Booty Tax
(Promo) Once known derisively as “swag,” the goody bags handed out at celebrity events now come under the heading of “gifting,” especially when tied to sophisticated marketing efforts.
But the new term can’t mask the fact that stars who can afford cosmetics, electronics and clothing are getting freebies. And the practice is just as ridiculed as it ever was.
For example, Jay Leno did a bit last month about the British military personnel held by the Iranian government. “It’s hard to say you’ve been a hostage when you end up with the same goody bag as the People’s Choice Awards,” he joked.
And the language probably won’t fool the Internal Revenue Service. The IRS said on its Website last year that “six-figure goody bags…qualify as taxable income and must be reported on tax returns.”
Why the change in policy?
“This has become big business for companies promoting their products,” explained IRS commissioner Mark W. Everson. “These things aren’t given without pride and prejudice. There is a tax implication for them. We just want to make sure no one crashes into the tax code.”
The IRS apparently hasn’t acted on this threat just yet, but the advisory has had a chilling effect. The Academy of Motion Picture Arts and Sciences (AMPAS) eliminated the official gift bag at this year’s Oscars ceremony, a tradition for the past three decades. The contents of the 2006 version had been valued at $110,000.
And the Hollywood Foreign Press Association (HFPA), which runs the Golden Globes, didn’t give out a gift bag at the January event because of the IRS announcement. In 2006, the booty was valued at $40,000.
What’s more, both AMPAS and HFPA reportedly wrote checks to the IRS to cover back taxes on gift bags given to both presenters and nominees and their events through 2005.
Is this the end of celebrity swag as we know it?
“It’s not that big a deal,” says Jane Ubell-Meyer, president of Madison & Mulholland, a New York gifting firm. “We abide by the IRS guidelines 100%, and we sent out a 1099 to every single actor this year.”
Ubell-Meyer conservatively uses the general IRS guideline that gifts or compensation valued under $600 are not taxable. Other gifting providers interpret the guideline differently, believing that a gift bag’s individual contents may not exceed $600 each, and it doesn’t make a difference what it adds up to collectively.
Gavin B. Keilly, principal of GBK Productions, a firm that specializes in fundraising and events, further observes that vendors that participate on site at a gifting suite are giving their products out individually, eliminating the possibility that any IRS valuation might result in their gifts being totaled and considered part of one large aggregate.
“As long as there are red-carpet events and awards shows, celebrity exposure will be generated and gifting will occur,” adds Mark Harris, director of global strategic marketing for Wow Creations, which hands out gifts at several events. “This industry is all about branding.”
That seems to be true. While there were no official Oscar gift bags this year, off-site gifting suites picked up the slack during the week before the event.
For example, Madison & Mulholland set up shop at a Los Angeles mansion called Haven House. The products included Shagui Diamonds (valued in the aggregate at $5 million), Magnolia flat-screen TVs and Pearls of Wisdom T-shirts. And they pulled in celebs such as James Woods, Jennifer Tilly, Alan Cummings, Lil’ Kim, and Chevy Chase.
Silver Spoon Entertainment Marketing took a penthouse at the Regent Beverly Wilshire Hotel, offering beauty and spa treatments. And at another Oscar gifting venue, Helen Mirren (named best actress for the title role in “The Queen”) simply loved two gifts from ezGear.
One was an ezWake iPod alarm clock radio, the other ezVision video glasses that, when hooked up to a portable DVD player, display an image of either a 50- or 64-inch TV screen, depending on the model. When Mirren was told they would send both products to her after the Oscars, she apparently was enthusiastic enough to have a messenger sent to the suite to pick them up.
Mirren showed she also was willing to pay for certain items. She took advantage of a gift certificate placed in Distinctive Assets’ bag from Liv’n Out Loud! Clothing Co., a trendy T-shirt firm. The actress subsequently bought six shirts — two for herself and four for her husband, director Taylor Hackford.
Coinciding with the pre-Oscar festivities, Distinctive Assets made sure that bags went to all the nominees for best actor and actress, supporting cast and best director. This rarefied list included Mirren, Clint Eastwood, Leonardo DiCaprio, Jennifer Hudson, Eddie Murphy, Meryl Streep, Will Smith, Kate Winslet, and host Ellen DeGeneres.
The day after the event, Distinctive Assets sent “consolation gift baskets” to the nominees who didn’t win. This year that basket was valued at over $75,000, nearly half of which covered an all-expense-paid trip to Caesar’s Palace in Las Vegas.
Tax implications aside, many observers wonder what’s in it for marketers. Does a wire-service photo of Paris Hilton clutching a giveaway make it a worthwhile investment?
Yes, sources say — if it’s tied to a major event.
“Award shows are incredibly convenient,” says Lash Fary, founder of Distinctive Assets, which has conducted gifting everywhere from the Grammys to the Kids’ Choice awards. “There are very few places you can go backstage where you have 100 of the top names in the whole world coming through.”
The items in a Distinctive Assets bag typically run the gamut from Altoids to $4,000 sports club memberships. There’s an initial fee of $6,000 to get included in the Grammys bag. And if a marketer wants to interact with the celebrities backstage, that’ll cost $20,000.
The Sak, a designer handbag company that sends birthday boxes to 20 carefully chosen stars, has worked with Distinctive Assets the past four years. “We buy into the lounge about 50% of the time and the bags the rest,” says Arianna Brooke, The Sak’s vice president of marketing.
