Your address will show here +12 34 56 78
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.

Festivals, Live Events
It turns out that doing your research has maximum payoff
Is it really that black and white? Regardless of all the effort that goes into the brand, promotion, F&B stalls that you personally handpicked, that giant inflatable rubber ducky you had installed, and the dozens of other artists on your roster—the entire success of your music festival rests on the headliner? In many ways, the answer is yes. The headliner can make the event a success as much as it can make it a flop. Such is especially true for a new or not yet established festival. No matter what you think, the fact is, the headliner defines the festival. It is the news worthy topic. Case in point: whenever the headliner is announced for Glastonbury, it makes front-page news in British mainstream media. The headliner is the anchor of your festival—the main reason other acts sign up to perform (usually for a reduced fee if not free). It is what will draw more curiosity to your festival and make people delve down deeper into the other acts. On the flip side, it is also what will stop people from doing just that. If the main act is not the right embodiment of your festival brand, it will not resonate to your audience and will lead them to look elsewhere. Sure, the festival draws music fans into forming a community, but the prestige and draw of the headliner is the ultimate deciding factor for the fans (unless of course, you’ve become a formidable brand such as Coachella, and people just can’t not attend your festival). While it’s true that you can’t cater to everyone (because hey, music preferences vary), your headliner needs to reflect your festival’s identity. There is no such thing as a bad act (Nickleback aside), just a bad headline act for your festival. Choose the wrong band further down the bill, and no one is going to be overly concerned. Commit that mistake for the headline, and you would have derailed the whole festival. Just imagine hiring Justin Bieber as a headliner for a festival full of heavy metal fans—his blood will be on your hands.  So how exactly do you find the headliner that is right for you? In this fast-paced and competitive industry, performers come and go, trends are perpetually changing. Deciding a headliner comes down to you and your business. Just like any other kind of business, it’s about knowing your product and demographic. It boils down to segmentation: WHAT do you want your brand to become? WHO is your audience?  If your expertise is country music, and your audience is into country, it’s probably not the best idea to do a hip-hop festival. You’d be surprised how often this simple, logical, miscalculation leads to trouble. WHERE are you planning to hold the festivals? Is it in a baseball field, a racetrack, out in the countryside with no infrastructure, or is in city center? WHEN are you planning on having it? Another thing to consider are your existing relationships to sponsors and the media—how can you leverage them for your brand? If Coca-Cola is one of your title sponsors, it maybe best not to hire Beyonce as your headliner. Let me share two personal experiences as examples. The Philippines, a highly Westernized country, has started a music festival uptrend. In its height, I was involved in two development festivals, one in 2014 and another in 2016, and a number of others (though in a more curatorial role). The scopes for the two festivals were very much similar: scope the largest music market possible. One was within the city centre of Manila in 2016, with a Top 40 line-up and a brand persona that demanded everyone’s full, undivided attention.  This was one brand that wanted to be heard, one that was commercially competitive and very millennial, to say the least. The headline options listed down on paper after the first brainstorming meeting with the clients would have made Billboard proud.  The other was out in a provincial city in 2014, nearly two hours away from the Metro. Initially, the provincial city posed a few problems logistically, but in the end, it turned out to be more of a pro than a con for the festival. We had to find an appropriate headliner that suited the Westernized market, one that would convince people from the city to travel two hours and stay for the weekend. There were many contenders for the headline, but finally, we decided on a legendary band that was rumoured to go to the Philippines for years but never made it—at least up until we brought them in.  Had we chosen a pop act for this festival, there would have been a number of issues. Transportation, financial capabilities, music market, PR spin, rumours (yes, you read that right), and of course, the audience’s emotional connection to the headliner, were some things we had to take into consideration in order to make the festival a success. In the end, both festivals turned out to be a success in their own right. The headliners played pinnacle roles in establishing the brands and one of which will be having a second run . Oh, in case you were wondering whom we brought in, it was Kanye West for Paradise International Music Festival in 2016 and Red Hot Chili Peppers for the 7107 International Music Festival in 2014. So How Do You Do It? To start, you must have a clear vision of what your festival is. You must know whom you’re trying to appeal to, what your price points are, and if your target demographic can actually afford it. You also would want to think about what sort of media coverage you want to attain, and what angles to pitch. More than likely, it will be aimed at a certain type of music fans. Naturally, the more types you can reach out to, the more likely you will have a success on your hands. But on the other hand, by going too wide, by trying to reach out to too many different types of fans, and too many genres, you run the risk of trying to provide something for everyone, and in the end pleasing no one and just over-running your budget.   You’ve got to make sure your line-up is cohesive and programmed correctly in the end.  Music fans that overlap, tend to hit it big—hybrid genres tend to work for the millennials. Music is incredibly polarising, probably more so than anything else that is bought and sold. According to a Repucom Live Music Sponsorship report, globally 26% of music fans actively dislike heavy metal or heavy rock music. That’s a quarter of your potential market. The same report puts the figures for those disliking rock at 7% and pop at 4%. Simply put, some genres mix, others just don’t. That is on a global scale. Your festival needs to be approached at a local level, so drill down into local figures, ones that are representative of where you are putting your show on. 51% of Japanese music lovers for example, prefer pop music to all other genres, and of all the countries surveyed came out lowest when it came to electronic music; this can be proven by looking at the line-up of a Fuji Rocks or a Summer Sonic festival.  The US was the only country where rock was the most popular (with 58% stating it was their preferred genre)—an Austin City Limits perhaps? If you were putting a festival up in Paris however, you would need to know that the French love electronic/dance music more than anyone else. Similarly, more than 2/3 of US and UK music fans love indie or alternative bands. Glastonbury, Coachella, Lollapalooza are great examples of that fact. That phrase in itself is open to interpretation. REM and Coldplay both fell into that category, and went on to be two of the biggest grossing bands in the world. The picture gets even more complicated however, when you consider another statistic. The UK is the global leader when it comes to festivals, but even there the number of foreign tourists attending that outnumber both locals and domestic tourists by more than 2 to 1. But is that a case of pandering to the foreign market? Or more a case of the domestic offering being so strong, that people are willing to travel for it? The latter is almost certainly the case in the UK, the US and to a certain extent, Europe, but not so much in Asia. In China for example, festivals there need to think localisation for success.  There, to get a crowd to attend, the local audience would demand both local and foreign artists performing, and visitors from the West would be looking for an alternative experience to what to them, are cookie-cutter festivals around Europe and the States.  At the end of the day, after considering all the variables and your market and audience, there are always options for headliners, and ways to creatively manage a line-up. The importance of the headliner needs to be balanced with practicality and priority with the festival. You wouldn’t launch a new product into a country without knowing the consumer habits of the population, so why on earth would you do it for a festival?  So do your research!  With the amount of money that is put into mounting a festival, you’ve got to do it right.  If you don’t know where to begin, simply seek help from one of the specialized firms like mine (wink wink) that specialize in these things.

Close Bitnami banner