Scandals tarnish star endorsements

A sputtering economy and a spate of superstar scandals are making companies more cautious about having famous faces attached to their products — and about whether they enlist celebrities at all, some marketing and branding experts say.

Olympic swimmer Michael Phelps and singer Chris Brown are the latest stars to see lucrative endorsement deals evaporate after they became embroiled in controversy. And as companies watch every marketing penny in this economy, they are weighing more than ever whether a high-profile name is worth possible damage to their brands and bottom lines if the star misbehaves.

"They are certainly thinking more about the potential risks," says Ann Green, senior vice president at Millward Brown, which works with more than 80% of the top 100 advertisers on how their marketing efforts affect their brands. "In the past few years, we have seen a slight decline in the use of celebrity endorsements and that is in part due to the risk associated as well as the necessary investment."

In a survey of national ads that aired during this year's Grammys telecast, brand and entertainment consulting firm GreenLight found that only 7% of those not connected to music or films featured a celebrity, compared with 13% last year and 21% in 2007.

"It's a considerable drop," says David Reeder, vice president of GreenLight. With the most popular entertainers and athletes demanding multimillion-dollar deals, hitching your brand to a superstar "becomes a really dicey proposition when you've got the economy working against you and these potential land mines sitting out there."

Kellogg k decided not to extend its contract with Olympic gold medalist Phelps after a picture of him apparently smoking marijuana was printed in a British tabloid earlier this month.

Days later, singer Brown, who sang the praises of Doublemint gum in a national broadcast and radio campaign, was booked on a felony charge of suspicion of making a criminal threat against a woman. The Wm. Wrigley Jr. Co., wwy a unit of Mars, said in a statement that it was "concerned by the serious allegations" and suspended the ads "until the matter is resolved."

Not all advertisers are abandoning Phelps. Subway, whose multiyear endorsement deal with him began in November, says that it will not sever their relationship — or back away from celebrity endorsers. "We accepted his apology," says Mack Bridenbaker, a spokesman for Subway, adding that Phelps' campaign spans broadcast, print and the Internet. "We're disappointed, sure. But we're going to stick by him."

Subway has had its share of celebrity pitchmen, including former New York Giant Michael Strahan and Tony Parker of the San Antonio Spurs, and it plans to continue hiring stars to promote its sandwiches. "I don't think moving forward anything's going to make us nervous about continuing that," he says.

Matt Delzell, group account director for Dallas-based Davie Brown Talent, says that the number of stars signed to endorsement deals won't diminish, but the vetting process will become more stringent.

"There will be a little more scrutiny put behind the selection process," he says. "Why are we choosing this celebrity? … Have they said anything in the media in the past that could be seen as disparaging?"

Companies may also lean toward more licensing deals, where a celebrity's name is literally attached to a brand, as a hedge against misbehavior.

Yamaha, for instance, which does not pay artists for endorsements, announced a licensing agreement last month with singer Alicia Keys to sell digitally reproduced sounds of her playing the piano. They plan to call it Alicia's Keys.

"It was trending that way anyway, but with the recent celebrity scandals, I think you'll see companies start to focus on it more," Delzell says.

With their names on it, he says, stars may be "more invested in the relationship which hopefully translates into more trust … more responsibility."