From Boy Band to Business Baron: Justin Timberlake’s Enterprise

From Boy Band to Business Baron: Justin Timberlake’s Enterprise

Justin Timberlake is one of the most successful entertainers of our time. While most people may know him for his musical genius, he’s an extremely bright businessman. In order to help us understand and appreciate his longevous career, we’re going to analyze his artist business model and break down each component.

Music Value Proposition

Justin Timberlake strives to fill the world with joy through entertainment. In a world contaminated with distress and division, JT creates content that brings people together. From full length albums to feature films, he’s committed to making the world a better place through entertainment and music.

Songs like Until the End of Time illustrate a world where love triumphs over chaos. JT also praises the power of love as an actor. In the movie, In Time, he fights against society’s standards and demonstrates how love can overcome social status. His work doesn’t stop as a singer and actor though, he also composes for films. He served as music composer for The Book of Love, a story about two strangers that help each other heal emotional wounds through friendship and understanding. In an interview with the Los Angeles Times, Timberlake states that he would “hear movies more than [he] would watch them [as a kid] (Greiving, 2017).” Timberlake consistently promotes the power of love throughout all of his content, which makes his work incredibly valuable to his fans and supporters.

While Justin Timberlake may align his brand with positivity and love, he isn’t without fault. When criticizing JT, some point to the Super Bowl halftime show from 2004, in which he “pulled off part of [Janet] Jackson’s outfit, briefly exposing her right breast in front of… 140 million viewers (Peter, 2018).” But this act can’t solely be the fault of Timberlake. The fact of the matter is that the halftime show performance is rehearsed to precision. The notion that JT would do something off-the-cuff is unlikely. The entire fiasco had to be prepared, more than likely as a way to increase ratings. Justin Timberlake has apologized for the situation on various occasions. Given his behavior since the event, one can safely assume that he learned his lesson and will not make mistakes of this magnitude again.

Streams of Revenue

In an interview with Kiplinger, Thomas Corley explains the correlation between millionaires and multiple sources of income. He stated that millionaires “calculate risks with their money to create [multiple] revenue streams (Block, 2017).” Justin Timberlake is no different. Despite his cordial demeanor, he’s an adamant businessman. Most artists depend on digital music streams, merchandise sales, and tours to make money, but JT finds other avenues. Not only does he generate revenue from digital song sales and touring, but he also acquires income from his acting career. JT has had an acting role in 18 films, including Alpha DogFriends with Benefits, and Wonder Wheel (Fandango, n.d.). He’s also a sound composer for films, co-founded Sauza 901 liquor, founded the William Rast Clothing Line, and is a minority owner of the Memphis Grizzlies (Kreps, 2014). Below is an illustration highlighting six forms of revenue for Justin Timberlake. He receives income from all of these enterprises.

Partners / Mediators that help generates revenue streams

“The power of one… is formidable, but the power of many working together is better. (Arroyo, n.d.).” One can accomplish many things and get very far on their own, but reaching new echelons will require the help of others. There are various partners that JT must work with in order to generate revenues from his businesses. In terms of music, he must work with his record label (Tennman Records) and Interscope Records to create, distribute, and market recordings. The label does many things on behalf of JT, including securing intellectual property, such as copyrights. Having control over the copyrights allows the label to produce products using JT’s name and likeness. The label is also responsible for establishing licensing deals with music streaming platforms (such as Spotify, Apple Music and Pandora), TV shows, and movies. They must also distribute the recordings to digital and physical retailers. On top all of these duties, the record label is in charge of marketing and promoting the music. Various groups (such as Legal, Finance, Accounting, and Marketing) collaborate from within the organization to generate revenue.

Live Nation is another important partner that helps generate revenues for Justin Timberlake. According to Live Nation, “every 18 minutes,” one of their events is taking place (n.d.). This worldwide company has such a grasp on the live entertainment industry, it’s a no brainer for JT to partner with them for his The Man of The Woods Tour (Live Nation, 2018). Performing at 27 cities in 17 days is no easy feat. He requires an experienced company to handle logistics, secure venues, promote the tour, and sell tickets in order to pull it off. This partnership allows him to rehearse appropriately without worrying about managing the day to day business aspects of a tour.

“Celebrities can make brands appear relevant… and help foster trust” but they can also “destroy the same trust” when the two parties do not complement each other (Schlossberg, 2016). In order for celebrity endorsements to be successful, there must be a clear connection between the two. Not having this connection will raise a red flag to consumers who feel the partnership is fabricated. Justin Timberlake has done a great job developing partnerships with brands that match his persona, one of them being with Sequential Brands Group.

