• by Karl Greenberg , March 11, 2009

Advertisers' use of celebrities is heading down, both because of the cost and the risk. According to David Reeder, VP, GreenLight Rights, who brokers celebrity deals for advertisers, only 7% of commercials during the Grammy's this year used celebs--down from 13% last year and 25% in 2007. What has risen is the use of deceased celebrities, he said: Elvis earned $51 million in 2008. Compare that to Justin Timberlake, who earned $44 million and Madonna at $40 million.

Reeder and Sheryll Kollin, SVP, director of broadcast business affairs at Doner, spoke on the second day of the Association of National Advertisers' conference on advertising law and business--on the multifarious legal and practical issues surrounding the use of celebrity endorsers for marketing campaigns. One thing they both asserted, emphasizing the point with a PowerPoint slide of Michael Phelps on the cereal box and on the bong: If you are going to take risks with younger celebrities, have an out. "A lot of endorsing celebrities tend to be younger, and youthful discretion is still ahead of them. They don't understand the responsibility they must have to the brand."

Kollin said advertisers must negotiate hard on the morals-clause issue. "With sites like TMZ and Smoking Gun, celebrities can't do anything without it ending up on media. I like to have a long, hard conversation with clients at the beginning, so that they understand that there will be baggage that goes along with a celebrity." Clients can't be vague about reasons for terminating a sponsorship arrangement, but need to enumerate all the possibilities around issues like drugs, public disrepute, and criticism of the endorsed product, crime, or moral turpitude.

She said the bottom line is a strong, specific termination clause that allows the brand to protect its image or the image of its product, ends further financial obligation to the celebrity, and gives it the right to terminate with no penalty.

"If you are paying lots of money and you have that celebrity's face associated with the brand, you need to fight real hard for a moral clause," she said, adding that on rare occasions the deals are reciprocal, where celebrities have asked for a moral out in case a company is looking bad.

Kollin said the work involved in signing a celebrity should be front-loaded, with a lot of research around a celebrity's affiliations, charities, previous deals, behavior, indiscretions, and consumer appeal--and, of course, whether the celebrity speaks to an advertiser's audience.

On that point, Reeder argued that while the roughly $40 million Buick spent on an endorsement deal with Tiger Woods didn't work because "fundamentally people don't believe Tiger drives a Buick," Woods endorsement deal with Gillette has worked, both because it aligns with Gillette's Champions moniker, "which underscores and reinforces Tiger's stature, and it gets him off the golf course, dresses him up and presents him as a more upscale figure. It works because every male who is a sports fan also shaves. Everyone can relate to it," he said.

Added Kollin, "You have to get the team together--before you ever pick up the phone--about what you want from that deal. You need to sit down with creatives, the client and account team, and ask first: 'Does this campaign have legs?'"

She said negotiators also must come to the table knowing which decision-maker represents the celebrity. "Find out when you are considering the celebrity; find out who the agent is, but, at the same time, be frank with the agent; find out how many lawyers, handlers, managers and publicists are involved," she said. "Knowing this in advance will help you set out a schedule with the advertiser: if you know you will have two attorneys on your side [for the agency and advertiser], two on their side as well [the agent's and the celebrity's], that adds time to the process."

Added Reeder: "How many hands does the deal have to pass through?"

Reeder and Kollin said it comes down to being able to walk away. "That's my number one rule: when entering any negotiation you need to be able to walk away if you have to," said Kollin. "You must have a Plan B. Nothing is worse than being told by a creative account team that you need to have this or that celebrity or we lose the client. That gives me no leverage, and I'm negotiating out of fear. I can't stress that rule enough."