An oboe player that signed with Phantom of the Opera 30 years ago was told that her contract would continue until the play closed. She assumed she would be there for three years. Now, she says the show paid for her children’s education and her mortgage.
Some members of the orchestra complain that they’ve played the same notes, seen the same people, and heard the same jokes for years, eight times a week. They also say that they missed it all during the Covid lockdown.
Since it opened during 1988, a whopping 20 million (or so) theater goers saw the show’s Broadway production. During those 35 years, it grossed $1.3 billion and employed approximately 6,500 people for almost 14,000 performances. More recently though with post pandemic tourism down, the show’s numbers have sunk. Last week, it had to close.
Still though, Covid was not the only reason that Phantom had its last performance on Sunday. It also had Baumol’s disease.
Our Bottom Line: Baumol’s Cost Disease
To understand Baumol’s Disease, we can start with an 18th century Mozart string quartet. Now and centuries ago, their productivity is the same. Labor intensive, the quartet cannot take advantage of economies of scale.
Similarly, a Broadway production like Phantom needs 125 people for every performance. Before they even opened in 1988, they had to have a production budget that covered creative fees for the designers, costumes, lighting, Also, there were the artists’ salaries and the auditions. rehearsal expenses and stage crew. Playwrights, composers, and choreographers got advances. Then, once the show opened, salaries were a huge chunk of the expense. Weekly, actors, stage managers, caterers, managers, and car services are paid. But also we can add advertising as a big ticket item and the theater’s cleaners, box office, stagehands. When Phantom’s weekly gross sunk to $800,000 it was $150,000 short.
As economist William Baumol explained, it is tough to enjoy the benefits of economies of scale when your production is labor intensive. And yet, because of those economies, when wages rise elsewhere, they nudge up what workers everywhere are paid.
As labor intensive sectors of the economy, education, healthcare, and the arts suffer from Baumol’s Cost Disease. They “catch” the higher wage from other industries that can afford it through their productivity. So too has Phantom of the Opera.
My sources and more: Once I began to search for Phantom of the Opera economics, the articles multiplied. However, NPR, Broadway News, and USA Today were the most healpful. Then also, the podcasts were so good because of their interviews. I especially enjoyed This American Life and The Journal. Also, please do look at my sources what I’ve quoted from this 2021 econlife post.