It's New Year's Eve 2004, and Mike Speranzo, the founder of Mr. Small's Funhouse and Theater in Millvale, is back from a two-week vacation in Orlando, where he had been visiting family, and where he had taken his 8-year-old son, Jordan, to Walt Disney World. But today, all is not well at Mr. Small's, a concert venue whose in-house recording studio has hosted the likes of Ryan Adams, the Black Eyed Peas -- even 50 Cent.
Over the holidays, one of the concert venue's soundmen -- Dave Wilson -- decided to move on. "He's been financing his life on credit cards for the past two years," Speranzo will later explain. "That's the real story of Mr. Small's: None of us have ever been paid."
There's now an impromptu company meeting taking place in the office's recently refurbished kitchen; Speranzo's partners knew about Dave's decision days ago, but didn't want to disturb his vacation, and so the team is discussing the news only now. Amid the din of conversation, which is punctuated by sharp voices and then bursts of loud laughter, a relieved-looking Dave emerges from the kitchen, clutching a day-planner, and quickly makes his way down the stairs and out of the building.
Two of Speranzo's business partners -- Larry Luther, who engineers the recording studio, and Todd Twiss, who operates the concert venue -- materialize from the kitchen next, seeming weary and defeated. Minutes later, Speranzo emerges as well, and begins pacing. "It's not the position," he sighs, absently glancing toward the door that Wilson passed through moments ago. "It's the human investment."
Wilson's departure, in fact, is just one more punch in a long list of body blows that the staff of Mr. Small's have absorbed over the recent few months. In September, when Millvale flooded due to Hurricane Ivan, Small's was forced to cancel 13 concerts. It ended up losing nearly $18,000 in revenue. In December, Clear Channel Entertainment, the concert-promotions giant who regularly brought high-profile national acts to Mr. Small's, announced its decision to significantly pull back on club-level bookings in Pittsburgh.
Some of the lowest attendance numbers in recent history had been severely affecting the businesses of other area promoters as well; less than two weeks after the Clear Channel announcement, longtime concert promoter Jon Rinaldo, owner of The World, announced that his club, too, was going under. Rinaldo complained of the financial strain his business was suffering due to the ever-inflating performance guarantees of touring bands.
The concert business in Pittsburgh, it seemed, was drying up. Stalled, without warning, by random acts of God and industry greed. But Speranzo, whose business plan seems to be modeled around the power of positive thinking and the dictum that true leaders are always in control of their emotions, doesn't often grow discouraged with ease. Now buzzing with energy, he pulls on a jacket and scans the room. "Who likes Thai food?" he barks happily. "You like Thai food? Let's go get Thai food."
Mike Speranzo had nearly become famous -- twice -- when the idea to launch Mr. Small's began to germinate. Now 36, Speranzo was in the 1980s and '90s a sponsored skateboarder, hanging out with pros like Kevin Stabb, Christian Hosoi and Mark Gonzales, with whom he shared a room briefly. But just prior to being offered his first professional board, Speranzo broke a leg during a practice session. He accepted a position as an instructor at Camp Woodward, a skateboarding and BMX camp for kids near State College, and in 2000 he even decided to give his career one final shot, managing to tie for fourth place in an amateur world championship vert-ramp contest. Nonetheless, Speranzo's dreams of becoming a skateboarding celebrity were fizzling.
"But I always had aspirations to be a successful musician," he recalls. Speranzo had played bass guitar in a handful of rock bands locally, most notably Out of the Blue, which won the Graffiti Rock Challenge in 1993. After Out of the Blue disbanded, it became the group now known as Crisis Car, which was eventually offered an opening slot on a Further Festival tour. But in music, as with skateboarding, fame continued to narrowly elude Speranzo. Even tougher was watching his wife -- Liz Berlin, a percussionist and vocalist for Rusted Root -- shoot to stardom herself. "It was so inspirational watching Rusted Root playing their homecoming show at the Civic Arena, thousands of people screaming and singing along. But yeah, there was some jealousy. Of course."
