In the commercial theater world, recoupment is the 'break-even' point. Before a show opens, investors provide the upfront capital—the money needed for sets, costumes, rehearsals, and theater deposits. Once a show is running, it must pay its weekly operating costs, often called the 'nut.' Any money left over after those expenses is considered profit, which is distributed to investors until they have received 100% of their initial investment back.
Why some hits never recoup
A show can be a 'hit' in the eyes of the public—playing to packed houses every night—and still fail to recoup. This usually happens because of high weekly operating costs. If a show costs $800,000 a week to run and only brings in $850,000, it only clears $50,000 toward recoupment. If that show cost $15 million to mount, it would take nearly six years of sold-out performances just to break even. This is why managing the weekly nut is as important as selling tickets.
Post-recoupment profits
When a show officially recoups, its financial structure changes. At this point, the production begins to pay out 'net profits.' Generally, these profits are split 50/50 between the investors and the producing team. According to The Broadway League, only about one-quarter of Broadway shows actually reach this milestone, making it a celebrated event often marked by a 'recoupment party' for the company.
Source: The Broadway League, 'Broadway's Economic Contribution to New York City.'