Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Non-Profit vs. Commercial Theater, What’s the Big Difference?

Author: Brian D. Spector

Date: November 14, 2023

Key Contacts

Back
Non-Profit vs. Commercial Theater, What’s the Big Difference?

For anyone interacting with New York City’s theater industry, it is important to understand the difference between non-profit and commercial theaters…

New York City is home to some of the most esteemed commercial and non-profit theaters in the world. While both contribute to the city’s bustling performing arts scene, there is a clear distinction between the two sectors.

For anyone interacting with New York City’s theater industry, it is important to understand the difference. In the most basic terms, commercial theater is motivated by generating profits for its investors. In selecting a play or musical, producers are largely focused on the bottom line, although artistic merit and entertainment value are certainly still considered. In comparison, nonprofit theater producers are driven by their mission, whether that is artistic innovation, cultural diversity, reviving classics, or something else.

Commercial Theater – Show Me the Money

Broadway productions are primarily commercial, as are many off-Broadway shows and touring productions. They are run like traditional businesses and are typically structured as limited liability companies or corporations.

The primary purpose of commercial theater is to produce a successful show that sells tickets and, thus, generates profits for investors. If a show is unsuccessful, there is a risk that its backers lose their investment. Because the large majority of shows do fail, producing commercial theater often involves greater financial risk than nonprofits. Of course, there is also the possibility of producing a hit show that generates profits for years to come. Original investors in “Rent” made back a staggering 675 percent on their investments.

In most cases, a new entity is formed for each individual show. When the show closes its commercial run, the company is dissolved, and any proceeds are divided among the investors based on the percentage of money that they initially contributed. Profits are then typically split among the producers.

Non-Profit Theater – Motivated by Mission

Non-profits rely on subscribers, donations, and public subsidies to fund their operations. Rather than form a new entity for each production, each show is part of a season of the non-profit company. Proceeds generated by each show are reinvested back into the nonprofit to fund future endeavors.

While many nonprofits are small, community theaters, others rival the country’s largest commercial theaters. In New York City, the Roundabout Theater Company boasts 40,000 subscribers, while the Manhattan Theater Club has 20,000. 

Due to their structure and diverse funding sources, nonprofits provide opportunities to do works that may not be viable commercially, but hold artistic merit. Because they are mission-driven, they are often more closely tied to the local community. Many offer educational programs, as well as programs for the elderly and disadvantaged.

While they are guided by their mission, nonprofit theaters are not averse to producing shows that will have commercial success. Many consider nonprofits to be the research and development arm of commercial theater. Major Broadway shows like A Chorus Line, The Lion King, and Hamilton were developed in nonprofits.

Nonprofits are attractive for development because they are often better positioned to absorb losses. If one production flops, other shows in the season can help offset losses, while the subscription base and other revenue sources can keep the entity afloat. In fact, many nonprofit theaters do not expect their more experimental, obscure, or edgier shows to be commercially successful. Instead, they count on such productions to further their artistic mission.

Blurred Lines Between Theater Sectors

Interactions between commercial and nonprofit entities are increasingly common. Many in New York City’s theater industry, including actors, directors, composers, choreographers, and set designers, work across both sectors. Partnerships between nonprofit and commercial producers are also growing, fueled in large part by economic necessity.

For nonprofits, partnering with commercial production companies can significantly elevate the scale and scope of the production. Meanwhile, joining forces can help commercial production companies shoulder the growing costs of staging a large production.

Nonprofits can also generate sizable profits by licensing successful productions to Broadway. In some cases, shows will go full circle — being developed at a nonprofit, transitioning to Broadway, embarking on a national tour, and returning back to a nonprofit.

Of course, not everyone believes that nonprofits should partner with commercial producers. Critics argue that nonprofits are losing sight of their missions by being too closely associated with commercial producers. On the other side, commercial producers are wary about unfair competition from nonprofits, which benefit from their subscribers, donors, public funding, and tax-exempt status.

