New York State extended the New York City Musical and Theatrical Production Tax Credit, a subsidy of up to $3 million per Broadway show, as the industry struggles with rising costs and subpar sales.
On May 3, Gov. Kathy Hochul announced the two-year extension through 2025 and said commercial Off-Broadway shows will also be eligible, albeit for a smaller credit. The Broadway League trade association lobbied for preserving the program. It was designed to jumpstart the industry, which contributes billions to the economy, and encourage productions “to begin performances sooner and come back stronger” as the city recovered from Covid-19.
Although it can take years to funnel funds to backers using the credit, producers call it essential and frequently cite it when raising money. “It’s a great tool and economic driver,” said Robert Fried, a leading theatrical accountant and partner at Withum who’s receiving an honorary Tony Award on June 11. “It’s an incentive to investors. It reduces some of the risk.”
The extension and expansion of the program — from $200 million to $300 million — was announced the same week that the World Health Organization said that Covid-19 is no longer a global health emergency. But Broadway’s box office remains off about 13 percent from 2018-19, its last full season before the shutdown, and production expenses have ballooned.
Grey House, a new play starring Laurie Metcalf and Tatiana Maslany that began previews on April 29 at the Lyceum Theatre, is being capitalized for a hefty $8 million. A chart that the production prepared in November for prospective investors projected it would take 30 weeks at an average gross box office of $885,000 to recoup its $6.5 million of production costs. (That assumes amortization, which accelerates recovery to investors to the detriment of royalty holders.) But Grey House can recoup production costs in 17 weeks at those sales when applying a $2.75 million tax credit, according to the projection.
Similarly, a December pitch for Parade — the Jason Robert Brown and Alfred Uhry revival that was nominated for six Tony Awards last week — estimated recouping its production costs within 33 weeks given its current average weekly box office receipts of $1.1 million. Were it to be credited for the full $3 million subsidy, the production projected it could earn enough in just 15 weeks at current sales to effectively recoup. (Capitalized at $7 million, the show cost $5.7 million exclusive of bonds, reserves, deposits and advances, according to the investor pitch.)
Among the first movers that received the entire $3 million tax credit: Moulin Rouge!, the lavish, $28 million musical jukebox musical, which has recouped on Broadway, production spokesman Adrian Bryan-Brown told Broadway Journal; Tina: the Tina Turner Musical, which closed at a loss last summer; and Walt Disney Co.’s Aladdin — according to a state disclosure in response to a Broadway Journal Freedom of Information request.
The Disney musical has played more than 3100 performances and grossed $561 million at the New Amsterdam Theatre. A Disney spokesman declined to comment. Tina and Moulin Rouge! also received $10 million in federal Shuttered Venue Operators Grants. Disney, as a publicly traded company, wasn’t eligible for the federal funds. The state program doesn’t take into account financial need.
Adventurous new plays that failed commercially last season also received the state credit: Pass Over ($887,000); Chicken & Biscuits ($1 million) and Thoughts of a Colored Man ($1.4 million).
The credit can be an incentive to keep a struggling show open and maintain employment to qualify for the maximum aid. Broadway productions can receive a tax credit of 25 percent of certain production expenses up to $12 million, which includes eligible initial capitalization costs and operating expenses. Off-Broadway shows in Manhattan with 100 to 499 seats can now qualify for a credit up to $350,000.
In addition to budgets, applicants submit a plan for participating in a state-approved diversity and arts job training program. Should a tax credit recipient go on to earn revenue that’s double its “ongoing production costs,” it must repay up to half of the subsidy to the New York State Council on the Arts, depending on profitability and how long it runs.
The program isn’t universally popular. “These tax credits are the same thing as trickle-down economics, which we know is a huge farce and not at all a good model for economic development,” said Elizabeth Marcello, senior research analyst at Reinvent Albany, a nonprofit organization that advocates for government transparency and accountability. She said that spending on public education as well as on subway signals and other infrastructure offers a more effective and equitable return on investment than subsidizing New York commercial theater, which doesn’t face serious competition for productions from other U.S. cities.
“Broadway is Broadway,” she said. “There’s nowhere else for them to go.”