In Indulge Your Senses: Scaling Intimacy in a Digital World (Post Hill Press, 2019), author Michael Dorf speaks to his three decades of business experience. In this edited excerpt, Dorf reflects on opening his business during one of the worst times in America's economy, and what he learned that kept his business' doors open.
I'll never forget the moment I began to feel that something big was happening--not just to me, but to the business world and American culture at large. And it all started with a hug from Joan Osborne.
It was New Year's Eve 2008, just a few months after the collapse of Lehman Brothers triggered the financial Armageddon that nearly wiped me out, along with just about everybody else on the planet. The timing was awful. I was trying to execute my crazy idea of building a live-music club in New York City with its own custom winery. That's right, we'd haul grapes in refrigerated trucks from world-class vineyards on the West Coast to Manhattan and make exquisite vintages right here on the premises.
We called it City Winery. It would have an intimate, 300-seat restaurant where customers could drink our fine wines and order a delicious meal while enjoying concerts by artists such as Elvis Costello, Steve Earle, Suzanne Vega, and Esperanza Spalding. When the Great Recession hit, our winery had been built, the grapes had arrived, the restaurant and performance space were under construction, and my forty-three limited partners who had entrusted me with $5 million were in no mood for excuses. Basically, I was screwed.
And yet the show had to go on. We had already booked Joan Osborne for opening night. Though most people know Joan from her huge hit "(What if God Was) One of Us," she is about so much more than that one great song. She's a powerful, bluesy singer, songwriter, and musical interpreter with a passionate following - exactly the type of artist we knew would appeal to our target demographic of affluent baby boomers.
Waiting for Joan to arrive, I was a bundle of nerves. But, hey, I'm used to it. At forty-six, I'd been riding the emotional roller coaster of the music business for a long time, starting in 1987 when I used my bar mitzvah savings to open a music cafe in downtown New York called the Knitting Factory. It took off immediately and, during the dotcom boom, I raised $5 million from some New York venture capitalists, partnered with Apple and Intel to webcast music festivals, and raved about how technology was going to change the world. We all know what happened next: The tech bubble burst, 9/11 hit, and the country plunged into a recession. In the scuffle, I lost control of the company to some slick Vulture Capitalists and ended up on my tuchus (that's "ass" in New York Yiddish).
By the time New Year's Eve 2008 rolled around, I was determined to make my comeback with City Winery--economic meltdown or no. As the crew set up the stage, Joan appeared and began her sound check. Watching her work, I found myself remembering the mistakes I'd made at the Knitting Factory, when I became so preoccupied with webcasting our shows around the world that I ignored the needs of artists who were actually making the music. In fact, I wasn't even calling it music anymore-- now it was content. A low point came when one of my idols, John Lurie of the Lounge Lizards, wrote an angry letter to New Times Los Angeles claiming that "Dorf is Frod backwards." I used to be so close to the musicians I loved. Now some of them wouldn't even look me in the eye.
So at City Winery, I decided there would be no webcasting, no streaming, no recording of shows, period. I was tired of musicians looking at me like, You got any more of my money in your pocket? This time, we would invite customers into our room and simply let them experience the joy of live music by great artists, who would get most of the ticket revenue because they deserved it.
When she finished her sound check, Joan spotted me. Her face lit up. Hopping off the stage, she flung her arms wide, wrapped me in a bear hug, and began thanking me for creating such a wonderful space, one of the only rooms in New York--not to mention the rest of the country--where she could present her music in a warm, sophisticated setting. She didn't have to state the obvious: The gig also made sense financially at a time when the Internet had decimated the recording industry.
When the concert began, Joan did her thing. She was radiant in her long dress, casting her spell, pulling the audience in. I felt a lump in my throat and realized why her hug meant so much to me. My biggest sin over the years was not ambition--no apologies there--but rather letting technology interfere with the simple human exchange between artist and audience.
That night, the magic was back, and everyone in the room seemed to be sharing the same warm feeling. In the months and years that followed, we remained packed nearly every night, despite the recession, and I gradually began to understand why the high spirits of that evening continued: Joan's embrace was not just about my own absolution. Our whole culture was going through a similar reckoning.
By then, the smartphone and social-media revolution was underway, and, like me, our customers had inadvertently let technology disrupt their connection to music. Now they were coming to City Winery to get away from their devices. Eager to escape their hermetic digital bubble, they were excited to watch their favorite musicians pluck real guitar strings and slam actual drum skins while also nourishing their other senses--the dramatic sight of a legendary performer up close, the aroma of the winery, the taste of great food and wine, the touch of a nearby friend. The intimate experience we offered was a rarity in a live-music business that leans toward impersonal stadiums and cramped dives with sticky floors.
Within a few months, I realized that my initial hunch was correct: Having a fully functioning winery on the premises did differentiate us from other music clubs and restaurants and gradually helped us turn a profit. Turns out providing an indulgent sensory experience in a digital world was great for business.
Over the next decade, as we brought in more investors and City Winery expanded to five more cities-- Chicago, Nashville, Atlanta, Boston, and Washington, D.C. In the fall, our seventh club will open in Philadelphia (a brief foray into Napa Valley was our only miss). Our growth is now accelerating so fast that we expect to reach $90 million in revenue this year and $250 million by 2022, eventually expanding to thirty to forty locations in North America, plus more abroad. With double-digit operating profitability (EBITDA), our 75 investors are happy to be getting a very healthy return.
Despite our success, I'd like to be clear that I'm no Luddite. I still believe in the miraculous power of digital technology, which I use every day to run my business (including lots of social media and email, with little paid advertising). But here's the important point: In our rush to adapt to the demands of the new world, business leaders have overcompensated to the extreme that anything carrying a whiff of analog is cast aside as hopelessly out of date, irrelevant to our future, and probably uncool to boot. As a wealthy venture capitalist once told me, "It's gotta be all digital or it's not worth doing." That's a big mistake.
My counterargument is simple: As technology becomes more deeply woven into our lives, the key to success for many companies can be found in satisfying their customers' yearning for live human interaction. Enormous opportunities await anyone who understands that modern life has become a complex interplay between the world of atoms and the world of bits--and both are crucial to success. It's not an either/or proposition.
Take a look around. Even the greatest online retailer of them all, Jeff Bezos, realized that he could not succeed without physical stores--so Amazon bought Whole Foods Market and has opened new stores selling everything from books to groceries (Amazon Go) to four-star Amazon products. Banks like Capital One are becoming trendy cafes for millennials and entertainment giants like Disney are running thrill-packed theme parks. Independent bookstores are doing brisk business selling print books while vinyl records and film cameras are making a solid comeback. The $44 billion direct-mail industry continues to thrive because those envelopes and cardstock flyers get people's attention. Meanwhile, artists whose work has been digitized--from writers to visual artists to musicians--understand they need live events to reach their audiences.
The "digital economy," though growing rapidly, is still not nearly as big as one might think: Online shopping still only accounts for about 10 percent of all retail sales in the US. Combine that with society's increasing skepticism about technology--fears about everything from device addiction and privacy violations to fake news and tech monopolies--and it creates tremendous opportunities for any clever entrepreneur or company offering ways to satisfy our very human demand for the real thing.
On July 31st, Joan Osborne will headline our final show at City Winery's original Manhattan location before we move to a bigger, better space at Pier 57 on the Hudson River, a sparkling new $400 million mixed-use development that we'll share with Google.
Joan's show will be a night to remember, an experience impossible to digitize. You know what? During sound check, I think I'll give her a hug.