Already a Bloomberg.com user?
Sign in with the same account.
For many companies, giving away tons of free stuff to celebrities is more rewarding than advertising
Every winter, Hollywood's biggest stars descend on film festivals and awards shows to promote their latest projects, exchange air kisses, and—most importantly—walk away with thousands of dollars in swag. At last month's Sundance Film Festival, James Franco, Jeremy Piven, and Elizabeth Olsen (the other other Olsen sister) were frequent guests of gifting suites. Items up for grabs ranged from tubes of Supergoop! sunscreen and Samsung Galaxy Tab handheld computers to Carrera sunglasses and Puma sneakers. Attendees were following in the footsteps of Paris Hilton, who once left a 2009 Sundance lounge with more than two dozen bags of free merchandise.
For many companies, giving away tons of free merchandise is worth the cost. RevitaLash scored a PR coup last month when Jennifer Love Hewitt proclaimed her devotion to the eyelash conditioner—telling a throng of paparazzi, "I love RevitaLash!"—while visiting a Golden Globes gifting suite. Hawking to movie stars has been particularly good to the small Ventura (Calif.) cosmetics company. In 2010 it spent $50,000 sponsoring and supplying film festivals and awards show gifting lounges. The company believes it generated press coverage equal to $2.4 million in advertising expenses.
While most companies keep their swagonomics private, the ritual of giving away freebies to celebrities has made a dramatic return amid the economic recovery. Gavin Keilly, whose GBK Productions organizes various gifting spaces during awards season, has planned a lounge where Oscar nominees can walk away with goodies ranging from $350 020608 Tears of Bleu designer jeans to a $40,000 African safari. "There has been a resurgence," says Karen Wood of Backstage Creations, a swag suite production company. "In the context of the economy, people are spending more. We're getting busier than we were in the past two years." According to Lash Fary of gifting powerhouse Distinctive Assets, this year's unofficial "condolence bag" delivered to Academy Awards runners-up the day after the show is worth $75,000. It features an Indian Ocean vacation valued at $16,000.
The goal, of course, is to create buzz. For many companies the potential boon of linking a celebrity to a product—especially in the Twitter Age—outweighs the losses or gaucheness. "The right product combined with the right celebrity and the right exposure, those three things together can create a pretty powerful marketing tool," says Michael Stone, co-founder of the Beanstalk Group, a marketing consultant. Says GBK's Keilly: "If we get one or two placements from it, it pays for itself."
Swag has also jump-started its own micro-industry. At Sundance, companies paid $7,000 to $10,000 merely to participate in a gifting suite, plus $30,000 for name sponsorship. Suite producers—a gifting oligopoly that includes Backstage Creations, Distinctive Assets, GBK, and Talent Resources—also pay up to $200,000 to rent space, arrange celebrity visits, and manage publicity.
Despite the gaudy values of gift bags, though, few celebrities redeem their travel certificates, traditionally the most expensive items. Other goods get passed off. Says Redfoo, of hip-hop group LMFAO: "Some of this stuff, I've got to be honest, I'm going to give to my friends. I don't need it." And even though they're famous, celebrities aren't immune from the IRS. Companies hand out 1099 reporting forms along with any gift worth more than $600. For some celebrities, the paperwork may bring back Pavlovian memories of Swaggate. In 2006 the official Oscar gift bag—valued at more than $100,000—set off calls from the IRS. (The Academy of Motion Picture Arts and Sciences took responsibility for taxes due on the swag—and discontinued the bags.) Meanwhile, Fary says, the actual value of the goods celebrities walk away with per event reaches only the low millions—particularly since so few redeem their vouchers.
Some gifting suites also allow celebrities to limit their tax liability by offering space to nonprofit groups. "It's a win-win-win situation," Keilly explains. "The celebrities win because they're getting a $50,000 or $60,000 gift bag. The charities win, and lastly, I win, because I'm making a living doing this."