Spider-Man Musical: A Cautionary Tale for Investors (and Managers)

Actors in the new "Spider-Man" musical are taking some big risks. So many of them have been injured in rehearsals for the show, with its complex flying contraptions, that a recent cover of the New Yorker featured an entire hospital ward of recovering web-slingers in red spandex.

But the bigger long-term risks are those borne by the investors in the play, who stand now to lose all $65 million of its costs. Talk about being caught in a tangled web. The backers made the critical but very frequent mistake of many investors and managers -- they bet on someone coming off a win.

It seemed like a sure thing. Three recent Spider-Man films set opening-day box office records and totaled nearly $2.5 billion in worldwide revenue. A new reboot, "The Amazing Spider-Man," is in production, featuring Andrew Garfield, the hot young co-star from "The Social Network."

The Broadway version, called "Spider-Man: Turn Off the Dark," comes from people with a record of both critical and financial success. Director Julie Taymor turned an animated Disney film into an unstoppable box-office powerhouse with "The Lion King." The music was by international superstars Bono and The Edge of U2. And there was the flying, promised to be Cirque du Soleil-style stunning. Anyone could spend $12 for a movie ticket to see millions of dollars worth of special effects. So the in-person experience has to be something special to justify a ticket price of up to $289 a ticket (in the "flying circle" section).

After repeated delays of the opening date, several outlets decided to break the rules and review the show. Ben Brantley of the New York Times said the only entertaining part of the show was watching the flying apparatus fail.

The sheer ineptitude of this show, inspired by the Spider-Man comic books, loses its shock value early. After 15 or 20 minutes, the central question you keep asking yourself is likely to change from "How can $65 million look so cheap?" to "How long before I'm out of here?"..."Spider-Man" is not only the most expensive musical ever to hit Broadway; it may also rank among the worst.

When it looks like a sure thing, put your hand on your wallet. Over and over, we've seen sure things fail on Broadway, in business, and in investing. Broadway legends behind "Annie," "Bye Bye Birdie," and "Funny Girl" have had their flops. "Hairspray" was followed by "Cry-Baby." Both were based on John Waters films but the first one made avalanches of money for its backers and the second made none. "Les Miserables" (world-wide hit) was followed by "The Pirate Queen" (flop).

Lessons for investors?

1. Successful people do not always know what it was that made them successful the first time.
2. When people have been enormously successful, no one wants to say "no" to them anymore.
3. People stay the same when the world changes around them. What worked at one time may not work even six months later.

It's just like the mutual fund disclaimer required by the SEC. Past performance is no guarantee of future performance. And in the case of "Spider-Man: Turn Off the Dark," my prediction is no performance -- by actors on stage or investment returns for the backers who thought it couldn't miss.

Image copyright David Apatoff 2011. All rights reserved.
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