If you live in or near New York City, you may be part of the lucky ones who get to see Broadway shows - whether theater or musical - on "Broadway" (although technically many theaters are not on Broadway itself but on side streets). Otherwise, your only option to see these shows live is to see them on national or regional tour. The revenue management side of it came to light a few months ago when talks about reducing actors' salaries while on tour found their way into the newspapers. Here are two examples: "On the road, actors seek higher pay" (NYT, January 2014) and "National Theater's latest shows part of non-Equity trends" (WaPo, March 2014).
According to the NYT, the tours of the best-known Broadway tours, such as Wicked or The Lion King, bring in "luxury tour rates" for the actors, starting at $1,807 a week and up to $6,000 for leads. (Obviously, actors don't go on tours year after year after year, many face months between engagements where they don't work, and the time where they can be cast as leads is usually rather short, especially when they also dance.) But other tours have decreased the amounts they pay their actors, with starting salaries at $976/week, for shows that are expected to be successful and reach a wide audience -- otherwise they wouldn't be going on tour to begin with.
Starting salaries for the tour of Mamma Mia! have sunk to about $500 a week, according to WaPo, although that tour will visit big cities such as Philadelphia and San Francisco for full-week engagements (as well as smaller ones for a night) and it shouldn't be too hard to find crowds of ticket-buyers for the show. The idea behind the lower prices is supposed to be that producers want to make sure they'll recoup their financial guarantees (weekly costs are $250,000-400,000 a week). Actors paid lower rates are also said to receive part of the financial gains once the initial costs have been recouped.
From the NYT: "The economics are complex. Most producers link actor salaries to the box office payments that road presenters guarantee... “Newsies” producers negotiated a $330,000 guarantee, low enough to avoid luxury tour salaries" so that its dancers/actors will be paid a minimum salary of $1,091 a week. Also, "Actors on low-wage tours do receive salary increases of 17 percent if a tour recoups its capitalization, and they also receive overages — a piece of the profits when a tour exceeds revenue projections. But these bumps do not come close to salaries on high-end tours."
An agreement seems to have been later reached where actors on tour would be paid something in the middle following a "tiered" contract (see WaPo article, published two months after the NYT one). I wish there was more transparency regarding how much or how little actors are getting paid. This is a very demanding, sometimes grueling, job that takes many hours of rehearsal for the sake of entertaining audiences, and if you've seen a good choreography on Broadway you know what I'm talking about. (If you don't, search for "Newsies" and "Seize the Day" on YouTube and watch what the dancers do.) There are many more talented performers than there are jobs for them in the show business world, but actors on Broadway tours should be performers their peers look up to, right after actors on Broadway shows (on Broadway) - models of what others hope to achieve. Broadway tours, which make Broadway reputation outside New York City, shouldn't staff rosters with less experienced performers willing to accept lower rates and undercutting their peers.
Here are more numbers for the theater-loving revenue management nerds out there, and maybe that's just me. Book of Mormon recouped its initial investment of $11.4m in only eight months, which was considered fast, and Newsies recouped its $5m investment in six. Incredibly enough, Newsies wasn't even supposed to go to Broadway - the musical was created for high school musical clubs, and had an off-Broadway run in New Jersey (I guess you could call that off-New York City, even) before positive reception by critics and audiences led producers to open the show at the Nederlander for a 12-week engagement. The 12 weeks turned into 2 1/2 years, and Newsies will be closing August 24. Go and see it if you can. The dance numbers are spectacular and, this being a Disney musical, it is highly family-friendly.
The Book of Mormon has also implemented dynamic pricing techniques, "which spikes on high-demand weekend and holiday dates. Unofficial reports peg the show’s advance sales at close to $40 million." The Hollywood Reporter article, from which the previous quote is taken, continues: "any show that returns its initial investment in under a year invariably does so by playing consistently to sold-out houses. Some shows can play two years or more without recouping... Despite sell-out business in one of Broadway’s largest theaters, the bigger-budgetWicked took 14 months to return its $14 million investment in 2004. That show continues to be Broadway’s top earner."
NPR had an interesting take on why theater tickets are cheaper in London's West End than on Broadway. ("[A]ccording to the Society of London Theatre, the average ticket price for a West End show is about $70. In New York, according to the Broadway League, the average price just crossed $100 for the first time.") Because London has many government-subsidized shows [like Paris, in fact], West End theaters - which are not subsidized - must be careful not to have prices too high and send potential theater-goers to their competitors. Also, it costs less to put on a show, so shows don't need to be huge hits to recoup costs. There is also less TV advertising in the West End, but the theaters on Broadway, having been renovated, are said to be much nicer. I haven't been to a West End theater, so I can't judge. But between these issues about actors' salaries and the practice to fine-tune shows either off-Broadway or even in other cities before going to Broadway, the New York theater industry seems to have refined the art of dynamic revenue management under risk aversion and adaptive learning.