GRATEFUL DEAD AND ROUND: INNOVATIVE INDEPENDENCE
Ron Rakow has served as president of Grateful Dead Records and Round Records since the companies' inception two years ago. With a strong background in business and finance, Rakow was able to overcome many of the capitalization problems that frequently face newly created independents. His business acumen is at least partially responsible for the success of a burgeoning artist roster that includes Keith and Donna, Old And In The Way, Jerry Garcia, Robert Hunter and, of course, the Grateful Dead.
RECORD WORLD: Upon going independent, why were two companies formed as separate entities as opposed to one label for all of your product?
RON RAKOW: When the Grateful Dead formed their own company, they didn't want to take the risk of being spread too thin. We agreed, then, that Grateful Dead Records would be only for the Grateful Dead and would be owned collectively by the group. Round Records is owned by Jerry Garcia and myself.
RW: Could you describe the way that your mailing list works? How many people receive your promotional material?
RAKOW: We had about 63,000 "Dead Heads" on the list last month, but it grows at the rate of about 1,000 per month, so we'd be safe in saying that there are now about 64,000. They all receive a package whenever we're planning a new release. We ask them to play the sample record they receive - they're 7-inch discs with six minutes of music on each side - for 15 friends, and a large number of them really try to do that.
The result is that we're sending out 64,000 packages to get a million ears exposed to our product. A lot of those kids also know how to call the record stores in their area to make sure that the records are stocked, and even to call radio stations to get them played. The Grateful Dead is a band, but what's hard for people to understand is that it's also a cult, a religion. The "Dead Heads" know that we're not trying to make the music conform to any particular format except our own. But in order for us to survive, the music has to be worked into the mainstream of public taste, and those people out there help us do that.
RW: Have you tried to determine how many of those people actually buy your records?
RAKOW: No, that would be expensive, but I have the feeling that it's a very substantial percentage. At present, though, we're finding that the unemployment rate among our audience is very high, much higher than the figures that are reflected in government reports. I'd estimate that about one third of the Grateful Dead audience is out of work.
RW: How has that affected your sales?
RAKOW: Well, it makes them somewhat slower. There's a certain amount of product, though, that people feel they have to own. If they're into that particular music tree, they have to partake of the branches, so we're not drastically affected. People will save up and buy the output of the Grateful Dead family.
RW: Is the Grateful Dead's following concentrated in specific markets?
RAKOW: California has an intense concentration; the percentage of our fan club membership, the "Dead Heads," in California is twice that of its normal percentage of the market. New York State has 15 percent of our membership. But our fan club has members all over, with heavy concentration in places that we've played frequently. And our distributors have made Round and Grateful Dead records available even in really remote spots; they've done an excellent job.
RW: Are your marketing efforts centered around the mailing list?
RAKOW: That's the most important single aspect of our marketing approach. The other things we've done haven't really been too interesting, because everybody does the same things: radio spots, TV spots, print advertising, a promotion allowance, and a rather substantial package of graphics that goes into record stores. Actually, I think we've done too much to expose our product; I think we should do nothing. The Grateful Dead, in fact, have decided that on some future album, we're going to do no promotion of any kind, because we have the feeling that it won't affect sales even one percent. I think that when you make a good record, the best advertising is somebody who really gets off listening to it. That person tells his friend, who in turn goes out and gets it and tells another friend. I think that's the way to sell records.
RW: Who handles radio promotion for your product?
RAKOW: We've engaged Howie Rosen and Noel Love in New York, two guys who are good traditional promotion men. They coordinate their activities with the promo men at our distributors.
RW: Round Records artists are basically spin-offs from the original Grateful Dead group or their collaborators. How immediate is the transfer of popularity from the Grateful Dead to its members, writers etc? For example, how are the sales of a Jerry Garcia or Robert Hunter lp compared to the sales of a Grateful Dead album?
RAKOW: Well, Jerry Garcia has a more direct connection in the public's mind with the Grateful Dead than Robert Hunter, because Jerry is in front of the group on stage. A Garcia record sells about two thirds as well as a Grateful Dead album and meets with an instantaneous excitement. The first Robert Hunter album sold far less than that, but still did surprisingly well, especially considering that he had never had a record before and had never performed. It was a profitable record, and his second album will be even more so. A record is profitable because of two things: on the one hand, there's how many records go out and therefore how many dollars were generated; on the other hand, there's how much is spent on getting the record out.
