It’s little surprise that three of London’s leading producing theatres have warned of “devastating” pressures on their finances, as rising costs, funding cuts and changes in audience tastes slash their reserves and force them into more cautious programming.
The Royal Court, Young Vic and Hampstead Theatres won’t be the only ones feeling the squeeze. Think back to the Covid lockdown period, when they and other physical entertainment venues, such as cinemas and concert halls, were unsurprisingly battered for months on end by empty seats, set against the continued high costs of large properties. Not much more than a year after returning to normal, all these establishments were hit by soaring energy costs followed by a cost of living crisis; as with local councils and universities, funding and grants to theatres have shrunk in real terms because of higher inflation.
The entertainment and media industries may be tough for new operators to enter, extremely competitive and notoriously exposed to fickle consumer demand; once on the inside, however, it doesn’t necessarily get any easier. Even the shift in the balance of power towards streamers such as Netflix and Amazon during Covid, their subscriptions boosted by captive audiences, couldn’t save previously booming producers of content: they were hit hard by the logistical challenges of filming, leaving them unable to deliver projects despite strong demand from studios and TV companies. More recently, strikes at different levels of the US movie industry have impacted post-production and other downstream businesses on both sides of the Atlantic.
Theatre woes are the tip of the problem iceberg in a hugely complex entertainment and media industry. Even in relatively good times, organisations are often juggling several disparate streams of talent and production to deliver a stage show, TV series, feature film or publication on tight budgets. Individual creative ‘practitioners’ need sound management and financial advice: longer term changes in these sectors mean that the sands will continue shifting for the foreseeable future. Print media is shrinking at a rapid pace as publications move online and provide content in real-time. Recorded music sales, which now promote artists’ tours and live events rather than the reverse scenario that prevailed until recent years, are focused on digital streaming instead of physical product. Traditional TV outlets are redefining their relationships with advertisers, as audiences’ consumption of entertainment through a variety of devices becomes less predictable.
It has arguably never been harder to balance revenues and costs in these sectors, so businesses need to be on the front foot, maybe enlisting help, in adapting to rapidly changing landscapes, thus improving their chances of longevity:
- Communications and negotiations with lenders
- Reviewing financial aspects of contracts in conjunction with agents and lawyers
- Advice on royalty payments and profit share
- 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
- Supporting grant applications to arts bodies
- Sale and leasebacks; property consolidations
- Administrations and other insolvency tools to facilitate restructuring
As ever, the Buchler Phillips approach is ‘work out, not bail out’. Owners and managers in the entertainment industry are welcome to contact us for a free, no-obligation initial consultation.
Written by Bea Vakharia, Analyst at Buchler Phillips, a UK based independent boutique firm with an impeccable Mayfair heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.