When Celebrity Brands Go Bust

By Matt Pillar, chief editor

Just like a fourth-of-July firecracker, it only took minutes for the Paula Deen brand’s meteoric rise to sputter to a quick and ashy demise.

Those minutes were marked by revelations that she’s made some brow-raising comments in the past, not unlike those comments—and in some cases far more insidious actions—that have cost many celebrities before her millions of dollars and incalculable damage to their respect and credibility (see Woods, Tiger; Pistorius, Oscar; Hernandez, Aaron; Armstrong, Lance; Stewart, Martha… and the list goes on).

Of course, when brand endorsements end badly, the personal loss incurred by the celebrity is just the top layer of much deeper financial fallout.

For the sponsoring brands and associated retailers, this is high-stakes and dangerous business. When celebrity endorsements work, they generate incredible returns. A 2011 study published in the Journal of Advertising reported that an athlete’s brand endorsement produces an average 4% growth in revenue and a 0.25% rise in stock returns. For perspective, using those figures we can safely assume that Tiger Woods contributed nearly $100 million per year to the bottom line at $24 billion Nike. Nike took a calculated risk when it stood by the most auspicious sports world philanderer since Wilt Chamberlain.

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