Actor Replacement as a Pseudo-Natural Experiment in the Value of Human Capital -- Evidence from Broadway Shows

The theater provides a quasi-natural experiment for testing the direct impact of key personnel changes in complex organizations. Theater shows routinely turn-over actors in lead roles for a variety of reasons. However, all other elements of the show remain in place, including the director, the script, other actors and the physical theater environment. Even the lines stay the same.Our analysis focuses on transitions between top featured cast members in long-running Broadway shows. We compare sales, capacity and ticket prices just before and just after the change in cast. We also characterize the performers in various ways, and control for the attributes of the show, as well as for team characteristics.We find that only the most talented theater stars affect the financial success of theater shows, supporting the MacDonald (1988) version of the superstar hypothesis. A transition from a “non-star” to a “star” results in higher ticket prices and higher revenues. However, celebrities and well known stars from other fields of the performing arts do not seem to have a significant effect on prices or revenues. Teams are important, and a departure of a team or someone who had worked with the current cast before is detrimental to the performance of the show. Seasonal effects are important as well