A DEAD HEAD FOR BUSINESS

By GREG JOHNSON

Aug. 18, 1996 12 AM PT

TIMES STAFF WRITER

The parking lot scene at Irvine Meadows Amphitheatre earlier this month had all the sights, sounds and smells of a Grateful Dead concert: sweaty vendors hawking tie-dyed T-shirts, patchouli-scented waifs begging for free tickets, veggie burritos sizzling on a portable gas grill.

The only thing missing was the Grateful Dead, the improbable music industry success that called it quits after the Aug. 9, 1995, death of Jerry Garcia, the band’s spiritual and musical soul.

Furthur Festival, the Dead-influenced alternative music tour that touched down in Irvine with former Dead players Bob Weir and Mickey Hart as headliners, undoubtedly gave Deadheads--devoted fans of the Dead--a welcome sense of deja vu. But the six-week concert tour also underscored challenges facing an unlikely business empire that the rock band stitched together during three decades on the road.

When rock bands break up, individual members typically scamper off to pursue their own pet projects--or simply wait for the royalty checks.

But Dead Inc. finds itself at an interesting business crossroads: It’s lost a founder and creative light, and its lucrative days on the road are over. Now the ancillary businesses--most notably a cutting-edge merchandising arm that’s licensing everything from a Dead Red table wine to pricey Garcia-designed neckties--are scrambling to stay successful.

T-shirts and other memorabilia were always secondary to the live concerts that defined the Dead. For nearly a decade, the Bay Area band was one of the nation’s most successful and profitable live concert acts, regularly generating between $30 million and $50 million in annual ticket revenue.

Now the focus is on the product-licensing business that’s ringing up tens of millions of dollars in retail sales through thousands of record stores and shops around the country.

How long can you market images of a band that no longer exists?

“The fact is that Grateful Dead has become recognized as something far broader than a rock band,” said Peter McQuaid, a merchandising professional who was hired by the band four years ago. “The trademarks have become associated with, or symbolize, a lifestyle or counterculture that will continue to go on without the concert tours.”

Garcia’s death forced an immediate rethinking of how the thriving business was organized.

Employment at Novato, Calif.-based Grateful Dead Productions tumbled from about 60 in mid-1995 to about 35 as the company spun off a unique ticketing agency, trimmed employment at a recording studio and laid off employees whose jobs disappeared when the touring ended.

“It’s been a very painful process,” said Cameron Sears, a former environmental group organizer who joined the privately held production company as president in 1990. “These people were our friends; they were people who worked for the band for 25 to 30 years.

“But the handwriting was on the wall,” Sears said. “The automobile factory wasn’t making cars anymore. We made every effort to find holes elsewhere that could be filled with our people, even temporarily. And our severance package went beyond what most companies would have offered.”

The band’s decision to call it quits also caused economic pain for longtime contractors who had supported the Dead on the road. During a typical tour, the Dead created as many as 90 high-paying jobs for sound, lighting, security, catering and transportation companies.

“After Jerry died, there was a repercussion or ripple effect in San Rafael [Calif.],” said Jacky Sarti, business manager of Ultra Sound, which, along with the ticketing operation, is headquartered there. “When you look at all the companies that worked on the tours . . . there was quite a bit of money that wasn’t being spent in stores.”

Dennis McNally, the band’s longtime publicist, said the downsizing of the company was painful for band members because “nobody ever left this place, and you really had to screw up bad to get fired. These people were friends, family. We watched each other’s kids grow up.”

To truly understand the Grateful Dead, one needs to look beyond the acid-tinged parking lot scene and concentrate on the numbers.

During nearly 30 years of touring, band members performed 36,086 songs during 2,317 concerts in 298 cities scattered around the world. During the band’s last five years on the road, Deadheads forked over $225 million for tickets--including an astounding $34 million in the six months before Garcia died.

The business side of the band continues to pioneer the potentially lucrative market for licensed memorabilia: It recently broke onto the national retail scene with boutiques in 260 Best Buy stores.

The Dead also sold more than 20 million records--not counting the thousands of bootleg tapes resulting from the band’s seemingly off-the-wall practice of encouraging fans to tape their concerts.

The band’s easygoing image also overshadowed the fact that its technical crews were among the nation’s finest.

