There is a clear appetite for Western cultural attractions in Asia, and the theater industry could be a lucrative market.
The next must-see Andrew Lloyd Webber musical may be making its debut in Beijing rather than Broadway. Recently, the composer and theater impresario announced plans to restructure his company so he can infuse more investment capital in Asia. The move by Lloyd Webber, famous for musicals such as Cats, Phantom of the Opera and Evita, lends further recognition to the region’s increasing influence as a growth market and tastemaker.
“They love the product out [in Asia],” Mark Wordsworth, chairman of Lloyd Webber’s companies, told The Daily Telegraph. “The commentators in London think it is all about the West End or Broadway. Well, we make more money globally from performances of The Phantom of the Opera in Manila, [Philippines].”
In the last decade, people in China have moved beyond spending the bulk of their incomes on the basic needs of food, clothing and shelter, and even past material products, notes Wharton Marketing Professor Qiaowei Shen. Nowadays, people will spend their “disposable income on cultural” attractions, says Shen. Wharton Marketing Professor Jehoshua Eliashberg adds that “Asia accounts for 30% of the total revenues in tickets sales in theaters.”
Lloyd Webber’s privately owned holding company, worth about $242 million, has recently demerged into two entities. One, named Really Useful Theatres (RUT), will concentrate on expanding Lloyd Webber’s Asian fan base, one “memory” at a time. (In fact, Cats has already been translated into and performed in Mandarin Chinese and Korean to reach a larger, local audience.) Lloyd Webber’s other company, known as the Really Useful Group (RUG) will focus on maintaining his British theater holdings.
With 460 songs and 19 musicals under his belt, Lloyd Webber wholly owns the rights to his creative works. Wordsworth told The Telegraph that someone is singing a tune from a Lloyd Webber musical every minute of the day, somewhere in the world. To that end, the company’s decision to focus on licensing for arena tours, films, animations, merchandising and even video games could lead to its copyright arm blossoming into the firm’s main moneymaker. In 2013, licensing deals generated about one-third of the company’s operating profits.
It’s not just Lloyd Webber who has foreseen the coming of age in musical theater in Asia. Mamma Mia! was the first popular Broadway-quality Western musical translated into Mandarin Chinese, generating nearly $21 million by the end of its second tour in 2012, with $11 million in production costs.
“In the past, we have looked at [copyright] in a very traditional way, which is: ‘Can we put this in a theater?’ Now we are thinking much more widely — for example, further arena content. There’s a great phrase: ‘You can’t pirate live.’ When someone puts a live performance on, we all get paid,” Wordsworth said in The Telegraph.
Eliashberg notes that cultural products, such as musicals:
“… produce different streams of revenue in different forms — based on the same intellectual property. Going global with a musical that performed well in London and New York City is one possible extension. Showing those musicals live in movie theaters as ‘alternative content’ represents another additional stream of revenue. Producing movies and selling DVDs, CDs and other merchandise represent more opportunities.”
It’s not just Lloyd Webber who has foreseen the coming of age in musical theater in Asia. Mamma Mia! was the first popular Broadway-quality Western musical translated into Mandarin Chinese, generating nearly $21 million by the end of its second tour in 2012, with $11 million in production costs. Cameron Mackintosh’s Les Misérables, the world’s longest-running musical, has been performed in Korean and Japanese and successfully toured China. Disney Theatricals has produced Beauty and the Beast in Chinese. Nederlander Worldwide Entertainment, founded by one of the big three major Broadway theater owners, has operations in China to bring Broadway shows, like 42nd Street, all over the country. Theater owners in New York and London are challenged by growth limitations and looking to Asia for opportunities.
RUG owns six London theaters, accounting for 20% of the audience seats available in the West End. Approximately 60% of the firm’s income comes from ticket purchases, while the rest is derived from merchandising and food service. Five of RUG’s theaters are historically listed with constant upkeep costs. As Wordsworth explained in The Telegraph: “People don’t own these buildings as money-making machines. They recognize it as their duty to preserve them for the next generation.” To that end, Lloyd Webber doesn’t even draw a salary from the theater group.
The Phantom of the Opera, running for 27 years, is the highest grossing musical of all time, raking in $5.6 billion worldwide, according to The Economist. That’s more profit than any television show or movie, including all the Star Wars films combined.
However, he does retain control of his own copyrights — a result of a story that sounds like the makings of a musical. In 1977, unhappy with the management of his projects, Lloyd Webber started the Really Useful Group, a name inspired by British children’s cartoon character Thomas the Tank Engine and his purposeful locomotive cohorts, the “Really Useful Engines.” In 1986, Lloyd Webber floated shares on the stock market. However, in 1990, he wanted private ownership again, raising money for the buyback by selling 30% of the company’s shares to PolyGram. In 1995, Canadian drinks industry giant Seagram bought Polygram, under its Universal arm, in Seagram’s ill-fated foray into the entertainment industry. Coming full circle, Lloyd Webber paid $75 million to buy back Universal’s 30% stake in his company so he could retain 100% ownership of all his works once again.
The Phantom of the Opera, running for 27 years, is the highest grossing musical of all time, raking in $5.6 billion worldwide, according to The Economist. That’s more profit than any television show or movie, including all the Star Wars films combined. The show has been seen by more than 130 million people in 145 cities in 27 countries. The initial investors of Cats received a 3,500% return, on an unlikely hit based on an obscure T.S. Eliot collection of poems, titled Old Possum’s Book of Practical Cats.
