[ergogroup]STEEL MAGNOLIAS - Update

[elie@ergoentertainment.com]

Dear Partners,
 
We wanted to give you a progress report on "Steel Magnolias" so you have the latest news and information.
 
As you likely know, the critical reception for the show was mixed, with particularly negative reviews coming from The New York Times and the New York Post.  On the flip side, The Daily News was wonderful and a number of other major papers -- Newsday, Newark Star-Ledger, Associated Press (syndicated nationally), and Variety, to name a few, were similarly positive as was Roma Torre at NY1, Liz Smith and the online reviews at Broadway.com and Theatremania.com.  Needless to say, the volume of favorable reviews is heartening but of course, the NYT, for better or worse, is the paper of record and its negative feelings towards the show are felt at the box office.
 
That said, our show continues to perform well and in a number of cases, as well or better than some of the other revivals that have opened or are opening on Broadway this season.  Daily sales, while not stellar, are consistent and healthy which bodes well for our long term prospects, long after the Denzels and Jessica Langes have finished up their limited runs.  With the warm reception that the show receives every night, with enthusiastic standing ovations the norm, it is clear that there is an audience that loves this play and is eager to see it -- our job then, is to tap into that customer base and keep them coming to the box office.
 
On that front, you will likely notice a lack of advertising in The New York Times in the coming weeks.  As you may already know, the NYT is the single largest part of any show's advertising budget (weekly ABC's alone cost several thousand dollars, and even a small display ad can cost $8-10,000), and given their negative review of our show, and in general, with their readership not a natural match for "Steel Magnolias", the producers have agreed that our money is better spent elsewhere.  Rest assured that we won't disappear entirely, but our limited advertising and marketing funds can stretch a lot farther in other media outlets.  
 
To that end, we have recently issued a new round of multiple email blasts to proven theatre ticketbuyers via sites such as Playbill.com, Theatremania.com, BroadwayBox.com and a major blast is scheduled for the beginning of May through Telecharge.com.  A direct mail piece is currently being prepped to go out ASAP to between 100,000-200,000 proven Broadway play ticketbuyers who have not yet bought tickets for our show.  Delta Burke was interviewed by Pat Collins of UPN-9 News on the 10pm broadcast this past Tuesday night; Delta, Marsha and Rebecca will all be interviewed on "The View" on Thursday morning between 11am and Noon; and in general, the press department is busy at work with myriad of publicity opportunities for our talented ladies.
 
In short, from a sales perspective, our outlook is "fair" but the entire team is working diligently on a daily basis to help us bridge the crowded April-May time period to the summer, when we are confident that the tourist market will be a fertile feeding ground for our show.  By "crowded", we of course mean the host of last-minute Openings that typify the end of the Broadway season prior to the Tony cutoff date, and then the splashy campaigns (mainly by the musicals and the new plays) leading up to the Tony Awards ceremony itself on June 5th.  In all honesty, we would be delighted with a Best Revival nomination for the show, and we are cautiously optimistic that Frannie Sternhagen will earn a nomination as Best Featured Actress in a Play, but the competition is star-studded and fierce so we are not relying on that expectation.  Moreover, while the Tony imprimatur never hurts, we don't feel that it is necessary to the ultimate success of the production.   Once again, the sho!
w's success hinges on continuing to attract our core audience of older women and mothers & daughters who will see our play irrespective of the accolades it earns or does not earn.
 
With respect to financials, we are advised by the show's General Managers that the 1st printed financial statement is in progress and should be issued soon.  At present though, we are pleased to report that the production costs are a bit underbudget and our preview weeks have cumulatively been just a little bit profitable, which provide us with an extra small cushion for "bumpy" weeks that may lie ahead, above and beyond the budgeted $345K reserve which is untouched (and we hope will remain that way).  To be fair, final production bills are strill trickling in so it would be premature for us to provide you with exact figures at this time.  But when it comes to dramatic plays on Broadway, "slow and steady" often wins the race and should we be able to continue to consistently run at a small profit on a weekly basis, we will ultimately outlast much of our competition which will only work to our benefit.  
 
You should also be aware that preliminary conversations are underway regarding re-casting the show after the current contracts expire later in the summer and there is also some discussion of a national tour.  If you have any names you would like to throw into the mix for casting consideration, please feel free to pass them along to one of us and we will make sure they are added to the lists that are being compiled.  Fact is, all of this is somewhat premature to consider, but we wanted you to know that it is already on everyone's radar.
 
"So nu?  When am I getting my money back?" -- that's the question you all likely have and in all honesty, the answer remains as it did when we first solicited your investment:  "We don't know yet."  If the show continues to run as it has, then the road to recoupment will be a very long, but not unrealistic one.  If we are forced to sustain losses in the coming weeks to help us get to the summer, that road will become an even longer one, and one which is not at all as smooth or assured.
 
One thing is certain though:  the "Steel Magnolias" team as a whole, and Ergo in particular, is committed to moving every mountain, leaving no stone unturned and in general, taking every step that is humanly possible to serve the financial interests of the production and its investors.  Only time will tell if we will be successful but we remain upbeat and positive about our prospects.
 
If you have questions, please never hesitate to be in touch with us and we are happy to discuss them with you and provide and/or obtain answers.
 
Once again, we are truly delighted and honored to have you as our partners on this magnificent production.
 
Best regards,
 
Donny, Yeeshai and Elie
Partners, Ergo Entertainment