Law & Policy, Music Business

Beyoncé Signs $50 Million Deal with Pepsi: 5 Tips for Negotiating Your Own Endorsement Deals

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Within the past twenty four hours, the web has been buzzing with the news of the Pepsi endorsement deal signed by musician and entertainment mogul Beyoncé:

“Beyoncé has signed a $50 million promotional deal with Pepsi, The New York Times reports. At some point after her Super Bowl XLVII halftime performance on February 3rd (of which Pepsi is a sponsor), the singer will appear in a new TV ad for the soft drink, which will also feature her face on a limited-edition run of soda cans. The deal will also involve sponsorship of her tour next year (Beyoncé is expected to release a new album at some point in 2013), along with a multi-million dollar fund for Beyoncé’s creative projects, even if they have no obvious connection to Pepsi. Lee Anne Callahan-Longo, general manager of Beyoncé’s Parkwood Entertainment, said those collaborative projects could include live events, videos or “a cool photo shoot,” but are still at the early stages of development.” – Rolling Stones.

Congratulations to Beyoncé for signing this deal. Now let’s shift our attention to your realities AML artists. First, in Africa’s music industry, we have seen that while our artists have not yet gained the kind of global recognition Beyoncé  commands, they are making huge strides. This year, we saw two names out of Nigeria’s music industry i.e. Tiwa Savage and Wizkid, sign major endorsement deals with Pepsi covering the continent. Therefore, it is believable that YOU too can reach a point in your careers, if you are not already there, where brands will seek you out and sign you to similar endorsement deals, albeit it for lower dollar amounts.

So, the question becomes, how can you , AML artists, get to the place where you can  sign endorsement deals with companies that may be interested in expanding their reach through you? If you get there or are already there, what are some things to be aware of?

Here are five (5) tips for negotiating your own endorsement deals.

1. Believe you too can achieve endorsement deals with reputable companies. Wizkid was a studio rat with no money and no real face time granted by industry heads to him. Today, he is rubbing shoulders with names in America and Africa’s music industry, traveling the world, and signing endorsement deals with Pepsi, among others. The same goes for D’Banj, Tiwa Savage, M.I Abaga and some of the names we have seen over time in the industry. Beyonce was once the Texas girl trying to break into the industry. Today, she is signing $50million deals.  All of these individuals are no different from you. The difference is that they BELIEVED they could be successful. My point? Your mindset has a lot to do with you getting endorsement deals. You have to believe that you too can achieve whatever you set your mind to. This is your step one.

2. Note that the trend is shifting and brands are now taking the place of record labels. The music industry, in general, has seen a remarkable shift from refusing to work with brands to now soliciting and accepting solicitations from brands that seek to work with them. In Nigeria, Ghana and other African countries, we have seen brands such as MTN, Vodafone, Pepsi, Samsung and so many other brands seek to work with artists and other entertainment talents to reach a wider demographic by tapping into the artists’/talents’ fan base. Understand this shift and take advantage of it. If you are someone like Eva, Sinzu and artists like that with a bit more traction, you can directly negotiate with such brands and have their marketing and promotion dollars help you reach a new and wider audience.

3. Hire a Very Good Entertainment Lawyer: Artists right from the onset of your careers, a good entertainment lawyer is critical. Indeed I have mentioned that the essence of  the music industry is “copyright law.”  The right to copy and to exploit the exclusive rights granted as a result of that copyright, is the crux of the music industry. If you do not get that basic premise, then you are really not serious about earning a living solely from what you say you love, your music. Get with the program from day one by getting a very good entertainment lawyer on your team.

4. Build Your Brand Equity: D’Banj and P-Square are great examples of artists who got in the game and have built very strong brand equity, so is Beyonce. You can hire a really good entertainment lawyer but you still have to put in the work and build a strong entertainment  brand.   Starting from your name to your image and even more importantly, the music you make, it must be a solid foundation for music that will sustain you, your family, grand children and great grand children. This means African artists, starting with Nigerian artists, it is no longer enough to jump up and down on stage performing. You must also protect your hard work, including your name. Recently I received a message from an artist called T9ice. I was irritated. We all know there is a 9ice who is well known and even performed in behalf of Nigeria at Mandela’s 90th birthday on a world stage. Has 9ice trademarked his name? If he has, has he stopped this T9ice from using his name? There are way too many established artists that allow these kinds of trademark infringement of their names to take place. You cannot afford to do so.

