As lead producer and landlord of Neil Simon’s Plaza Suite, Ambassador Theatre Group has bragging rights to the most commercially successful play of the 2021-22 Broadway season.
The average ticket price for the Sarah Jessica Parker and Matthew Broderick revival was $213 the week ended May 29, behind only The Music Man and Hamilton. Pairs go for as much as $2,051, which includes Piper-Heidsieck Champagne and Ladurée macarons served in a semi-private lounge at ATG’s Hudson Theatre.
The U.K.-based conglomerate isn’t crowing. “ATG does not control, and cannot provide comment about” Plaza Suite, an ATG spokesman told Broadway Journal in an email.
Control is a high-stakes question for the company, which suffered heavy losses during the theater shutdown. In last year’s Federal bailout of live entertainment, the U.S. Small Business Administration allocated $79 million to five venues operated by ATG and to three shows its subsidiaries produced, including $10 million for Plaza Suite. ATG insists that the eight grants didn’t run afoul of an SBA rule that no more than five “affiliated” entities were eligible for the funds. ATG and Plaza Suite said they’re not “affiliated” with each other as the SBA defines the term, because of an absence of control.
Sparked by 2020 legislation to protect the live music and theater industries and championed by Senate Majority Leader Chuck Schumer and the Broadway League, the $15 billion Shuttered Venue Operators Grant program helped save countless jobs and bolstered about half the Broadway shows that opened or reopened in 2020-21. For many producers, the money was a godsend in a start-and-stop season undermined by virus variants and anemic tourism.
But the Shuttered Venue rules can be murky. They’re less detailed than those of other federal pandemic aid programs and haven’t been tested in court, noted Jessica Abrahams, a Washington, D.C.-based partner with the law firm Faegre Drinker. “So there is no case law or court precedent for how all of this should be interpreted, including the scope of terms that are not expressly defined in the SVOG language,” Abrahams said in an email.
To take one example, the original Broadway production of the hit musical Waitress closed on January 5, 2020, two months before Covid-19 upended theater. It still collected $10 million from the SBA, the largest sum available for a single entity.
To be eligible, businesses must’ve been in operation as of Feb. 29, 2020, but the SBA didn’t fully define “in operation.” Entities that didn’t have performances in February 2020 were able to submit box office reports and other documentation for any month between January 2019 and January 2020. Waitress lead producer Barry Weissler didn’t return calls seeking comment.
Publicly traded corporations, or companies owned by publicly traded corporations, were barred from the SBA program. There was no prohibition against private equity firms, including Providence Equity Partners, the majority owner of ATG. Multinational companies couldn’t apply if they operated in more than 10 U.S. states. That didn’t affect ATG, which has venues in six states and generated about half of its revenue in the U.K. in 2019-20.
In addition to Plaza Suite, recipients of the federal program included Harry Potter and the Cursed Child on Broadway and in San Francisco, produced by ATG subsidiary Sonia Friedman Productions; Harry Potter’s U.S. venues, the Lyric and Curran theaters; and three other ATG theaters in New Orleans, Louisiana; San Antonio, Texas; and Sugar Land, Texas, outside of Houston.
The $79 million for ATG and its productions eclipsed the $50 million procured by five companies of Hamilton.
The Small Business Administration said it uses the principle of “affiliation” to determine whether an entity is eligible for a program reserved for small businesses. Affiliation occurs “where one firm has the power to control another firm, or a single person or entity has the power to control both,” according to an SBA document about the Shuttered Venue program. ATG maintains that it doesn’t control Plaza Suite or Harry Potter, so aid to those shows doesn’t count toward ATG’s five-grant maximum — which it exhausted on five of its venues.
ATG may have minimal control at Hogwarts. Sonia Friedman Productions — a lead producer, or general partner, of Harry Potter in New York and San Francisco — is said to operate independently of its majority owner, ATG. Harry Potter creator J.K. Rowling is another general partner. “We can confirm that the Ambassador Theatre Group is not affiliated with the production and therefore has no conflict with SBA requirements,” Adrian Bryan-Brown, a spokesman for the show, said in an email.
Plaza Suite is less clear cut. ATG subsidiary ATG NY LLC is listed as the first general partner, or managing member, of Suite 719 LLC — the company presenting the play. The operating agreement, filed with the office of New York Attorney General Letitia James, notes that “conduct and control” of the show is “exclusively vested in the managing members.” Rick Miramontez, a spokesman for Suite 719, said that there are three managing members, “none of which have the power to individually control the production entity, as contemplated by applicable SBA regulations,” he said in an email.
Nicholas Solosky, a Washington-based partner of the law firm Fox Rothschild LLP, said that rationale doesn’t always fly. “A lot of times, the SBA will say, ‘when no one has control, everyone has control,'” he said in an interview. (Besides ATG NY, the play’s managing members are Hal Luftig and Gavin Kalin. Miramontez is a spokesman for both ATG and Plaza Suite.)
If ATG were shown to control Plaza Suite, they could be deemed affiliated. Solosky, who has called SBA affiliation rules “notoriously ambiguous,” stressed that he’s not familiar with the $10 million Plaza Suite grant and can’t make a judgment about it.
ATG disclosed in a U.K. filing that although it’s entitled to less than half the earnings on some of its shows, “the production agreement requires unanimous consent in decision making resulting in joint control.” The SBA has said the power to veto decisions is one form of control. ATG declined to say whether the filing applies to Plaza Suite or share any internal agreements covering the managing members.
Shuttered Venue applicants were required to disclose their affiliates, according to the SBA. “Congress did not direct SBA to challenge an applicant’s conclusion that a minority owner is not ‘affiliated’ for SVOG purposes without in-depth knowledge about the inner workings and management arrangements of a company,” an SBA spokeswoman said in an email. (An entity that owns at least half of another’s voting stock is automatically considered affiliated. Minority ownership is the gray area.) “So the affiliation disclosure as it relates to minority owners is assumed correct absent clear evidence that it was false,” the SBA spokeswoman said.
Miramontez noted that Suite 719 LLC is an independent operating company with its own lawyers, including SBA specialists. “It stands by its disclosures to the SBA and its eligibility for its SVOG grant,” he said.
While the SBA required applicants to submit financial statements and tax returns to document revenue loss, there was no account for actual need. Applicants merely had to provide a “good faith certification that the uncertainty of current economic conditions makes the grant necessary to support ongoing operations,” the SBA said on its website. The SBA didn’t define “necessary” or require set language “because every eligible entity’s circumstances are different.”
The success of Plaza Suite, whose Broadway opening was postponed for two years because of the shutdown, could be evidence that its federal handout was a waste. Or that it worked wonders. That’s the conundrum when subsidizing theater to spur economic development. Blockbusters may not need help, but they contribute disproportionately to the industry’s recovery.
