At Trusted Advisor we held our first Royalties Summit on May 6, where, supported by Miller Kaplan, we united business managers and industry experts to discuss the rapidly changing world of licensing, royalties, and ownership models.
For our first panel “Extending an Artist’s Brand,” we brought in Vincent Leoni, Partner at Miller Kaplan and head of the Royalties Audit Department; Tony Mulrain, Partner and Co-Chair at Mintz’s Sports and Law Practice Group; and Daniel Weisman, VP at AllianceBernstein. The three panelists discussed the changing definition of celebrity, and how the past year has impacted the way brands and artists negotiate endorsement and licensing deals.
A changing power dynamic
With the pandemic furthering our usage on social media — royalties, brand deals, and licensing have become significantly more focused on the artist themselves — their personality, their niche, and more specifically, their market.
Weisman finds that in the past year, there has been a very crucial shift in the power dynamic between artist and brand — before, the artist approached the brand, and had to mold or change their image to suit the endorsement. Now, brands are approaching the artist, as personality and authenticity have become significantly more marketable. He points to the Travis Scott McDonald’s deal as an example.
“The changing industry has shifted the power to artists who can command eyeballs to move the needle,” Weisman said. Speaking specifically about the Travis Scott x McDonald’s deal, Weisman continues: “Without a doubt, if the merch component of the endorsement deal was left to the brand, there would not be as much impact. But because the artist was given free reign to control their vision, their artistry, they were able to make as much impact as possible, rather than a saccharine, watered down version of what the artist wants.”
Identifying and penetrating a target market
Because so much of licensing and royalties have started to center around artist personality, the marketplace has grown a lot more niche, segmented, and more importantly, targeted.
But, that means when an artist wants to expand their brand, they have to gain a very specific understanding of the industries their voice is pushing into. Leoni states that as the licensing industry has grown more complex, there are a growing number of factors that need to be accounted for, other than maximizing the royalty percentage.
“If the clients and the business manager don’t have specific experience in manufacturing or retail, they need to consult someone with expertise in that field. It is not about getting the highest royalty percentage for your client anymore. It is a combo of the royalty percentage versus the base from which it is being calculated.” Leoni said.
Mulrain noticed that the most successful brand deals occur when the client is able to 1) command their audience, and 2) when their niche is able to suit the brand’s DNA. Especially since the new generation is driven by social media, influencers, and personalities, authenticity and the artist themselves have become paramount.
“What I’ve been seeing more is equity deals, in which brands go to the artists, asking for endorsements in exchange for equity in the company. I’m seeing more equity deals in the past year than in the past twenty years in the space,” Mulrain said. “Because of that, it is important to consider brand DNA. The adjectives of an artist need to match that of the brand, because if there is no match of brand DNA, the marketplace sees right through that.”