Your name is what a brand like Pepsi needs to trade on. Beyonce is essentially licensing her name to be used by Pepsi in exchange for $50million; and other revenue that may come from such use. If Beyonce did not protect her brand name, there would be nothing to license and make so much money from.

This brings me to my final point on how to negotiate your own endorsement deal. Here we look briefly at the deal points to be aware of.

5. Understand the Deal Terms You Will Be Signing. As I stated, the growing movement in the music industry has been a lot of these endorsement deals. In Nigeria, we have seen  multi-national companies from Asia, USA and Europe, enter into huge  endorsement deals with our celebrities.  In film, we have seen Genevieve Nnaji, Stephanie Okereke, Ini Edo and much more sign major multi-million naira deals. In music, D’Banj, Don Jazzy, Lynxxx, Tiwa Savage, M.I Abaga, Davido are examples of celebrity music talents that have signed endorsement deals. In many instances, I have discussed some of the basic negotiating points in these endorsement deals and some of the obligations of the parties. However, let me reiterate some key points for the benefit of those visiting AML for the first time.

    • First, know the person you are about to get in bed with. One night stands and casual sex may be justified in non-business settings. In business settings, it is often fatal. You cannot afford to sign a major endorsement deal with a reputable company and have no clue (who you are doing business with. Do your due diligence regardless of the reputation of these persons or brands you intend to work with. If you are not a fit, it is not worth it.)
    • Second, make sure you understand the specific service or product you are expected to endorse. In Beyonce’s case, she understands that Pepsi wants her to endorse their soft drink and also other products/projects that may not be related to their soft drinks. On both ends, those are savvy entertainment lawyers drafting the contracts for Beyonce as well as Pepsi. For Pepsi, you want to broaden the scope and definition of “products or services” so that if your competitor wanted Beyonce, it would be hard for them to get her. The clause is so broad that it allows Pepsi to easily say, “well you can’t endorse that product because we want our name on there and it need not be related to our soft drink.” Similarly, for Beyonce, the broad clause where she gets to choose whatever “creative” projects she wants Pepsi to essentially fund or work with her on, allows for her to have creative control over her brand. While you may not be Beyonce, in your niche markets, African artists, you may be able to negotiate on such terms. If you are in LIRA in South Africa, P-Square/Davido or D’Banj in Nigeria, you may have similar leverage.
    • Third, understand your obligations and duties. Earlier this year, soccer player Ronaldinho lost a Coke deal because he was drinking Pepsi. Besides it being a breach of his exclusive contract with Coke, it also cost him (substantial) loss of money (his endorsement deal).
    • Fourth, be familiar with your “Right of Publicity.” I have touched on this on numerous occasions. You the artist essentially grants a right of publicity/usage rights to use your name, image, likeness, voice to endorse a product/service. The company or sponsor wants broad rights here. You want to limit the scope of use. You do not want a situation where your brand name is diluted because of overuse or endorsement of products inconsistent with your ethos and your brand values. Take for example you are Beyonce. In the Pepsi deal, we know Pepsi is distributed worldwide. Beyonce wants to control her image and you see her doing just that with a limited edition runs of Pepsi soda cans that use her image.
    • Fifth, understand how long the contract will last i.e. “duration/length of time.” Beyonce’s contract lasts for a few years. As the talent, you want a short duration when you sign endorsement deals. This also depends on where you are in your career and your age. If you are in your 30s like Genevieve Nnaji or Tiwa Savage, you may want a longer duration because it is a guaranteed and stable income. If you are Wizkid or Davido, you want a limited duration. You are young, there is so much more to discover and you do not want to be tied down to Pepsi for such a long time when you could have a deal with  Coca Cola for more money and on better terms.
    • Sixth, know the reach/territory. Beyonce is the global brand ambassador for Pepsi. Tiwa, Lynxxx and Wizkid are Pepsi brand ambassadors for Africa. For the African artists listed, it is a good thing because they can have multiple deals in different markets: Asia, Middle East, USA, so long as they can build their brand equity so that they are coveted in those markets. As the talent, you don’t necessarily want a far reaching endorsement deal like Beyonce’s unless you have her kind of positioning and power. Instead, you want to, again, limit the scope so that you can negotiate and diversify your brand’s portfolio in other markets. These principles apply whether you are endorsing a Pepsi deal, working with a music distributor or signing a record contract. By the way, Beyonce negotiated Pepsi to sponsor her tour. This is a common deal negotiation where music is concerned. We see it often here in the USA and around the world and we saw Lynxxx do this with Pepsi in Nigeria.  You can also negotiate other perks like Beyonce has.
    • Seven, know how you will be compensated. This could be fee based or royalty fee based. In Beyonce’s situation, she has a base fee but the reports are silent on whether the base fee of $50million will increase over the term of the contract. It may or may not. In royalty fee based situations, the numbers typically played with range from 8-12%. In this deal, Pespi stands to make a lot more money than the $50million it is paying Beyonce. So, (there is a likelihood as with many types of contracts in the entertainment business, that) Beyonce may have given room in her contract to renegotiate the terms in the nearest future.
    • Eight, look out for the “Morals Clause.” These days, it is not unusual to find celebrities behaving badly.  Companies now include a broad morals clause that allows a company to terminate the contract if a celebrity behaves badly. I doubt Beyonce’s lawyers or Beyonce agreed to this. For you the artist, you do not want a morals clause. If there should be one, then you want a narrowly tailored language that gives room to wiggle out. For celebrities, you have to think, who defines “bad behavior?” There are clear examples defined by law i.e. breaking the criminal code i.e. robbery, murder, assault etc. But, what if you were in public and a reporter sticks a mic in your face asking about a hot topic and your opinion on the hot button topic? What if you respond, your response is appropriate but offends many that disagree with your position? What if you are asked to “apologize” and you refuse because it is truly what you believe? What if the company whose brand you represent now wants to pull the plug because under the morals clause, “it is offensive” to many, what do you do? Your lawyer should forsee such issues and should be able to focus on the language in your agreement to protect your interest.

