Update: the seat-fill budget depends on who carries the box-office risk

Our article on the seat-fill budget implicitly assumed that whoever runs the calculation is whoever collects the revenue. A presenter pointed out that this equivalence depends entirely on the contract. The article has been revised.

A prior question was missing: who carries the box-office risk, that is, who makes or loses money depending on how many tickets are sold? The answer determines who owns the calculation, and it changes at the same time the definition of the contribution margin, that is, what remains of the ticket price once the costs directly tied to that sale are paid.

In a flat-fee buyout, the presenter pays a fixed amount for the show and keeps the box office. The seat-fill budget is theirs, and their contribution margin per ticket includes no variable artist fee, which often makes it higher than they think.

In a revenue split, producer and presenter share the box office. Each therefore has its own seat-fill budget on the same room, calculated on its share. Two businesses can arrive at two different spending ceilings for the same show, and both are right.

In a co-production, where the two parties finance the show together and share the results, the calculation is done jointly, and so is the decision to spend. That is where budget disagreements arise most often, because the question was never asked at signing.

What to redo

If you had applied our calculation, redo it starting from the share of the box office that comes to you. On an equal split, your spending ceiling falls to half of what you had calculated, a considerable gap.

The revised article adds this line to the calculation table and one question to the decision block. The rest of the reasoning stands: inventory is dated, the margin on one more seat is close to the ticket price, and cutting the budget when sales are slow remains the most expensive mistake.

Building the budget that carries these decisions is detailed in splitting the budget across channels.