Ultra Sound, a San Rafael-based company that handled soundboards for nearly two decades, provided audio services for an entertainment stage at the Republican National Convention in San Diego last week. And Candace Brightman, the band’s longtime lighting guru, lit up the AT&T; stage at the Olympic Games in Atlanta.

Said John Scher, president of Montclair, N.J.-based Metropolitan Entertainment Group, which began coordinating and producing Grateful Dead shows in the early 1970s: “The Grateful Dead were constantly reinventing themselves when it came to things like sounds, lighting, merchandising and ticketing.”

Those who’ve worked with the Grateful Dead say the group’s success was driven by band members’ desire to please their customers. And it’s unlikely that any rock band ever attracted such a diverse group of fans.

The band’s telephone hotline still advises penny-pinching Deadheads with rotary dial telephones that touch-tone models “can be purchased for under $20.” Yet Deadheads also are recognized as pioneers on the Internet, and membership in the rec.music.gdead newsgroup has soared to more than 70,000 “netheads.”

The media like to concentrate on penniless parking-lot denizens who count on “miracles”--free tickets, in Deadspeak--for concerts. But Scher said Deadheads run the cultural gamut, “including more than a few judges, doctors and lawyers.”

Scher recalls the late-model BMW that screeched to a halt midway through a Dead show in Philadelphia in the 1980s. The driver, dressed in a three-piece suit, jumped out and began “cursing at some ‘bleeping’ judge who dared to keep the courthouse open late that night.”

“All the while, he’s taking off the suit, the vest, the tie and the dress shirt,” Scher said. “Underneath he’s wearing a pair of cutoffs. And then he whips out this tie-dyed shirt and runs off to the concert. Just like Superman.”

The band’s glitzy, four-color merchandise catalog also underscores the upscale tastes of Deadheads. A current issue offers $190 silk tour jackets, $120 sunglasses, $59 golf club covers and, for the Deadhead who’s got everything, a $90 “Workingman’s Briefcase.”

Relix, a bimonthly magazine for Deadheads, reports that 90% of its subscribers have college degrees and about 50% boast household incomes of $40,000 or more. And DeadBase, a Grateful Dead-licensed database that offers a comprehensive song list for the band’s 30 years of live concerts, once reported that its average customer spent $2,308.05 on stereo systems.

“The audience always came first,” Scher said. “And the brand loyalty, for lack of a better word, that that attitude encouraged exceeds anything else I can think of.”

What else, Scher said, could explain the band’s unlikely habit of encouraging fans to make bootleg copies of its live shows.

The band broke another industry dictum by putting key technicians on year-round salaries so they wouldn’t be lured away by competing bands. It again broke ranks in the early 1980s by creating a 40-person ticket agency that ended up selling 500,000 tickets annually--even though the agency never had a listed number and the band rarely advertised its shows.

“We could have sold a million or more tickets each year, but that wasn’t the deal we had,” said Steven Marcus, 43, one of four former supervisors who acquired GDTS Too when the operation was spun off earlier this year by Grateful Dead Productions.

The Grateful Dead’s legendary largess with employees and contractors increased, employees said, when the band’s popularity boomed following the 1987 “Touch of Grey” album.

Employees enjoyed extraordinarily high wages, generous health plans, tour bonuses and a raft of freebies that included T-shirts, compact discs and concert tickets.

Marcus reports that the ticket agency regularly turned a $200,000 to $300,000 operating profit but that band members could have easily “made $1.5 million a year if they’d wanted to. . . . Their attitude always was that ‘There’s enough money to go around.’ ”

McNally, who’s writing a book about the Dead, tied the generosity to the founding band members’ social beliefs.

“Pardon the mystic overtones here, but Jerry always viewed [success] as one of those things that, if you don’t seek it, it will come to you. If they’d have gone into this with the idea of grubbing money, it would have failed.”

The president of a company that printed the band’s concert tickets for more than a decade described band members as “straight-up people. They didn’t try to nickel-and-dime you like they teach you at Stanford and Columbia.”

But business school types would probably lavish praise on the Grateful Dead’s acumen when it comes to leveraging the band’s name and trademarks. Although overall employment at Grateful Dead Productions has dropped, the merchandising arm now has 20 employees, up from a dozen three years ago.

The company won’t discuss revenue or profit, but retailers and licensed manufacturers say sales soared in the wake of Garcia’s death as longtime Deadheads restocked their T-shirt collections and newcomers rushed to grab a piece of musical history.

