A New Beat At The Hard Rock

With theme dining as stale as last week's fries, the company is counting on live music and the Web

In the middle of the circular bar in Chicago's Hard Rock Cafe, a 17-foot steel-and-glass column glows with the light from 64 flat-screen monitors mounted on it. The striking centerpiece is part of an effort by the rock-'n'-roll-themed chain of restaurants, casinos, and hotels to reinvent its 30-year-old brand. In the first phase, Orlando-based Hard Rock Cafe International (RANK) is spending $50 million to begin refurbishing the 105 locations that it owns and franchises in 38 countries. In phase two of a new music strategy, the company plans to bring more late-night musical acts to key locations and stream them into its other venues via the Web.

The makeover is a response to a harsh reality facing Hard Rock and competitors from Planet Hollywood International (PHWD) to Harley Davidson Cafe: Theme dining may be a concept whose time has come and gone. The industry has suffered nearly a decade of waning growth and revenues as a result of too-rapid expansion, mediocre food, and stale entertainment. Last year, Planet Hollywood filed for Chapter 11 protection. Hard Rock, wholly owned by London's The Rank Group, saw same-store revenues drop 20% from 1995 to 1999 and by an additional 3% in the first half of 2000. Its first-half total revenues rose 5%, to $200 million, and profits by 18%, to $35 million.

DIGITAL STREAMING. The Web plays a key role in Hard Rock's plan to draw customers back by attracting an after-work crowd of 20- to 35-year-olds. "We'll use the Web to create a forum for up-and-coming artists and to bring national bands that play our large concert venues into the smaller locations," says Scott Little, Hard Rock's chief financial officer and strategic planner.

Working with Microsoft Corp. (MSFT), Little says he has spent almost $7 million to build a state-of-the-art network to handle digital streaming of events in real time as well as e-commerce. He's also in talks with five major record labels, he says, and expects to ink a revenue-sharing deal with a leading online CD distributor in a few weeks. Traffic at the Web site, launched at the end of 1998, has climbed to 500,000 unique monthly visitors, Little says, and is expected to draw 1 million by the end of 2000.

Meanwhile, Hard Rock announced a partnership on Sept. 14 with online auctioneer eBay (EBAY) to create its own branded section within the site. Hard Rock is also joining with Music Choice, a digital-music programmer that reaches 28 million cable households, to produce and distribute concerts for the Internet and television from Hard Rock's Orlando and Chicago restaurants.

Along with an upgraded menu, new locations will have fewer and more strategically placed items of memorabilia, rather than Hard Rock's usual collage-style arrangement. And the decor's music themes will be more up-to-date. "In the past, we've tilted the scales too much toward yesterday's music," says Peter Beaudrault, president of Hard Rock. "Now we've got to redirect our focus to music that's popular today."

Ron Paul, an analyst for food-industry consultant Technomic Inc., says Hard Rock may be the only theme-dining company that learned lessons from the past decade. "Hard Rock is the icon of theme dining by sheer virtue of its age, longevity, and ability to appeal to two different generations," he says.

Competitors aren't likely to sit still, though. The owners of the House of Blues clubs are working on their own Net strategy. And Planet Hollywood International launched its own site at the end of July, setting up a separate company to run the Net business. Planet Hollywood has also partnered with eBay to auction celebrity merchandise. The goal, says Planet Hollywood CEO Robert Earl, is to "leverage a billion-dollar brand to create a mini entertainment portal."

Not everyone is convinced that Hard Rock's makeover as an entertainment and Net company makes sense. Says James Scurlock, publisher of the newsletter Restaurant Investor, "Hard Rock has built an extraordinary brand, but I'm not sure how well they will do as music entrepreneurs," he says. Still, backers are convinced that a digital makeover and a music update will restore Hard Rock's luster for a new generation of diners and viewers.