Elvis and Entrepreneurship

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I have just
returned from the Shrine. The acolytes have prepared the grounds
for holy week. The Porta-Potties are lined up and ready to go.

August 16 marks
the 30th anniversary of the death of Elvis Presley. Memphis
entrepreneurs have arranged lots of promotional events, all of which
are sold out.

It is too late
to make a reservation at Heartbreak Hotel, which is within walking
distance of the Shrine.

My front door
is exactly 7.9 miles from the Shrine. On the 16th, sometime
around 2 p.m., I shall drive a little under two miles down Goodman
Rd. to Highway 51, where I will turn north. Highway 51 becomes Elvis
Presley Boulevard 2.3 miles north of Goodman, when I cross into
Tennessee. I shall continue driving another 3.7 miles.

There will
be busloads of disciples visiting on this holy day. I want to see
how many bus-loads.

Elvis bought
Graceland for $102,500 in 1957. It carried a mortgage of $37,000.
It will probably bring in more than this on the morning of the 16th.
Then it will do it again in the afternoon. Even discounting for
price inflation, this is a good rate of return. Then there are the
shops. The Shrine gets 600,000 visitors a year, second only to the
White House.

Graceland is
legally located inside the city limits of Memphis, but this part
of town is officially known as Whitehaven, which no doubt brings
chuckles to local residents. It is not 1957 any more.

AMERICA’S
ICON. WHY?

A lot of entertainers
are referred to as America’s icon. If you count the sale of paraphernalia,
there is only one contender. Lisa Marie Presley sold 85% of these
rights, excluding Graceland, for an estimated $100 million in 2005.

As my friend
Jimmy Napier would say, "When someone puts $100 million in
your hand, close your hand."

The question
is: "Why Elvis?"

When Sun Records’
mastermind, Sam Phillips, started recording black blues, rhythm
and blues, and gospel singers, beginning in 1950, he had a very
small market. The number of radio stations that played these records
was minuscule. Phillips recorded, though did not release, what is
generally regarded as the first rock and roll record, "Rocket
88," in 1951.

The rock and
roll phenomenon became a cultural force outside of the black community
in late 1953 or 1954, depending on who is making the assessment.
Phillips was present at the creation.

What made Elvis
was an audience of teenagers, mainly girls, who had disposable income.
This was the first teenage generation in history that did. The record
industry in the 1930′s was heavily supported by young adults, but
Glen Miller and Benny Goodman also appealed to older people who
had money. Goodman’s famous concert at Carnegie Hall in 1938 was
not a phenomenon of teenagers.

The screaming
teenage girls at Frank Sinatra’s performances from 1942 through
1944, during and after his time with Tommy Dorsey’s orchestra, were
a herald of things to come. But the war years were still tight economically.
It took the full economic recovery of the early 1950′s to put so
much money into the pocketbooks of tens of millions of teenagers
that they could finance their own subculture.

Elvis walked
into Sun Studios in July, 1953, to pay to cut a two-side record
for his mother. He recorded another one, also at his expense, the
following January, 1954.

Phillips asked
him to record at Sun’s expense the following July.

Why?

He had heard
another man singing a song he liked, and he was reminded of the
truck driver who had paid to record four songs. He had his secretary
look up his name in the files and then call him. He also had two
studio musicians schedule him for an audition. They were not too
impressed, but did not veto Elvis. Then Phillips invited him to
do a session.

I once saw
an interview with Phillips about the July 5 recording session. He
said that Elvis and the two sidemen were playing standard country
music songs at first. Phillips was not impressed. He let them take
a break. During the break, Elvis and the other two started horsing
around with Arthur "Big Boy" Crudup’s blues song, "That’s
All Right (Mama)." Phillips said he heard this, went back into
the recording room, and told them this was what he was looking for.
Could they do it again? They did. Then they did a similarly upbeat
version of Bill Monroe’s "Blue Moon of Kentucky," a waltz.

His first record
was released in August. Elvis was so nervous that he went to a movie
theater to hide. It was played by a local DJ, also named Phillips
— no relation to Sam. The phones started lighting up. Kids wanted
to hear it again, so he played it again.

When Elvis
came out of the theater, he had begun phase one of his career as
a musical icon.

