Rolling In the Dough

The new Fortune has an entire section on the Rolling Stones money-making machine. Inside Stones Inc:

Jagger is eloquent and informed, but he has a disclaimer: “I don’t really count myself as a very sophisticated businessperson,” he says as he leans back on the couch. “I’m a creative artist. All I know from business I’ve picked up along the way. I never really studied business in school. I kind of wish I had, kind of, but how boring is that?” he says with a grin.

Like the protagonist in one of his most devilish songs, Mick has been around for many a long year. He had plenty of smarts to begin with, and now he has 40 years of music industry experience under his belt. Jagger may be getting a trifle old to rock & roll–he’ll turn 60 next July–but from a business perspective he’s at the top of his game. Which makes sense in a way. After all, that’s a typical age for a CEO of a large, multinational organization. (Okay, so most of the CEOs we follow don’t have to swivel-hip their way through “Midnight Rambler,” but you get the point.)

There are, of course, plenty of detractors who say the Rolling Stones should pack in their guitars and drumsticks. “Way old,” they sniff, “and way irrelevant.” I have two responses, one subjective and one objective. Subjectively, the Rolling Stones sound pretty damn good, even after all these years. And objectively, if they’re such has-beens, then how do you explain the band’s phenomenal commercial success over the past decade? No, they aren’t writing groundbreaking songs anymore–in fact they haven’t really recorded any new material of note in 20 years–but we sure are listening to their old stuff. A lot. And buying concert tickets. Millions and millions of them. And that’s the wrinkle here. Even though the Stones have been in what you might call a creatively fallow period, we want to hear them more than ever. Couple that with the fact that they have perfected their business model, and it’s easy to understand why they are such an astounding moneymaking machine.

The bottom line is this: “The only rock & roll band that matters,” or “the greatest rock & roll band in the world,” or whatever you want to call Mick, Keith Richards, Charlie Watts, and Ronnie Wood, they are far and away the most successful act in rock today. Since 1989 alone–the beginning of the modern age of the Rolling Stones (more on that later)–the band has generated more than $1.5 billion in gross revenues. That total includes sales of records, song rights, merchandising, sponsorship money, and touring (see charts: Hot Licks and Packing Them In). The Stones have made more money than U2, or Springsteen, or Michael Jackson, or Britney Spears, or the Who–or whoever.

Talent and Labor:

As with most thriving enterprises, the Rolling Stones Inc. runs on a combustible mix of talent and intense labor–the product of four decades of trial and error. The band downplays the effectiveness of the organization: “I’m sure that if you looked at it and analyzed it, you could say, ‘Well, that’s fucked up,'” says Jagger. “That shouldn’t be like that. No, of course it isn’t run well. No show business organization is run well. There’s always too much money paid out.” Keith, for his part, just shakes his head: “It’s a mom-and-pop operation,” he laughs. “Mick is the mom, and I’m the pop, and then we have these offspring that need feeding.” Well, kind of.

The Stones, or at least some members of the band, can still come across as wiggy rock stars. (“You’re talking to the business right now,” Richards tells me, holding up his two hands ceremoniously. “These are the business.”) But in many respects the Rolling Stones are like any other large business. They are global, they pay taxes (grudgingly), and they litigate. The band has a P&L and budgets, and accountants, and lawyers, and bankers, and investments, and software, and hardware. “They know what they’re doing,” says Barry Diller, a Jagger confidant. “That’s what separates them from any other band.”

Spend time with their senior entourage and you quickly realize how the Stones got so market-wise. Sure, Mick attended the London School of Economics (“I mostly studied economic history”), but his greatest talent, besides strutting and singing, is his ability to surround himself and the rest of the band with a group of very able (they probably hate to be called this) executives….

Touring for $$$:

Today touring is professionalized, complete with immigration lawyers, traveling accountants, and real-time budgets. It is also the biggest moneymaking part of the Stones’ operation. Since the 1989 Steel Wheels tour, the Stones have grossed over $1 billion on the road. Though exact profit margins are hard to come by, it’s safe to say that tens of millions of that total flowed to each of the band members. It wasn’t always this way. “When we first started out, there wasn’t really any money in rock & roll,” says Jagger. “There wasn’t a touring industry; it didn’t even exist. Obviously there was somebody maybe who made money, but it certainly wasn’t the act. Basically, even if you were very successful, you got paid nothing.”