However, as the theater industry grapples with rising costs and declining audiences, the two sectors need each other to succeed. To forge successful relationships, all involved need to ensure that their legal agreements clearly establish the rights and obligations of each party, addressing issues ranging from creative control to marketing to licensing rights.

How We Can Help

Whether you are producing a small workshop or a full Broadway show, the attorneys of Scarinci Hollenbeck’s Entertainment & Media Group are ready to assist. We understand the myriad of legal issues that can arise when producing theatrical performances and will work with you every step of the way to minimize risks and position your project for success.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Brian Spector, at 201-896-4100.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Don’t Overlook the Importance of Business License Management post image

Don’t Overlook the Importance of Business License Management

If you operate a business without the proper license, you risk fines, insurance issues, reputational harm, and even business closure. Even innocent mistakes, like forgetting to renew a license, can have significant consequences, such as losing your lawsuit for payment of services that are unlicensed, which makes it imperative to have business license management procedures […]

Author: Dan Brecher

Link to post with title - "Don’t Overlook the Importance of Business License Management"
Failing to Comply With NJ Rent Control Exemption May Prove Costly post image

Failing to Comply With NJ Rent Control Exemption May Prove Costly

What Developers Need to Know About New Jersey’s Rent Control Exemption Law to Ensure Entitlement to Exemption for Newly Constructed Multi-family Housing.  A property owner in Jersey City is facing a $400 million federal class action lawsuit alleging that the landlord did not follow the procedural steps required to be eligible for exemption from local […]

Author: Patrick T. Conlon

Link to post with title - "Failing to Comply With NJ Rent Control Exemption May Prove Costly"
Crypto Securities Law: When Tokens Become Investment Contracts post image

Crypto Securities Law: When Tokens Become Investment Contracts

The application of traditional federal securities laws to crypto assets continues to evolve. In some cases, the Securities and Exchange Commission (SEC) considers tokens and other digital assets to be securities. This makes them subject to federal securities law, including the Securities Act of 1933 and the Securities Exchange Act of 1934. This classification has […]

Author: Bryce S. Robins

Link to post with title - "Crypto Securities Law: When Tokens Become Investment Contracts"
The Due Diligence Process for NY Condominiums and Cooperatives post image

The Due Diligence Process for NY Condominiums and Cooperatives

While the New York City real estate market can be extremely competitive, moving too quickly often backfires. Before purchasing a condominium or cooperative in New York City, it is important to do you homework. Purchasing property in NYC can involve a dizzying number of legal issues. These include condo and co-op rules, rent restrictions, and […]

Author: Jesse M. Dimitro

Link to post with title - "The Due Diligence Process for NY Condominiums and Cooperatives"
Smart Contract Legal Issues: Drafting Agreements for Blockchain post image

Smart Contract Legal Issues: Drafting Agreements for Blockchain

Smart contracts feature a unique blend of legal agreement and technical code. This innovation has the potential to reshape how business is conducted. At the same time, smart contract legal issues around enforceability, jurisdiction, identity, and compliance are common. The legal framework for these self-executing agreements is still evolving. What Are Smart Contracts? Smart contracts, […]

Author: Bryce S. Robins

Link to post with title - "Smart Contract Legal Issues: Drafting Agreements for Blockchain"
Are Stay Interviews the Key to Retaining Top Talent? post image

Are Stay Interviews the Key to Retaining Top Talent?

Retaining top talent continues to be one of the greatest challenges facing employers today. Even in an employer’s market, the loss of a key employee can disrupt operations and result in significant costs. While compensation plays a role, long-term retention often depends on workplace culture, communication, and employee engagement. One increasingly popular strategy for improving […]

Author: Angela A. Turiano

Link to post with title - "Are Stay Interviews the Key to Retaining Top Talent?"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. Message frequency may vary. You can reply STOP to opt-out of further messaging.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!