The Economics of Running a Music Venue

The Economics of Running a Music Venue
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MMI’s Entertainment & Media Business program recently hosted the first of a six-part series entitled, “Economics of…” Our guest was Scott Leslie, co-owner of Majestic Live in Madison, which includes The Majestic Theatre, Live On King Street, The Frequency, and the Summer Set Music Festival. Below is a summary of my candid and informative conversation with Scott where we discussed the joys and challenges of being a talent buyer, how music venues make money and Scott’s tremendous love for the City of Madison.

Scott and his partner, Matt Gerding purchased the Majestic in 2007; what were your biggest challenges at the start? The Majestic had just gone through an emergency shutdown by the police department and we didn’t necessarily have all the details on that… so, it came with a reputation that we didn’t think would be as hard to overcome as it was. Part of that was major skepticism from stakeholders in downtown Madison; people terrified we were going to turn it into a clandestine hip hop nightclub. There was a neighborhood advisory council we had to go to for the first year, to make sure they were happy with what we were doing. It was a very difficult process because we knew what we wanted to do and that our intentions were good; it was a bit alarming to deal with people that thought everything we were saying was bullshit. We knew that we wanted to be all things (as far as music). You have to come up with your own identity as a venue and not let other people dictate. If you want to open a punk rock club, that’s great, go get yourself a 100 capacity venue because that’s what you can fill on a nightly basis. The bigger the venue the less options you have to care about the type of music you book. We don’t shy away from booking anything and now we have a few more options as to where to put a show. Our target demographic for the Majestic is people who live downtown or go out downtown. We’re not here to book our favorite bands; we’re here to book bands that will sell tickets. We knew that from the beginning, but it does take a while to figure out which bands will sell tickets… It seems to me a lot of your marketing is trying to educate the community about new bands, is that true? No, we’re trying to sell tickets, but informing the audience is part of the process. We operate under the assumption that if we book your favorite band you are most likely going to find out because you are engaged with that band in some way; via their e-mail list or on Facebook. We are continually marketing towards the fence sitters. People who are engaged in live music will find out what is going on, who we need to reach are the people who aren’t actively seeking out live music. What you see as trying to educate people is actually us trying to persuade the fence sitters. What about Madison as a live music market, where does Madison fall in comparison to Chicago, Minneapolis or Milwaukee? One of my mentors in the business said the challenge with Madison is that the town is sophisticated musically, but they are not quite there yet on ticket price. Meaning, there is no doubt that the artists coming through Chicago and Minneapolis can sell tickets in Madison, the question is can they sell tickets at a price that makes the money work? I get in arguments with agents over this all the time. We’ll get offered something that is flavor of the week, or an artist that has minor celebrity and that is their only appeal. The agent’s attitude is, it’s a college town, kids will come out for that… My response is, the kids have 35 options this week and that is just this week. Madison is not impressed just because you choose to come to town. The market tends to play above its weight class in that way. careers in entertainment industry How much negotiating room do you have with agents? Less and less... And that is being further driven by the bands, which need to work more than before to make money. The band will say, what do you mean it’s not the right time to play Madison Let’s switch gears and talk promotion – online, print, or word-of-mouth – where do you invest the most? Scott did an informal survey of the room and online was the clear winner as to where people get their concert info. “I love print because you can craft what you want to say, it’s a mass media piece in every coffee shop and small business, but it is becoming less and less relevant. That used to be where you HAD to find out about stuff. When I lived in Los Angeles, I got the L.A. Weekly every Thursday and scoured the ads to see what shows were announced. Once print lost the ability to be that first place where people went to find out about what shows were coming up, they lost everything. So it is becoming harder to justify money on print. There are certain shows lend themselves to that audience, certain shows are definitely an Isthmus crowd… In general we are running out of places to advertise with any kind of effectiveness. The natural inclination then is to say, that’s great you don’t have to spend any money on print ads or radio ads anymore… Well, that money is now spent hiring people – we have two people that it’s there full time job to be living on Facebook all day and Twitter all day. We have a prompt at the end of our ticket buying process that asks where you found out about a show; word of mouth is number one, artist website is number two, and then it is our e-mail list and our Facebook  page. It is very difficult to cut through the noise of what everybody else has to say... there is no silver bullet… You mentioned the three marketing people, what’s the size of your full-time staff? We have a person that handles ticketing and contracts, an accountant, myself, my business partner who spearheads marketing and promotion, a marketing coordinator, a graphic designer, a street team coordinator, a general manager, a production manger and actually our graphic designer also handle special events… it’s getting pretty big. I assume your business depends on the special events – weddings, etcetera? Weddings are big, we also rent the Majestic out every Sunday to a local church. You