We take very realistic looks at how much can be spent on making our records. When Jerry Garcia is producing a Robert Hunter album, I'll tell him that he has "X" number of dollars to spend, and he invariably comes in below his budget. If I tell him that he has to have it in 36 days, he invariably delivers it in 32 or 33. That's the kind of responsibility that he feels about anything he undertakes. He never fools around; he's never casual or purposeless, and he'll never go into a studio and waste time.
RW: Do you envision any of your product being very successful in the singles market?
RAKOW: Yes, and I've been very dissatisfied up until this point. I would rather fail than be moderately successful, and the only way that we can ever score a dramatic success is to have a hit single. I identify very strongly with the music that I represent, and it would make me feel very good if a million people would agree that anything I offered was worth having. I want to sell a million records not only because of the monetary considerations, but because to get a million people to agree with you about anything is something to be proud of.
RW: How did you first become involved with the group and eventually come to head their record company?
RAKOW: I was part of the Grateful Dead family for years before Christmas of 1971, when Garcia was interviewed by Rolling Stone. That was a major interview in several parts, and one of the things he said was that he wanted to figure out some way to initiate an independent record company situation. I thought about it for about three months until the method of setting the operation into motion occurred to me. We spent six months putting it all together.
RW: I've heard that your financing is very unusual. Would you explain it?
RAKOW: Grateful Dead and Round Records are financed through the First National Bank in Boston. They evaluate the credit of every distributor that we do business with.
RW: Have you had problems with distributors placed on hold?
RAKOW: No distributors have been cut off for credit reasons. When they're late they are called by the bank and are asked to explain why. The bank is obviously active on the financial marketplace; they know when business is bad and when money is tight. They'll make allowances when necessary and as a result, we've had no losses of credit and nobody on hold. Our distributors have always acted responsibly and our product always sells through. The advantage lies in my not having to be in the horrendous position of having to sell something to somebody while demanding money from them at the same time.
RW: How high is the returns rate on Grateful Dead and Round Records product?
RAKOW: We haven't had enough returns. They've been averaging about 12 percent, and since our catalogue sells at that rate, the returns are simply shipped to another outlet. Experience tells me that if I were to get our product into the stores in greater depth, we'd sell a larger quantity of records. The problem is that everybody is now governed by the same recession-oriented negative psychology and they're buying lightly. Right now, for example, we have an album called "Old And In The Way" that's selling dramatically, and I think we could increase our volume substantially if we had more records in the stores. In some markets, every store is out of that record, and we've had to rush product to the distributors as fast as we can. Among the greatest sins in the record business is to have somebody walk into a store desirous of a record and not have it available. That's inexcusable, especially since records are returnable. One of the chief problems with the independent distributor mechanism is that it's difficult to spread the confidence that we have in our product to the distributor and retail levels.
RW: We've heard that your company is currently involved in developing an alternative recording device. Would you describe it?
RAKOW: There's not too much that I can say about that because I'm under the advice of council that we should first get further along with the patenting process before we divulge the details. We think that music has been the least considered aspect in the development of the electronics industry. Speakers, for example, are basically the same as they were 50 years ago - they're paper cones. Records are also basically in their original form. Technology has advanced sufficiently though, to permit the development of alternatives, and that's what we've been spending our time on. We're now working on a holographic retrieval system that we believe will be out in about one year.
RW: How important to the quality of your records is the polyvinyl chloride lining of your sleeves?
RAKOW: We've found that our records have met our quality standards at the pressing plant, but didn't by the time they were out of the stores. We then analyzed what happened between pressing and delivery and found that there's constant friction caused by the paper sleeve rubbing against the vinyl, and that problem is exacerbated by the lower quality vinyl that is now commonly used. There's much less aberration in recording reproduction when a vinyl sleeve is placed against the record. The sleeve costs us a little more than three cents, and it's one of the hidden benefits in buying our records.
(by Eliot Sekuler, from the "Dialogue: Viewpoints of the Industry" section, Record World, April 12 1975)