Friday, August 21, 2009

Bolting to the Bank

As Usain Bolt marks another birthday, many track and field fans are celebrating the occasion with him, being very mindful of his establishment of another set of world records. There's really no greater gift he could ask for, is there? How many persons can boast that they earned a gift of two world records? The man is in a class by himself, an extraordinary phenomenon that defies explanation. I couldn't help but think about what this continued success means for him, and his economic well being, not that the latter is under threat.

I have written in the past about the role alliances between entertainment and traditional business can play in contributing to the development of an entertainment economy in Jamaica, and by extension the Caribbean. So I went searching on the Internet to discover how the Bolt phenomenon is being leveraged. The fact is, athlete Usain Bolt has moved from being a mere runner to become a celebrity, known not only for his record breaking achievements but also his likability. The media love him because he provides good entertainment. I can't say I've found out all there is to know, but I'll share some of what I found along with some of my thoughts. I do discuss some legal issues that should not be taken as legal advice. I suggest consulting with an attorney-at-law if there is some idea you want to act on.

Sneaker Freaker Magazine on July 25 had this release:
Olympic sprint star Usain Bolt has just released his Gold Collection online at Puma's e-shop, giving fans and aspiring athletes the chance to rock his golden steez. Capitalizing on his unbeaten record for fastest 100 and 200 metre sprints, Bolt in collaboration with Puma bang out a metallic menagerie of product.

The products they spoke about can be seen here on the Puma e-shop.

So what might all this mean in dollars and cents? Usain Bolt has a standing endorsement arrangement in place with Puma, which includes the grant of a license to use his identity (image and likeness) for the sale and promotion of products.

Licensing serves a number of functions depending on the objectives of each party. It benefits the licensor, or brand owner by, 1) helping to build their brand, 2) helping to protect trademarks, and 3) generating revenue. One the other hand, a licensee, or manufacturer may benefit by using a license arrangement to, 1) grow market share, 2) build competitive advantages, and 3) generate revenue. From the list of benefits we can conclude that it appears to be a win-win situation for both parties.

For a star like Usain Bolt, endorsement contracts along with a licensing provision could be very lucrative ways to supplement his revenue. For instance, it could allow him to take full advantage of his fame by having his image and likeness translated into merchandise that fans buy and want to be associated with. In the case of licensing for consumer products, a typical licensor could expect to earn royalties representing 10% of wholesale sales (5% of retail sales) paid to him usually on a quarterly basis. It is also quite typical of these deals to include an advance payment that is non-refundable and fully recoupable. Of course, all of this is subject to the specifics of the individual contract and the relative celebrity power of the talent. That said, for the sake of my point assume that wherever you see official licensed products the talent's representatives are probably collecting about 5% of the selling price (mind you, all 5% will not end up in the hands of the talent) - let me emphasize that this is not necessarily the structure of Usain Bolt's Puma contract, but rather it is the general expectation of licensing contracts based on the current licensing practices. This is not bad return for just being a star. As far is I could see, there are two official Usain Bolt licensees, Puma of Germany and Sun Island of Jamaica. (I'd be happy to know if there are others). The latter making it very clear that the license they have restrict them to sell only in Jamaica.

This therefore begs the question, who are all these other folk selling Usain Bolt merchandise? A quick peek at reveals a slew of vendors trying to cash in. The point I'll make here is that licensing is not the be-all and end-all of the process, because after the agreements come the policing. Many of those who are trying to hustle the name are in fact in breach of intellectual property laws. Bolt's image and likeness are his, and only he, or his assignees have a right to determine how they are used/exploited.

Typically, licensing deals will be specific on matters having to do with territory (as with Sun Island) in which the licensee can sell the products, the time period, and the product category. Often the initial deal will be 3 years with an option to renew, while the agreement will also speak to the matter of exclusivity (or non-exclusivity) granted to the licensee. There are a number of other elements to consider, but I will explain them at another time. Suffice to say that with these agreements artists and other celebrities can design for themselves a solid source of revenue.

I am not going to suggest that landing some of these arrangements will be a walk in the park, but it can be done. Neither will I suggest that they are for everyone. Recently, I wrote a post about reggae artist Levi Roots and his arrangement with the Subway restaurant chain in the UK. The more recent story is that, "Mighty Crown Celebrates New Sneaker Deal with Explosive World Tour". According to the release the Mighty Crown is the most successful non-Jamaican dancehall sound system worldwide. Here's a quote:

The super sound Mighty Crown has once again collaborated with Nike to release the Dynasty High sneaker. The unique studded sneaker is an elite revamp of Nike’s 1981 original Dynasty High. Blazoned with the Crown logo on the tongue, the sneaker is being released in conjunction with the Anniversary of Mighty Crown’s Yokohama Reggae Festival (SAI) — Japan’s largest Reggae stage show.

This is the third sneaker deal for the Japanese sound system, and they currently have two clothing lines and a dancehall magazine. There is a lesson in here somewhere for the Jamaican originators, so take from it what you will.

It would seem to me that our entertainment economy is not a pipe dream after all, hinged as it is upon Jamaican entertainment (music, arts, sports) and culture (cuisine, language, rastafari). If we can get past the fact that we may not all become mega stars, earning mega bucks, to looking at the ways that we can exploit the niches and through creative arrangements secure for our talent some steady sources of revenue, we may be surprised at what the combined revenues begin to look like. Licensees may not all be able to sign on with a Usain Bolt, but there are lesser-known stars with commercial potential worth considering.

So then, while I think Puma is willing to ride this wave to the bank, thanks to Usain Bolt, I doubt they have the long-term interest of making any significant contribution to the growth of the Jamaican economy, and why should they? The long-term exploitation of this revenue option is really up to Jamaican talent and their management. The question is, are these Jamaicans up to the challenge?

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Anonymous said...

Just want to say what a great blog you got here!
I've been around for quite a lot of time, but finally decided to show my appreciation of your work!

Thumbs up, and keep it going!


Anonymous said...

Great read! I want you to follow up on this topic?!

-Yours truly,

Anonymous said...

Thanks for good stuff