In March 1997, Speranzo put himself onto a third career path: With his wife and an engineer by the name of Peter Beckerman, he opened a 5,000-square-foot recording studio on Grant Avenue in Millvale, just blocks from the current Mr. Small's location. He began spending 18-hour workdays turning it into what he hoped would become a world-class facility. Six years later, Speranzo and Berlin decided it was time to upgrade. The Catholic Diocese of Pittsburgh had recently put St. Ann's Catholic Church on the block; by then, the church had been vacant for years. Speranzo and Berlin purchased it -- schoolhouse, rectory and all -- for $85,000.
Today, referring to Small's as a multi-use facility is something of an understatement. The complex comprises a professional-grade recording studio; a non-profit arm known as Creative Life Support; a bed-and-breakfast for touring bands and recording artists; and a skate park that sits next to the Allegheny River and underneath the 40th Street Bridge. But it's the concert venue that brings in the bulk of the company's revenue. When Speranzo first started booking shows at Small's, however, this wasn't the case.
At the time, Jon Rinaldo, who has been running the concert booking company Joker Productions since 1989, was bringing the majority of mid-level bands who came through town to Oakland's Club Laga, a room he rented regularly. Most of the leftover club-level acts went to promoter Mike Elko, whose Elko Productions still books occasional shows at the South Side's Rex Theatre, among other venues. That left little spillover for Mr. Small's.
When they did host a show, it was a rare occasion, and the bill often consisted largely of jam bands, thanks to the relationships culled from the years that Berlin spent on the road with Rusted Root.
And then, after months of struggling with the economic consequences of running a nearly empty calendar, things began to change. First came the call from Clear Channel.
Clear Channel is a multi-media entertainment conglomerate with headquarters in Texas; it lays claim to thousands of radio stations, concert venues and highway billboards across the country. During the last few years, allegations that it practices corporate censorship have been heavily reported by media watchdog groups. The allegations have even inspired a Web site, ClearChannelSucks.org, which accuses the company of attempting to spearhead a broadcast radio monopoly, among other free-market transgressions.
When it first approached Mr. Small's, Clear Channel hadn't had much luck sinking its claws into the club-level market in Pittsburgh. Rinaldo and one of the city's other promoters, frequent CP contributor Manny Theiner, were unwaveringly independent, and so Clear Channel's concert-promotions arm chose to offer Mr. Small's an industry-standard deal: Speranzo would be paid a "room rate" of roughly $1,300 a performance, and he would be guaranteed that money whether or not anyone showed up. If the event was a sell-out, Clear Channel, acting as the promoter, would enjoy the windfall. But if it was a bust, Clear Channel would assume the loss, which, as a major corporation with thousands of irons in the proverbial fire, it could easily afford to do. Signing with Clear Channel, though, proved to be a financially prudent move for Small's; 2004 was a year that brought De La Soul, They Might Be Giants, The Mooney Suzuki, Le Tigre, Elephant Man, My Morning Jacket and the Charlie Hunter Trio to Millvale.
Speranzo had been in negotiations with Clear Channel for months when the deal finally came together. Coincidentally, at around the same time, the owner of Club Laga's Forbes Avenue location decided to develop student housing in the building's concert space, and Rinaldo suddenly found himself without full-time work. Speranzo was thrust into a moral dilemma: offer a job to a colleague in need whose 15 years of industry contacts might put Small's over the top, or go for the sure bet with Clear Channel.
"All our eggs were in that Clear Channel basket," Speranzo says, in response to the suggestion that he might have instead hired Rinaldo to take over his bookings. "The deal was sealed." Speranzo also worried that Rinaldo would be "saying certain things to agents about our room, because he was trying to preserve his business. Quite honestly, it's tough, the situation we were in, because we've been friends for a long time. I have a lot of respect for him."
