For TheaterWorks, last December was the best of times. But it quickly devolved into the worst of times.
In the span of a few weeks, the nonprofit celebrated its highest grossing production in its 22-year history. But it was soon stunned with the news that the play’s director had been diagnosed with cancer, a confluence of factors that triggered its downward spiral into red ink.
Fast forward a year later. While Rob Ruggiero, the play’s director and also the organization’s associate artistic director, is now in full remission, TheaterWorks is staring at a $104,000 deficit.
Part of the theater company strategy to climb out of debt is to lay out its misfortunes to the nonprofit’s subscribers and community groups. So far, the response has been prompt and swift.
But what should have been a homerun for the theater company — playing to sold-out houses — failed to generate the necessary revenues to offset the high cost of putting on a play that required 11 actors. Steven Campo, TheaterWorks’ artistic and executive director, said the company took a calculated gamble that the high cost of producing its grandest production, “Take Me Out,” would be offset with the revenues generated from playing to full houses and a boost to its reputation.
Critical Events
The theater company counted on leveraging the play’s success to fill its theater for future plays. But as Ruggiero battled for his life, he was unable to play a critical marketing role. As a result, TheaterWorks was unable to recoup its initial investment in the high production costs of “Take Me Out,” which Campo described as a “loss leader.”
“It was a big gamble but not an under-thought gamble,” said Campo. “It was the highest box office gross in our history. It was a money loser, but we would have been fine if we had been able to leverage that success.”
Similar to many nonprofits, TheaterWorks’ operating margin is thin, and it operates with a small staff. So the loss of a key staffer can play a big role in its success.
While the high cost to produce the play was anticipated, the fact that most season holders would want to take in the play was not. Its 6,000 subscribers receive discounted tickets, paying $122 for tickets for five shows — an average of $24 per play. That’s a significant reduction from the cost of a single ticket, which costs $35 for weekday shows and $45 on weekends.
But during the play’s run, which ended in January 2006, Ruggiero began to experience medical problems. Shortly thereafter, an MRI found a cancerous tumor in his lower back.
With the loss of Ruggiero’s role to market the nonprofit as he battled for his life, TheaterWorks was unable to leverage its success with “Take Me Out,” Campo explained.
“We run a very lean operation,” said Campo. “He was not with us for seven or eight months, and we were unable to translate the benefits from “Take Me Out” going forward. We were dealing with something totally unexpected.”
Calling For Help
The situation led Campo to investigate “Key Man” insurance to battle future problems, though the costs outweighed any advantages for the small company.
So as TheaterWorks embarked on its 2007-08 season, which began Sept. 1, it faced its greatest deficit since it was founded in 1985. At that point, Campo made the decision to seek additional support from its subscribers and others as well.
In a letter and e-mail, TheaterWorks outlined its fiscal problems and discussed Ruggiero’s illness publicly for the first time.
The response was surprising, said Jacques Lamarre, TheaterWorks director of marketing and public relations.
“Never in my experience with nonprofits had I seen such an immediate and inspired response,” Lamarre said. “We’ve been galloping to keep pace with the level of response.”
“About 80 percent of our revenue is generated from subscriptions, ticket sales and rent from other tenants in our building,” said Campo. “People didn’t donate before because they saw us as self-sufficient, which we were to an extent.”
While the response so far has been promising, more steps will be taken. Playbills include its appeal, and the company has reached out to funding organizations and grant programs, scheduled an annual fund-raising event and has pared down its current $1.5 million budget. Campo also took a 22-percent pay cut.
“I did it because I thought I needed to and that it would send a message about a certain kind of leadership,” he said. “When I hear about companies laying off people on the lower end and at the same time giving out large bonuses to the top, that really bothers me. ”
Getting out of debt won’t be easy, said Kenneth Kahn, executive director of the Greater Hartford Arts Council, because nonprofits are feeling the economy’s pinch.
“I think it’s always a hard slog for nonprofits,” Kahn said. “We’re all struggling to make our budgets, and it’s always a challenge. It’s nothing unusual, what TheaterWorks is going through. It is unusual how they got there, but they’re going to recover.”