The initial
hit was his version of "Blue Moon of Kentucky," formerly
a bluegrass song. It was number 3 or 4 for weeks in Memphis. Close
behind was the flip side, "That’s All Right (Mama)." Both
songs got air play across the South for the rest of 1954.

Here was the
key: Elvis took a bluegrass song — a white backcountry genre decidedly
not highly commercial, even in the South — and a black blues song,
and combined both artistically into something entirely new. He made
them hits in the white teenagers’ world.

Phillips now
had what he wanted. He had either signed or would soon sign other
locals who had crossed over musically: Carl Perkins, Johnny Cash,
Jerry Lee Lewis, and west-Texan Roy Orbison. From 1954 to 1958,
Sun Records transformed the tastes of millions of teenagers, males
and females.

The picture
you get in Walk
the Line
(2005) is accurate. It took only four years to
create a new subculture that defined itself in terms of its music,
and Phillips was the single most important taste-changer in this
transformation project.

This subculture
had money to spend. A two-song 45-rpm record in 1955 cost 89 cents.
In today’s purchasing power, that is $6.90. We buy a dozen songs
on a CD for $15 today.

Popular music
had been dominated by crooners and harmonic groups like the Ink
Spots and the Four Lads in 1953. In 1955, rock and roll was becoming
dominant, with rhythm and blues close behind. Sun Records’ style
was called rockabilly, but not by the kids who bought the records.

No one could
have predicted this. No one did. Elvis got there very early because
of a highly improbable series of events.

Phillips sold
Presley’s contract to RCA for $35,000 in November, 1955. What is
astounding in retrospect is that this was considered at the time
to be to be a lot of money to pay for an untested performer’s contract.
In addition, RCA paid Elvis $4,500 and his manager $1,500. There
is no doubt that his manager persuaded RCA’s executives to become
entrepreneurial.

RCA released
"Heartbreak Hotel" in late January, 1956. By April, it
was number-one nationally. It sold a million copies in that initial
run. RCA got its money back, and a lot more.

I went to work
at a southern California record store in 1956, my first real job.
My memory tells me that Presley was the dominant singles-seller
that year. If there was one artist whose single records we would
have not wanted to forfeit, it was Presley.

Elvis remains
the entertainment world’s master money-generating singer half a
century later. Why else would a company pay his daughter $100 million
for 85% of his name? As the head of the company said, he thought
the name was under-marketed. It will not fade in his lifetime, he
said. I think he is correct.

Sam Phillips
by 1959 was no longer a cultural force. He proved to be a musical
shooting star. The sound inside his head and then on his audiotapes
was shared for about 48 months by millions of teenagers, who were
never quite the same again. Then the shared connection ended. He
disappeared. But shed no tears. He got rich anyway.

Phillips was
one of the original investors in another Memphis resident’s entrepreneurial
venture: Holiday Inn. Almost no one in Memphis believed in Kemmons
Wilson’s vision in 1952: a national chain of middle class motels.
He invited local builders to join him. They were not interested.
Phillips bought in as an investor shortly after the company went
public in 1957. The economic effect of Holiday Inns on hotels around
the country soon created a lot of industry-wide heartbreak.

[Note: a
hotel gives you room access only from inside the lobby. A motel
gives you access from the parking lot. Wilson thought the country
needed a standardized motel chain for the middle class. He was
regarded as a crackpot by his peers in 1952, just as Phillips
was.]

Sam Phillips
was an entrepreneur: a man who sees the future in a new way and
who then puts money on the line to take advantage of this perceived
future. He was there when a teenager walked into his studio to record
two songs, at his own expense, and then two more about six months
later.

What if Phillips
had just let it go at that?

Just letting
it go at that is what entrepreneurs do not do.

ENTREPRENEURSHIP
IN ACTION

No one knew
in January, 1955, that Presley was 18 months away from becoming
a national sensation. He had recorded several records that were
popular in the South, songs in a new format — not country, not bluegrass,
and not blues. That was it. His only attempt to get on television
was on "Arthur Godfrey’s Talent Scouts" on March 23, 1955.
Godfrey turned him down.

Elvis spent
the first half of 1955 on the road, playing junior high schools,
high schools, and local lounges. If you want to see an exhausting
exercise in seeming career futility, take a look at Elvis’
performance schedule for the first half of 1955
.

