Written by Dom Smales
The best brand deal I ever did was not really a brand deal. In 2011 Sam and Nic Chapman, the make-up artists behind Pixiwoo, were being approached by PR teams at beauty brands who wanted them to hold a make-up brush up and say something nice about it. We could have taken the fee and moved on. Instead, we teamed up with a brilliant partner and built a brush brand with them. Real Techniques launched that year and is still on shelves fifteen years later. The Miracle Complexion Sponge (launched in 2012) became one of (if not the) biggest selling beauty products in the world.
Over the next decade we did thousands of short-term partnerships with a multitude of beauty brands, none of which were as commercially successful or rewarding as that deal to launch Real Techniques. I believe the management business is about to relearn that lesson, and rather quickly.
The percentage problem
Last month I argued that the sponsored post is quietly turning into more of a media cost with a person attached. Organic reach has drained out of the feed and brands are having to buy back distribution they used to get for free in the deal with the creator. Once a brand pays the creator for a post and then pays again to make anyone see it, the brand deal stops being so much about advocacy and starts to be more about the media plan. Surely that means the creator’s value is diluted, no?
My headline last month was deliberately provocative – ‘The Brand Deal Is Dead’ (I had to get your attention!). Don’t worry, brand deals are not dead, but they must evolve. The word partnership in ‘Brand Partnership’ must start meaning more and I’m already seeing that change. This might mean less volume, but instead means better partnerships leading to more competition in the broad categories for TMs as well as getting deals for their mid-level talent.
The point is narrower too: That revenue is becoming less predictable and the value inside it is drifting towards the platform, rather than the people making the work, which makes it a fragile place to keep everything you have built as a Talent Manager. So the question I would be asking if I were running an agency today, is not ‘How do I win more campaigns?’, it is ‘Which are my top creators and what do we own with them or what can we build with them?”
What co-founding actually looks like
I do not mean advisory equity handed over as a ‘thank you’ at the end of a decent year. I mean a stake in a business that exists whether or not your talent posts this week. Product brands, formats and shows, licensing, live, software. Things with a balance sheet which can be valued and sold.
And it does not have to start with shares, which is where managers get stuck. It can be a license, a royalty or a share of back-end that still pays long after the work has stopped. That is the test worth applying to anything you sign this year. A fee ends fast; a royalty does not. Equity is the strongest version of the same idea, and if you can get there, get there.
RUM Beauty is a great modern example of creators building rigorous brands (full disclosure: I am a co-founder). Three creators (Sam Chapman, Jo Jones and Sali Hughes) have conceptualized, identified market needs, strategized marketing and sourced all the manufacturing. They also raised the money to launch this brand with value squarely in the company, product and brand itself, and not in the volume of posting the creators must do to sell it. That value grows with its organic reputation and compounds.
The parts nobody puts in the press release
I should be straight about the difficulties, having lived most of them. Equity does not pay salaries in March. Management is a cashflow business and you will be funding the build out of the commission income that is itself under pressure, which is why most of these stall in year two.
Then there is the conflict people prefer not to discuss. The moment you are both agent and shareholder your duty of care and your shareholding can point in different directions, and your talent will eventually be offered something brilliant for their career and terrible for the company you jointly own. You also need an answer to the awkward version of the future, when the creator wants to leave the agency but keep the company. Most management contracts say nothing about any of that.
Where I would start
Keep the management agreement and the venture agreement as two separate documents, because collapsing them into one is the most common mistake I see. Be honest in writing about who brings what, since an audience is not the same contribution as capital. Paper it before it works, because nobody negotiates well once there is money on the table. And start with one client rather than five, because this is a partnership, not a portfolio strategy.
The next fifteen years
Talent managers have spent fifteen years taking a percentage of somebody else’s business and done it well enough to build an industry that did not exist in 2010. The brand deal built most of this and deserves more respect than it gets. But it is not the thing that gets us to the next chapter. The managers who come out of this decade with real value will be the ones who kept the campaign business running and used it to fund the building of IP with incredible creators.
If you are interested in how small Talent Businesses can scale and build their IP with creators, I run a very small, bespoke mentoring and advisory service for talent managers and agency founders, wanting an outside perspective on where they are heading. If that is you, get in touch. [dom@domsmales.com]
