The Last Days of Manhattan’s Studio 54
Studio 54 has tales of Michael Jackson riding in on white horses, Manhattan’s premier nightclub during the late 70’s. Ian Schrager and Steve Rubbell built their first club called Enchanted Garden, based out of Queens, NY in 1975. Schrager came from humble beginnings in Brooklyn, and performed well in his studies at Syracuse University. He went on to law school, practicing as a lawyer for three years before stumbling on an epiphany. A business associate asked about going into business, instead of advising “those playing the game.” So Schrager took Rubell on his offer, wondering what venture to explore. The nightclub industry was simple enough, not capital intensive, and seemed fun for a couple thirty year olds.
Enchanted Garden was a raucous, booming house of partying. Two years later Studio 54 was founded, in Manhattan. The two partners were best friends in college, Schrager the shy one, Rubell the boisterous one. Studio 54 pioneered modern day nightlife, from big dance floors to velvet ropes to luxurious bars. There’s a stigma against doing business with friends, since partnerships can sometimes lead to permanent undoing. Bitterness can ensue, like Creative Artists Agency’s Michael Ovitz and Ron Meyer. Schrager says there’s nothing wrong writing checks with friends, long as the two partners have opposing skills. Schrager was analytical, linear, and a perfectionist when it came to details. Rubell was a dreamer.
Studio 54 survived only for thirty-three months. There’s always that saying about shooting stars burning brightly, but briefly. Things that go up fast, fall down fast. Like Ovitz and Meyer, Schrager and Rubell were running the town. For reasons unknown, Studio 54 didn’t pay income tax. Plenty of movers in New York didn’t pay income taxes during the era, like Frank Lucas and other big wigs of the cocaine epidemic. But when you own a jewel like Studio 54, feds will find you. Ian Shrager chalks it up to ego, when you’ve had success, early in age it feels like the rules don’t apply to you. There’s inmates that do well in prison, that don’t just survive but thrive in the penitentiary. Schrager wasn’t one of them, openly talking about how scared he was behind the bars. You’re told when to eat, when to shower, and other inmates might want to enforce their own rules on you.
There was one reprieve. Ian Schrager found solace through reading David Halberstam’s The Powers That Be. It talks about the traditional media powers of ABC, CBS, Time, New York Times, and the Washington Post. Institutions that were molded by instability, many times nearly undone. Insurmountable pressure, built these companies into the institutions of today. Schrager also read about Walt Disney, pioneer of animation in the 1920’s. Animation was available to everyone, or the materials to make it, but only Disney thought to have moving stills of a mouse steering a ship. Prison lasted thirteen months, lifetime recovery lasted a decade.
The legal process, fighting charges, the pen, being a free man on the street, recovering financially and emotionally- took ten years says Schrager. Legal fees were around $1 million. Taxes, penalties, and interests from Studio 54 totaled $750,000. Financial institutions wouldn’t touch Schrager or Rubell, most banks didn’t even allow them to open a checking account. The investors ran away as well, leaving a hard climb back up. The only luck involved the new owner who purchased Studio 54, when Schrager and Rubell was legally forced on the sale. Schrager and Rubell received a promissory note. But when the new owner defaulted, he agreed to purchase Studio 54 in exchange for his hotel on 38th and Madison.
In nightlife, people stay up late but don’t stay over. The hotel business seemed like a natural extension of that. It was very capital intensive. The operation of running a hotel is more complex than running clubs. A close friend had given Schrager advice. David Geffen simply said “You don’t begin until you start.” Harry Helmsley and his Helmsley Palace, had new competition from upstart Donald Trump and his Grand Hyatt New York. Competition was stiff, tougher than the original Studio 54. But that element excited Ian Schrager, whose greatest lesson is not to get dispirited. Former New York Jets special teams coach Mike Westhoff had a metaphor to motivate his players. The Devil was having a going out of business sale, leaving his loft in Manhattan. Someone asked The Devil, what its most valuable tool was.
Discouragement.
Because when someone is discouraged… All of The Devil’s tools work.
In 1989, Steve Rubell was hospitalized. It was due to dehydration, Rubell passed away at the age of forty-five. The hotel on 38th was making money, renamed Morgans. It allowed Schrager and Rubell to expand, opening the Royalton. But losing his business partner was harder than prison. Sometimes you’ve got to put your big boy pants, and strap em’ up. Looking back at what Schrager has accomplished, he says Steve Rubell would be proud.
I grew up in Brooklyn.
Back then it was very middle class and everyone was striving to improve their lot in life. I’m happy I wasn’t raised somewhere more affluent. I think it made me hungrier. I had no idea where I was going or what road I would travel on, but I knew I wanted to be successful. I’ve always been very competitive and driven, in sports or whatever. I think that’s a quality you either have or don’t.
In the end, there’s so little that separates people.
-Ian Schrager.