Jagger recalls that in the beginning, “you’d just jump from gig to gig. There’d be no sound or lights or anything.” Gradually, beginning with the Stones’ 1969 American tour–which ended with the debacle at Altamont–the touring business would become modernized, with traveling lights, sound, and stage. Jagger himself had a major hand in this, sometimes negotiating directly with promoters in various regions and countries. But it wasn’t until the 1989 Steel Wheels tour, when Canadian rock promoter Michael Cohl took over managing the band’s shows, that the Stones would begin to fully exploit the economic potential of this business.

Generally speaking, prior to Steel Wheels, the band would hire a tour director–the late Bill Graham of Fillmore West fame once filled this role–who would call local promoters in each city to set up shows. Individual deals would have to be cut with each promoter, who took, say, 10% to 15% of ticket sales after the cost of the show. The tour director would then have to collect $250,000 here, $400,000 there, from promoters all over.

Cohl, who started out as a self-described “drugged-out, late-teens strip-club owner from Ottawa,” had been one of those local promoters. After a run-in with the volatile Graham in 1988, Cohl came up with an idea that he thought would tantalize the Stones, who at the time weren’t on speaking terms with each other, never mind touring. “I knew the guys from Pink Floyd, who knew Prince Rupert, and I asked them if they would call Rupert for me,” he tells me as the sounds of the Stones rehearsing “Street Fighting Man” echo backstage. “Ten minutes later Rupert was on my phone saying, ‘Excuse me, young man’– he talks in this very nice, formal British accent–‘excuse me, I understand you have something to say to me.’ And I said $40 million for 40 shows. He said, ‘Very interesting.’ “….

Tickets and taxes:

The ticket-pricing controversy burns Cohl up. Athletes like Derek Jeter and Marshall Faulk are free to make whatever they can, “but people complain that Mick and Keith can’t. I think that is the biggest load of crap. We are only charging $50 a night for club shows, which we lose money on. I read on eBay one of the tickets to Roseland Ballroom [in New York] went for $10,000. That makes us schmucks! When we charge $300 for some seats, somebody’s out there selling them for $500. If we were to charge $500, somebody would sell them for more. Come on, what are they complaining about?” It’s true that ticket prices to Stones shows have outpaced inflation (along with health care and college tuition), but you kind of get the feeling that the same people who are complaining about high ticket prices also rue the fact that Blind Boy Fuller died poor.

The Stones are famously tax-averse. I broach the subject with Keith in Camp X-Ray, as he calls his backstage lair. There is incense in the air and Ronnie Wood drifts in and out–it is, in other words, a perfect venue for such a discussion. “The whole business thing is predicated a lot on the tax laws,” says Keith, Marlboro in one hand, vodka and juice in the other. “It’s why we rehearse in Canada and not in the U.S. A lot of our astute moves have been basically keeping up with tax laws, where to go, where not to put it. Whether to sit on it or not. We left England because we’d be paying 98 cents on the dollar. We left, and they lost out. No taxes at all. I don’t want to screw anybody out of anything, least of all the governments that I work with. We put 30% in holding until we sort it out.” No wonder Keith chooses to live not in London, or even New York City, but in Weston, Conn…..

How long?

So what keeps the Stones going? Money, yes. But the band could make big bucks simply by doing commercials instead of touring. Going on the road is about ego gratification. “This whole thing runs on passion,” says Richards. “Even though we don’t talk about it much ourselves, it’s almost a sort of quest or mission.”

The Stones and their estates will continue licensing songs and selling records for years. But sooner rather than later, the touring will cease. Jagger’s stage antics are remarkable when you consider his age. But how much longer? Charlie Watts, the oldest Stone, is already 61. The band hasn’t said this is the last tour, though it could be–and of course that kind of speculation is great for ticket sales, particularly in second-tier cities, where this really could be the Stones’ last show.

“How long can we go on?” asks Keith. “Forever. We’ll let you know when we keel over.” And when that day comes, it will mean not only the end of the world’s greatest rock band but also a winding-down of one of the most successful enterprises this crazy business has ever known.