Keynote Q&A: AEG Worldwide’s Gary Gersh

Interviewed by: Ray Waddell, Oak View Group

Gersh: As a super young guy starting to look at talent in general, the deciding factor for me was always whether someone could play live. I learned from being a fan. And, as a student of the business, I followed guys like Chris Blackwell, Ahmet Ertegun, Arif Mardin, Jerry Wexler, Berry Gordy. They all understood the difference between good talent and great talent. I always felt, and then I learned, that we can teach people to make records but we couldn’t teach them to be great on stage.

Waddell: You’re an accomplished businessperson and you’ve done really well in different businesses. But on the live thing, there is a lot of conventional wisdom and unconventional wisdom around certain accepted practices. How much of it is instinct and how much of it is just straight up business?

Gersh: There is a piece of it that is just straight up business – just a numbers game, understanding how the structures work. I’ve been in the touring business for a long time – on the other side of the table. I’d like to have some of that money back, now that I know what this side of the table looks like. The biggest challenge is helping to create an atmosphere of talent development and artist development. That is where we are headed as a company – developing talent all over the world. With Jay [Marciano], Paul Tollett, Shawn Trell, and Rick Mueller, we’ve been growing the company and competing with ourselves, not looking too much outside at what’s going on.

Waddell: I want to back up a little bit to your involvement in what was going on in grunge and how the music scene in Seattle developed. You were at the epicenter.

 Gersh: Some of it was simply circumstance. It is such a weird thing. Grunge – I don’t think I’ve ever used the word. It’s a made up thing. It’s like you see a guy in a ratty plaid flannel shirt and you’re like ‘Oh, they’re grungy so this is the grunge scene.’ Being one of the original partners at Geffen, three of us dealt with signing the talent: myself, John Kalodner, and Tom Zutaut. Tom was signing Guns N’ Roses and all the things that he was signing. John was legendary and signing Whitesnake, Cher, and all of these amazing others. Fortunately for me, none of that appealed to me. It wasn’t what I was going home and listening to. I gravitated slowly to another scene and that scene was happening underground. It started to grow and grow and grow. The truth of the matter is that one of the must important acts that I ever signed to Geffen was Sonic Youth. I signed them before I signed Nirvana. Kim and Thurston were super influential in that scene. They were unbelievably, highly respected in the independent world. I was able to get to know them over time and convince them that they could have a broader future if they signed with Geffen. At the time we were a smaller, more focused, more artist development company in a world of behemoths. When I signed Sonic Youth, Kim Gordon had produced Hole’s first record so I signed Hole. Kim and Thurston told me about Nirvana. I saw Nirvana play up in Olympia. Once they were signed, the whole scene opened up. We ended up doing very, very well with Sonic’s first few albums. At the same time, I met a band called the Posies, who I also signed. Yes, Nirvana kind of blew up and blew up fast and became super big. And Pearl Jam was coming up not too far from that. That blew up slower but became huge. But it is the circumstance that I’m discussing. The weird part about it is, I think, if two gigantic bands came out Nashville tomorrow, it would be the hottest place on the earth. It’s not like Seattle was a hot bed of talent and there were all these rock bands hiding in the bushes. There just happened to be two world-class songwriters and performers who came out at the same moment.

Waddell: Are there key pieces to that puzzle like locally-driven record stores, radio, and promoters that embrace talent and present it, even if it was just a club on the local level? Will something like that ever happen again or do you think that was the last time?

Gersh: “In that day, there were great record stores in almost every city in America –
local record stores and chain record stores. There were a lot of great bands that happened before, during, and after Nirvana and Pearl Jam. It was an independent scene that was coming from a different place. The Sonics were pretty much the first band to sign to a major label, and it opened the door for everyone else to come through. It made it okay for Nirvana and everything that came out of that scene. It was vibrant for a long time. There were a lot of other cities that were vibrant once the door got opened.

“Certainly the people running independent record stores, and the coalition and everything that was happening in those days, were about the discovery of music. Today the discovery of music happens a different way. I do believe that there could be scenes that happen regionally. There are still good clubs everywhere. Word of mouth is just a different thing, and people will try to grow their audiences in different ways. It could happen again, for sure.” 

Waddell: Good. And I bet it was fun and an exciting time. You started as a record store clerk and got paid in albums, is that true?

Gersh: When I started, I did get paid in albums. I was just a little bit under 16 years old when I started. After I turned 16, we started a chain of record stores called Licorice Pizza, out on the West Coast. There were five of us that started it. I was the head buyer. I had a real, incredible immersion into how the music came from labels, what the sales people were like, how the records went over the counters, and why people were buying them. We would do things in those days that were unheard of, like guarantee sales didn’t exist. We would have people perform in our stores. It was a very different time. You could love music and help to break it. That kind of schooling I wouldn’t trade for anything. That is indelible in my life.

