The Impact of the Broadway Theatre on the Economy of New York City
The availability of live theatre in New York and other major urban centers across the country has always been recognized as a unique and powerful attraction, but no reliable estimate of the economic contribution of theatre existed. In the usual course of affairs it is impossible to separate theatre-connected expenditures from figures for the total economy. However, an unusual situation presented itself in the fall of 1975, when nine Broadway musical theatres were closed for twenty-five days as a result of a strike by Local 802 of the American Federation of Musicians, reducing total attendance and theatre revenues by some 70 percent. This strike presented the opportunity for a near-controlled experiment indicating the economic impact of the Broadway theatre on the earnings of closely related business activities.
Realizing that such an opportunity might not occur again, and recognizing the importance of understanding theatre's role in the on-going economy of the nation's cities, Professor William Baumol of Mathematica, Inc., Princeton, New Jersey, conducted the first systematic investigation of the indirect economic contribution of the Broadway theatre: the expenditures of audience members related to their theatre attendance. Actual theatre expenditures were also considered to achieve a total picture of the industry's economic impact.
As a result of this work [prepared for the League of New York Theatres and Producers] evidence now exists which demonstrates that live theatre makes a substantial financial contribution both to the economy of its immediate community and the economy of the nation. Furthermore, it specifically shows that the commercial theatre in New York City stimulates income and employment amounting to more than a quarter of a billion dollars annually.
Although this report is focused on New York City, the methods used to gather and interpret the information can be applied to other communities, and is applicable to any theatre, whether or not it is profit structured. The commercial theatre's annual gross revenue from ticket sales amounted to some $57 million in the 1974-1975 season. The study found that, in addition, theatregoers spent nearly an equal amount on transportation, dining, and hotels as a result of their attendance. These outlays stimulated further expenditures totaling $168 million in the metropolitan area, and an additional $110 million across the country - or a national total of $275 million.
The theatre industry directly contributes $43 million to the economy of New York City. This figure represents expenditures by producers, theatre owners and ticket brokers for performer's salaries, sets, rents, etc. In addition, it was learned that theatregoers annually spend approximately $45 million on restaurants, $10.3 million on taxis, and $4.3 million for parking. Bus tours bring in 600,000 people per year to attend the theatre, and organized theatre tours bring in a minimum of 20,000 visitors every year who often stay the better part of a week. These visitors are estimated to spend another $2.5 million on hotels, shopping, etc. Direct tax payments to New York City are at least $5.7 million. These figures, adjusted for the stimulation they provide to expenditures by the recipients of these amounts (the multiplier effect - see p. 6) yield the figures reported here.
Much of the information was provided directly by the pertinent industries -- theatre tour operators, ticket brokers, producers, theatre owners, etc. Our estimates of the theatregoers' contribution to the income of restaurants, taxis and parking lots are based on an investigation and analysis of the reduction in flow of revenues to these activities during the strike which lasted from September 18 to October 13, 1975.
The evidence indicates that during the strike weeks ticket sales and attendance dropped to 30 percent of their normal level, for a season and the revenues of taxi owners and operators fell some $117,000 per week. During this period, parking lot operators are shown to have lost about $50,000 per week. However, the largest loss, aside from the theatre itself, is probably that experienced by the restaurants which suffered a decline in revenues o the order of $510,000 per week.
Part 1. Theatre and the economy.
1. The main statistical results.
2. Analysis of the results.
3. The multiplier effects.
4. Concluding comment.
Part 2. Income and employment contribution of New York's legitimate theatre;
research methods and results.
1. Nature of the strike and its effects on attendance.
2. Research procedures.
3. Transportation and food expenditures.
4. Expenditures by ticket sales outlets.
5. Expenditures on organized theatre tours.
6. Convention visitors.
7. Digression: Ticket outlets.
8. Expenditures of the theatre itself.
9. Aggregate contribution of the theatre.
10. An alternative estimate.