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Branding, Concerts, Festivals, Live Events, Sponsors

Celebrity Economics 101: A Crash Course in Valuation

Ever wonder how certain acts can command astronomical talent fees, yet someone more talented gets paid pennies on the dollar?  Or how one DJ can get paid $100k, while a band of 5 gets paid a fraction the amount?

Previously, there was a list of artist fees released online.  Regardless if they were accurate or not at the time, they definitely aren’t now.  Rather than discuss exact fees by basing it on a ‘rack rate’, let’s talk how we get to that fee and how to accurately price it out for a corporate endorsement or an event.

I get inquiries about celebrity talent pricing quite often (daily, actually) and it’s such a broad question to answer.  The best way to go about it is to understand that there are no flat rates or rack rates in the industry.  If you’re quoted a price by a talent buyer or agent, without he/she knowing the workscope, it means it’s priced at a base commission they want.  There are exemptions to this of course, but generally, high-profile celebrities go by a ‘market price’.  Talent costs fluctuate like stocks or real estate; one day they’re hot, the next they’re not.  Unless of course you’re Taylor Swift or Katy Perry – and yes, as blasphemous as it is, I put them in the same sentence.  Let me go through my own personal valuation thought process. When it comes to celebrity talent buying, for concerts, endorsements, appearances, campaigns and festivals, there are variables to consider.  The following is not a concrete formula but hopefully it helps in giving you a better perspective.

Note that from this point on, I’ll be using the terms ‘celebrity talent’, ‘musician’ and ‘artist’ interchangeably.



Who is the celebrity talent and how culturally relevant is he/she at the moment? Have they been nominated for or won awards recently?

Supply/Demand – If the celebrity talent is extremely relevant and on international magazine covers regularly, the availability of the celebrity becomes slim.  This may mean the musician/artist is on tour or off promoting a movie.  Also, winning awards tend to spike the demand even more for the celebrity talent, since there is more press and publicity on them. This puts their price at a premium.  Higher the demand, higher the price.


Where will the celebrity talent be when you need their services?  Will he/she be filming for a movie or television series, on tour, on vacation?  Will the artist’s staff be on a hiatus or on another tour for a different act (dancers, backup singers, band members)?

For location, it helps to know where the celebrity will be around the time you’ll be needing them.  It’s a good way to determine travel costs, logistics, etc.  It also helps to know if the artist is on a world tour, on vacation or on a honeymoon (yes, I’ve booked someone during their honeymoon before).  All this is tough to find out, but if you have the information, it could help significantly.  For instance, there has been a time when a musician had to decline an offer I submitted because he had been on hiatus for some time, and there wasn’t enough time for rehearsals for his band and dancers. Keep in mind that this is an important factor to consider.


If the artist is on tour, is it with a global touring company or a self-promoted tour with local promoters?  

If the artist is touring with a group like Live Nation or AEG, this defines who you’ll need to contact (if the artist is even available at this point).  If the artist however is touring on their own, or isn’t at all, there may be a possibility of touring the artist yourself or promoting a local show for them. 


If the artist is not on tour, or near your area, are you planning a one-off show/appearance or a regional tour offer?  Is the artist entertaining offers at all?  Willing to do a one-off?  If it’s for a concert, what is the artist’s average ticket price previously?

This is an important part of valuation.  One-offs are generally on the pricier side simply because the artist will need to put together a touring team, staff and fly to the location of the show or appearance for one event. Especially if that flight is across the Pacific Ocean.  Just looking at the time factor, flights from LA to Asia is almost 12hrs and factoring in the return flight, this is a whole day already on travel alone.  Workscope wise, you’re already asking the artist for one additional day of work right off the bat.  And if this artist is in high demand, that extra day will need to be taken into consideration.  Regardless if it is a private show with a one-song performance, or a full-on public event, the costs begin to escalate drastically when you put the preparation time, workscope and amount of hours the artist has to spend on a flight into consideration. The cost difference between a one-off private show and a one-off public event is at most times, minimal.  Economies of scale in tow, a one-off show is generally 50% pricier (if not double the market value of an act) for top-tier acts.  This is when putting a run of shows together or hopping on a tour might be wiser and more economical.


