Celebrities are putting the ‘A-list' in capitalist like never before

Sydney Morning Herald

4 days ago

Celebrities are venturing beyond the billboard and the big screen – and into big business. Hailey Bieber, a model married to Justin, recently sold Rhode, her make-up brand, in a deal valued at as much as $US1 billion ($1.5 billion).
Skims, a shapewear label founded by Kim Kardashian, a reality-TV star, makes $US1 billion in annual sales and is expected to list on the stockmarket soon. Rihanna is now a billionaire not directly because of her music, but thanks to Fenty Beauty, her make-up label. Ryan Reynolds, a Hollywood actor, is active in everything from telecoms to online privacy. Surprisingly, many of these superstar businesses have become a source of innovative new consumer products.
Celebrities have long used their fame to peddle things. Michael Jordan, a basketball player, is thought to have made over $US1.5 billion ($2.3 billion) from his partnership with Nike over the past 40 years. Nespresso has reportedly paid George Clooney more than $US40 million ($61 million) to have his mug selling its coffee. Two decades ago Hulk Hogan, a professional wrestler, helped market the 'Hulkster' cheeseburger, pre-cooked and frozen for your convenience.
The practice continues. This week President Donald Trump launched 'Victory 45-47″, a line of fragrances for men and women priced at $US249 ($379), having launched 'Fight Fight Fight' ($US199, $303) last year.
By contrast, the new superstar brands put the A-list into capitalist. Ms Bieber and co are involved in operations and hold equity stakes of varying sizes in the underlying businesses. Many celebs have begun to rethink the value of traditional endorsement and licensing deals. Social media now give them a line straight to their fans. Direct-to-consumer distribution, meanwhile, has made getting a product to market easier than ever. Given that the real money is in building and owning a brand, rather than advertising, why not launch one instead?
This thinking in turn is altering the life-cycle of consumer goods. Just as pharmaceutical giants acquire biotech startups to refresh their drug pipelines, so consumer giants are buying up the most successful celebrity brands. The match makes sense. The hardest part of building a brand is the first 100,000 sales, but the A-list has a fan base that is well-disposed towards them and their wares. Once a celebrity brand gets off the ground, a consumer giant has the production and distribution networks to help it grow.
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Hence the series of deals. Among the first was Apple's acquisition of Beats Electronics, a headphones and streaming business co-founded by Dr Dre, a music producer. Many were shocked when the tech giant, which prides itself on in-house research and design, paid around $US3 billion ($4.5 billion) for the brand in 2014. More recently Diageo, a drinksmaker, has bought a tequila firm co-owned by Mr Clooney, in a deal valued at around $US1 billion, and a gin distiller partly owned by Mr Reynolds, for up to $US610 million ($928 million).