• by Michael Stone , June 7, 2010

It's tough to be a celebrity these days. Album sales are down and concert sales are fading for music artists. Box office hits are no longer guaranteed, which means less upfront cash for big names. TV advertising is noticeably slowing.

With consumers either spending less or finding more affordable (or free) options online when purchasing film, television and music, celebrities are, regretfully, earning less. As marketplace dynamics change and to overcome these issues, many are cozying up to a new source of revenue: retail product licensing.

Celebrity licensing is not a new phenomenon. After all, Jaclyn Smith has had a successful apparel line since 1985 at Kmart and celebrities have been licensing their names for fragrances for decades. But the recent caliber of celebrity licensors, including Madonna, the ultimate A-lister, combined with the volume of deals and the overwhelming interest from retailers of every variety is new.

Licensing has quickly become an important source of (perhaps) annuity revenue for celebrities, while at the same time serving as a necessary reputational boost for those who wish to stay in the limelight even when they are not touting their day jobs. But the most significant reason that this strategy is working for celebrities is because it is working for retailers.

As if it wasn't enough that the recession slowed spending and dramatically reduced foot traffic in retail stores across the country, retailers now have to compete in a wholly new way with online shopping sites. Internet empires like Zappos, BlueFly, Gilt Groupe and even Amazon, among others, have adopted a traditional department store-like model: selling multiple brand names under one "virtual" roof.

But they execute this model more efficiently than traditional department stores because they can use new technologies to allow consumers to easily navigate the online shopping experience and they are able to consistently offer deeply discounted items. Department stores -- from Kohl's to Saks -- have responded by changing their own approach.

With traditional strategies no longer enough of a draw, retailers are, more than ever, seeking out the power of celebrity to bring consumers in the door and deliver new audiences. Mega-retailers like Macy's and JC Penney's, for example, now have to differentiate themselves from their peers and online competition with licensed celebrity lines.

Licensing is no longer just a strategy for branding or marketing. When done well, it can be a necessary life line for entertainment "brands" (loosely defined) and retailers alike.

But not every celebrity, no matter how famous, can, or rather should, license his or her name. There are a few universal rules that need to be followed for long-term success. They include:

• Aspiration: The celebrity has to evoke identifiable and aspirational brand-like equities in the minds of consumers. Consumers must want to look like, sound like, move like or be like the celebrity brand. Without this, licensed products will languish on shelves and retailers will be disappointed. Consumers need motivation to shop and to buy.

• Relevance: This is a big one and encapsulates the entirety of the program, including selecting the right category for the right consumer audience at the right price point in the right retailer. Every part must work together to ensure success.

• Contribution: In order for a licensed line to be successful, the celebrity must be involved in the planning, designing, development and then marketing of the products.

• Integrity: Consumers need to believe that the products a celebrity has licensed and is promoting are credible. They need to know the celebrity is behind the design and that it accurately translates their long-time experience with the celebrity's persona.

The celebrity licensing marketplace is saturated for sure, but perhaps surprisingly, it's not yet oversaturated. As retailers continue to present a need for smart and relevant brand extensions and exclusive lines, opportunities for celebrity-licensed products will continue. And, if done strategically, they are bound to succeed.

We won't be seeing this trend going away anytime soon.