Report warned of musical's financial risk

Auckland City councillors were warned of the financial risks of My Fair Lady before underwriting the musical that flopped and lost $1.9 million.

Two star-studded plays lost a further $500,000 over the same period last month, taking losses for the council's entertainment arm, The Edge, to about $2.5 million.

"Medium to large-scale commercial productions such as My Fair Lady are subject to significant financial risks," treasury policy analyst Eric Wen told councillors in a report last October.

He said the global financial crisis had led to a fall-off in spending on entertainment which was "likely to have an impact at the box office".

The council has released the report to the Herald, minus figures about the commercial costs of the Opera Australia production at the Civic Theatre, which was aimed at an older audience.

The report shows The Edge expected to sell between 62,500 and 78,000 tickets to achieve a profit of between $600,000 and $1.35 million.

The break-even point was 52,724 tickets, representing 58.1 per cent of house capacity.

Mr Wen said that while this did not appear a particularly high break-even point given the record of musicals staged at the Civic Theatre, "officers are wary of the fact that the show has yet to prove its viability on a commercial scale".

He noted the show had run as part of a subscription with Opera Australia drawing less than 40,000 people at smaller venues in Melbourne, Sydney and Canberra.

The Edge's confidence was based on high attendances during its run in Australia, favourable reviews from Australian audiences, an expectation it would return to Australia on a commercial basis, and a strong marketing and publicity budget, Mr Wen said.

The Edge's expertise in selecting successful productions and the potential economic benefits were also put up as reasons for the council to support and underwrite the musical.

The show, with tickets priced at between $80 and $120, opened on March 25 and closed two weeks early on April 12. Just 18,000 tickets were sold.

Finance committee chairman Doug Armstrong said the council had accepted the expert advice of The Edge board and the view of council officers.

"Auckland would be pretty much an arts desert if it wasn't for The Edge doing things and taking an element of risk in bringing shows down [to Auckland] that no one else has got the horsepower to do," Mr Armstrong said.

The Edge chief executive Greg Innes yesterday disputed Mr Wen's risk assessment on the impact of the global financial crisis.

"I don't think there had been a suggestion that there was a significant impact on the entertainment business at that point [last October]."

THE NUMBERS
* 62,500-78,000: Anticipated ticket sales.
* 52,574: Break-even point.
* 18,000: Number of tickets sold.
* $1.9m: Loss for the musical.