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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 exceptions 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.

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.

Branding, Festivals, Live Events, Sponsors
The way to a sponsor’s pocket is through digital benefits…  It’s often an indication of how healthy an industry is by the number of people wanting to involve themselves with it.  Not only does that apply to the amount of people, but to the type of people as well.  And it couldn’t be truer when it comes to sponsorship in the live events industry in Asia now.  Regardless of the type of event; festivals, concerts or sports and regardless of the celebrity talent involved, sponsors were tight pocketed in the past.   A few years back, the only businesses who were willing to put their Dollar, Yuan, Peso, Won, Rupee or Yen where other people’s mouths were, were the telecom giants and the ubiquitous beer and beverage brands. Today things are very different—and there are a couple of reasons why. To put this all into perspective, let’s first look at how much companies spend in sponsorship.  From 2012 to 2016, based on IEG’s annual reportsthe average growth of sponsorship spending rose on an average of +4%, with 2015 and 2016 tallying to roughly $57.5Bln and $60.1Bln USD — and we are looking at an anticipated rise of 4.5% in 2017.  In North America alone, the sponsorship spend was $21.4Bln and $22.3Bln USD, about 37% of total global spend with a rise of roughly 4.2% for 2016. In Asia Pacific, the year over year rise has been leading the pack.  From 2015 to 2016, a 5.7% rise accounted for $14.8Bln USD sponsorship spending, with an estimated 5.8% rise upcoming for year-end.  There is no doubt that strong domestic spending by globalized Asia Pacific brands like Samsung, Huawei, HTC and others, have played its role in developing this trend.  According to a PwC special report, China, India, Indonesia and Mexico are the next big emerging markets, followed by Nigeria, Saudi Arabia and the Philippines on the long-term radar.  Sponsoring Live Music Events In terms of spending in the live events industry, the breakdown of the global sponsorship spend is a good chunk of the total.  In North America, roughly 14% of the overall sponsorship spend is spent on entertainment including, festivals, fairs, and other annual community events.  This trend seems to be prevalent in Asia Pacific as well. Speaking of music in Asia, the rise in popularity across the continent of the international/regional live music scene has been remarkable, with every country seeing steady growth not just in the number of events being held, but in the revenue made from them.  According to Ministry of Culture figures, there were 2,500 concerts in Taiwan in 2012 alone, earning a total of NT$4.08 billion. In the three years since then, concert revenues in the country have increased by an average of 39%. In Thailand, the revenue from live music in 2009 was $103 million.  That had increased to $124 million by 2013 and is expected to hit $167 million by 2018.  It is a similar story throughout the region, as local bands are putting more effort into live shows and regional tours—a symptom of the falling revenue from album sales.  The shift from a hands-on product from CD sales to the live product has allowed brands to capitalize on the business from all aspects; it has given brands the opportunity to partner with their market directly in an “indirect” endorsement per se. This is only the tip of the iceberg: sponsors are seeing that growth in Asia has only begun.  The largest consumers in the world will eventually come from the East, and it’s about time for brands to capture their foothold before someone else does.  Sponsorship Trends and Engagements With 98% of sponsors using social media, it is no surprise that social sharing and social media-based engagement is top priority for companies.  Whether or not it is purely for data driven collections or community based building, the importance of social media is an indicator that sponsors seek connectivity.  With that, technology has sponsors seeking VOD, VR and streaming properties.  Suddenly, a live event is not only for those with a ticket to see, but for anyone who has access to the Internet.  In 2014, Chinese video and movie streaming site LeTV streamed rocker Wang Feng’s concert to 75,000 paying customers in just 2 days.  There is no surprise then that IFPI’s Global Music Report 2017 has made special mention about the phenome of the streaming potential of the Chinese population of 1.36bln – untapping a once frivolous market. In recent, new techy ticketing platforms, such as Eventbrite, PouchNation and Ticketflap have utilized the use of RFID and NFC wristbands and integrated the use of social sharing and social media platforms like WeChat and Facebook into their systems – further integrating social media and allowing advertisers to connect more directly to their demographics.  Now, with the infrastructure in place, sponsors and promoters team up with platforms such as WeChat, Twitter, Instagram, Snapchat to generate worldwide buzz with a simple click of a button before a ticket is even sold. Instead of having your company brand logo on a billboard or on official merchandise, music event sponsorship is now an immersive “data gathering” experience, and one that can last the whole year globally.  If done correctly, a company sponsoring a property can interact with a very specific and targeted demographic like never before.  It is no longer just visual recognition for a brand, it is about becoming an active community with the brand.  This allows affinity for the brand to grow from a grassroots/lifestyle level, maximizing each dollar and allowing multiple touch points that can be subtle and non-intrusive.  Aside from on-site activities, there is a very real chance for sponsors to play an active part, whether it be hosting a pre or after-party, or simply supplying additional benefits for the attendees.  They can offer backstage passes, exclusive merchandise — real, tangible, and memorable experiences that will be highly sought-after and talked about for years to come.   Imagine viral footages of celebrities such as Taylor Swift delivering a back-stage package to a group of awestruck tweeners or Kanye showing up at a show unannounced and hanging out with the crowd—it’ll easily set social media ablaze and have global exposure within minutes. That is why, looking around festival sites today, or watching a headline act on television, you quickly realize that everyone from tech companies to clothing brands, banks to insurance companies are all making their presence known.  By sponsoring a live event (at least when you do it correctly), you are not only bringing brand awareness to potentially millions of people, but also having the control over people’s perception of your brand forever.  Music is a universal passion shared amongst community—why not associate your brand with that passion?

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