As the bad news about the economy kept piling up, Thaddeus Smith got mad and then he got even.

He runs the party-booking business at Music Box at Fonda Theater in Hollywood, and when times get tough, the kinds of celebrations held at the Music Box are among the first casualties. His sales in the summer were down $100,000 compared with the previous summer.

Instead of bemoaning his fate, he declared war on the recession. Since then, he’s been winning battles.

Early in the morning Oct. 1, Smith converted the sales office he oversees at the Music Box, which he co-owns with Burt Nelson and Marco Roy, into a “War Room.” He spray-painted the name in red letters on the door to the sales office. He brought in a female mannequin dressed in army gear and gave her a mock assault rifle from an event he hosted for the film “Starship Troopers.” He also gave military caps and dog tags engraved with their names to Sarah Quigley and Brian Sayers, the two event managers who do the Music Box’s bookings.

“When I walked in, I thought the place had been tagged,” Quigley said.

“I’ve known Thad for 15 years and knew he was crazy enough to do it,” Sayers said.

But that was all just symbolic. There was substance behind the style, and the substance was about adapting to a new environment. The rules: be flexible with clients, listen to what they can work with realistically and don’t think anyone’s business is beneath you.

While Music Box has some cushion it caters to the entertainment industry, which is sometimes more resilient in the face of economic pressure than other business segments Smith saw an opportunity to jazz things up.

“I think that now can be a time for customer service to make a true comeback,” Smith said. “This recession is bringing service back to the people. They’ve become fed up with automation and impersonal business.”

There was also a concrete goal: He and his two event managers had to book $400,000 worth of new business from Oct. 1 through January. They booked $450,000.

That not only exceeded the goal, it’s twice what they booked the same time the previous year. They have set an identical goal for the first part of 2009.

Exclusive clubs

The Music Box, built in the 1920s as a movie theater on Hollywood Boulevard near Vine Street, is a 25,000-square-foot entertainment complex that hosts concerts, dinners and parties for up to 1,300 people. Clients have included the Grammy Foundation, Universal Studios, Sony Pictures, Nike and the L.A. Gay and Lesbian Center.

Smith oversees bookings for the special events; concerts are handled by Smith’s partners.

When Smith and his partners started running the Music Box almost six years ago, Hollywood was in the middle of its renaissance. Exclusive clubs, expensive lofts, high-priced events and celebrity sightings along with an elitist attitude were becoming prominent on the landscape.

But then the economy took a turn for the worse in 2008, leaving Hollywood business owners like Smith and his partners looking for a creative way to deal with the downturn when others around them wallowed in self-defeatist attitudes.

“This is the first time that the newer Hollywood businesses have had to adapt to a major decline in the economy and humble themselves,” said Kerry Morrison, executive director of the Hollywood Entertainment Business Improvement District.

When a business or organization is forced to cut its budget, Morrison said, entertainment, such as holiday company parties or an annual awards banquet, usually goes first.

Beyond that, companies believe it looks tacky to host an extravagant party during a recession, she said. So the parties they do book often are less profitable for the venue.

“People still want to go out,” she added, “but they are not going to be able to pay for the extravagance or frills as in the past.”

Music Box was at a slight advantage because some of its clients are in show biz, said Nelson Gayton, executive director of the Entertainment and Media Management Institute at the UCLA Anderson School of Management.

“The entertainment industry has always been about relationships, so networking at parties and mixers are part of making those connections,” Gayton said. “Even though the economic downturn is curbing a lot of special events across the board, it’s probably not as much in the entertainment industry, as it is almost regarded as a necessity.”

Simple plan

Smith had a simple plan: go through all the Music Box’s files and contact every client who had booked an event over the past five years. That would be a minimum of 500 phone calls.

Smith’s instructions: ask how the client was doing, if there were any special events being planned and what the budget was. Smith, Sayers and Quigley would make 30 to 40 calls each a day.

If a client couldn’t afford to rent out the whole venue, Music Box offered a smaller room at the theater. They also offered discounts for in-house services, such as table centerpieces. Another option was a buffet instead of a sit-down dinner.

“You just never say no,” Smith said. “I said to the sales team, ‘Come to me before you say no to someone.'”

Through the sales calls, as well as networking and referrals, they booked bar mitzvahs, parties, fundraisers, weddings and mixers at rates as low as $1,000 all the way up to $100,000.

Every time a deal closed, the trio would celebrate with a war-room cheer and declare a battle had been won, listing each on a white board. In the first months of its war on recession, the Music Box won 23 battles and generated about twice the money compared with the same time the previous year.

One of those battles that Quigley won: the wedding of Anadel Baughn and Christopher Barbour, who had attended rock concerts together at the Music Box during their five-year courtship, falling in love with the venue as they fell in love with each other.

Barbour, a script coordinator for “CSI: Las Vegas,: and Baughn, a TV and film actress, dreamed of having their wedding in a charming Hollywood venue. But the couple, who describe themselves as lower middle class by L.A. standards, knew their total wedding budget of about $15,000 wouldn’t get much, considering they wanted 100 guests.

So when Barbour called up Music Box and Quigley said they would be able to work with their amount for the wedding and reception, he said he was shocked.

A Saturday wedding would have been out of their price range, but Sunday was cheaper because the hall wasn’t in demand.

Barbour said Quigley didn’t want to book his wedding in a small room and force him to share the venue. So she arranged the Sunday alternative for April 5.

“I appreciate their honesty,” Barbour said. “They are trying to make a profit and are not concealing that, but there is a real human touch to how considerate they were in negotiations.”

Quigley and Sayers said their success has been driven by Smith’s encouragement and war-room antics.

“If one of us is down, the others bring each other up,” Smith said. “We try to remember that in the larger scheme of the world, even with the recession, our worst is many people’s best. We’re still pretty fortunate.”

It’s important for any successful war to have an exit strategy, Smith said. It may be a better economy in his case, but he said the war-room technique will be abandoned once it stops working or when he gets bored. “If I get bored in life, I’m losing. The same with sales.”