Needless to say, there are more terms that your lawyer will help draft/negotiate on your behalf. But the above is a basic foundation you should be aware of as a professional in the music business focused on establishing a long term and successful career. As I always say, bring your A game and a sharp business mind to the table if you are really about your music.

Catch you all later.

Cheers,
Uduak

Photocredit: Pepsi promo pictures via Hello Beautiful

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Africa Music Law™

AFRICA MUSIC LAW™ (AML) is a pioneering music business and entertainment law blog and podcast show by Fashion and Entertainment Lawyer Ms. Uduak Oduok empowering the African artist and Africa's rapidly evolving entertainment industry through brilliant music business and entertainment law commentary and analysis, industry news, and exclusive interviews.

Credited for several firsts in the fashion and entertainment industry, Ms. Uduak is also a Partner and Co-Founder of Ebitu Law Group, P.C. where she handles her law firm’s intellectual property law, media, business, fashion, and entertainment law practice areas. She has litigated a wide variety of cases in California courts and handled a variety of entertainment deals for clients in the USA, Africa, and Asia.

Her work and contributions to the creative industry have been recognized by numerous organizations including the National Bar Association, The American University School of Law and featured in prestigious legal publications in the USA including ABA Journal and The California Lawyer Magazine. She is also an Adjunct Professor at the prestigious Academy of Arts University in San Francisco.
For legal representation inquiries, please email (uduak@ebitulawgrp.com). For blog related inquiries i.e. advertising, licensing, or guest interview requests, please email (africamusiclaw@gmail.com). Thank you for visiting Africa Music Law™.

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