Waddell: [The record stores] were a kind of cultural epicenter, wherever they were. I think people forget that. They get their fix from social media or however. Is streaming helping to develop bands like albums and the radio did? I think the streaming works well with the festival mindset in that you can experience and can shuffle from one to the next. You don’t have to commit to the whole album. You see one band and hear another. I think the iPod and streaming together have fostered the way we consume music live and recorded content. Would you agree with that? And do you think it’s developing talent?

Gersh: Yeah, I agree with it. It’s connecting dots. All of a sudden, it says if you like that you’ll like this. Those recommendations are very valuable. Also what we pay for a monthly service turns out to be nominal. It becomes a thing that is just on your phone bill. I think it will just continue to add more and more people that wouldn’t be out buying music. I think we’ve made a cultural shift to people understanding that streaming is available 24/7 everywhere in the world. It’s that much more available to people who are part-time listeners.

Waddell: Streaming is like water or electricity – it’s just there. But you really have to put some effort in, and get off your wallet, to go see a show or a festival. Really, the gauge of an artist’s popularity is how they are doing live and how many people are standing in front of that stage.

Gersh: Yeah. I was talking to somebody who was saying that here [in Nashville] maybe a week ago, Jay and Beyoncé were at one stadium and Taylor was at another stadium. Bridgestone [Arena] was sold out. The Opry had something going. It was just on, everywhere. I think that is telling, about where people’s desires are. I think live shows, and big live shows, are becoming better for it. You have to compete with other shows that are coming through town.

Waddell: Break down how this global touring division will work. AEG has already been doing tours. It feels like maybe there was a shift away from the number of tours they did five years ago. When I talked to Jay [Marciano] about three years ago, he said that they were going to focus more on building and acquiring assets that were more permanent, like festivals and venues. Clearly, they did that with the festival acquisitions and on the venues and promotion companies too. Will there be an uptick on the number of tours produced or promoted by AEG now with your division?

Gersh: We now have over 110 clubs and theaters. We’re building Nashville Yards. We’re building the Mission Ballroom in Denver. We’ll probably add another 15 or 20 next year. Clubs, theaters, and venues are kind of the bedrock. Jay wanted to have the foundation built super smartly. That will yield benefits for decades to come. Festivals have grown exponentially – Coachella and Stagecoach, Hyde Park, Hangout, Firefly. We have 37 of them now, Coachella being an outlier because it’s the biggest festival in the world. It’ll do nearly 125,000 people a day for 6 days this year. Those two divisions, festivals and venues, are run by really great people. It became apparent that the last real bedrock piece we needed to get together was touring. I was raised at EMI to really think globally. I told Jay the only way that I’d put it all together is if we built it globally, and he agreed. I think we’ve already shown through the Stones, Taylor Swift, Justin Bieber, Ed Sheeran that, once we are in business with an artist, we don’t usually lose [them]. We are building a very broad-reaching division that has artist development and marketing in it. It has its own business affairs and operations. It has its own buyers. If we can develop more talent early, I think we will have done a great job. More is better, but probably better is better.

Waddell: To have the clubs, theaters, and festivals is a very effective artist development tool today. They aren’t mutually exclusive. I think the festivals are underrated as an artist development tool. If the band has the goods and everybody sees it, it’s that act that you see going from stage A to stage C. It stops you and you go home and tell everybody that you know. Do this times 50 across the country and in the clubs and the theaters as well – having both gives you a pretty good artist development platform. In North America, you then wouldn’t have to worry about radius clauses. You have a network. The upper level of arenas and stadiums is very competitive. It costs a lot of money. Are you envisioning something similar to say Arthur’s team over at Live Nation? Or just do an elite few tours and then have this whole other thing going on on the artist development side to build them up? Or are you going to home grow talent?

