Business Acumen and Marketing Mastery: Broadway Style
Posted on Thu, Feb 16, 2012
Applying business acumen in show business can be a bit tricky. Think of the high net-worth individuals who are asked to invest in a Broadway show. They know the odds of a blockbuster hit are very slim. According to a recent article in the NY Times, only about 30 percent of the shows even turn a profit. (If you do not subscribe to the NY Times, use: http://www.nytimes.com/2012/02/11/theater/phantom-of-the-opera-reaches-10000th-broadway-performance.html?_r=1 )
But when the probability of a business investment is akin to a crap shoot, standard approaches to making an investment decision such as discounted cash flow might best be put aside. Take the case of investor James B. Freydberg cited in the same NY Times article linked above. Back in late 1987, at the time of the infamous “Black Monday” stock market crash, he and his business partner decided to put up $500,000 in a play called “The Phantom of the Opera,” because he figured that this investment had a chance of making better return than anything he could find in the stock market. And, wow, was he right! Last Saturday, “Phantom” celebrated its 10,000th performance on Broadway. Freydberg told a reporter for the NY Times that this investment has since proven to be his second best, (his best being in Apple).
With such extraordinary returns that can be had in an investment in a Broadway hit, it would not be surprising if finance professors have been hard at work trying to come up with a model predicting a show’s success. Interestingly enough, marketing professors have already taken a crack at this. For example, several marketing professors wrote an article called “Exploring the Determinants of Broadway Show Success” published in the esteemed Journal of Market Research back in 1998. Studies such as this and others focus on factors such as reviews by critics, type of show, and receipt of awards, as well as marketing efforts such as spending on advertising.
If you’re interested in how sophisticated statistical analysis such as regression analysis is used in marketing research, read these academic papers. If you just want a quick read of a fascinating example of the effective use of the “Four Ps of Marketing (i.e., price, product, place and promotion), read the article in the NY Times. Regardless of which you choose, you appreciation of the impact of successful marketing on business success will be further enhanced by listening and reading our “Business Acumen: Your Key to Success,” and :Marketing Mastery: Your Key to Success.”