Rinaldo, who years ago booked one of Speranzo's rock bands at Graffiti, doesn't seem to return the sentiment. "I wish them luck," he said. "But it's almost like they're on an amateur level. This is coming from agents and tour managers and bands. I don't want to name any names, but I would get comments like, 'There's this really bohemian vibe. They would have these bohemian kids loading equipment. Like they were all stoned out of their minds, you know?'"
Industry gossip is now the least of Speranzo's worries. Due to Clear Channel's decision to withdraw from club-level bookings in mid-sized markets, Smalls' business plan has now been pushed back nearly to square one. The venue's January calendar advertises mostly local band showcases. The scheduled out-of-town acts, such as the Virginia Coalition and Lotus, are fairly obscure, and with nowhere near the star power of many of the bands who graced Smalls' stage during its corporate-sponsored previous year.
"For me, it was just one more thing," says Berlin, of Clear Channel's decision. Speranzo, now digging into a plate of tofu, simply shrugs.
"You've got to understand," he says. "To me, it wasn't a death nail in the coffin that Clear Channel was deciding to do this. To me it was like, 'OK, we're presented with new challenges. And the gentleman who is currently booking the venue is going to have to show who he really is, because if he doesn't, he's going to be letting all of us down. That was my first thought.' But it wasn't like, 'Oh my God, Clear Channel's pulling out! What are we going to do?' It didn't really hit me that hard."
If you're a concert promoter reading this now, you're probably chuckling to yourself, or at least assuming that Speranzo is merely putting on a good face for the public's consumption. A young venue with no promoter, few connections and no third party to offer big guarantees to touring bands? Good luck, Small's.
But as it happens, Speranzo and Berlin are laughing right along with you. After two frustrating years of wrestling with the Pennsylvania Liquor Control Board, Mr. Small's is now in possession of what might suitably be called the concert venue's secret weapon: a liquor license. Thanks to the income a full bar will generate, they assume, remaining at least financially status quo should be very easy indeed. One minute, it seemed, Small's was nearly out of business. Now it's back in, and in a big way. "The reason [Small's] survives is because of the diverse streams of income," Speranzo offers. As his financial advisers like to say, "This business isn't vanilla ice cream."
Truer words were never spoken. As a for-profit business, Mr. Small's, like nearly all businesses of similar ilk, could never exist outside the bubble of its many bank loans, the explanation of which seems to grow ever more complicated, even as Speranzo attempts to diagram them simply.
"There's a lot of interesting stories for the bankers to talk about when they talk about Small's," he says, during a tour of his facility's recording studios and sound booths. Most are outfitted with thousands of dollars of state-of-the-art equipment, the bulk purchased with the help of a $424,000 bank loan. Speranzo and Berlin also borrowed an extra $100,000 from family to outfit and upgrade their space; another $50,000 went onto various credit cards, some with interest rates now in the low 20 percent range, thanks to Speranzo's occasional late payments during Smalls' leaner, pre-Clear Channel days. He now writes checks to the tune of nearly $2,000 a month to his credit-card lenders, and that's to say nothing of the monthly mortgage payments on Berlin and Speranzo's 4,200 square-foot Friendship home, which they purchased just one week before Valentine's Day, 1998.
"It wasn't an easy finance," Speranzo admits, staring down at a soundboard and an empty chair. "It's not like we're making pens here, and we can quantify the number of pens. It's complicated."
Speranzo and Berlin are in the beneficial position of being young promoters with honest reputations. And many highly visible acts who have played at Small's have gone on to sing the venue's praises on stage and in other cities. According to Berlin, They Might Be Giants "wrote a new song during their sound check about Small's and performed it at their show that night." Broken Social Scene, she says, "raved about Small's from the stage." The alternative-pop band Metric recently talked up Small's in Woman's Day magazine. Ryan Adams spent a month at the in-house bed-and-breakfast, and rehearsed regularly for an upcoming tour with the Rolling Stones. And using Smalls' video-production equipment, MTV2 stopped by to document a performance by indie-rock favorites Low.
"There's a fundamental faith in this," Speranzo announced halfway through lunch. "This is a development that's, like, three-quarters of a million dollars. This is my house. This is my son. My friends, my family, my whole life -- everything I've worked for up to this point."
