Val, I hope you've seen Tommy live. It blows the movie away.
I was into musicals breifly towards the end of highschool (I was dating a drama student). Phantom and the other Webber abominations (Joseph, Cats, etc.) were quite popular within those circles, but they had no real concept of what a musical meant. A musical is an opera with dialogue breaks. The main focus should be in quality of music, as well as the quality of story. Phantom was an intriguing story, but the lyrics and music lacked seriosuly (in my opinion).
I think we could see the popularity of musicals return if we were to see some real quality. Until it can match it's competetors, who have the benifit of huge audiences, great exposure, popularity, and finances, musicals will remain on the back burner.
If a musical with the quality of Falstaff or the Barber of Seville were to come along, we might see a different response.
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