13 October 2010

The Business of Justin Bieber


What can the pop star teach business about branding?

In the three years since 16-year-old Justin Bieber was “discovered,” he has released two albums (the first an EP), appeared in several television shows, performed for U.S. President Barack Obama and launched a major concert tour, which lands in Vancouver on Tuesday.

Whatever one might think of his look or sound, that’s not a bad start for a kid who used to busk outside the Avon Theatre in his hometown of Stratford, Ont.

Raised by a single mother with limited financial resources, Bieber is now a multimillionaire and likely to become much wealthier as time goes by. Published estimates put his net worth at US$5.5 million and his earnings at $45,000 a month, but these figures seem low when one takes into account the volume of record sales, his concert earnings and his merchandising and endorsement income.

Since its release last March, Bieber’s My World 2.0, along with his earlier release, My World, have repeatedly topped the Billboard 200 charts, having sold some four million albums at last count in addition to nearly eight million songs digitally downloaded in a year when overall sales are down 11 per cent from a year ago. That makes him a hot property for his label, Island Def Jam. Sales of the record have been getting a boost from his concert tour and so, presumably, does his income.

Successful tours are money-spinners. Consider that Miley Cyrus averaged nightly box office of $1.2 million during her recent tour of 57 dates, and Jay-Z grossed more than $1 million per concert in his Blueprint 3 tour earlier this year.

It goes without saying that some are more lucrative than others. Lady Gaga, according to some estimates, brought in just $31 million from 106 concert dates. Using the more conservative assumption, Bieber should reap proceeds of roughly $22 million for his 75-city tour, given that he is playing some smaller venues. In Regina, for instance, only 6,000 seats were available, with ticket prices at $45 and $65, making it tough to break $300,000 gross for the gig and turn a profit.

After all, there are four dancers, five musicians, four backup singers, the usual army of technicians, helpers and hangers-on, as well as the warm-up act, Jasmine Villegas, all dipping into the same pot.

Of course, these numbers may well understate the revenue potential. We don’t know how much of the staging costs of Bieber’s tour are covered by the sponsor, Xbox 360, which has made product placement part of the act. Neither is it known exactly what return accrues to concert promoter AEG Live.

In case Bieber’s adoring fans (or their parents) needed any more incentive to buy tickets to see the mop-topped heartthrob, Bieber’s handlers have seen to it. Out of each ticket purchased, $1 goes to Pencils of Promise, a charity committed to increasing educational opportunities in the developing world. Bieber has said he hopes to build 15 schools around the world for needy children. It is the perfect marriage of philanthropy and marketing.

And speaking of marketing, a mighty merchandising machine supplements Bieber’s income through sales of T-shirts, posters, hoodies, jewelry, wristbands, baseball caps, lunch boxes, water bottles, buttons, teddy bears and his new book, Justin Bieber: First Step 2 Forever, My Story, all available at the official online store, where orders over $25 receive a free guitar pick inscribed with his name. All of this is handled by an independent licensing agent, Bravado International, a division of Universal Music Group.

In September, Lady Sandra Home Fashions Inc. of Montreal announced a licensing partnership with Bieber to create a line of bedding, bath coordinates and beach towels reflecting, an article in Home Textiles Today said, “the young rock star’s many emotions and states of mind.”

The dominant colour of the collection is purple, apparently Bieber’s favourite.

Bieber’s team comes by merchandising naturally.

His manager, Scooter Braun, is a former marketing executive; and his mentor, rap star Usher has — among other offerings — a line of fragrances including Usher VIP, “a confident, charismatic, masculine scent.”

Of course, the records, tours and merchandise are nothing new. The music industry has been built on this business model. What makes Bieber unique is his use of social media to promote his brand. If media reports can be believed, at any given moment, Bieber accounts for three per cent of all traffic on Twitter. Not only does Bieber deepen his fan base with Twitter, but he has created an asset that can be monetized. His Internet drawing power, for example, led to a deal, said to be worth $3 million, to pitch for Proactive, an acne medicine.

Moreover, as competition in the social media realm heats up, rivals will be anxious to recruit Bieber and other tech-savvy celebrities to their cause — and be willing to pay for the privilege.

Legend has it that Braun saw a video of Bieber on YouTube, tracked him down and flew him to his headquarters in Atlanta where a star was born. Clearly, social media are the bedrock of Bieber’s brief career. It will be fascinating to see whether the Bieber phenomenon survives the frenzy live and online, or fades away, as fleeting as one of his tweets.

THE VANCOUVER SUN



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