Garcia drew rave reviews in recent years with designs for his neckties, and Ben & Jerry’s reports continued strong interest in its Cherry Garcia ice cream. And although Deadheads might prefer to drink Ripple, the company recently licensed Dead Red, a California red table wine that’s being sold for $12.99.

The Grateful Dead balked at bank affinity and telephone debit cards featuring the band’s ominous “steal your face” logo. But the merchandise catalog--it’s also available on the company’s elaborate Web site--still features more than 450 items, ranging from sports sandals to Jerry Garcia Christmas ornaments.

In recent months, the company has been deluged with proposals that promise “a very seductive cash flow at a time when our revenues have been abruptly changed,” Sears said. “But we’re trying to make sure that our marks are used in a tasteful and restrained way.”

Unlicensed vendors also have managed to ride on the band’s coattails.

“We all know the guy who’s vending [unlicensed] merchandise in the parking lot who looks like he wouldn’t have a penny to his name,” said Rebecca Adams, a sociology professor at the University of North Carolina who is studying the intricate web between the band and its fans. “But while you’re standing there talking, he’ll sell 15 T-shirts at $20 a pop, and he might end up making $50,000 a year from the parking lot.”

Willy Chilvers, a Forestville, Calif., artist who’s been selling handmade, tie-dyed ties to Deadheads for more than 10 years, said: “Initially, Jerry’s death caused a tremendous emotional blow. But later on I realized that this also jeopardized half of my income. It made me realize that I’ve got to extend my product line.”

The band’s businesses were never the result of market research or, until recently, a strategic plan. Rather, members jump-started new ventures “as the need arose,” Adams said.

“I get the feeling that just as their music on stage was driven by improvisation, their business dealings also were heavily improvised,” she said.

In the early 1970s, for example, the band pumped increasing amounts of time and money into a state-of-the-art sound system known as the “wall of sound.”

The bulky nature of the system forced the band to send two units out on the road, with one leapfrogging ahead so technicians could set the system in place. After one particularly stressful tour, the band sought shelter in temporary retirement.

Other experiments--a travel agency called Fly by Night and a record company--failed, and the band has been ripped off by friends.

Business experts will grimace, but the band usually relied on family and friends to run its businesses. McQuaid, who was hired in 1992 to build the product-licensing business, was probably the first outsider brought aboard because of his professional credentials.

And the band’s social beliefs didn’t include “planning for a successor,” Adams said.

“Jerry Garcia was a charismatic leader,” Adams said. “There was no thought given to who would replace him. It just wasn’t something he would have thought about.”

Technically, Furthur Festival wasn’t a Grateful Dead Productions tour--it was handled by a number of different promoters with long ties to the Dead. But Sears, McNally and a Grateful Dead Productions crew traveled along to provide services for Weir’s band, Ratdog, and Mystery Box, Hart’s group.

“It was a logical extension of what Grateful Dead Productions is all about,” Sears said. “We’re in the business of overseeing the affairs of bands.”

But if the Dead is no more, why don’t the survivors simply set the operating company to rest?

“That would be the easy thing to do,” Sears said. “I could form my own production company, tickets could do their own thing, and merchandising could go on its own.

“We’re still in transition right now, and I think the interesting story will surface in six to 12 months when we’ve really had time to make the hard decisions on what Grateful Dead Productions is going to be. We’ve spent so much time and effort creating this beast, and it might make sense to take it to the next level.”

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Staying Power

The Grateful Dead toured nearly nonstop for three decades and were among the nation’s highest-grossing musical performance acts. From 1987-1995 they were among the top five, ranking first in 1991 and 1993. Top five North American musical performance acts and gross ticket sales (in millions):

1990

*--*

Performer Ticket sales 1. New Kids on the Block $74.1 2. Billy Joel 43.0 3. Paul McCartney 37.9 4. Grateful Dead 29.0 5. Janet Jackson 28.1

*--*

1991

*--*

Performer Ticket sales 1. Grateful Dead $34.7 2. ZZ Top 24.7 3. The Judds 22.7 4. Rod Stewart 21.9 5. Paul Simon 21.2

*--*

1992*--*

Performer Ticket sales 1. U2 $67.0 2. Grateful Dead 31.2 3. Guns N Roses/Metallica 31.1 4. Neil Diamond 28.4 5. Bruce Springsteen 27.7

*--*

1993 *--*