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From Issue #16 May 9, 2013

Phish Scales

The band created a massive empire by building an audience one fan at a time.

By Rohin Dhar Twitter icon 

This story originally appeared in similar form at Priceonomics, and appears with permission.

Over the past four years, the rock band Phish has generated over $120 million in ticket sales, handily surpassing more well-known artists like Radiohead, the Black Keys, and One Direction. Since its start 30 years ago, Phish has consistently been one of the most popular and lucrative touring acts in America, generating well over a quarter billion dollars in ticket sales.

By other measures, however, the band isn’t popular at all. Only one of its original albums has ever made the Billboard top 10 rankings. None of their 883 songs has ever become a popular hit on the radio. It’s made only one music video, which was mocked mercilessly by Beavis and Butthead on MTV.

If the traditional band business model is to generate hype through the media and radio airplay and then monetize that hype through album sales and tours, Phish doesn’t fit the model at all. For a band of its stature, its album sales are minuscule and radio airplay non-existent. So when the “music business” cratered in the 1990s because of file sharing, and radio’s importance declined because of the Internet, Phish remained unaffected and profitable as ever.

Phish doesn’t make money by selling music. It makes money by selling live music, which turns out to be a more durable business model. This wasn’t some brilliant pre-calculated strategy by the band or its managers; it’s the business model that sprang forth from Phish’s brand of music. The band developed the kernel of this musical style during its first five years, when they played almost exclusively in bars in Burlington, Vermont; they grew their audience a few people at a time.

During this period the band maniacally focused on improving the quality of their music through intense practice and frequent gigs at bars. And while at first these gigs were relatively unsuccessful, their audiences grew over time, and the band started to make money. After five years of obscurity, the group was profitable before anyone in the music industry knew who the hell they were. And with profitability came the freedom to make music on their terms.

In the parlance of startup language, Phish bootstrapped its business rather than seeking support from institutional players like record labels, talent agencies, and concert promoters. And that’s made all the difference.

The slow, linear rise of Phish

Phish’s first gig was playing an ROTC Ball in late 1983, before the group had even settled on its eventual band name. If you’ve ever heard the band play, you already know that its music probably wasn’t the best choice for future army officers and their dates to boogie to. Eventually, the band was drowned out when someone put on Michael Jackson’s “Thriller.”

After a brief detour when lead guitarist and vocalist Trey Anastasio was suspended for a semester from the University of Vermont for sending a human heart and hand through the U.S. mail as a prank, most of the band transferred to Goddard College, where the members could pursue a self-directed study of music. During this period, they started to regularly play gigs at local bars.

Phish’s first regular bar gig was weekdays at 5 p.m. The few people who came were their friends. After the ROTC dance debacle, the band couldn’t even get booked for campus gigs, let alone real music venues. But they stuck with playing bars at off-peak hours, and eventually the audience swelled modestly from friends to friends of friends and beyond.

Phish biographer Parke Puterbaugh comments:

This all worked to Phish’s advantage, as they weren’t swamped by success but experienced a slow, steady climb, during which they nurtured their craft in an environment where they gained a following one fan at a time. They gradually cultivated a varied audience of college students and hipsters from Burlington and environs.

Phish started to display the kind of growth in its fanbase that would characterize the rest of its career: it would win over fans one at a time through its live performances, and those fans would recruit their friends to come to the next show.

Eventually, Phish was invited to play at a more popular local bar called Nectar’s. At Nectar’s they moved from the upstairs stage to the main stage. Band frontman Anastasio remembers:

Usually there wouldn’t be that many people at the beginning of the night. People would come and go, and it would just kind of swell. Eventually, it started getting really packed, which is why we had to stop playing there. But for a long time, it wasn’t.

Eventually, they started to get a lot of stage time at the more popular bars in Vermont. During this time, the members honed what would become their signature talent: keeping a live audience enthralled, dancing, and having fun all night. Drummer Jon Fishman describes the freedom to experiment they had during this time:

For five years we had Nectar’s and other places around town to play from nine until two in the morning…We’d get three-night stands, so we didn’t even have to move our equipment. Basically, the crowd was our guinea pig. We’d have up to five hours to do whatever the hell we wanted.

A fan reminisces what it was like to hear Phish in those days:

“They sort of sucked when we first started seeing them,” admitted Tom Baggott, a Phish fan and acquaintance. “They were getting it together. They were sort of sloppy, you know, but that was the fun of it. That was the magic of it. It was like there was a big joke going on and all the early Phish fans knew the punch line—which was that this was gonna be something big.”

These insanely loyal fans not only dragged their friends to shows, but also started taping the shows and passing out the tapes to friends. Rather than squelch this “piracy,” the band encouraged it. Tape exchanges not only provided great marketing that led to larger show attendance, but also helped develop an obsessive fan base that would later desire to collect everything about the Phish experience: rare tapes, concert experiences, official albums, and merchandise. (Editor’s note: See Jon Seff’s “Collect Them All,” for more about how live-show trading works.)