Gersh: Again, I think that it’s all talent based. If there is an artist we believe we can really grow, whether they are at the middle or the top or at the bottom, and we think it’s worth both of our time and our money, we are going to chase it and really try to be in business with them. Arthur is a genius at touring. He is incredible at what he does. We have a lot of people that have been around a long time as well. We have a lot of intelligence. I don’t think the thing is for me to build some elite team and go after just the biggest things. We are in a battle for everything. That’s just the way it is. At all sizes and at all levels. I think we will continue to be in a battle for as long as we are in a battle. That is kind of what we do every day. Then there will be the development of the talent – if we can get in early and keep them. Justin Bieber has never done a show with another promoter. And Taylor and Ed Sheeran. That is how Louis [Messina] runs his business. If we can continue to do that while we are developing more stuff earlier, hopefully we’ve made the right choices and I believe that our team will make good choices. I’ve been good at making good choices. Our business grows because people tell other people that we do a good job, we do what we say we’ll do, and we are good people. I don’t have any doubt that, apples to apples, we will win. They will win too. That is just the way that it is. We don’t need to win the way that they do. [Live Nation] is a public company. It’s about the stock price. Michael Rapino has done an amazing job. They can’t take anything away from the job he and his team have done. We don’t have to do that job. [AEG is] a private company. Fortunately, we are well-funded because Mr. Anschutz is one of the richest men in the world. We can grow at our pace, intelligently. I think that there was a time when AEG thought of itself as more of a boutique company. It’s no longer that. It’s a multi-billion dollar company.

Waddell: When your margins are so tight and you just wrote a $50m check and you put all the effort into scaling and flex pricing and knowing your market and coming up with a price the artist can live with, it has to be discouraging to watch it going out the window for another much higher multiple price on the secondary market. I notice where AEG has gotten out of business with StubHub on their secondary. Is that move related [to the fact] that you’re going to be in the global touring business more and risking more on the guarantees and hoping to recapture some of that secondary money? It’s billions of dollars a year.

Gersh: We see ourselves being involved in the kind of ticketing businesses that our artists want to be in. The VIP, platinum, and the secondary market are big items. I think today, artists are much more open to seeing the possibilities. If the secondary market is going out the window to someone else and it’s billions of dollars a year, I think it’s something that artists and managers are taking a look at it. How does that work for us going forward? Ticketing is in a big state of flux right this minute. And it’s a big business. Obviously, Ticketmaster is a behemoth. There’s a lot of room for us and a lot of room for partnering. I think you are going to see tons of changes in ticketing.

Waddell: I’d be remiss if I didn’t bring up the whole block booking: Staples Center and the O2, the Forum and the Garden, all of that. And understand, as an observer, that none of this is your call and it’s certainly not mine. You can say whatever you’d like to about it.

Gersh: We didn’t start it, so let’s just start there.

Waddell: I didn’t either. I had zero to do with it. It’s very tough to cover by the way. Are these sorts of things a distraction?

Gersh: Yeah, of course. There are moments when companies in all areas of business need to make decisions to hold their ground. That isn’t pleasant. In that particular case, we were forced into something that didn’t go down well and it ended up not being good for anybody. One thing about Jay and Dan and Mr. Anschutz and the whole team is that they aren’t going to be pushed around by anybody. They aren’t afraid of anybody. We are going to hold our ground when we need to. Mr. Anschutz and the whole team didn’t get here by accident. These things, when they come up, you have to take a hard look at what the line you’re going to draw. I can only say that all of us are all glad that it’s over.

Waddell: Companies become big. You block book festivals. I’m sure both companies do it. You require assets so you have more power to make them work together, leverage or not. To me it’s a no brainer that they would do that. It also helps in routing if you can bring 3 or 4 festivals to the table. It helps an act budget and plan their year. It also benefits you guys and the other guys that have several festivals. My question: can an independent festival compete with that sort of approach? You have roots in independent. Can a festival or promoter or venue operator break through now and get traction?

Gersh: A local market that has a local festival that isn’t owned by one of us – those can sometimes be more valuable. You can be an act that maybe would be the 5th or 6th slot on the main stage at Firefly but you can be a headliner at a local festival. As you grow, I think the local festival market also has less risk in it. Maybe it is a festival for 10,000 or 15,000 people. Those are really good things to do. If a festival is selling out at 10,000 or 15,000 people, it’s highly likely that one of us is looking to partner with you. But I still think the local festival market, just like the local venues, are really important.

Waddell: I think you’re right. According to a survey by a company called Skittle, out of 520 promoters, venue operators, and event producers, 82% of people working in this business are suffering from continuous levels of stress.

Gersh: Everybody has to take care of their stress their own way. People that know me know that I get up every day and I meditate and do yoga. That doesn’t necessarily mean when I get to the office I don’t get run over by a truck every day. Like I said before, I answer to my children and my wife. I try to go into the office and do battle every day – get our teams to treat people the right way. And when I come home, I try my best to leave it there. It doesn’t always work but I don’t want to live my life in stress. I don’t want any of you to live your lives in stress. I am a very ambitious boy, so it’s not that I think you need to be one or the other. I think we need to find the balance in life.