Most importantly, what is your bottom line?  How much are you projecting to make on the deal and how much are you willing to pay for the celebrity talent in the process?  

One of the most important factors of determining value is the projected profit/loss statement.  More in particularly used for ticketed concerts, this method can also be used to rationalize the ROI and payment for endorsers as well.

This is best done by the local promoter who’s familiar with expenses in the city, whereas the Talent Buyer can assist in guiding with the basics.  It’s standard to use the current ticket prices or rough market value to determine your base revenue.  The more thorough and prepared you are with this, the chances of starting at an equitable price with a more efficient process is likely to happen.  With this in consideration, you need to make sure that it is reasonable for both parties. It would be unfair for the artist to only get paid 5% of gross earnings and likewise, it would be unfair for you to get paid 5% too. This also helps with your minimum and maximum budgets for the celebrity.  If the celebrity comes out to being out of budget, you’ll know when to move on or know when you need to bite the bullet and spend on talent.  To help visualize what this looks like, here’s a sample P&L Statement.  


Special Consideration – Is the artist able to make it into your country?  

This doesn’t really concern the act all too much before you start talking, but if your country needs immigration permits, invitation letters, song lyrics approved and a criminal record check conducted, be sure to note that prior to approaching a celebrity.  Places like China have restrictions (political and lyrical) and a lengthy permit process that involves the talent in question.  Surprisingly, a country like Canada have specific immigration requirements as well.  If you find out through your preliminary research that the celebrity would be denied entry, it might be best to seek alternatives prior to initiating talks. 


A nice and easy analogy I use when explaining about the process of celebrity talent buying is Real Estate.  Let’s consider the celebrity talent as a house, and all the other celebrities out there the housing market.  The celebrity’s rep (agent, manager, touring group, publicist) would be similar to the selling agent.  You, the client/promoter, would be the equivalent to the house buyer, and if you chose to use a talent buyer, that talent buyer would be considered the buying agent for your future home.  And in both instances, the buying agent is technically ‘optional’ but always provides four major benefits: market information (about the industry for the region), access (to deals not accessible to the public), reputation (in the industry to leverage better deals) and peace of mind (that you’re talking to the right people and the deal you’re signing is fair).

The buying agent would take the client brief and look around the market for deals that match the client’s needs.  And in specific cases, the client may point the buyer directly to what he/she wants to buy.  Here, when a house or talent is short-listed, the buying agents and selling agents negotiate a deal fair to both parties based on its market value – and this is where the information about the market is beneficial.

Ultimately, knowing about which celebrity gets paid the most for a performance isn’t so much about reading rumors from paparazzi or tabloids or even Googling it. It is more about the economics and the true market value. And for the businesses out there, information and research is the key in finding a fair market value for anyone you are hoping to bring in for your concert or product. 

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Concerts, Live Events, Sponsors

In the times of the Roman Empire, gladiators fought beasts and the crowds waited for chariots to crash (like in NASCAR).  We wouldn’t say that we share too many similarities today, however, a few things still ring true.  One of which is promotions.  Yes, you heard that right.  During the days of the Coliseum, they didn’t have the internet (hard to imagine right?), they didn’t have flyers, nor did they have radio.  But come the day of the event, the Coliseum filled with spectators—regardless of distance, crowds were there.  It’s a chain of command, an influential voice that people listen to.  It’s ideas/people/concepts that people need to witness—an experience that people can’t miss.  All brought to you virally by social sharing.

 

Today, the modern form leverages new tools.  The contemporary form, Social Media, is just as influential. 

 

There’s a reason 98% of businesses use social media.   However, successfully using social media can be a challenge. Part of that challenge is correctly leveraging the tools of the trade.  It’s an integral part of business strategy, and is something companies need to get comfortable using.

 

In live events, creating buzz is your business; attract the right people and manage the public’s expectations.  Social media is a key ingredient in that process.  Offering assistance from integrating sponsors to becoming an outlet for free advertising.   With social media advancements like live streaming, it’s an inevitable part of a business’ future.