After years of honing its craft in Burlington, Vermont, Phish got its big break in 1989. Or rather, it manufactured its big break. The Paradise Rock Club, a 650-seat venue in Boston that was a proving ground for rock bands, refused to book the band. By this time, Phish had two buddies serving as its business managers who were responsible for booking gigs. The managers took a gamble and decided to rent out the Paradise and take the risk of selling the tickets themselves.

With the help of its now-diehard fans, Phish sold out the club. Many trekked down from Burlington. One fan organized two buses from Burlington that brought almost 100 people.

After Phish sold out the Paradise, doors were open to them. Phish biographer Parke Puterbaugh relates the scene in the Boston music industry:

Beth Montuori Rowles recalled the reaction at Don Law’s office the next day: “Jody Goodman, who was the club booker at the time, was like, ‘Does anybody know who this band Phish is? They sold out the Paradise last night. How did that happen? I’ve never even heard of them before. They’re from Vermont. What is this? They sold the place out!’

“All of a sudden it was like the radar’s on them. The next time Phish played in Boston, the Don Law Company promoted it. They wanted a piece of it. End of story.”

Phish started touring in progressively larger venues. Still, the growth was never exponential or Bieber-esque. In an interview with High Times, Anastasio reflects:

If you look at the whole 17 years of Phish, it was an exact, angular rise. It was at the point where our manager used to be able to predict how many tickets we were going to sell in a given town based on how many times we had played there previously. Every time we played, it got a little bit bigger, and it kept getting a little bit bigger.

Shortly after selling out the Paradise, and despite not a single music label or management company knowing its name, the band was profitable. Rather than rushing to put out a Top 40 hit, the band could focus on doing more of what was already earning it money: making music and touring.

From here on out, the band rapidly accelerated the number of shows, performing well over a hundred times a year all over the country. By the end of 1994, they sold out the Boston Garden for a New Year’s Eve show. They were cemented as a big-time band that could sell out arenas, bring tens of thousands of fans to remote weekend festivals, and generate tens of millions of dollars in ticket sales per year. They were bona fide rock stars.

Why do people like Phish?

Among people who don’t frequently listen to Phish, it can be hard to figure out why the band is so popular. In this relatively early video, you can get a sense of the effect the band has on its audience. Even as the band plays a slow melody, the audience raucously bounces around, captivated by every note.

So why do people love Phish? Partly because the band is made up of immensely skilled musicians. Their intense practice conducted over years means that not only are their individual skills strong, but as a collective entity, they know how to play with each other. They are skilled musicians, but listeners disdain virtuoso musicians every day. The band members’ technical skill cannot completely explain their rampant popularity.

The first part of the answer is that Phish’s live performances are built around an interaction between the band and the audience. That’s the product that Phish sells. The audience is an integral part of the show.

When the audience hears the right cue from the guitar, the fans know to chant “Wilson,” and they know that Wilson is the antagonist from Anastasio’s senior thesis, an epic musical composition. When the song “You Enjoy Myself” comes on, the audience roars with delight when the guitarists jam while jumping on trampolines, even though they know it’s coming. As you listen to live recordings of Phish, you notice that for every note the band plays, the audience provides a response that guides the band. It’s the back and forth that creates a live musical production.

It took a decade of determined practice before Phish really started improvising onstage on a grand scale. If going to a U2 concert is like purchasing a mass-produced print, a Phish show is like buying a unique painting. The band has never played the same set list twice, and you never know when a 10-minute song could morph into a 30-minute improvised jam.

Phish also offers an immersive world that fans can get lost in, not unlike Tolkien’s Lord of the Rings. There is a mythology about the band and its shows and history. Just as a fan of Lord of the Rings may have memorized Frodo’s family tree, a Phish fan knows what Gamehendge and “the rhombus” are.

Fans don’t merely go see Phish; they collect Phish experiences. They track the number of concerts they’ve gone to, which songs from the band’s catalogue they’ve heard, and which venues they still need to see Phish perform at. Due to the band’s improvised and varied sets, Phish fans constantly collect new experiences. Popular shows like Gamehoist, Big Cypress, Clifford Ball, and Salt Lake City 1998 have taken on near mythological proportions.

Finally, it seems that Phish is full of whimsy and extreme energy. The band might be flying through an arena playing on a giant hot dog, performing an eight-hour set till sunrise, or pretending that Tom Hanks is on stage with them. There is an unpredictability to their shows. The drummer occasionally plays a vacuum cleaner onstage, and almost always wears a woman’s dress while performing (except when he performs naked). At any Phish show, something strange, amazing, or unique could happen. For the diehard fan, the fear of missing out on one of these shows drives them to try to attend every one.

All these reasons why people do like Phish also explain why other people don’t like Phish. Almost none of the experience of watching Phish live translates over to its recorded music. Its studio-recorded albums, without the excitement and energy of the audience, sound comparatively sad and lonely; almost like the difference between eating a great meal with a group of friends versus all by yourself. And while the music may demonstrate technical prowess, the complicated, layered 30-minute jams performed by the band don’t translate well to the radio.

