There is no greater success story on Broadway than “The Lion King.” It is reliably among the top-grossing stage shows in New York, where it has brought in nearly $2 billion over its 26-year run; its global total is five times that amount.
The musical’s producer is the theatrical division of the Walt Disney Company, an entertainment industry behemoth that earned $89 billion in revenue during its last fiscal year.
And yet, the show was one of roughly four dozen productions that have received millions of dollars in assistance from New York State under a program designed to help a pandemic-hobbled theater industry in New York City.
Over the three years since the program was established, New York State has bestowed over $100 million on commercial Broadway productions.
“The Lion King,” along with other juggernauts like “Aladdin,” “The Book of Mormon” and “Wicked,” each got the maximum $3 million subsidy.
The program was initiated by Gov. Andrew M. Cuomo at the height of the coronavirus pandemic, as theaters were nervously preparing to reopen after being shut for a year and a half. It was later tripled to $300 million by Gov. Kathy Hochul, who is now considering whether to seek an extension when it expires next year.
Some state lawmakers and fiscal watchdogs say the theater initiative, called the New York City Musical and Theatrical Production Tax Credit, lavishes taxpayer money upon shows that do not need it.
But the governor and Broadway leaders say the money provides an important boost to a major local industry and tourist draw that has yet to fully recover, with attendance about 17 percent below where it was before the pandemic.
“We are still in a crisis situation, and I’ll do whatever it takes,” Ms. Hochul said in a brief interview earlier this month. She said she viewed Broadway as important to the state’s economic well-being and a major driver of tourism, so any decision on the program would consider whether tourism has fully rebounded, whether Times Square feels safe and whether “everything’s back to normal.”
“This is not a permanent situation,” she said. “It is a temporary assistance to make sure that one of our most iconic industries never fails.”
New York, like other states, doles out billions of dollars in incentives, subsidies and tax breaks to stimulate business investment. Billions of tax dollars have been invested in green energy, real estate development and high-tech manufacturing projects, sometimes with dubious results. Last month, the state even approved a tax credit for news organizations.
The theater initiative is only available to commercial producers. The city’s struggling nonprofit theaters, which have been forced to lay off staff and cut back on programming, are not eligible because the subsidy is designed for taxpaying organizations; the rules also exclude ballet, opera and orchestra performances.
“It’s just the state giving private companies public money,” said State Senator Sean Ryan, a Buffalo Democrat. “You’re transferring that money to major companies like Disney.”
The money has gone to a wide array of productions. Some, like a revival of “The Music Man” starring Hugh Jackman and Sutton Foster, were significant hits even without state aid. Others, like the musical “KPOP,” were fast flops. There is a long lag between when a production seeks the state aid and when it is issued, so in several cases, the state has given money to shows that have already closed.
The money has not always served its purpose: “The Phantom of the Opera,” the longest-running show in Broadway history, got $3 million from the state despite having grossed $1.36 billion over 35 years on Broadway, and then closed anyway.
The theater industry says the program — which was recently expanded to include for-profit Off Broadway productions — has helped struggling shows turn a profit, and kept otherwise wobbly investors on board as a large number of new shows have opened at this risky moment.
“We bring 38 to 40 new companies to Broadway every year, and we have to capitalize each production,” said Jeff T. Daniel, who is the chief strategy officer at the Shubert Organization as well as the chair of the Broadway League’s government relations committee.
He noted that the program started as a “pandemic reopening incentive,” but argued that it remains necessary. “Without the tax credit there are years we could be 30 to 40 percent down in shows, because of the risk profiles of shows and the increasing difficulty of capitalizing them.”
The amount any show can receive is capped at $3 million. Twenty-two shows received the $3 million maximum; another 22 were given between $1 million and $2.8 million; two others have received more than $600,000 each. Although much of the first round of grants went to long-running successes, newer productions are now accessing the benefit.
