Friday, January 29, 2016

Going for the Gold (Jay Z)

However, in the fragrance industry, it is virtually impossible to sustain the success of a celebrity fragrance brand without: (i) promotional support from the celebrity in the form of public appearances; and (ii) regularly updating and refreshing the brand with “flanker” launches and new line extensions, which are fragrance launches using new packaging, often new fragrance scents and some variation on the name of the originally launched brand.
[Claim #22 in the complaint filed by Parlux Fragrances, LLC and Perfumania Holdings, Inc. against S. Carter Enterprises, LLC and Shawn Carter, filed January 25, 2016, in the Supreme Court of the State of New York.]
Good morning, class. Let’s review the players:

Jay Z is actually Shawn Carter.

S. Carter Enterprises, LLC belongs 100% to Jay Z. It “owns and controls the rights to market the name and any related trademarks of Jay Z.”

Artistic Brands Development, LLC is a Delaware corporation with offices in Miami.

Marcy Fragrance Trading Co. LLC is a Delaware corporation with offices in New York City.

Shawn Carter is “the Manager and 100% member” of Marcy Fragrance.

Marcy Fragrance “owns a 40% membership interest in Artistic Brands.”

Okay. Now let’s review the relationships:

In April, 2012, Carter Enterprises and Shawn “Jay Z” Carter himself granted Artistic Brands the rights to use Jay Z’s likeness “in the manufacture, distribution, promotion, and sale of fragrances and certain related beauty products.”

Around the same time Parlux Fragrances obtained an exclusive sub-license from Artistic Brands for “the sole and exclusive, worldwide right to manufacture, promote, and distribute Jay Z branded fragrances.”

So, Jay Z and a company fully owned by Jay Z grant perfume licensing rights to a company that is 40% owned by Jay Z through yet another company which is fully owned by Jay Z. Everybody clear?

The Jay Z perfume rights are then sub-licensed to another company in which Jay Z has substantial stock and/or warrants.

If you think sounds complicated, take a look at the dense web of relationships between Parlux Fragrances and Perfumania Holdings, Inc. I wrote about them here.

Parlux has done a lot of celebrity fragrances. They thought, not unreasonably, that a Jay Z line would do big business. In fact, they were counting on projected sales of $15 million in year one, and $35 million in year two. As part of the inducements to Jay Z, they agreed to minimum guaranteed royalties, i.e., they would pay him a pile of money whether or not they sold any Jay Z perfume. This is typical of celebrity name deals and is intended as an incentive to make sure the licensee doesn’t sit on the rights but instead gets a product promptly to market.

Parlux did indeed launch Gold Jay Z in October of 2013 and it sold well initially.

Another part of the deal was that Jay Z would provide promotional support to the brand. This is also a standard part of celebrity licensing deals (for obvious reasons) and the Parlux contract was quite specific about Jay Z’s obligations.

And yet, for reasons known only to himself, Shawn Carter apparently refused to do any of the promotional events arranged for him by Parlux. These included any of the required three public appearances per year (at least one in New York City), as well as an appearance on Good Morning America and in the Sephora store in the same building as the TV studio. He also declined to take part in an interview with Women’s Wear Daily editor Pete Born. He declined to appear at Macy’s, to participate in social media promotions, or to provide a quote for Parlux’s press release about the Gold Jay Z launch. (These are all claims made in the Parlux complaint; we haven’t yet heard Jay Z’s response as to their validity.)

If we take the Parlux account at face value, Shawn Carter has done an impressive job of stiff-arming the company behind his fragrance brand. His actions would appear to work against his own financial self-interest. What on earth could be his motivation?

Jay Z would not be the first celebrity to get cold feet after agreeing to a perfume deal. I covered the bizarre saga of the Prince fragrance a few years back. The Purple One had signed a deal with the rather infamous guy behind the Designer Imposters® line of knockoff fragrances. He then didn’t lift a finger to promote the scent. He also failed to offer a defense when sued for losses by the fragrance company, which led to a $3.9 million judgement against him. Prince finally got his legal act together, appealed the verdict, and eventually settled out of court.

Prince being Prince, we can chalk up his non-compliance to his being a talented musician but a temperamental diva. I can’t speak to Jay Z’s merits as an artist, but he is well known as a mogul with vast business interests. It would seem doubtful that he entered into these highly detailed contracts on impulse, or without benefit of beady-eyed legal advice. So what happened? Did he not like the final product? Did he take a dislike to the people at Parlux? Was there something about the incentives of the deal that gave him a bad feeling? Did he change his mind and figure that perfume promotion was not compatible with his desired media persona? Did he simply lose interest? Or is he just an asshole?

Right now we know nothing and can only wait for his attorneys to respond in their own filings with the court. Stay tuned. This should be good.

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