Some people in this world love Phish more than you can possibly understand. This author’s wife is one of those people. As a compromise, one Phish song was selected to be played during the dancing portion of our wedding reception. When that song came on, half the dance floor cleared out. They stood to the side and stared with befuddlement as the other half of the attendees moved to a slow, strange, and seemingly undanceable song. The Phish fans were in rapture because their favorite band was blasting through the speakers, and they knew that if “Tweezer” was being played now, that “Tweezer Reprise” would make an appearance at the after-party.

The business model

From 1989 onward, before the band had even been signed to a record label, Phish was profitable from live touring. Keep in mind that the group had been at it for five years, scraping by on gigs in Burlington’s bars. Because Phish achieved financial independence before the music industry even recognized it, the group could more or less do whatever they wanted.

Phish took its early profits and started its own management company, Dionysian Productions. It hired a staff of 40+ people that handled its elaborate stage productions and back-office operations. The group built their own merchandise company so that the shirts and other paraphernalia sold reflected the band’s artistic sensibilities. The band even started a mail-order ticket company so that fans could buy tickets directly.

In 1991, Phish signed with a major record label, Elektra (owned by Warner). Because the band had the leverage in the relationship, they never really had a lot of conflict with their label about artistic control. They didn’t need money from album sales, because they made money from live shows, so they never had to dilute their artistic vision to get radio airplay and sell albums. Of course, the result of this artistic freedom was that Phish never sold albums at a rate commensurate with their popularity.

Perhaps more so than any major musical artist today, Phish derives its business model from hard-core fans of its live music. When Madonna sells out arenas across the country, she’s selling tickets to people that live in those places. When Phish sells out arenas or festivals across the country, it’s because diehard fans fly across the country to see the band. In the rare instances when fans don’t make the trek and the shows don’t sell out, the band punishes the no-shows by performing a particularly epic set. In a forum where ardent Phish fans compare how much money they had spent on going to see the band, the answers were in the tens of thousands of dollars.

While Phish undoubtedly has fewer devotees than Madonna, the ticket revenue per fan is way higher because its loyal followers attend multiple shows. Not since the Grateful Dead has a band built a following as dedicated. And like the Grateful Dead, Phish merchandising is a big business, as fans gobble up Phish T-shirts, baby onesies, and hats.

When file sharing and piracy ravaged the music industry, Phish was insulated because their primary business was selling access to live music, not recorded music. In fact, the band was able to take advantage of the trends of digital downloads and streaming. It bundled digital downloads of live performances with ticket sales so that everyone who attended a show could download its broadcast the next day. And those who can’t attend a show live can pay to stream the performance from Phish’s Web site. While technological advancements have made it harder for some artists to profit from their work, they have, if anything, made it easier for Phish to do so.

The rise and fall and rise of Phish

In 2004, Phish broke up. There are a lot of reasons given: rampant drug use by the band; the financial pressure of having over 40 people on a payroll that needed to be paid whether the band was touring or not; and that after 20+ years of a grueling tour schedule, the band had simply run its course.

In an interview with Charlie Rose right after the breakup, frontman Anastasio gave a compelling reason for the breakup — the passion for making great music together was no longer there. Anastasio tells Rose how he once felt about the music:

You know, it was like — the only thought was about the show. I mean, I used to lock myself in my hotel room as soon as the concert was over. For years, I would run back to my hotel room and start working on the set for the next night. And even though there wasn’t really a set list, there kind of was. Like I knew what was going on. And I was working and working and working, you know, oh my God, for hours, ripping pieces of papers up, books, you know, and I’d like you to practice them, come on, guys, everybody in the practice room. And then hours before the show, songs we hadn’t played in a while — I mean, it was just like a heavy work ethic until we got onstage. And then it was just a celebration.

The band that had practiced so diligently for most of its tenure stopped practicing in 1998. By 2004, fans began commenting that the musical quality of the band was declining. What could have been a triumphant final show in Coventry, Vermont, was a disaster. Not only did rain and mud wreak havoc on the weekend, but the band’s performance was universally panned. The musical geniuses of Phish went out with a whimper.

Phish, Inc., became a bloated, drug-riddled entity precisely when their desire to make great music together was waning. It was time to call it quits.

Until, that is, it was time to call it unquits. The band reunited in 2009 for a three-night show in Hampton, Virginia. The announcement sent a shock wave through the Phish community and an even greater shock wave through the Ticketmaster ordering system. The heavy traffic crashed the site.

In the five years they were broken up, the band members cleaned up, streamlined their staff, and gradually rebuilt the personal relationships between them. And so, in a testament to the strength of the following the group had built, the band members reunited and have generated over $120 million in the four years since.

After researching this story and finding out how hard Phish works at their craft, Rohin finally agreed to attend one of their shows with his wife this summer.

Rohin Dhar is the co-founder of Priceonomics, which was incubated in winter 2012 at Y Combinator. He also co-founded Personforce. Dhar drinks coffee and rides a bicycle.

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