Royalty-based contracts work for both celebrities, brands

Royalty-based contracts work for both celebrities, brands
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First Published: Tue, Jun 24 2008. 11 07 PM IST

Starry-eyed: Currently, around 80% of the endorsement money is pumped into deals with celebrities from Bollywood and sports.
Starry-eyed: Currently, around 80% of the endorsement money is pumped into deals with celebrities from Bollywood and sports.
Updated: Tue, Jun 24 2008. 11 07 PM IST
Mumbai: Sometime this year, Bollywood actor Priyanka Chopra will morph into a superheroine, bounding across the pages of a comic book, fighting evil. For her efforts, Virgin Comics Llc. will pay a royalty fee on every comic book it sells under that title—besides the usual endorsement fee for the strip that Chopra inspired and helped co-create. According to industry estimates, the royalty fee could range between 8% and 30%.
Starry-eyed: Currently, around 80% of the endorsement money is pumped into deals with celebrities from Bollywood and sports.
Another Bollywood actor, John Abraham, gets a royalty fee from Arvind Ltd for its limited edition line of clothing titled “John Abraham by Wrangler”. The actor backs up the design effort with on-ground activation and brand placement, and even creates personalized messages to go on the swing tags with each of the garments. Arvind markets the Wrangler brand in India under a joint venture agreement with US-based VF Corp.
Though rare in a market such as India, royalty-based endorsement contracts are gaining ground as celebrities as well as brand custodians look at endorsements as mutually beneficial business ventures. “Such deals work very well for the brand as the celebrity is more committed towards promoting the product he endorses. And for the celebrity, it could mean higher visibility as well as an additional income,” says Vinita Bangard, chief operating officer, Percept Talent Management, an arm of Percept Holdings Pvt. Ltd.
According to Suresh Seetharaman, president, Virgin Comics, royalty-based deals also put a fair amount of pressure on celebrities to be more accountable. “If they have a stake in the project, they are likely to be more consistent and dependable in the way they project themselves and conduct themselves in public. They are less likely to be flippant or indulge in anything that could jeopardize their own interests.”
“As more celebrities get professional advice from managers, they will get more involved in co-ownership,” says Jon Wilkins, group founding partner, Naked Communications Ltd. “The major determinant will be how entrepreneurial the celebrity is,” he adds.
Take the Kolkata Knight Riders’ team which had a strong fan following during the recent Indian Premier League tournament. The team entered into a contract with sports goods manufacturer Reebok India Co. to design sports merchandise. Not only did Reebok India pay to be a licensee for the brand, it will offer the team a percentage of the profit as royalty fee.
Estimated at around Rs300 crore today, the market for celebrity endorsements is projected to touch Rs2,000 crore by 2010. Currently, around 80% of this money is pumped into brand endorsement deals with celebrities from Bollywood and sports. Industry experts say that while only 5-10% of these deals are actually royalty-based endorsement deals, the tide is slowly turning.
“It’s not just about endorsing a brand, or lending your face to it. There is much more involvement today,” says Anshul Chaturvedi, marketing manager, Wrangler. “So, not only are they (celebrities) spending more time in marketing the product with on-ground activities and placements, but they also voluntarily avoid competing brands... that is an indicator of how much the endorsement culture has progressed in India.”
“As the remuneration is linked to business, it makes sense for a company to encourage such royalty-based deals,” says Manishi Sanwal, general manager, LVMH Watch and Jewellery India Pvt. Ltd. Since 2001, the company has launched a limited edition signature collection of Tag Heuer watches by Shah Rukh Khan and recently even launched watches branded with the star’s Kolkata Knight Riders logo. Though the deals were not royalty-based, the actor’s contract does have a clause allowing both parties to negotiate a royalty fee, says Sanwal.
Experts, however, maintain that it will still be a while before brands can realize the full potential of such branded merchandise. Also, there’s a fear that the grey market could make inroads into this lucrative market. “Within two weeks, spectators were walking into the stadium wearing cheap knock-offs (of Kolkata Knight Riders team shirts),” says Bangard.
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First Published: Tue, Jun 24 2008. 11 07 PM IST