Use of Social Media #1 – Event Promotions

The most obvious is promotions.  Getting the word out about your event is never easy, but social media is an easy cost effective way.  Using at the bare minimum, Twitter, Facebook and Instagram, you have an opportunity to instantly connect and engage with thousands of potential customers. Create buzz by making your own hashtags and use online influencers and celebrity talent to double down on the engagement.

Use of Social Media #2: Integrate Sponsors and Activations

Sponsors want the ability to advertise and you want a co-sign (and potentially some funding). Social media enhances the real-time engagement of attendees with sponsors. Social media posts amplifies the event, exponentially reaching every attendees’ network.  Ultimately making it a must-see, must-attend event for the future.  Bringing the sponsors name in tow, it strengthens the sponsors name making it a great tool for activation as well. Organic and subtle is key though, as intrusive marketing makes it too obvious and alienating to the target market.

 

Social media is the perfect vehicle for this type of value-driven content, providing potential customers the opportunity to interact with your event and your sponsor’s’ product, all while generating real value for themselves.


Reason #3: Ticket Sales Integration

Social Media—it’s a news source, it’s a way for a person to share with their network and for their network to listen to their ‘reliable’ source.  It only makes sense that integrating sales, like tickets sales, is the natural evolution.

 

If you knew your friends were going to an event, you’d naturally be more inclined to buying tickets. By integrating the platform directly into a source like Facebook or a WeChat, sales conversions dramatically increase. 

Reason #4: Data Collection

Simply put, Big Brother is omniscient online.  Always there, always knowing.  By integrating social media, you’ve put the data out there that you can control and collect.

 

Social media-derived data, is far more amenable to analysis than the traditional media data you get from surveys and raw sales data. You’re able to instantly see which forms of marketing work and which don’t by simply tracking engagement through social media analytics.  Simply using Google Analytics right out of the box, you can already break down geographical data, time of date and pages a consumer visits.

 

Data is key to knowing your consumer and how to serve them better.


Reason #5: Emergency Services

In my opinion, this is a necessity. When large groups gather, risks of injury, brawls and emergencies rise.  Going through traditional channels to convey valuable safety information to your attendees is still needed (public announcements, radio, 9-1-1).  However, the easiest way to efficiently disseminate information quickly is through social media.

 

The Federal Emergency Management Agency (FEMA) wrote in its 2013 National Preparedness report that during and immediately following Hurricane Sandy, “users sent more than 20 million Sandy-related Twitter posts, or “tweets,” despite the loss of cell phone service during the peak of the storm.”
– Scientific American

 

In terrorism disasters like the Manchester bombing after the Ariana Grande concert a few months ago, social media was used.  Emergency services used it to locate the injured.  News companies used it to convey messages and news to the public.  The attendees of the concert used it to find out what was happening and what to do.  And the public used social media as a way to offer help to those that were affected.

 

Since nearly everyone has smartphones, the use of social media can be a life saver.

 

 

By using social media and integrating it properly within your network, you’ll be able to increase sales, track data and ultimately help in running a safe event.

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Concerts, Live Events
Head on over and purchase the new Ultralife album from Oh Wonder now!

Buy your Ultralife here.



MANILA / ULTRALIFE 

 

On July 21st, Malaya Productions and Pinnacle Live bring to you Oh Wonder Live in Manila for their Ultralife Tour!!  You must have a valid concert ticket to attend the show at Samsung Hall on July 21st.

Please note that only official tickets purchased on Ticketworld will gain you entry. Tickets are available on ohwondermusic.com





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China, Concerts, Festivals, Live Events, Tour

So, you’re a top promoter. You’ve run successful festivals across Europe and the Americas. You’ve done mainstream, electronic indie, folk, rock and even country. You’ve even gone upmarket, selling smoked brie to marketing managers in designer wellies, over the sounds of the specially flown in Senegalese four piece. 

Time to break into the Asian Market and in particular China – literally the biggest market on planet earth, and they love everything western don’t they? Pick up a success story, lock stock and barrel, rebrand it Rorraparooza and job done.