So, exactly how has Small's managed to stay afloat with the live-music industry in a seemingly perpetual crash-and-burn? For starters, Liz Berlin's Rusted Root royalties sure haven't hurt; the original Mr. Small's recording studio on Grant Avenue wouldn't have been built without them. But indeed, there's a method to Speranzo's madness. Below are five points essential to his company's success.
1. Control the means of production.
Like our town's most historically notable entrepreneur, Andrew Carnegie, Speranzo has nearly perfected the art of vertical integration. By dominating many aspects of his production process, he's nearly eliminated the need for middlemen. Carnegie, for instance, didn't simply own steel mills. He also sought to control the barges that would transport the iron, and even the railroads themselves. Carnegie liked dealing direct, preferring to sell straight to consumers, and thereby bypassing standard distribution systems.
Speranzo and Berlin's new role as both venue owners and concert promoters positions them in a similar situation. With Clear Channel Entertainment no longer acting as middleman, their financial risks increase, but so does their potential for making money. Other local promoters who've tried it before, however, are already shaking their heads. In a recent letter to the Pittsburgh Post-Gazette, Mike Elko wrote that, "A promoter cannot be a club owner. A promoter promotes. A club sells alcohol, environment, nice settings and a friendly staff."
But with his own liquor license (see No. 3, "Booze it up"), Speranzo now holds a powerful trump card. "I think you have to be very, very careful about how you rely on your bar revenue to cover up your production costs," he says. "But I don't agree with Elko's perspective that you can't be successful if you fundamentally hold both ends of the chain."
Thumb through just about any how-to manual in the business section at Barnes & Noble -- Robert T. Kiyosaki's Rich Dad, Poor Dad comes to mind -- and you'll find the phrase "multiple streams of income" repeated ad naseum. Clearly, Speranzo has been taking notes. And while he's quick to admit that Mr. Small's has yet to turn a profit, on paper the company is a mini-empire. Consider its skateboarding park, and especially its "rock-star hotel," where band members can sleep for as little as $50 a night. Small's may very well be the country's only concert venue with the ability to provide its clients with fresh sheets, a bedside table and a common area complete with a baby grand piano. ("It needs a little tuning," venue-owner Twiss says.)
As landlords, Speranzo and Berlin also provide a good night's sleep to a number of tenants who live on their property, including engineer Larry Luther. Together, Luther and Speranzo have even created a series of studio packages that are available to younger bands who record at the facility. (See No. 1, "Control the means of production.") One such package offers bands 27 hours of studio time and 100 burned and printed CDs for a set rate. "Lots of high school bands get that one," Luther says.
Drummer Pat Thetic, whose punk-rock group Anti-Flag recorded its sixth album at Mr. Small's, claims that his band's decision to spend its money at the facility had much to do with -- surprise -- Speranzo's attitude.
"If you were going into battle," Thetic offers, "I would want Michael to be my general, because he makes everybody believe that he can do it. I'm sure he won't be making millions, but I think he'll be able to make enough to survive."
3. Booze it up.
For months, the staff at Mr. Small's were reduced to giving away free plastic cups of all-you-can-drink beer at every concert. ("It was the least we could do to make sure our clients were happy," says Twiss). But with the recently acquired liquor license, they've managed to secure that elusive brass ring of the local nightclub industry.
"Here it is!" Speranzo announced in his office, holding up the laminated sheet. "Forty-two thousand dollars."
Speranzo and Berlin are both firmly convinced that their license will prove to be Mr. Small's ace-in-the-hole. Speranzo explains it thusly:
"Let's ring the biggest breadwinner show that we've done," he says. "Which was [last March's] Michael Franti and Ziggy Marley show. Or any of the higher profiles. Gwar. Ministry. We would come out $2,500 a night, tops. For a sell-out room."
