Hi James,
When I have the budget, I try to use a live band. I use a mix of adult professional and semi-professionals along with a couple of our better student musicians from our school's band program. I can't pay the kids, but we do give them free tickets for their families and free merch from the shows.
The amount paid varies based on what I have in the budget.
The rate you're using seems fair and is actually a bit on the low side compared to programs with which I'm familiar. The number of players dictates the stipend paid to each. I try to pay between $300-$500/player for the entire production.
My music director (a volunteer from our English department who is a wonderful piano player and loves musicals), organizes the players from church groups and other contacts she has from local colleges. We schedule about 10 rehearsal sessions and 4 performances. The band rehearses separately from the actors until we do a sitzprobe on the Saturday before tech week. Then we do about 3 or 4 full rehearsals with the band before opening.
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Josh Ruben, M. Ed.
Fine Arts Head
Northwest Whitfield HS (dba, The Northwest Theatre Co.)
Tunnel Hill, GA
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