Yes, and no, but mainly no. Yes, China is potentially the biggest market in the world. It has a population of 1.3 billion people, around three quarters of which listen to music regularly. And there have been success stories, where a renowned western band has gone in, sold out and come away smiling. But there have been more cases where that has not been the case. The reasons for that are many and varied.

Getting There

First of all, logistics wise, China is a vast country – second largest in Asia (second only to Russia) with an approximate size of 9.6M KM2. What goes on in one part is pretty much ignored by the rest of the country. Unless you plan on touring for the best part of a decade you can shelve plans of “breaking China”. Moving stages from one end of China to the other, while sourcing the appropriate technical rider needed from multiple cities and countries, while still complying with the artists’ requirements is not only difficult but is in reality, truly moving mountains (literally and figuratively). It’s also not as easy as renting 18-wheelers to transport the gear from one end of China to the other, most cities and provinces have their own entry and exit permits for items coming in and out which need to be obtained weeks prior to entry. Added to that, it’ll take at least a day or two of clearing per entry and per exit. Unless you have multiple sets of gear, or willing to do shows every fortnight rather than every second day, you might as well get spot dates and fly (private if you can).

Also permits and visas are on a different level than anything you will have experienced before, unless you were behind the unsuccessful attempt to take Slipknot to North Korea. There are working visas, travel visas, public safety board certification, and others that take nearly 6 weeks for approval per city. First of all, you’ll need three types of letters, letters that need to be issued by different levels of government and all with different types of requirements (artist set list & lyrics for one):

  1. Ministry of Culture Letter of Invitation
  2. Foreign Liaison Office Letter
  3. Public Safety Board Permit (Local Government Letter)

Once you have these letters, and assuming there’s been no denial, you will need to take this approval to the Artist’s nearest China Embassy in their home country to get issued the one-time entry working visa.

Added to all this, once the visa is approved and issued, it can be just as easily terminated depending on the artist’s public actions leading to an event. Whether it be the government’s change of heart due to the artist’s lyrics or their political or religious associations, a terminated working visa can come days after issuance or days before the actual event. We can note a number of high-profile cancellations in the last two years: Bon Jovi, Maroon 5, and Selena Gomez a few months ago to name just a few. These issues can be overcome, but needs to be considered, and organised and politicized with local relationships. And most important, the artist must know in advance of what they can and cannot do, leading to an event (politically and publicly speaking of course). Don’t assume anything and don’t go at it alone.




Getting to the People

That goes for the audience as well. The audience in China is simply different from the west. Fans are fans are fans, but… fans and audiences are not necessarily the same thing. That is not a bad thing, it is just another thing you need to be aware of, and prepared for. They are fickle and unpredictable. What has worked before for someone else does in no way mean it will work again.

In order to organise a successful gig, event or festival in China – and all of Asia to a lesser extent – you need to embrace two concepts. Experience and Localisation. Let’s deal with the first of those. If you don’t have experience, and I mean a lot of specific experience of organising similar events, not just in China, but that part of China, then forget it. You need to find someone who does, and someone who has contacts, as many as possible. It is essential to get local government buy in, and that is something you need someone on the ground for.

Localisation is something that will make or break the event. Only around 10% of music derived revenue in China comes from non-Chinese-language music. To market an event, to get people through the door, and to get them to stay, you need local bands. And not just a token band or two to open the set while most people are still considering what top to wear. They need to be prominent, maybe more prominent than your “star” act. Of course this comes with its own problems, if the “star” act’s ego managed to get through customs. 

Localisation also applies to the way the event is run, from the initial promotion down to the actual operation. A 100% western approach will not work, you need to have local operatives in each aspect of the setup, working with you to prevent you from forcing a square peg (albeit a fantastic square peg) into a round hole.

But regardless of all of this, China is an amazing place to bring music to and it has enormous untapped potential. Similar to how the film industry is now, the East is the new “in thing”. With 1.3 Billion people, even getting 0.01%, yes 0.01%, of the population to attend your $10 events is $130M USD in revenue. I’d gladly take the chance to do so. You just need to know how to go about tapping it.    


Mike Pio Roda
Managing Director – Pinnacle Live Concepts

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