July 26 (Bloomberg) -- The contract between Broadway producers and unionized stagehands will expire Sunday with a distinctly undramatic absence of shaking fists, angry placards and picket-line chants. There will be no strike and no interruption of box-office business-as-usual, certainly not during one of the busiest times of the year as tourists flood the city.

The two sides took a recess last week until after the contract runs out, and this being one labor-management showdown in which all parties can generally afford summer homes, who can blame them? After all, the only certain outcome of the negotiations is that when the dust settles, everyone will claim victory -- and ticket prices will go up.

The stagehands will have retained most of the arcane work rules -- some dating from their union's founding more than a century ago -- that give them, weirdly, almost total control over what goes on in theaters. As members of the International Alliance of Theatrical Stage Employees, stagehands must be present at rehearsals in the theater and during performances. Only a stagehand can plug in an electric cord, move a prop, raise or lower a curtain. Only stagehands can build and maintain sets.

Nothing happens in a Broadway theater without one or more of the industry's 350 union stagehands getting paid. That won't change.

This makes Broadway producers crazy. Every time a contract comes up for renegotiation, they complain that IATSE's work rules are responsible for skyrocketing production costs. The result, they say, is fewer shows produced, a higher failure rate of the ones that are produced, and inevitably, higher ticket prices.

Pretty Good Deal

And they're right, sort of. The stagehands have a pretty good deal. They get full-time salaries and benefits, often in the $100,000 range, for what is essentially part-time work, when you consider the fact that your average Broadway show runs 2-1/2 hours, eight times per week. Some of the work rules are inarguably expensive; requiring the presence of a stagehand when a reporter interviews a playwright in the theater's lounge, for example, seems an extravagance when everyone in the industry will benefit from the exposure.

If a Broadway musical is being mounted for, say, $10 million -- which is a low average figure for a show that hasn't already been developed in a nonprofit theater -- about 15 percent of the pre-opening costs will go to the stagehands. Once the production is up and running, assuming it does run, those costs drop considerably.

But those extraordinary capitalization costs aren't due solely to the fact that stagehands have a decent contract. Every time a producer mounts a Broadway show, he or she has to rent a theater and then start from scratch: Renting lights, building the sets and the equipment that controls them. Some of these are unique to a show, but others an outsider might think ought to be part of the theater package.

Stripped Bare

The practice is called ``four-walling,'' and it means that the producer is renting a theater as if it had been stripped bare. The producer also pays for the theater's box office personnel and front-of-house employees, among a host of other costs. Half a show's weekly running expenses are related to paying for the house, not the production.

It's been this way ever since the three Shubert brothers wrested control of the commercial theater from the Theatrical Syndicate at the turn of the last century and gained iron-clad control over more than 1,000 theaters nationwide and the shows that went into them. (In London's commercial theater, where union costs are considerably lower, the same rules apply.)

Surreal Setup

This setup is a gift not only to those 350 stagehands, but to theater owners, who don't have to invest in equipment and who get producers to pay the salaries of their employees. Another wrinkle: Sometimes the theater owners also are the producers or co-producers, in which case they're more likely to give themselves and their partners a break on, say, rent. Other times, they're just landlords, looking, not unjustifiably, to generate the most income from their property, no matter how much pain that causes.

If you are an independent producer struggling to keep your show alive, the weekly rent is a lot more daunting than the cost of your stagehands. That's the chief reason why the current makeup of Broadway management, which includes both independent producers and theater-owners-slash-sometime-producers, is so completely dysfunctional. There's so much hollering between them it's clear they hate each other nearly as much as they hate the unions.

Everybody Happy?

And that's why the only guaranteed outcome from this surreal situation is higher ticket prices. They keep everyone happy but the customer.

When I was reporting on the opening of ``The Phantom of the Opera'' in 1988 at the Majestic Theater, one of Broadway's crown jewels, there was much hand-wringing over the $50 top ticket price. Two decades later, ``Phantom'' charges a top price of $201.50. ``Young Frankenstein'' will open in the fall at the Hilton Theater with a top ticket price of $450. And as sure as Christmas follows Thanksgiving, the $500 ticket will arrive with the New Year. When Irving Berlin wrote that there's no business like show business, he wasn't kidding.

(Jeremy Gerard is an editor for Bloomberg News. The opinions expressed are his own.)

To contact the writer on this story: Jeremy Gerard in New York at jgerard2@bloomberg.net.

Last Updated: July 26, 2007 10:19 EDT