The Show Must Go On

August 11, 2022

One of the many great pleasures of being in London for at least part of the summer is the wonderful feeling of leaving a theatre, with hundreds of other happy people, to walk out into a warm evening buzzing with life.  Our love of opera at Buchler Phillips is well known but, as disclaimers might say, other performance art forms are available!

During Covid we didn’t know when the curtain would be lifted on live entertainment again. Thankfully, concerts and theatres recovered surprisingly strongly by the end of the last lockdown. Shows postponed perhaps three times finally went ahead and audiences were soon back in the habit of booking far ahead to see their favourite acts.

Nonetheless, there remains no business like show business when it comes to weighing up which sectors might be heading for particularly tough times when recession bites. Live entertainment is notoriously costly to stage. In the summer months we’re distracted by  festivals and other ‘temporary’, outdoor events.  We don’t think about longer term inflation sending already high ticket prices through the roof, with stricken consumers’ thoughts far away from theatreland and its empty seats, set against the continued high costs of large properties.

Last year the operational gearing of high fixed costs and fast profit improvements coming from revenue increases was good news as theatres and concert halls returned to life. The high proportion of freelance staff working in the industry was also helpful in that respect. Recent minor downturns showed that while spending on large items was squeezed, ‘experiential’ spending on eating out, cinemas and theatres held up reasonably well. Sadly, the next 18 months or so could be different, as crippling energy costs, more expensive mortgages and limited pay increases promise more than a winter of discontent.

Live entertainment businesses, large and small and across a variety of sub-sectors, therefore face significant challenges balancing revenues and costs for the foreseeable future. Getting their houses in order will involve reviewing some important drivers of their revenues if they are to adapt to rapidly changing landscapes and improve their chances of longevity. These might include:

  • Communications and negotiations with lenders
  • Reviewing financial aspects of contracts in conjunction with agents and lawyers
  • Royalty payments and profit shares
  • Treatment of Intellectual Property and intangible assets
  • Structuring strategic alliances and major contracts
  • Due diligence on potential transactions
  • Reviewing and optimising cost bases – permanent and freelance staff; properties
  • Grant applications to arts bodies

After barely a leg-up from public funds during Covid, one would hope that the arts world in its broadest sense has a very realistic view of what it will take to keep its head above water. There is much to do for businesses that want to make it at least as far as when the fat lady sings.

Written by David Buchler, Chairman at Buchler Phillips, the UK’s leading independent corporate recovery, restructuring and turnaround firm.


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