April 11, 2009 -- Recession aside, some celebrities made bonanza business deals in the past year.
Jessica Simpson's foray into country music may not be an unqualified success--but the millions she's pocketed shilling shoes and handbags certainly is. Talk show favorite Ellen DeGeneres, at 50 years old, became a CoverGirl, adding millions to her already bountiful coffers. Meanwhile, Colombian crooner Shakira scored the biggest deal of her career.
The soured economy has been a double-edged sword when it comes to celebrity business deals. On one hand, the credit crunch pinched manufacturing to the point where licensing deals overall took a dive. "In the fourth quarter, there was sage blowing up and down the hallways, and this year will be tough too," says Ramez Toubassy, president of Brand Sense Partners, who negotiated Britney Spears' and Halle Berry's fragrances and Sheryl Crow's new denim line, Bootheel Trading Co.
But because of the downturn, it's become even more important to launch with an already well-known name, which is why well-established celebrities like Simpson and DeGeneres have seen an uptick in their business careers.
With companies spending less to launch new initiatives, "the reality is that the right celebrity is still the best way to stand out," explains Ryan Schinman, chief executive of Platinum Rye, which has negotiated corporate deals with hundreds of celebrities, including Madonna's campaign for Motorola's iTunes-enabled cellphone.
While a celebrity may come up with his or her own ideas about a business, there are many people working behind the scenes to ensure that star and product are a good fit.
Toubassy, for instance, does market research to find out what qualities the public most associates with a celebrity, and what type of product it might buy from that star.
Last year, when research showed that the public associated singer Sheryl Crow with fashion and Americana, Ramez brokered a partnership with apparel manufacturer Western Glove Works to create a line of Crow-branded denim, now sold at Dillard's. "We treat the celebrity [brand] like any other consumer brand," says Toubassy.
These days, female stars are the biggest moneymakers because they are more likely than men to get coverage in tabloids, blogs and fashion magazines.
"More than ever, pop culture is about women," says Michael Heller, president of celebrity marketing firm Talent Resources, which has negotiated deals for Mariah Carey and Lindsay Lohan, among others. Female celebs have an even easier time selling to both sexes: "Women want to be like them, and these women attract men, as well," says Heller.
Perfumes remain a powerhouse revenue generator for celebrities. "The margins are high, the price point is good, you can do a bunch of different types of perfumes and sell them everywhere from Barneys to Target," says Heller.
In January 2008, Oscar nominee Anne Hathaway took the old-fashioned route and signed on as spokeswoman for Lancôme's Magnifique fragrance, a deal that will most likely bring in $2 million a year. (Lancôme confirms the deal is for multiple years, but will not say how many.)
Other celebrities hope a lower upfront fee--usually in the low six figures--will net them more in the end, as they also get a percentage (usually 5 percent to 10 percent) of royalties on wholesale earnings.
Actress Halle Berry and country singer Faith Hill last year partnered with fragrance giant Coty to brand their own scents. If they are lucky, the fragrances might sell as well as Britney Spears' did, netting $1 billion in retail sales since her Elizabeth Arden-partnered line (including Curious, Fantasy and Believe) launched in 2004.
Of course, lucrative opportunities go way beyond perfume. Last year, Colombian singer Shakira jumped on concert promoter Live Nation's gravy train, inking an estimated $70 to $100 million 10-year deal.
The concert promoter (which also represents U2, Jay-Z and Nickelback) last year signed Madonna for a reported $120 million, although Live Nation will not confirm numbers for anyone. The Shakira and Madonna deals mean that Live Nation will negotiate everything from albums to merchandising, whether a concert T-shirt or a cosmetics ad, as well as sponsoring concerts. (The company operates 150 venues in 33 countries.)
"Shakira is one of the few truly global artists," says Jason Garner, global music chief of Live Nation. "She can sell music and tickets in nearly in every corner of the globe."
Clothing is another way to bring in the big bucks. Sheryl Crow, Mandy Moore, Kate Moss, Sarah Jessica Parker, Victoria Beckham and Madonna all launched their own lines over the past two years.
But few can beat Jessica Simpson for her well-timed and well-executed rise to merchandising moguldom. In 2005, before being dragged down by "mom jeans" and mediocre album sales, Simpson sold the master license to her apparel/clothing brand--the right to market her name worldwide--to the Camuto Group for a reported $15 million. Camuto, which also manufactures and markets the BCBG Max Azaria, Tory Burch and Nicole Miller labels, is known for its surprisingly well-made and chicly designed goods sold at a moderate price point.
The Jessica Simpson Collection rolled out slowly with shoes, averaging $90 at retail, mostly sold through Macy's. That was a huge success--so the line expanded into categories including handbags, sunglasses and jewelry. In 2008, Simpson's products raked in $300 million wholesale, which means that the blond bombshell, who gets royalties once she earns back her reported $15 million advance, would have broken even last year--and everything from that day forward will be more in her pocket.
Of course, there's an almost unlimited array of business deals a celebrity can cash in on--50 Cent and Jennifer Aniston made millions with water (VitaminWater and SmartWater, respectively); Robert DeNiro, Justin Timberlake and Sandra Bullock all have successful restaurants.
But that doesn't mean everything a star touches turns to gold--while the public may want to smell like Britney Spears' perfumes, it doesn't want to eat what she cooks up--her New York City-based Southern-inspired restaurant NYLA closed in 2002, a mere six months after opening.