In January,
a promoter in the country music field, "Col." Tom Parker
(Andreas van Kuijik), heard about him. Parker began going from performance
to performance in different towns. He saw the screaming girls. He
perceived that Presley could be much more popular.

Elvis’ schedule
was being handled by Elvis’ manager, Bob Neal. Parker convinced
Neal and Phillips to let him take over running Elvis’ appearances.
This was on June 17. By mid-July,
Elvis was playing at municipal auditoriums. Things got better.

Neal pulled
out of the deal in September because he disagreed with Parker about
Elvis’ career strategy. This left Parker as sole manager.

Parker negotiated
the $35,000 buy-out by RCA in November. What is rarely discussed
is that RCA had offered Phillips $12,000 for Presley’s contract
earlier in the year. Phillips had turned down the offer. Parker
got Phillips a much better deal. For this, Parker was paid $1,500
— paid directly by RCA, not by Phillips.

"Heartbreak
Hotel" was released on January 27, 1956. Parker had already
scheduled Presley on the "Dorsey Brothers’ Stage Show."
This was Presley’s first TV appearance. The show preceded Jackie
Gleason’s show, The Honeymooners, on Saturday nights, which
was great positioning. To land Presley a guest appearance on this
show was no small feat prior to "Heartbreak Hotel." That
first appearance was all it took: on January 28. The Dorseys invited
him back on February 4, February 11, February 18, March 17, and
March 24.

Independent
of Parker’s efforts, "Heartbreak Hotel" sold 300,000 copies
in the first week. Elvis sang it on the Dorsey shows on February
11, March 17, and March 24. Sales continued to soar.

In March, RCA
released his first album, "Elvis Presley." This was an
emergency move. Elvis’ career was taking off like a rocket after
just five weeks. Management had to do something, fast, to cash in
on its own property. The album would sell a million copies before
the end of 1956. It was the first RCA album to sell a million copies.
It was the first rock and roll album to sell a million copies.

Only in March
did Parker re-negotiate the contract, getting 25% of Elvis’ income.
Elvis did not have to sign it. He did anyway.

Elvis appeared
in April on Milton Berle’s TV show. In that same month, "Heartbreak
Hotel" made it to number one.

Also in April,
Parker negotiated a seven-movie contract with Paramount. Who could
have known in April, 1956, that Elvis Presley could act? He was
not a great actor, but he was no embarrassment. Who could have known
that these films and many more would find huge audiences over the
next decade? These low-budget, high-profit movies made Presley and
Parker much richer, even though these movies were generally much
worse than he was.

He appeared
on Berle’s show again in June. That appearance caused a sensation:
his swivel hips when performing "Hound Dog." NBC cancelled
Berle’s show that month, despite the high ratings when Elvis appeared.
This ended "Mr. Television’s" television comedy career.
To see the video, click
here
.

On July 1,
he was on Steve Allen’s TV show. Allen made him wear a tuxedo. No
swiveling. On September 9, he was on Ed Sullivan’s TV show, although
Sullivan was absent that night. It drew about 60 million viewers.
He appeared twice more on the show. His television appearances are
remembered mostly for Sullivan’s show.

In short, when
Parker took over as Elvis’ manager in September, 1955, Elvis was
a regional performer on the country music circuit. Six months before,
he had been performing at junior high schools. One year later, he
was the biggest pop music icon in the world, a position he retains
until today.

What percentage
was that worth?

Parker re-negotiated
his contract in 1967 for 50%. This was at Elvis’ musical nadir in
terms of quality. Parker then got him a contract to do a 1968 NBC
television special in front of a live audience. It was broadcast
on December 3. The
"Elvis" special
re-established his career as a live
performer. It was a true one-man show (no guests), probably the
first in television history, and surely the most successful. It
was the highest-rated television special of 1968. Much of the success
was the result of the director, but Parker was still the career
ramrod.

Parker then
negotiated Presley’s appearance at Las Vegas. In a series of 58
consecutive shows, 130,000 ticket-buying fans showed up to see him
— the largest crowds in Las Vegas’ history, before or since. Elvis
there demonstrated beyond any doubt the versatility of his talent,
doing country music, ballads, rock, gospel, and seemingly everything
else except opera. Nobody before him had done anything like this.
Only Linda Ronstadt would match this versatility, beginning in 1967.
There are no other examples of singers generating equal sales in
so many different fields.