can’t go into this business thinking it’s going to be easy and that every show you put on sale is going to sell out… Is a single wedding going to make the difference in your year? No, but if you hire somebody that can book 20 weddings throughout the year that money adds up quickly. It’s a crucial part of our business. If we’re closed on a Wednesday night, that opportunity is gone; we made no money that night. Provided that your not losing money being open, which is not as difficult to do as you might think, it would be hard to justify turning down weddings or special events. You have also been doing themed dance nights with local DJs (like 80’s vs. 90’s) and you recently had your annual Mad Men party– has these events been successful, were they an attempt to try and fill empty nights? That’s how they started; now they’re a key part of our what we do. It’s our Halloween and our New Years Eve. You mentioned the Mad Men party; next week we have a Backstreet Boys vs. NSYNC dance party. These events are great for a few reasons. One, you never want to be closed on a Friday or Saturday night and there are times we don’t have bands booked on those nights, so this is a great option. Two, It gives opportunity to someone that might not be familiar with the Majestic or interested in seeing live music, it gives them the chance to experience the Majestic, have a good time, see posters for our shows and maybe become a ticket buyer for an upcoming event. Finally, it keeps people interested in what we are doing; if we can get people used to looking at out calendar as part of their entertainment options, if we can become part of that conversation on a regular basis, then those nights help the live music nights too. What about Live on King Street, which is free to the audience, but you’ve obviously got to pay the bands? …And we pay them more than an average date because they look at it as a festival date – even thought it’s a free festival. You’re having to pay a band to fly in (instead of being routed through on a tour); consider the band are paying their manager 10% and their agent 15%, if we’re paying the band $10,000.00 and the band has five guys and two crew members.... How many flights and hotels does it take before it’s not worth it for the band to fly in to Madison for a one-off show? The common misconception is that venues are rolling in money; that’s not true, it’s very hard to make money doing this. Another misconception is that the bands are rolling in money; that’s not true either, they have a lot of expenses to get from point a to point b. Live on King Street is an epic pain in the ass, but it’s also my favorite thing we do each year. We’ve yet to make money on it, and I don’t care, it’s still my favorite thing that we do... It buys us love with the neighborhood; local bars and restaurants benefit off the event more than we do, every bar is packed. But, LOKS is the opportunity to own something that is becoming a defining part of what it means to live in Madison in the summer, just because it losing money now doesn’t mean it will be losing money five years from now. Very few things in this business are instant gratification… Lets talk profitability - how big of a part does the bar play in profitability? It’s enormous. The profitability of promoting concerts would not allow us to keep the doors open - we wouldn’t make one rent payment. If you’re in the middle of nowhere, maybe you can do it, but not in downtown Madison. Our expenses from month-to-month are enormous and it forces us to make some decisions that are not popular. I’ll own it because I’ll defend it; we don’t give away free tap water at the bar, we sell bottled water and people are angry about it. It’s not because we don’t want to give something away for free, but we have a small bar and it takes up space and time; the time it takes my bartender to get you ice water is time we could have sold a few drinks. Margins are thin and little things matter, there’s a famous quote; “I lose a little bit of money, but I make it up in volume.” What about ticket price, obviously it matters, but how much? Is there a line in the sand with Madison ticket buyers? When we first opened up I think it was $25. Now, I think the audience is accepting of $25. Additionally, I don’t think a $17 or $18 ticket is fooling anyone. Fence sitters are not going to skip a show because it is $20 instead of $18. Everything is a gamble – booking a band, the ticket price - this business is legalized gambling. You are putting money up, the odds are better than a casino, but you’re not going to double your money. You are going after small amounts of money and looking to do it enough times to maintain. We do a three-day music and camping festival that is an insanely risky proposition; we’re risking hundreds of thousands of dollars on one event. I don’t want to be disingenuous about the risk; somebody is going to show up. If we put up a $5K guarantee and another $5K to put on the show, somebody is buying a ticket and somebody is drinking beer, so in a club like the Majestic it is hard to lose a lot of money. It’s different if we rent the Barrymore and we don’t participate in the bar, then our risk goes up because it’s based solely on ticket sales. What about the City, now that you’ve been here a few years what is your relationship with Madison? The King Street neighborhood has changed a lot and I would like to think that the area businesses embrace knowing that their might be 600 people coming into the neighborhood on a Tuesday night, it benefits everyone in the area. In a lot of ways King Street has become a defining neighborhood for Madison – I know we love it. The neighborhood is a close-knit group of business owners; we feel we’re all part of something special in Madison. We are a small part of telling the story of what Madison is and what it is becoming. -Mike B. Join us for the next Backstage Pass: The Economics of... Running a Recording Studio with Mike Olson, owner, Blast House Studios &MADISON MUSIC FOUNDRY Monday, January 13 @ 6PM in Room 103 Madison Media Institute       Are you interested in event promotion? Check out the Entertainment & Media Business Program offered at Madison Media Institute.