It is 10:30 PM on an evening in early June, 1959, in New York City. Fading Broadway producer Max Bialystock is opening his newest show, “Funny Boy,” a comic musical version of Hamlet (“Opening Night”). The theatergoers leave shaking their heads — the show is a complete flop and closes before the opening night is even over. Max reads the terrible reviews and laments the downward turn his career has taken, but he is determined to make it back to the top ("King of Broadway").
Leopold “Leo” Bloom, an accountant, arrives the next morning at Max’s shabby office to go over the books for the show. Max hurriedly shoves him into the bathroom to hide -- one of his elderly women supporters has come to pay him a visit. It turns out that Max has been playing a gaggle of little old ladies, trading affection for their regular checks. Leo walks out of the bathroom and in on a dirty game that this woman, dubbed Hold-Me-Touch-Me, is making Max play with her in order for him to get his check -- and immediately turns around and hides again.
Max manages to get Hold-Me-Touch-Me out the door, and he and Leo get to business. Leo confesses that he has always harbored a secret desire to be a prominent Broadway producer like Max once was, but Max scoffs and tells him to just do the books. After a bout of hysterics when Max tries to get him to hurry up his speech, Leo points out a discrepancy in the accounting for Funny Boy: Max raised a hundred thousand dollars for the show, but it only cost ninety-eight thousand. Max begs him to shift the numbers around a little to hide it, and Leo reluctantly agrees, musing that one could quite possibly make more money with a show that flops than one that is a hit. Suddenly, Max is very interested, and comes up with a scheme: the pair finds the worst play ever written, hires the worst directors and worst actors, but raises two million dollars for the show. Once the show flops and closes, they keep the money and go to Rio.