Celebrity endorsement of businesses and products dates back to the 1760s. Josiah Wedgwood, the founder of the Wedgwood brand of pottery and chinaware, also called the father of the modern brand; used the royal endorsement of Queen Charlotte and other marketing devices to create an aura around the name of his company that gave the brand a value far beyond the attributes of the product itself. In fact Pope Leo XIII and Thomas Edison are known to have endorsed Vin Mariani, a Cocaine-laced drink in the 17th Century.
Celebrity endorsement is the use of a celebrity’s acquired fame and reputation by a business or company to sell their product or service in exchange for valuable consideration. In modern times, it entails in most cases, the use of the celebrity’s image in product packaging or advertisements. In this current age of social media, some endorsement deals include an agreed payment per tweet or photo promoting the business’ products or service on the celebrity’s social media accounts like instagram or twitter. Recent examples in Nigeria include Pepsi’s endorsement deals with popular singers Tiwa Savage and Wizkid.
Celebrity endorsements have tremendous economic advantages for a business or product when executed correctly. Endorsements are associated with increasing sales and have been known to increase the stock values of businesses. Apart from financial benefits, the endorsing celebrity enjoys a reputational boost which logically translates into increased worth in the endorsement and entertainment market.
In recent times several celebrity endorsement relationships have gone south and in the less prudent cases, left a bitter taste in the mouth of the sponsoring businesses. A failed endorsement relationship could translate into costly and oftentimes embarrassing losses to the business. It can be very heart-breaking for a business to spend millions of naira printing product packages bearing the celebrity’s image and several millions more in billboard, TV, and social media advertising only to be rudely jolted back to reality after a court unfavourably interprets a clause of the agreement or after a celebrity falls from grace. The recent case of Lance Armstrong’s confessions and the consequently failed deals readily come to mind. A study estimated the shareholder loss caused by Tiger Woods’ extramarital affairs in 2009 to be between $5 billion and $12 billion. It therefore means that considerable care and skill must be exerted in negotiating an endorsement agreement to clearly spell out the duties and obligations required for a smooth relationship.
Choose Your Fate Wisely
Much like in a marriage, compatibility is key. For instance, a business whose target market is the family might want to strongly reconsider offering an endorsement deal to a celebrity whose art is inclined towards nudity or is adult oriented. Such celebrities would work best endorsing a line of evening wear, perfumes or alcoholic beverages as opposed to Cussons’ Imperial Leather soap or Dufil’s Indomie Noodles.
The celebrity too, must not just be driven by the benefits of a juicy deal but must consider whether the business’ ideals match his/her own in order not to lose credibility among the fans who sustain his/her celebrity status. A celebrity who has built a considerable fan base hinged on his/her political neutrality and activism would do best to avoid a notoriously partisan business.
It is important that a business thoroughly researches the favoured celebrity at the time of offering the deal to be sure that there is nothing in the celebrity’s past or a likelihood of an event occurring in the future that may tarnish the image and brand of the business.
Every offer must be contingent upon the negotiation and execution of a final written agreement. Making an unconditional offer has the effect of binding the offeror (business) to a contract given life by the celebrity’s acceptance. It is important to always leave room for negotiations to iron out the kinks in the agreement before closing the deal.
The “Morals” Clause
Celebrity endorsements are reputation based agreements. A celebrity who loses his/her fan base is of no worth to the business anymore. Sadly, Death and Disgrace Indemnity is not offered by most insurance corporations in Nigeria. Therefore businesses have to painstakingly ensure in the morals clause of the agreement that they are allowed a certain flexibility to react and protect their investments in the event of a scandal. A good morals clause should clearly specify what immoral or illegal conducts the celebrity is expected to avoid during the period of endorsement and should also put into consideration the current reputation of the celebrity and the inclination of the celebrity’s art. A business cannot reasonably demand pious behaviour from a controversial musician. A morals clause provides for termination or suspension of an agreement upon breach of the terms in it. It is important never to make the exercise of a morals clause by a business contingent upon conviction because in the event of a criminal charge, it may take a longer time than the business would fancy for a conviction to be pronounced. A good morals clause allowed companies in deals with famous persons, the likes of Tiger Woods etc. to protect their goodwill from sinking with that of the celebrities.
Exclusivity restricts the celebrity from advertising, using or endorsing directly or indirectly competitive products or services. Both parties must agree on what is to be considered competitive to the business. For instance, an artiste endorsing a bank’s services should not endorse a mortgage institution known to be affiliated with a competitor bank. It is best practice to provide in the terms of the agreement, a clause compelling the celebrity to seek the approval of the endorsed business before entering into any other endorsement deal. It is important to bear in mind however, that the more restrictive the exclusivity clause is, the higher the endorsement price will be.
I want it and I want it NOW!
One issue that enjoys no more than cursory attention thus making it the major cause of disputes is the availability and scope of service of the endorsing celebrity. Celebrities have busy schedules. While the availability clause should be flexible, it is pertinent in negotiation to ensure that critical dates in the tenure of the deal are identified and specifically committed to. It is also necessary to specify the celebrity’s scope of services in such a manner as to accommodate eventualities and protect the business owner from having to re-negotiate inclusion of a new scope of service at the mercy of the celebrity. Activities and services like photography and video shooting sessions for commercials, billboards, and product packages and personal presence for events and product launches must be specified. With the proliferation of social media, platforms like twitter, facebook, instagram and youtube should be covered.
The endorsed business should be sure to include an option for renewal in its favour, i.e. an option to renew, exercisable by the business. This will provide a safe escape route where the celebrity is no longer desirable.
Intellectual Property Rights
A clause stating that the sponsoring business shall retain ownership of all intellectual property (trademarks and copyright) in the works and products that emanate in the course of the endorsement deal is vital. After investing millions of naira in advertisement and branding, the sponsoring business should reserve the right to use such video and pictorial adverts including product packages even after the tenure of the deal. It is advisable that the sponsoring business specifically provide in the agreement that copyright in all works produced in the course of the deal with the creative input of the celebrity shall be deemed assigned to the business in perpetuity. It is important to tailor the IP clause to the effect that work produced with the contribution of the artist within the tenure will be considered a “work for hire”, thus intimating an employer-employee relationship for the purposes of copyright.
Trivial specifics or not?
Matters such Territory, ADR and the Jurisdiction clause should be not be trivialised. The agreement must clearly and unequivocally spell out the geographical areas covered by the agreement or where the products of the agreement may be used by the business. However, with the current trajectory of ICT, the geographical lines may be getting very blurred.
Options for ADR must be provided in case of a dispute, and where parties are from different countries, they should both agree to submit to the courts of a particular jurisdiction in the eventuality of litigation.
Before a celebrity or a business owner goes smiling to the bank with millions in endorsement fees and millions in dividends from increased sales, the negotiation and execution of the endorsement agreement must be undertaken with surgical precision.