holdings Ltd’s net debt of $778 million — which swelled to fund later acquisitions — the operating loss in 2020-21 was a still-hefty $131 million. (The holding company reports in pounds, which I converted into dollars based on the exchange rate at the time.)
To stabilize its finances, IEHL said it cut staff and salaries. It also borrowed additional funds from Providence Equity Partners and brought in another private equity firm, Silver Lake, as an investor.
Despite the revenue shortfall, IEHL said it continues to repair and renovate venues, several of which are more than a century old. Its occupancy rate was just 68.5 percent for its theaters in the 12 months ending in March 2020. That was its highest percentage of seats sold in recent years but still presented “further headroom for growth.”
Sir Howard Panter and Dame Rosemary Squire founded ATG in 1992 and ran it until 2016. The current CEO, Mark Cornell, a former Sotheby’s executive, oversees a six-member global leadership team, whose background is primarily in leisure, hospitality and finance. Its highest-paid corporate director, presumably Cornell, earned $793,000 in 2020-2021, down from $1.4 million two year earlier, according to filings. A spokesman for ATG declined to answer questions about its finances or make Cornell available.
Acquisitions have been a mainstay of its growth strategy.
Since 2013, when Providence Equity Partners became a majority owner of Ambassador — terms weren’t disclosed — the Providence Equity-backed holding company went on a shopping spree that exceeded $400 million, according to filings. Among the new assets are advertising and marketing agency AKA, the German entertainment companies Mehr! and BB Entertainment and the Golden Gate and Orpheum theaters in San Francisco.
The “fully integrated operator across the entire live entertainment value chain,” as IEHL calls itself, has produced some memorable theater. ATG Productions subsidized this season’s acclaimed Roundabout Theatre revival of Jeanine Tesori and Tony Kushner’s Caroline, or Change. It was lead producer of the beguiling 2019 revival of Harold Pinter’s Betrayal, whose director, Jamie Lloyd, has a decade-long association with ATG. Sonia Friedman Productions was a lead producer of the past three Tony Award winners for best play: Matthew López’s The Inheritance, Jez Butterworth’s The Ferryman and Harry Potter by Jack Thorne.
ATG Productions also appears to have a hit in a revival of Neil Simon’s Plaza Suite, which stars Sarah Jessica Parker and Matthew Broderick and begins previews Feb. 25 at the ATG-operated Hudson Theater on Broadway. Ticket availability is scarce on ATG Tickets, the primary seller, and cost as much as $702, including fees.
IEHL describes its financial interest in any show it produces as “immaterial” — i.e. irrelevant to a company that reported revenue of $590 million in 2019-20. But a long-running tenant adds value to a venue.
The verdict isn’t in on Harry Potter at the Lyric, which ATG readied for the Ministry of Magic and Hogwarts at great expense. Harry Potter’s weekly grosses peaked months after its first preview, in March 2018, then steadily declined. In its first two years, the two-part, more-than-five-hour spectacle failed to recoup its $35.5 million capitalization. Determined to cut expenses and appeal to a wider audience, producers recently reopened a streamlined, single-part version that’s been well-received by critics.
Notwithstanding recent losses, Providence Equity Partners and its clients may still get a decent return on their theater investment: The U.S. touring market doubled in the seven years before 2018-19, to $1.6 billion, according to the Broadway League. And IEHL has touring houses in five U.S. cities, including Boston, where the ATG-operated Emerson Colonial presented the pre-Broadway tryouts of Moulin Rouge and Plaza Suite. Producers I spoke to say landlords continue to command bargaining power, even during the pandemic, given the scarcity of available houses.
Buying IEHL could be an opportunistic play on culture, commercial real estate and live entertainment bouncing back — for a billionaire, pension fund or another private equity firm. One theater owner working both sides of the Atlantic recently recalled wisdom from the late Shubert Organization President Bernard Jacobs. “The only way you can make money in the theater,” Jacobs said, “is to own them.” It’s worth noting that two of the Shuberts’ most lucrative tenants, producer Cameron Mackintosh and composer Andrew Lloyd Webber, later added “landlord” to their own resumés.