Sequential Brands Group is the parent company of the William Rast clothing line, which JT co-founded with Trace Ayala in 2005 (Chan, 2016). He depends on Sequential Brands Group to manufacture quality clothing, hire models that will showcase the garments, market the apparel to the public through various mediums (including magazines and websites), and distribute the clothing to major retailers (such as Macy’s and Dillard’s). The partnership makes sense because the clothing resembles JT’s brand and appeals to his target audience. The apparel is advertised as premium (just like Justin Timberlake’s persona) yet affordable (for his younger fans aged 18-24).

Another partner JT works with is Sauza Tequila. “As a tequila lover and entrepreneur, [he] wanted to bring the passion and dedication that went into every bottle of his 901 Tequila to his fans (Sauza 901, n.d.).” He has adamantly crowned tequila as his favorite alcoholic beverage, so having his own line is not so farfetched. This partnership makes sense because his influence over the public can increase sales for Sauza, and the increase in sales will add more revenue to his name. He’s also a tequila aficionado and does not shy away from it.

While some may argue that artists should not be endorsing alcohol (especially since there are so many teenage music fans), at the end of the day we all have minds of our own. Martha Lockie from New Life House (an alcohol rehabilitation center in California) published an interesting article on the topic. She agrees that celebrities endorsing alcohol makes a parent’s job more challenging, but she also stated that “vilifying celebrities or alcohol companies” is not the solution (Lockie, n.d.). She goes on to state that “families who demonstrate healthy drinking habits at home, clear boundaries and consistent consequences when family guidelines are ignored [will be more equipped at] handling possible alcohol and drug abuse in their children (n.d.).” Every parent must make it their mission to instill principle and morality within their children. Having these values will allow a person to understand right from wrong, and that includes being influenced down the wrong path. The general public should have no issue with Timberlake’s 901 tequila.

In his role as an actor, he partnered with WME (his talent agency) to acquire roles in movies and TV shows. WME is the first talent agency in the world (Charity Buzz, n.d.), so it makes sense that JT would rely on their expertise for his acting career. The talent agency acquired the business of booking all of his events as an actor and performer in 2013 (Halperin, 2013). That means that WME now manages his tours, books his live events, identifies acting opportunities for him, and even finds endorsements deals for him. They play an integral role in his success as a celebrity, influencer and performer.

His role as a minority owner of the Memphis Grizzlies also creates a partnership between him and the organization. This partnership is less demanding though. Since he is only a minority owner, he does not have the authority or responsibility associated with being a majority owner. Majority owners assign GM’s and are heavily involved in basketball operations. Timberlake on the other hand, just enjoys rooting for his hometown basketball team and watching his investment grow. The organization’s revenues have increased by an annual average of 5.3% over the past decade (Statista, 2018) and is currently valued at $1.025B (Forbes, 2018).

Essential Activities to Generate Revenue

There are various activities that must happen in order to generate the revenues I have identified. JT has to write songs and rehearse his performances in order to provide his services as an artist and actor. Marketing, selling, licensing and music distribution is also required for him to generate revenue from his talents. Other important activities include social media management, personal brand development, legal overview, accounting and financial analysis. Below is an illustration listing the key activities.

In order to get a better understanding of how these essential activities generate revenue, we will examine them individually.

