When the hottest band on the road insists on a sweetheart merchandise deal, a venue manager has to build his case thoughtfully, always assuming reasonable people will be reasonable.
It was 1985 and Van Halen was playing the Houston Summit. At the time, it was standard for major arenas to ask for 40 percent of merchandise sales at concerts. Van Halen’s manager, Ed Lefler, was demanding a 30 percent deal.
Lefler’s approach was simple. “If you want to play this act, it will be a 30 percent deal, not 40 percent.”
Mike McGee, who ran the Summit at the time, wasn’t trying to be obstinate or hard-headed about the demand, “but it was hard for me to say okay, you get 30 percent, because what happens down the road? I had held the line for so many other acts so many times. I had a policy that if I offered him the opportunity for 30 percent, it had to stand the test of past and future events.”
So McGee began the negotiation this way.
“We’ll do an earned discount. We’ll start at 40 percent. If you do $6 a head, we’ll take it to 37.5 percent to the building; if you do $7, we’ll take it to 35 percent; if you do $8, we’ll take it to 32.5 percent; and if you do over $8, then you have your 30 percent deal.”
Lefler: “You’re being unreasonable and unfair.”
“What is your average per cap?”
“We’ve been averaging about $6 a head.”
“Okay, so in other words, you are looking to make $4.20 per person who comes to the show, 70% of $6. I’ll tell you what I’ll do. I’ll guarantee you $4.20 a head for each paid admission that comes into the building. You give me all the merchandise, all the correct sizes, and let me take the gamble on the upside.”
“I can’t do that. I might be giving away money.”
“You can’t say I’m being unfair.”
And that’s how it got resolved.
“I didn’t guarantee him the money. He said he’d take his chances on the other side,” McGee recalled.
Of course, this was only possible because McGee had a good understanding of his market and the band’s history. “I knew we’d do over $8 a head. We wound up at something like $12, so it did qualify for the 30 percent. But it was the gymnastics involved, so he could get his 30 percent and I could protect all the deals I’d had in the past as well as the deals going forward relative to my normal 40 percent. I needed to maintain the integrity of the deal structure.”
LEAVE IT ON THE TRUCK
During that same era, Guns ‘N Roses played the Houston Summit and the issue was, again, merchandise related. Well, one of the issues.
Their hot T-shirt was black with the words “Get in the Ring, Motherf****r.” (without the asterisks)
McGee called their merchandise manager, Doug Goldstein.
“I’m not going to sell that shirt because I still live here and I’ll get the calls tomorrow and you guys will be 500 miles down the road.”
“If you don’t sell that shirt you’re going to kill my sales; it will be horrible.”
“Doug, I hear you, and I don’t want you to think I’m being unreasonable or unfair.”
The Summit was playing two shows back-to-back, which gave McGee some leverage.
“What is your average per cap?”
“About $8.75 a head.”
“How about this? If we don’t do your per cap tonight without the shirt, the second show I won’t charge you anything for the merchandise and I’ll let you sell the shirt on the second night.”
McGee knew the merchandise would hold and would do well above $8.75.
“And I’m hopeful after the first night, because you have a bunch of stuff on your truck that is inventory you can’t sell that will sell if you don’t have that shirt on the stands, you’ll sell a bunch of merchandise you wouldn’t otherwise sell.”
The first show day arrived and, per standard practice, the various turn ins — first, second and third drops — began. “Our first turn-in, we had a per cap of almost $11. I think we did a $15 per cap, maybe higher,” McGee recalled. Just before the show started, he was back in touch with Goldstein.
“Doug, did you see the turn-in?”
“Yep.”
“We’re going to leave that shirt on the truck tomorrow night, too.”
“Whatever you say, boss.”
“We’re getting rid of a lot of inventory that otherwise was going to some Third World country.”
“Yep.”
“So you’re making money on goods you already had money invested in. It’s going to be a good night for all of us.”
Everyone was happy, but it was two of the longest nights in McGee’s life, because the show was scheduled to start at 8 p.m. and Axl Rose was pulling his shenanigans and the show didn’t get started until 11 p.m. both nights.
Still, there was the silver lining. “At some point, you can’t compromise integrity and character. Just letting someone have their way is not right.”
Regardless of who you are dealing with, the patron or someone coming in, a building has set policies, McGee said. You don’t work the policy to the problem, you work the problem back to the policy. Sometimes, you have a bad policy. Sometimes you have to make a decision based on changing something.
“I’m not going to espouse the morality, but I knew that was not consistent with the mores of the community in which I lived. I had a responsibility to the community and those I work for and I knew that T-shirt would not be well received in the community and also knew it would not impair Goldstein economically,” McGee added.
Bottom line, there’s always a way to grow your basis and build a case assuming reasonable people will be reasonable.
Secondly, it’s important to know your market. “I had enough confidence and back-end knowledge about merchandise in our market. We were always in the top 5 in the country. I knew we would surpass his average per capita,” McGee confessed. “I was coming from an informed perspective.”
“How did I do that? I was one of the first people to have a facility merchandiser, one of the first accounts FMI [Facility Merchandising Inc.] had. They stayed on top of that. I knew, when a show came in, all about the last five places they played prior to Houston. I knew what they had done, what were the best sellers and what they had on the truck as well as they did. We had to make sure they would have enough inventory. I had our guys make sure they had the inventory so we could get there. We knew what they had on their trucks before they got to the building.”
How did FMI know? Well, for starters, at the time, FMI was owned and run by legends Terry Bassett, Bob Geddes and Irving Azoff.
That’s the rest of the story. — Based on a true story as told to Linda Deckard.