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LEAD

The Dead Have Customers, Too

A look at the business organization behind the rock band The Grateful Dead, which grossed over $50 million in 1993.
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The most fan-friendly and comprehensive business organization in the rock world is run by the lowest-key granddaddies of them all. Surprise: the Grateful Dead are a lot like you

For six years running, the Grateful Dead rock band has appeared on Forbes magazine's list of the highest-paid entertainers, alongside other perennial list makers like Madonna and the Rolling Stones. The band, according to Pollstar, a trade publication that tracks concert receipts, was also last year's top touring act in the United States and Canada, selling $45.6 million in tickets for its 81 concerts. Add in recording royalties, licensing dollars, and merchandise sales of everything from tie-dyed T-shirts to stadium blankets imprinted with the band's "skeleton and roses" insignia, and the Dead's gross last year was well over $50 million.

What's singular about the Grateful Dead, though, is neither their financial success nor their almost unmatched 29 years of performing the same program to sold-out stadiums. Rather, it's the bona fide business -- complete with offices, payroll, and letterhead stationery -- that supports the band's free-flowing persona. Musical artists are the raw stuff at the core of a multibillion-dollar industry, but they tend to be the ultimate outsourcers; a business behind a band is unusual in the rock industry. One that is closely managed, carefully run, and unapologetically traditional is rarer still.

Grateful Dead Productions (GDP), incorporated in 1976, is certainly the rock industry's most fully formed company. Its 60 full-time, year-round employees -- who enjoy health-care and dental-care benefits, profit sharing, and bonuses -- move the musicians from concert to concert and handle a broad range of operations, including mail-order ticket sales, catalog merchandising, concert-site merchandising, a record label, a publishing company, a fan club, and a nonprofit foundation.

It's a stretch to imagine Jerry Garcia, the Dead's hirsute guitarist, losing sleep over whether new fans will become repeat customers. Or co-front-man Bob Weir holding forth on recurring revenues from concert tours. Or the group debating whether it's really focused on its core competency. But the structure of Grateful Dead Productions is such that it meets two tangible business needs: first, Dead fans -- the company's customers -- are better served than the fans of any other musical artist or group. And second, band members themselves -- as quasi managers and sole shareholders of the corporation -- steer the colossal force that whirls around them while distancing themselves from most operational details. Whether or not they think of themselves as entrepreneurs, the members of the Grateful Dead have what owners of other growing businesses strive for: an organization that thrives but doesn't distract.

Given how easily the business side of entertainment can dwarf and consume performers, it's remarkable that as their popularity has swelled, the Grateful Dead have managed to retain any of their counterculture image. What's intriguing is that the band seems to have done so not in spite of its growing network of business operations but because of it.

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"If there's a general concept that we've developed, I think it's one of maintaining control over what is our business," says Cameron Sears, who's been with GDP since 1987. The lanky 34-year-old manager coordinates tour plans from the skylighted attic of the band's Victorian house in San Rafael, Calif., which serves as GDP's offices. Tugging at his goatee, he describes GDP's evolution: "When we farmed things out we found that, by that simple fact, we'd lost control. And control in the creative process is very important; it's how we maintain our integrity. The more people that come between us and the final delivery of our art, the more diluted it becomes. And the less money we make."

Once an ordinary house with living rooms and bedrooms, the Deadquarters is now a warren of compact offices in which staffers oversee that creative process and supervise the mechanics of concert tours. Next to the space Sears shares with two others and the charitable Rex Foundation is GDP's "computer-network-station brain center," which houses a relational database of detailed expenses and revenues, venue by venue. An average concert last year, for instance, brought in $563,000 in ticket sales, but 45% to 65% of that was eaten by promoters' fees, building rental, and ancillary costs, like security. "When we're going back to a concert site," says Sears, "we get information off the computer and we negotiate. We can say, 'Your security costs are 20% higher than any other place in the country; you've got to cut those fees in half.' "

The fan-club operation in the next room is the "home of the Deadheads" and also home to a database of their 90,000 names. Last fall GDP mailed fans their first issue of the Grateful Dead Almanac, a combination newsletter and product catalog that offers a dizzying array of more than 150 items -- among them 50 recordings, 12 varieties of T-shirts, three styles of mouse pads, and golf balls emblazoned with the band's "Steal Your Face" skull logo.

The Dead make it easy for their ardent fans to keep track of scheduled performances. Two hot lines ("For the latest updated concert information on this hot line, press one. . . . "), one for each coast, describe tours and other appearances by band members. Whenever concert and ticket announcements for one of the band's thrice-annual national tours are imminent, the phone lines log 20,000 calls a week.

The band's ticketing business is probably the service most appreciated by customers. Started 12 years ago to handle the Dead's legendary New Year's Eve shows, Grateful Dead Ticket Sales now distributes up to half of all Dead concert tickets directly to fans. The Dead are the only band to run such an extensive operation. Pearl Jam's fan club has embraced the concept, but it may find that selling tickets directly to concertgoers can be costly: in addition to the hot lines and a line dedicated to ticketing instructions, the Dead support yet another line just to handle ticket problems.

In the summer of 1993 the band brought all merchandising in-house. Until then, outside contractors had handled concert-site vending, licensing deals, and prosecution of souvenir bootleggers. "Our contract with the merchandising firm was expiring," says Sears, "and we had become sure enough of ourselves to do it ourselves." Under merchandising director Peter McQuaid, who had previously cofounded a company that runs fan clubs for other rockers, average product sales at concerts have doubled to $2 a head. "I think it's appreciated by the fans that the band is more responsible for the merchandising," says McQuaid. He has introduced a level of management to the expanded operation as well. "We have a new software program for our mail-order processing and inventory control and for our music-inventory control. We're on the verge of generating our own daily, weekly, and monthly sales reports and profit-and-loss statements for each division -- wholesale music, retail music, tour merchandising, and so on. It will give us much more accountability to the overall GDP operation."

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How much does all of this business require of Garcia, Weir, and the rest? "We kind of leave it up to them," says Sears. "If they show particular interest in something, then we feed into that, but the idea is to allow them the opportunities and go about our business." Band members may review T-shirt artwork or help figure out tour routes, but nobody needs to wait for their opinions. There are people on staff whose job it is to make sure those things get done.

The job of chief financial and executive officer of GDP is a shared responsibility that band members trade off among themselves. The current CEO, bassist Phil Lesh, followed drummer Bill Kreutzmann. The CEO pro tem gives his approval to purchasing authorizations, compensation issues, schedule changes, and advertising designs.

But most weighty decisions are made by all the band members, at more-or-less-monthly board meetings. They're joined by Sears and McQuaid, and by controller Nancy Mallonee, publicist Dennis McNally, and longtime road-crew member Ram Rod. A portion of each meeting is open to all the staff, but as other boards of directors do, the group considers accounting audits, income projections, salary reviews, vacation policies, and the like in private.

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If the goals of having your own business are to play to your strengths, have a good time, and do things on your own terms, then the members of the Grateful Dead are very good businessmen. It's that familiar balance of control and delegation. "The major decisions, I'd say the band members are very involved in," says Sears. "The minutiae they're not involved in much at all. Really, they're not unlike the president of any other corporation."

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Last updated: Sep 1, 1994




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