On Broadway, the saying goes, “You can’t make a living but you can make a killing,” with only seven out of eight productions recouping their initial investment. Steven Connell of market research firm IBISWorld says British musicals generate around $269 million, only accounting for 5% of the performing arts sector. A report from the firm paints a dismal picture for British theater, predicting a “decline in investment into arts as the government continues its austerity-defined period by reducing the budget of various departments. These events have put the future of the performing arts industry in jeopardy.” In America, musicals generate $1.9 billion, accounting for nearly 40% of the live performance industry.
As Lloyd Webber is attempting to expand his footprint in Asia, one of his projects in the US has faltered: A 52-city North American tour of Jesus Christ Superstar was recently canceled without explanation weeks before its June 9 opening night. The production was to have starred Johnny Rotten of the Sex Pistols and Michelle Williams of Destiny’s Child. But the tour’s promoter said in an email that ticket sales did not support the production, The New York Times reported.
A Global Stage
Most of the revenue from musical theater comes from touring. “Apart from holiday weeks, it is hard to do $2-million weeks for hit Broadway shows. On the road, you can have $2-million weeks all year long,” Key Brand Entertainment CEO John Gore told The Economist. His company runs Broadway.com and Broadway Across America, handling the North American tour of Phantom and Sunset Boulevard, as well as the UK tour of Cats and Starlight Express for Lloyd Webber.
Lloyd Webber’s musicals have fared extremely well around the world. In 2013, turnover for his company increased by 70% in the Asia Pacific region, according to The Telegraph. It took only five hours to sell out 5,000 tickets of Phantom in Shanghai, with one ticket sold every four seconds.
Kumiko Yoshii, executive vice president and head of international business development at Key Brand Entertainment, says Western musicals in Asia:
“… have been very well received. Many shows that we play on Broadway or in the West End speak to a universal audience. While the regional cities in the US tend to have bigger houses than Broadway houses, we find that the houses in various Asian markets have similar capacities to the ones on Broadway with 1,400-1,800 seats, or sometimes a little over 2,000 … Therefore, the numbers have been similar in the developed markets, where the ticket prices are also similar to what we have in New York or on the road.”
Lloyd Webber’s musicals have fared extremely well around the world. In 2013, turnover for his company increased by 70% in the Asia Pacific region, according to The Telegraph. It took only five hours to sell out 5,000 tickets of Phantom in Shanghai, with one ticket sold every four seconds, China Daily reported. When Cats debuted in China, it made $5.6 million and toured nine other Chinese cities in addition to Beijing and Shanghai.
Shen notes the translations of Lloyd Webber’s musicals into local languages can “open up the market” beyond the big cities, where buying a ticket to an English-language musical might only appeal to a “small niche market of those who can understand English and want to demonstrate their accessibility to Western luxury items.” If Lloyd Webber is looking to do regular shows in Asia, he needs to increase his audience levels by providing “language-friendly versions — language will still be an issue for many people,” adds Shen. Tim McFarlane, who runs Lloyd Webber’s division in Asia, told China Daily: “For us, we want to present shows in the local language because it’s easier for audiences to appreciate it.”
Fear of Pirates
In China, which is notorious for its problems with people selling pirated goods, Lloyd Webber’s musicals are in a unique position. “Copyrights are very valuable things, as long as you can keep the cash flow going. And Andrew’s personal brand means we can leverage off that,” Wordsworth told The Telegraph. His original shows have valuable “brand equity,” notes Eliashberg. For example, if there was a knock-off version of Cats called “Dogs,” people would still choose the authentic version, says Shen. “If it’s clothing or toys, I’m not sure they would. Copyright is still an issue in China,” she adds, though it has a “multidimensional effect.” While revenue is stolen from the original content owners, the copycats “raise awareness for a public brand,” which also helps to market the products.
“Merchandise sales, like soundtrack recordings, are important to someone like [Lloyd Webber,] adds Robert Cain, CEO of entertainment consulting firm Pacific Bridge Pictures. “To take more control of revenue streams, I imagine lots of things are sold at the theaters themselves.”
Entering Asia also gives theater promoters the chance to dip into the exploding Chinese movie market. Wordsworth told The Telegraph that many musicals, like Starlight Express, translate well onto the silver screen. According to Cain: “By 2020, China’s movie market will be bigger than North America’s. There are 18 new screens opening every day in China.”
Eliashberg notes: “As a case in point, the total domestic growth of Phantom was $51 million. With a further $107 million earned internationally, Phantom reached a worldwide total of $158 million. The movie did well, particularly in Japan and South Korea.”
China will also profit when Lloyd Webber imports his musicals, since the “revenue sharing is set by the government,” says Cain. In 2012, RUG and United Asia Live Entertainment (UALE), the commercial arm of China’s Ministry of Culture, signed an agreement to bring Lloyd Webber’s musicals to China, and one of their first ventures was to produce the Chinese-language version of Cats. They organized both a British and Chinese directing team to keep the performance standards high. The Chinese version of Phantom is planned next, according to China Daily. Ma Chencheng, deputy general of UALE, told the newspaper that while the organization has adapted “Western musicals for popular cultural consumption” in China, the ultimate goal “is to create our own musicals in Chinese about Chinese stories, which may be sold overseas someday.”
For Andrew Lloyd Webber, the business strategy of shifting his focus toward the East is a smart one. “There’s a clear appetite for Western cultural attractions in Asia. From a marketing standpoint, Lloyd Webber’s decision is very reasonable,” says Eliashberg.
*[This article was originally published by Knowledge@Wharton.]
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.