“We gave Britney Spears one of the Elliot Lucca bags we had at the American Music Awards, and about two weeks later she showed up in a couple of different magazines wearing it,” Brooke adds. The bag retails for more than $500.
What’s more, Brooke has received thank-you cards from Sarah Jessica Parker, Eva Longoria, and Charlize Theron. “Just having the celebrities carrying your product sort of influences the people around them,” she says. “They are definitely looked to for direction on trends and fashion.”
Ubell-Meyer notes that “gifting is about showcasing amazing, new and cool products to the media to create exposure that normally you could not even pay for through advertising.”
Know your celebrity
Getting products in celebrities’ hands is one thing; getting them to use them is another. Thus, the first challenge is to understand the celebrity lifestyle.
“When you’re Sharon Stone or Teri Hatcher, you can’t go to the makeup counter at Barney’s like most girls,” says Fary. “We like to give them a lot of fun new beauty products so they can have that same girly experience of discovering new scrubs, new masks and new eyeliners in the comfort of their own home.”
Fary likes gift bags to have “a broad range of recognizable brand names as well as up-and-coming brands because part of our job is to introduce celebrities to products they wouldn’t otherwise have come across.”
And celebrities “realize it’s a quid pro quo thing,” says GBK’s Keilly. “They’re going into the gifting lounge to get free things in exchange for the photo with the vendor. [In turn,] the vendor uses the pictures on its Web site and in trade shows and related print media. It’s a no-brainer for them.”
GBK sold Magellan GPS on the benefits of participating in the pre-Oscar hoopla. “This was the first time for us, and we came back with some nice pictures, including Helen Mirren and Penny Marshall,” notes Magellan spokesperson Angela Linsey Jackson.
Liv’n Out Loud! put its Lifestyle T-shirts in Wow Creations’ celebrity gift bags at the Sundance Film Festival and in Distinctive Assets’ bags at the Oscars. At the latter, the bags went to all the nominees for best actor/actress, supporting actor, and best director.
But isn’t the sight of celebrities grabbing bags of booty just a little unseemly? And what about the tax issue?
Some firms have solved both problems by making it easy for celebrities to give the free stuff away to charity on site.
Gifts for charity
At the Golden Globes, Starbucks gave celebrities one-of-a-kind T-shirts designed by Mychael Knight from the hit Bravo Show Project Runway. All recipients then autographed the shirts, and they were auctioned off online for the Clothes Off Our Backs children’s charity.
Backstage Creations, run by Karen Wood, operates gifting suites at the Golden Globes, Sundance, People’s Choice Awards and other events. It often provides the option for on-site donations through CharityFolks.com.
But this probably hasn’t had much effect on public perception. Sundance — or “Swagdance,” as it’s often referred to — had its biggest gifting orgy yet in January. A documentary made at the film festival was aptly titled Sundance Celebrity Swag Hunt, whose two protagonists compete over who can come up with more gifts.
The conclusion? Don’t expect swag to disappear anytime soon.
“More and more people are being pitched and gift bag awareness has spread to more and more events,” Fary says. “[It seems] every event now has to have a gift bag. I can’t think of a single company that doesn’t do some sort of celebrity marketing.”
Next stop: Cannes
What’s next on the swag circuit now that Sundance and the Oscars are over? The Cannes Film Festival, the world’s biggest marketplace for the film business, is a logical choice. Just be prepared to spend five times as much.
This year’s event, running May 16 to 27, presents some challenges for American gifting companies. Products have to be shipped to France and moved through customs. Then there are travel and hotel expenses for companies primarily based in Los Angeles. Sometimes the gifts never arrive and have to be returned to the manufacturer.
“At Sundance, where a marketer may have spent $2,000, here you are looking at $10,000 plus the cost of getting the product to Cannes and the difficulty in finding lodging,” says Cannes veteran Mark Harris, whose firm Wow Creations is preparing a gifting villa for this year’s festival.
Not all of his clients are participating. But several are, including Liv’n Out Loud! cofounders Alyson Bruu and Kristine Fichera, who decided to parlay their recent success in the states into international recognition at Cannes.
We put our clothing in both the Oscars and Sundance gift bags, but couldn’t actually attend either event because of our explosive growth, which reached nearly 6,000% in one year,” says Bruu. “We were just too busy to leave even for one day.”
But they soon changed their minds. “When the invitation came to go to the French Riviera and be part of a gifting villa in Cannes for five days, meeting and greeting celebrities, it took about three-and-a-half seconds to make the decision to go,” Fichera adds. “We want to take advantage of the face-to-face opportunities we didn’t tap into at Sundance and the Oscars.”
Another angle to play at Cannes is in the luxury lifestyle arena. Nikki Beach, whose hotels and resorts caters to an elite clientele, returns to Cannes this month for the third consecutive year with a VIP gift suite at the famous Carlton Hotel beachfront.
This suite has been hosted for the past two years by Hollywood gifting diva Nathalie Dubois. Her company, DPA, has handed out gift bags at the César Award presentation in France and the Emmys and Oscars in Hollywood.
Nikki Beach’s 2006 Cannes retreat featured skincare products from Elizabeth Grant, hairstyling by Frederic Fekkai, and makeup by Face Stockholm. A $30,000 celebrity gift bag included Petrossian caviar, Nikki Beach’s Bubble Yummie terrycloth collection, and Caribbean Escapes vacation packages.