People forget
this chronology when assessing Parker’s influence. He is dismissed
as a money-grubber. He was in fact a value-creator on a massive
scale.

Parker ran
Elvis’ career with a heavy hand, but he left a legacy that continues
to generate huge amounts of money.

IS ELVIS
ALIVE?

In terms of
his career, Elvis’ death launched the next phase, which has been
more profitable than what had preceded it. His fans never saw him
grow old. This added to his legend. "The king is dead. Long
live the king!"

Priscilla Presley,
another entrepreneurial genius, understood the potential of what
her daughter owned in 1978, and she created an empire. Anyone looking
at Mrs. Presley’s wedding photos would not have guessed what was
underneath that bouffant hairdo.

We all know
the rumors. Elvis is in hiding. He has not really left the building.

A few years
ago, the topic of his death came up in a group of church members
where I attended. "Do you think Elvis is alive?" someone
jokingly asked.

One lady in
the group had a direct answer: "I gave him his last bath, and
then I tagged his toe." That statement pretty much ended the
argument. She had been the person on duty at the facility where
his body had been transported.

I dropped her
husband a note two weeks ago, asking him to ask her to write a brief
article on this. I thought you might like to read it. I know I would.
He wrote back to say he had asked her to do this for years. She
just does not want to do it.

So far, I have
not received a manuscript. Sorry about that.

WHAT
ENTREPRENEURSHIP ACCOMPLISHED

I was never
a big Elvis fan. I
have discussed this elsewhere
.

I don’t think
anything he recorded ever equalled his first record, "Blue
Moon of Kentucky." That song and "That’s All Right (Mama)"
were acts of artistic entrepreneurship on Elvis’ part, the creation
of a new musical style which caught the attention and money of millions
of teenagers. He reinvented his music repeatedly over the next two
decades. His voice changed. His style changed. His audience changed.
But still he met consumers’ desires. He was an entrepreneur.

He had a great
back-up band in the 1969—71 era. He had good artistic taste,
outside of his movies ($100 million gross), which he did not control
and despised, and their songs, which he was forced to record: 100
million albums.

Sam Phillips
told the story of how his friends warned him about Bill Monroe’s
reaction. After all, Elvis had taken a fine bluegrass classic, written
and performed by the man who literally invented bluegrass, and turned
it into rock and roll. "Bill will eat you alive if he ever
meets you." Phillips really did worry about this.

Some time later
— I forget how long — he was backstage at Grand Ole Opry. There
was Monroe, who played there for decades. Monroe came over to him.
"Are you the man who released Elvis Presley’s version of my
song?" Phillips had to admit that he was. "Well, I just
want to thank you. I made more money in royalties from his version
of that song than anything I ever wrote."

Lesson: royalties
covereth a multitude of musical sins.

Phillips is
laughed at as the man who sold Elvis’ contract. But he probably
could not have provided the setting Elvis needed to become an icon
within a year.

Parker is hated
by the fans because he got 25%, then 50%, of Elvis’ income. But
he brought Elvis to the attention of his audience. He gave Elvis
the venue that made Elvis into an icon. There was no indication
that Elvis would escape the country music circuit until Parker took
over as manager in September, 1955.

It is not good
enough to have raw talent. You need access to an audience. The entrepreneur
brings talent and market together for the sake of profit.

Elvis
wound up like the anonymous man whose suicide in a hotel room inspired
Mae Axton and her partner to write “Heartbreak Hotel.” Sometimes
the full results of entrepreneurship are not what the entrepreneur
plans. Elvis could not handle the results of incomparably successful
entrepreneurship, including his own. That was an ethical defect
on his part, not a marketing defect. He failed to understand the
Book of Ecclesiastes on the nature of vanity. In this, he was not
alone.

August
15, 2007

Gary
North [send him mail]
is the author of Mises
on Money
. Visit http://www.garynorth.com.
He is also the author of a free 19-volume series, An
Economic Commentary on the Bible
.

Gary
North Archives

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