We have all heard of influencer marketing. But influencer capital is on the rise where celebrities not just endorse the brand but enhance the value of an asset with their association and take a share of the profits from the inflated transaction proceeds. This piece in the NY Mag shows the concept while on the rise now, has existed since the times of Charles Lindbergh.
“Charles A. Lindbergh helped define the modern celebrity, starting with the inaugural transatlantic flight of 1927. The Guggenheim family, which invested millions in aviation-related programs, paid him to barnstorm around the country, boosting the idea of air travel and convincing capital to invest in air companies. It worked, helping to create a “Lindbergh Boom” as Wall Street raced to finance the new industry. But Lindbergh was more than a celebrity endorser; he was also a promoter with a stake in what he was promoting. In 1934, facing rumors of impropriety, Lindbergh’s team released financial statements revealing millions of dollars in inflation-adjusted profits from the sale of airline stocks over the previous six years, with more still held in Pan Am shares. Not bad, especially considering it was the Great Depression. In comparison, his annual salaries from two airlines were token.”
Celebrities in effect don’t just want to get paid for their time but also a share of the future profits through stakes in the venture:
“In 2017, George Clooney and a couple of buddies sold their superpremium tequila brand, Casamigos, to the British multinational Diageo for up to a mind-boggling billion dollars only four years after the bros launched their project. Stories about the deal emphasize the tequila’s quality, but Diageo wasn’t paying ten figures for the secret recipe. Analysts evinced concern: Diageo was obviously overpaying from a numbers perspective; only star power could explain the price. Yet the purchase came in the middle of a great year for the firm, whose stock ended the year up 40 percent, more than 20 points ahead of the extraordinarily hot S&P 500. What’s $1 billion when your market capitalization is up $25 billion?
Clooney was hardly the first celebrity to start a brand — he wasn’t even the first to make a deal with Diageo, which offered Sean Combs a fifty-fifty profit split to develop and market the vodka brand Cîroc — but the Casamigos billion marked a new era. No longer was it enough to vouch for a product; now we expect celebrities to have ownership stakes. Even when they’re dressed up in partnership language, it’s important to distinguish these more traditional celebrity endorsement deals from genuine promotional plays like Casamigos. The difference here isn’t just the tax category — labor income versus capital gains — it’s volume: In the age of promoter’s profit, successful owners make much more money than even the most elite workers.”
The concept took to the next level in the crypto world:
“Some celebs hawked their own NFT collections directly to fans, grabbing cash in exchange for limited-edition electronic postcards. Many A-listers signed traditional promotional deals for cryptocurrency services, spawning the era’s first celebrity anti-promoter, actor Ben McKenzie, who began speaking out against the crypto space in general and endorsements from his fellow celebrities in particular. Crypto also launched its own category of capitalist promoters whose fundamentally insubstantial projects managed to break through and attract serious money. These men — such as Do Kwon (terra/luna), Alex Mashinsky (Celsius), Changpeng Zhao (Binance), Michael Saylor (MicroStrategy), and Sam Bankman-Fried (FTX, or what remains of it) — conjured larger-than-life personas and alleged fortunes out of code, and the phenomenon they represent deserves its own essay.”
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