That's because, as Berlin explains, when Small's was working with the Clear Channel show promoter, they had no stake in the success or failure of the crowd turnout. "We were just the room, and they were the promoter," she says. "So what's going to happen now is we'll be the room and the promoter."
Speranzo, clearly excited by the prospect, waves his hands. "Not only that," he rapid-fires. "But let me explain it this way, too: The best we ever did under our marquee events was $2,500. With the liquor license, we had a show two weeks ago. I was gone on vacation, and it was a local showcase show. Local bands. And the bar did $1,700, and we did $800 over the door. So that's $2,500. So my mind is a lot different about the potential. Now if we do a show that's a sellout, the potential is going to be $4,000, $5,000, $6,000 a night. If we're able to fundamentally carry what we've been able to do last year, I think we'll be OK. I think we'll all be satisfied."
4. Invest in your staff (emotionally), and they'll invest in you (financially).
Twiss and Luther, for their part, seem satisfied as well. As dual owners in their respective departments of the business, they've often gone without paychecks for weeks at a time, choosing instead to upgrade a piece of equipment in the studio, or furniture in the venue's backstage area. By treating his employees as part owners, Speranzo has the option of using 100 percent of Smalls' net revenue during any given month to upgrade his facility.
It's a clever business move -- Twiss himself offers that "as a venue owner and a business owner," he goes out of his way to treat every artist who visits like gold. "Personally," he adds, "I drive tour-bus operators to their hotels. I pick them up at the end of the night. I make sure that even the bus driver has a great experience in Pittsburgh."
Twiss is well aware, of course, that if Small's ever hits the big time, he'll reap the benefits along with the rest of Speranzo's co-owners. Or, as with a Silicon Valley programmer working for little more than stock options, the entire system could crumble, and just like Dave the soundman, he could be left with nothing but his own personal debt, and a line for his résumé.
Asked if he truly believes that one day his hard work at Small's will pay off financially, Luther says, "I wouldn't be doing this if I didn't think that." Luther offers that if he didn't have faith in Speranzo and his business plan, "I would have stopped a long time ago."
5. Lead with confidence.
Talk about vertical integration and diversification all you want, though, and the key variable in Smalls' complicated math equation remains consistent. That variable is Speranzo himself, whose consummate never-say-die attitude could float a sunken ship, never mind a well-respected music venue with a dedicated staff. It might even be fair to call Speranzo's decidedly ultra-ambitious and irony-free attitude un-Pittsburghian.
Indeed, it's impossible to meet him, or to bear witness to his fully engaged, energized sensibility without wondering why he's still even here, given that so many others in the local music industry have gotten out while the getting is still relatively good.
"We've been in a bubble of our own work ethic," he says of himself and his staff, as if the alternative -- not working seven days a week, not working around the clock in an all-consuming pursuit of never-ending, self-imposed deadlines -- would be nothing less than unthinkable. "This is something we've always been able to do to ourselves, which I think is really sadistic as hell: We'll have a two-week window, and we'll decide we need to accomplish four weeks worth of work. Which we really don't," he admits, sheepishly. "It's all a matter of standards."
Speranzo's future, of course, remains very much up in the air. After all, what would a superstar CEO like Warren Buffett -- or for that matter, even Donald Trump -- have to say about an empire built upon credit-card debt and family loans? But Speranzo's hope is that the relationships his staff have forged with national acts will cause them to think of Mr. Small's the next time they travel through Pennsylvania, whether or not those bands are being offered a Clear Channel guarantee for their show.
And as always, big change is afoot at Small's, most significantly within the recording studio, which is about to receive one final facelift. A second bar is also in the works; tentatively dubbed "The War Room," it will act as a sort of museum of Pittsburgh's rock 'n' roll history. Speranzo himself is now in negotiations with a local skatepark, which he may soon be operating in the South Hills. And Liz Berlin is currently working on a Small's-themed television pilot, something she describes as a localized take on Austin City Limits.
"My thing," Speranzo says, "is what if the story came true? What if this all worked? It would mean that we accomplished for ourselves what was unaccomplishable."