2-Jul-2018 (Mon)
Wherein shit's really expensive.

Always open with a joke, especially if it's a poop joke:

A guy walks into a bar and starts chatting with the manager. Suddenly the manager gets a radio call and says, "I gotta go, someone's poopin' on the sidewalk".

One of our regular local homeless crazies had gotten his hands on a framed painting of some kind. After running around in the street and harassing people for a while, he set the painting down in the middle of the street, took off his pants and squatted over it while cars honked and maneuvered around him. He could not be dissuated from this course of action -- everyone's a critic. Eventually, he completed the act.

After some time the cops showed up, and they said, "What do you call that?"

"THE ARISTOCRATS!"

(Pause for applause.)


A little while ago, Barry and I happened to look at one of our calendar listings from a month in the early 'aughts, and we were struck by how few days we were open. For those first several years, we were open on average about 3 nights a week. It was pretty much every Saturday and most (but not all) Thursdays and Fridays, and a smattering of mid-week events. These days, we average 8 or 9 events per week, counting both rooms. We looked at that old calendar and said, "How the hell were we able to stay open??" Well, the answer is, we were losing money even back then. But not nearly as much as today! And we're also doing so much more business now -- and yet we're losing even more. How's that possible?

It's not just a "lose money on every sale but make it up in volume" situation. It's much simpler (and more annoying) than that.

Math time! Vague and highly approximate math!

Since those early years, our rent has gone up by around 2.5× and our insurance has gone up by around 4×. (That's counting only the main club side, and totally ignoring the rent due to DNA Pizza and Above DNA.) Minimum wage has gone from $9 to $15, plus now we have to cover medical benefits for all of our employees which we didn't before (which makes for an effective current minimum wage of more like $16.90).

Meanwhile, ticket prices have stayed pretty much exactly the same. Seventeen years later, people still expect small live shows to cost $8 to $12, and large live shows to be $15 to $18, or maybe $20 for a show that's going to sell out early. Big dance parties remain in the $12 to $20 range. People just won't pay more. Drink prices also have not kept pace with expenses, or even with inflation: I think our prices have only gone up by a couple bucks since then. A drink that cost $7 in 2001 still only costs $9 today.

Over that period, compounded inflation comes to 42%. That means that what you can buy for $1 today, you could get for 70¢ in 2001. If you were paying exactly the same price for it, that $18 ticket in 2001 should cost you almost $26 today.

In other words, the real cost of a drink or a concert ticket has actually gone down. Today's drink prices are 10% cheaper, and today's concert prices are 30% cheaper. What a bargain.

So we've tripled the number of events we do; and we now often do 18+ and all ages shows, which greatly increases the number of potential customers; and yet we're hemorrhaging even harder than before.

That's what happens when your cost of doing business increases by 3× or 4× but your income stays stable or decreases, even while you're moving 3× as much product! You have to run so, so much faster just to stand still.

By the way, just to fend off the Libertarians: I am completely in favor of everyone having healthcare. I think it should be considered a basic human right. But it sure would be nice if I didn't have to pay for the whole thing myself. Like, if we could maybe tax a billionaire or two?

Likewise, I'm in favor of people being paid a living wage for their work, but it's not like we have the option of saying, "Welp, our rent is crazypants, so now our cocktails are $25 and our weekend dance parties are $45. Hey wait, where are you going?" So the always-correct Invisible Hand of the Free Market is telling us, "Your product is not economical, therefore night clubs should not exist".

Or should be loss leaders for vertically-integrated multinational artist management cartels.

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14 Responses:

  1. We’re going to miss the warrior woman hubba on Friday Kelly McMahon

  2. CTD says:

    The Invisible Hand of the Free Market is telling you to move to Oakland!

  3. Creech says:

    I feel ya. Ask me how I feel when some techbro complains about paying $1.00 for a game of pinball.

  4. Brolin Empey says:

    I thought that you bought the DNA Lounge instead of renting/leasing it?

    • jwz says:

      I own the business, not the property. Commercial space and residential space work very differently. It's extremely rare for a business to own their building. We rent this building (pair of buildings) from the grandson of the guy who built it in 1921, and he has been really excellent to us over the years. This is his grandfather in the middle, standing basically where the DNA Pizza bar is today, during the groundbreaking:

      • Jieves says:

        How do improvements work? When you replace the A/C and do the noise-dampening work, do you get any financial benefit from that?

        And what assets does the business hold if you liquidated—anything beyond the liquor licenses and food/sound equipment?

        • jwz says:

          With commercial property, essentially everything beyond the physical structure of the building is up to the tenant. The reason is that all the interior improvements are assumed to have no value to the landlord: when a nightclub is replaced with a Pottery Barn or an open-plan office for a tech startup, the first thing the new tenant is going to do is gut the place to the walls. When you're renting an apartment, you expect it to have a refrigerator and a toilet. With commercial property, you start with an empty box.

      • Troy says:

        A resident of SF back in the 60s -- the 1860s -- might have something to say about your LL here.

        https://www.economist.com/free-exchange/2015/04/01/why-henry-george-had-a-point

        Increased rent extraction is what is keeping a limit on other prices -- LLs tend to hold the whip hand, especially in SF!

  5. Chris says:

    Compared to Amsterdam those prices are pretty low. A cocktail here is typically ~$12 and a weekday live show ~$15. How does anyone even make any money in the bar/restaurant business anywhere? Is it all rent and insurance?

    Some cursory browsing for cocktail prices in SF (7 Mile House, Mosto) seems their prices are higher, are you sure the drinks aren't too cheap? I couldn't find a menu on the website.

    • jwz says:

      Yes, well, the Colonies have some issues that Amsterdam does not.

      I have honestly never heard of those places, but I suspect those are fancy cocktail bars whose bitters are served from little spray bottles and whose bartenders have well-groomed beards and suspenders. I have a lot of love for those kinds of bars, but they are not in the business that we are in. It's a different world.

  6. BHN says:

    Don't think you could sneak in a $0.25 increase per drink, per year or something to stop some of the bleeding? Every little bit helps...

    Pitch it as the cost of the new regulation compostable straws! ::ducks::

    • Owen says:

      There's actually a good reason drink prices tend to be round numbers, and it's not "drunks can't do math:" dealing with coins and small change is fiddlier and slower than deaing with bills, which slows down service - especially in the US, where there are no dollar-sized coins in wide circulation.

      That's not to say that that idea can't help, but it's a lot more likely that our gracious host would move prices by a whole dollar at a time unless the benefits were extremely clear.

  7. Jim says:

    Have you considered some odd events like, say, chocolate syrup wrestling?

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