“It’s an integral part of how we raise money and finance shows now,” said John Johnson, a producer working on “Stereophonic,” a leading contender for this year’s best play Tony Award, and “Lempicka,” which flamed out quickly and will close as a total loss. “It brings more jobs into the city, and gets people working and spending money in town.”
The aid has made a key difference for shows like the 2022 revival of August Wilson’s “The Piano Lesson,” which had broken even on its own, but became profitable thanks to the state. Alex Edelman’s comedy show, “Just For Us,” also became profitable because of state support; it was so well received that Edelman is being honored with a special Tony Award next month.
Most shows on Broadway have received or are seeking the grants, with one notable exception: “Hamilton.” Its producers decided not to apply.
Disney declined to comment on its participation in the program.
Government assistance to the performing arts has become important as many arts organizations have struggled in the postpandemic era.
A huge federal aid program, the $16 billion Shuttered Venue Operators Grant, was established during the pandemic and gave up to $10 million per organization to arts presenters and producers.
This spring, a group of Democratic lawmakers is proposing that Congress enact a program that would set aside $1 billion annually for nonprofit theaters in America — a sector that has been especially hard hit.
In New York, the film and television subsidies alone cost state taxpayers $700 million a year, fattening the coffers of corporate titans like Amazon, NBC Universal and CBS. One eye-popping example: NBC’s “Saturday Night Live,” shot in New York City since 1975, has received more than $158 million since 2013.
Detractors say the expansion of New York’s theater program illustrates two central problems with public support for private enterprise: temporary tax breaks often become permanent, and they are used to incentivize economic activity that would happen anyway.
“The shows are not going to go anywhere,” said Liz Marcello, policy fellow at the watchdog group Reinvent Albany. “The theaters are physically on Broadway. It’s totally ludicrous.”
An independent analysis of the state’s vast pool of tax incentives and subsidies, quietly published online earlier this year by the New York Department of Taxation and Finance, found that most of the incentives eat up far more public funds than they generate in tax revenue.
The theater program money is considered a tax credit, but it is “fully refundable” and paid as a reimbursement for eligible expenses even if there is no tax liability, functioning “the same as a grant program,” according to the report.
“Due to how the program is structured, larger shows, which typically hire more employees, receive a higher share of the tax credit,” the consultants who wrote the report found. “One criticism of the program is that it does not take the need of the production into account.”
The analysis found that the state receives just 11 cents back in direct tax revenue for every dollar spent, and 23 cents back when supply chain ripples trickle down through the economy.
Still, it calls the subsidies “reasonable” because they generate economic activity, noting that “the value of Broadway as an iconic institution cannot be dismissed.” The analysis cites “the tourism impact of Broadway, where nearly half of ticket sales are to those outside of NYC and its suburbs.”
State Senator Brad Hoylman-Sigal, a Manhattan Democrat who wrote the first bill creating the theater tax credit program, agreed with the justification: “You can’t view the importance of Broadway solely through the lens of actuarial study. Broadway is the heartbeat of arts and culture in New York City and state, and the multiplier effect for countless other creative jobs is probably incalculable.”
The most profitable Broadway shows are supposed to reimburse the state for as much as half the tax credit’s value when their net profits exceed a certain threshold, with the money going to the New York State Council on the Arts. But not a single show has triggered the provision, according to Empire State Development, the agency that administers the program.
The program demands that shows that receive money invest in training a diverse work force, and that they make free or low-cost tickets available. Recipients have sold $20 and $40 tickets to 135,000 low-income New Yorkers so far through Passport, a program set up by the nonprofit Theater Development Fund.
Michael Naumann, the nonprofit’s managing director, said the state’s program has made theater more accessible. “If we can bring people to these shows, it is doing what it was meant to do,” he said.
Mr. Daniel, of the Shubert Organization, said that Broadway deserved to have the state program extended. “We’ve proved that it works,” he said. “It’s a responsible credit, and we’d like to see it extended, to continue to recognize these crazily optimistic 38 to 40 companies that open on Broadway every year. It’s entrepreneurial and worth the credit.”
