Sillerman began his latest buying in an unlikely place, on an empty football field a few miles from his house, where he accidentally stumbled on a marketing gold mine. He was planning the "All for the Sea" benefit with Ron Delsener when he noted something odd about the rock trade: It rarely attracted national advertising. "For its size," he says, "it was incredibly inefficient. If you were Bill Graham in San Francisco, you might have a great venue like the Fillmore, but you weren't getting big sponsors. It's one event in one place with a few thousand people. But what if you owned dozens of venues?"
Sillerman thought that if he could unite the promoters, cluster their amphitheaters, centralize bookings, and sell the total package to national sponsors, he'd create an unstoppable league of live entertainment. Easier said, of course, than done. Years earlier, Delsener had tried the same thing, only to see his efforts crumble amid bickering and suspicion. "These guys hated each other," says Delsener. "They didn't want to give up their secrets. And no one had the type of money Bob had to just buy them out."
Indeed, he had the money -- and a second motive. At the time, his company, then called SFX Broadcasting, was a chain of 72 mid- and large-market radio stations that often sponsored local concerts but missed out on the lucrative ticket and concession sales that went to promoters. He wanted a piece of that action. "Bob saw this great opportunity for all kinds of cross-promotion," says Mitch Slater, the other half of DelsenerSlater Enterprises. "He's clearly a visionary, a guy who sees things other people don't and then seizes it."
Sillerman's opportunity came in 1996, when Delsener and Slater complained that they didn't like their partnership deal with Houston-based Pace Entertainment. The two companies had teamed up to buy the Garden State Arts Center, but DelsenerSlater was getting only a third of the venue's proceeds. "Bob said to us, 'Why didn't you come to me?' " recalls Slater. Over lunch at a midtown Italian restaurant, Sillerman agreed to buy DelsenerSlater for $27 million in cash. He brought on Slater, 38, and Delsener, 63, to jump-start the concert division. He moved their staff of eighteen from a cramped brownstone into his spacious offices. The two men then began introducing Sillerman around the insular concert world, opening doors long closed to outsiders. Most promoters vowed never to sell -- at first. But armed with fistfuls of cash, and promises of big earnings, he preached a gospel that was hard to resist. "Every one of these guys could be bought," says Don Fox, owner of New Orleans's Beaver Productions and a rabid SFX critic. "He's like Santa Claus. He gave them the biggest payday of their lives. These people? They just took the money."
Sillerman quickly snatched up dozens of outfits in San Francisco, Boston, and Washington, D.C., among other cities. He targeted those with a stable of amphitheaters, which the promoters had built a decade ago to steal business from stadium owners. Sillerman kept each business intact, drawing its seasoned chiefs into SFX with blocks of stock options. Finally, in the spring of last year, he assembled his unruly bunch in a Nashville hotel to deliver his marching orders. "He walks in wearing jeans and a T-shirt, and the first thing he tells us is 'We're all gonna make a lot of money. We're gonna have a lot of fun. But most important, we're gonna have a lot of fun making a lot of money,' " recalls Gary Becker, CEO of Pace Motor Sports.
The Becker family had sold Pace's three successful units, including its concert business and Broadway touring outfit, for $190 million in cash, stock, and debt just a month earlier. The family liked Sillerman's get-rich bravado but feared a corporate culture would destroy their chummy club. Sillerman set them straight. He works well with entrepreneurs because he's one of them -- he speaks their language and has no problem spreading credit along with cash. "Most of the business things we've achieved," he says, "have been other people's ideas that I've been able to embellish a little."
In his buying spree, Sillerman had forked over hefty goodwill payments -- money given above a business's tangible bricks-and-mortar assets. In several cases, it equaled two thirds of the selling price. In the end, the goodwill run-up was over $1 billion. And Delsener, who had sold first -- and relatively cheap -- was reportedly furious. "He was Sillerman's consigliere, his ace in the hole," says one veteran promoter. "And then he got the least money. He practically gave the business away."
Delsener denies this, insisting he could have retired rich "long before Bob Sillerman showed up." When I ask him about the inflated payouts, he turns humorously gruff. "He tells us what he pays after the fact," says Delsener. "We say, 'How much? You could have got it for half that, you stupid fuck.' He says, 'I know.' Tell him I said that."
"Could we have paid less?" Sillerman says. "In some cases, maybe. Definitionally, when something is auctioned off, it means you're paying more than someone else. If you think it's worth ten, we think it's worth eleven. Somebody has to think we're paying too much."
Most everybody thinks Sillerman is paying too much, including the very promoters who have grown rich on lavish SFX buyouts. "They overpaid for us and they overpaid for everybody," says one promoter with Bill Graham Presents, which sold to Sillerman for $68 million in cash and stock, or seven times cash flow. "I'll tell you flat-out I sold for the money. When was I ever going to get a golden opportunity like this again?"
"Bob can take a dollar bill and in 25 minutes it's $100," says Bruce Morrow. "You don't ask how; you just appreciate it."
For Sillerman, it was worth it to sew up the industry quickly rather than dicker with doubters. Today his 120 stages form a rock-and-roll Super Bowl for advertisers. With 25,000 events in 1998, he delivered 58 million demographically desirable consumers with a single contract. "These are people voting with their feet and their wallets," says Sillerman. "If you go see Tom Petty or the Spice Girls, you've chosen to do it. You're excited. You're not doing this passively -- like watching TV at home. You're spending money, and you're very receptive to hear direct or subliminal messages." Indeed, SFX's ads in trade magazines aimed at advertisers read, "Remember that magical moment when your daughter's eyes widened to meet her favorite characters live on stage? . . . It's exciting, it's magical, it's completely engrossing. And we found a way to package it."
In a business that still has its share of sixties-style idealists, Sillerman's hard-sell tactics have many competitors cringing. "It's all we can do to keep sponsorship off the stage," says Scott Welch, who manages Alanis Morissette, one of the few artists bypassing SFX promotion. "It's a corporate mentality. The act becomes the reason to sell beer, the reason to sell parking."
Such hand-wringing hasn't stopped major brands from diving into the mosh pit. In quick order, Sillerman has locked up $70 million in sponsorships. His music halls are turning into marketing malls, from Kendall-Jackson (wine-tasting tents), Smirnoff vodka (banner ads), and Johnson's Kids Hair Care (shampoo samples) to its biggest catch, Levi's, which zipped up the rights to an entire second stage in most of SFX's amphitheaters for $15 million over three years.
"If you want to reach the entertainment buyer, we've got the only national model," says Irv Zuckerman, who founded the St. Louis-based Contemporary Group concert-promotion company in 1968 and sold to Sillerman for $92 million in cash and stock. Zuckerman himself had tried to reach national advertisers years earlier, but with limited success. "Bob has delivered on every one of his promises to us. He's a great jockey. He's the one you want to ride this horse."