
Brian D. Spector
Partner
201-896-7206 bspector@sh-law.comFirm Insights
Author: Brian D. Spector
Date: November 14, 2023

Partner
201-896-7206 bspector@sh-law.com
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.
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-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.
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.
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 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.

Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Author: Marc J. Comer

For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
Author: Marc J. Comer

For many New Jersey business owners, a closely held company represents decades of work, financial investment, and personal sacrifice. Trusts in business succession planning are one of the most effective tools for protecting that value, allowing founders to control how and when the business passes to the next generation while reducing the risk of disputes, […]
Author: George McGowan

In today’s digital economy, New Jersey businesses of all sizes rely heavily on technology vendors, software providers, cloud platforms, and managed IT services. Whether your company is purchasing software, migrating data to the cloud, engaging a cybersecurity consultant, or entering into a long-term managed services agreement, a careful IT contract review can have significant operational, […]
Author: George McGowan

Non-disclosure agreements (NDAs) remain a critical tool for protecting sensitive business information. However, New York NDA requirements have evolved, and businesses must ensure these agreements are carefully drafted to remain enforceable. In a competitive market like New York City, NDAs are commonly used to protect proprietary information, client relationships, and strategic plans. At the same […]
Author: Dan Brecher

How Courts Evaluate Testamentary Capacity and Undue Influence Will contests in New Jersey are difficult to win, given the strong presumption that a properly executed will reflects the testator’s intent. However, challenges based on lack of testamentary capacity and undue influence remain common, particularly where there are concerns about mental capacity or the involvement of […]
Author: Marc J. Comer
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
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!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!