The Wall Street Journal Interactive Edition -- October 17,
                             1997

 Why These 'Angels' Invest
 Thousands on Broadway

 By VANESSA O'CONNELL
 Staff Reporter of THE WALL STREET JOURNAL

 Susan Friedman took it as a bad sign when she
 recognized no famous faces in the audience. Her
 husband, Evan, a stockbroker, was even more
 cynical. Just before the show's off-Broadway
 opening Monday night, he chided her by predicting
 quietly that "it will take a nose dive."

 They were right, but too late. The Friedmans
 already had invested $10,000 in "Three-for-All," a
 collection of sketches about everyday life
 featuring a Barcelona, Spain-based comedy group.
 The show's producers decided to throw in the towel
 later that night after reviews in early editions of
 the next day's papers called the show "a failure of
 imagination" that "never builds to a satisfactory
 finish."

 Mrs. Friedman was disappointed about her financial
 loss, but says, "We were in it for fun, not
 profit." Besides, they got some good laughs from
 the show, which was funnier than they expected. And
 they got to rub elbows with the Spanish celebrities
 at a private dinner that evening at the trendy
 Coffee Shop restaurant in Manhattan.

 Two commandments of smart investing are to never
 let emotion interfere with your decisions, and
 never bet on a business you know nothing about. But
 if those rules were always followed, there would
 probably be no such thing as "angels," the
 old-fashioned slang term for well-heeled backers of
 New York musicals and plays. The Friedmans say they
 invest in shows out of commitment to the theater.
 They are also drawn to the glamour.

 Their chances of actually making money are slim.
 "We use only money we could afford to lose, because
 that's what could very well happen," Mrs. Friedman
 says. Of the three musicals and three plays the
 Friedmans have backed over the years, they've
 gotten their money back on just three. Their
 biggest profit to date is only $3,500 from a
 $10,000 investment in "A Funny Thing Happened on
 the Way to the Forum," the Broadway musical revival
 that opened in April 1996.

 While Broadway's hottest producers turn to coteries
 of rich investors for most of the cash they need,
 there is room for people with much shallower
 pockets. Because of securities laws restricting
 private offerings of this type, producers typically
 prefer that most, if not all, investors have a net
 worth of at least $1 million when they make the
 investment, and an annual income of more than
 $200,000 ($300,000 for couples).

 But you don't necessarily need to open your wallet
 very wide to invest. The cost of mounting shows has
 escalated sharply -- producing a Broadway play
 requires $1 million to $2 million these days, while
 a musical eats up $4 million to $10 million. As a
 result, it is common for producers to have as many
 as 100 to 300 investors for big shows.

 The typical minimum investment depends on the
 number of backers and the cost to launch the
 production. To raise half of the $6 million needed
 to mount a revival of the "The Sound of Music" on
 Broadway this March, one of the show's
 co-producers, Scorpio Entertainment of White
 Plains, N.Y., assiduously courted hundreds of
 people around the country who had indicated to
 Scorpio that they might want to bet as little as
 $10,000 on a show. (One-hundred fifty have already
 said yes.)

 In hopes of impressing them, Scorpio President
 Steven Baruch enclosed with legal-offering
 documents a brief news story about the show's star
 and a sample promotional mailing Scorpio intends to
 send to about 200,000 theater-goers. "Aggressive
 marketing gives a show a financial jump start," Mr.
 Baruch says.

 David Goldstick and his wife, Deedy, spread the
 risk of a financial loss by investing together with
 three other couples. Each couple in the partnership
 contributes one-quarter of the producer's minimum,
 typically $10,000. Of the dozen or so shows the
 group has backed together in recent years, they
 have enjoyed both modest hits (the off-Broadway
 play "Jeffrey" brought a $225 total profit to date)
 and suffered complete wipeouts ("Song of Singapore"
 and "Das Barbecue").

 For would-be angels with no connection to show
 business, the biggest barrier to entry is simply
 finding out what future productions are in the
 works. One good source is Theatrical Index ($12 a
 copy, 212-586-6343), a New York publication that
 lists shows on and off-Broadway in all stages of
 development. To get your name onto a list of
 potential backers, write a show's producers,
 explaining that you understand the risk and can
 afford to lose the money you want to put up.

 Self-taught pianist Theodore J. Forstmann, a
 pioneer of the leveraged buyout and co-founder of
 Forstmann Little & Co., a private investment firm
 in New York, begrudgingly attended a backers'
 audition last year after a friend, producer Pierre
 Cossette, joked that he was looking not for money
 but for a piano player for "The Scarlet Pimpernel,"
 a $10 million Broadway production opening next
 month.

 Mr. Forstmann says he was so taken with the music
 that he bought the entire remaining $2 million
 interest, leaving Mr. Cossette to turn away most of
 the 300 other potential investors who came to the
 backers' audition.

 "I'm not investing in the theater; I am investing
 in 'The Scarlet Pimpernel' because I love its
 music, " says Mr. Forstmann, who owns no stocks but
 has acquired a $13 billion stake in 22 companies
 through his firm.

 If you chip in millions, like Mr. Forstmann did,
 you can be dubbed a producer yourself, and get
 "above-title" billing, meaning your name runs at
 the top of the playbill and promotional posters.

 The price tag for billing is much lower
 off-Broadway, where budgets are more modest. Eric
 Krebs, an independent producer who raised $450,000
 for the 1995 musical "Lust," a commercial failure,
 says off-Broadway angels can get above-title
 billing as an associate producer for an outlay of
 about $50,000, and a below title billing for about
 $25,000.

 On-Broadway or off, you'll generally get invited to
 opening night simply by investing the producer's
 minimum, plus a pass to the show's party that
 night.

 Lou and Sheryl Barbich, of Bakersfield, Calif.,
 flew to New York for the openings of "Smokey Joe's
 Cafe" and "A Funny Thing Happened on the Way to the
 Forum." They consider it fortuitous that during
 each show, one of the actors lost a feather from
 his costume that floated Mr. Barbich's way. He
 collected both, and saved them as good luck charms.
 So far, so good: Unlike the two other shows in
 which they invested, these have returned their
 $10,000 investment, plus a profit of a few thousand
 dollars.

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