  • Songwriting – This activity is essential for any artist. Although Timberlake is highly regarded for writing his own songs, many people have no idea that he has written hits for other artists. He wrote Blow and Rocket for Beyoncé in 2013, Rehab for Rihanna in 2007, and Miles Away for Madonna in 2008 (Stephens, 2017). His writing skills bring in the loot, but more importantly, they allow him to maintain his celebrity. Fresh material is required create momentum for a tour, place JT on the music charts, and sustain his relevance in a fast-paced industry.
  • Music composition – Not only does JT produce music for his own works, but he also composes for films. This requires him to be in the studio experimenting with sounds until he can match melodies with movies. One example of a song he composed for film is Can’t Stop the Feeling!, which was featured in the film Trolls. Timberlake went on to win a Grammy for “best song written for visual media” with Can’t Stop the Feeling!(Brown, 2017). The recording had “2.4 million downloads in 2016 [and was] streamed nearly 700 million times,” making it the top-selling track in 2016 (Newman, 2016). I think it’s wise to say that composing music is an essential activity for JT’s business model.
  • Marketing – This activity is extremely important. Timberlake can make the greatest music compositions for film and release the ultimate sound recordings, but without effective marketing many will never know. Marketing requires money, but a person with Timberlake’s celebrity can pay with other resources. This activity is imperative to maximizing ticket sales and making tours profitable. Social media is a big tool for marketing, which is the next activity we’ll discuss.
  • Social Media Management – Social media is everything right now. In order for JT to reach his core audience, he must be active on social media. His busy schedule makes that challenging though. To solve this problem, JT has to hire somebody to manage, oversee, and analyze his social media accounts. Traditional business professionals might not see the value in social media, but JT’s team sure does. “90% of Instagram users are younger than 35 (Pennsylvania State University, 2015),” making it the ideal place for Timberlake to reach his core audience. Posting pictures, uploading videos, and sharing glimpses of his private life allow Timberlake to speak with his fans and monetize an emotional connection.
  • Personal Brand Development – Even though Justin Timberlake has seen an extremely high level of success, he must continue to grow and cultivate his brand. Working with a brand strategist will allow him to continue growing as a celebrity and will help him identify areas of weakness, as well as strengths.
  • Performance Rehearsals – Practice makes perfect. In order to put on the best performances, JT must rehearse. According to Willis, Timberlake rehearsed eight to ten hours per day as he prepared for his Super Bowl Halftime Show (2018). One can only imagine how much time he is dedicating to his nationwide tour.
  • Selling – A dedicated sales team is needed to generate revenue. Sales people “establish relationships with retail stores, rack jobbers, and online outlets to set up channels of distribution for album sales (Get in Media, n.d.).” This group of people communicates with merchants and provides JT’S record label with all the information required to maximize sales, including: quantity of merchandise required, market area demographics, and monthly sales reports.
  • Licensing – This activity allows Timberlake to make money by having his music featured in films, commercials, TV shows, and even online music streaming sites. Licensing allows third-party entities “the right to use the music in a visual space (McDonald, 2018).” For a fee, Timberlake will allow a third-party entity, such a film company, to use one of his songs in their movie.
  • Music Distribution – How can Timberlake make money from selling his music and merchandise if it’s not available to consume? In order to get revenue from songs streams and digital downloads (as well as vinyl and physical cd sales) the music must be accessible to his fans. This is why music distribution is an essential task. His record label (and more specifically his sales team) will ensure that the music is sent to all the appropriate retailers so fans can listen and buy his products.
  • Legal Overview – A legal team is extremely important in any business sector, especially one as highly scrutinized as the music industry. I labeled legal overview as an essential activity because JT must abide by all copyright and federal laws in order to continue doing business in the U.S. The legal team will also steer JT away from unlawful activities that might implicate his celebrity in a negative manner.
  • Accounting – Justin Timberlake may have millions of dollars, but who’s counting? His accounting team tracks costs and expenditures, puts money aside for taxes, classifies revenue and expenses, and balance the checkbook. Accountants are essential to any business. During fast-paced times, such as touring, they are even more important. These individuals allow JT’s to see where the money is going to and coming from, which will identify trends and allow them to maximize profitability.
  • Financial Analysis – The Finance Team is also an integral part of JT’s business model. They manage investments, analyze revenues, forecast finances, create budgets, identify the most profitable projects, and develop plans for upcoming endeavors. Without their support, it would be very difficult to know the risk and reward associated with a project (like a tour) or an investment (like the Memphis Grizzlies).

Expenses

There are various expenses related to the revenue streams that have been identified, including music production costs (studio time, mixing and mastering, production rates, etc.) advertising expenditures, salaries (accountants, financial analysts, legal team, sales team, etc.), copyright registration costs and music distribution fees. Costs associated with touring also create heavy expenses.

Record labels tend to invest anywhere from $150,000 – $500,00 in an artist’s recording and up to $300,000 in video production (IFPI, n.d.). This is the price an artist must pay in order to compete in the music industry. Utilizing state of the art equipment, collaborating in other famous artists, and hiring the most experienced music professionals to work on your projects comes with a substantial price tag, but as you can see from the graph below, it’s not such a bad idea.

According to Statista, in 2016, over 190 billion dollars were dedicated to marketing in the United States (2017). This figure is staggering and illustrates how great of an expense advertising truly is. However, it is essential to any business. You have to invest money to make money. JT knows that Tequila 901 commercials, William Rast magazine articles, and online commercials for his tour will create dividends for him and his businesses. Often times, it’s the difference between being seen/heard or being invisible/mute.

Salaries are another big expense. Accounts/Financial Analysts and Attorneys may not have a lot of things in common, but one thing they both love is money. In 2017, accountants earned $50K, financial analysts earned $56K, and attorneys earned $91K on average (Salary.com, 2018). Let’s say JT has three accountants, two financial analysts and three attorneys on his team. According to the figures provided by Salaries.com, that would result in $588K in annual salaries (just for his finance and legal team). Keep in mind that these particular professionals are more than likely to get paid above average, especially if they’re hired by a celebrity and expected to work on the tour. Other important salaries to consider include the marketing team, personal brand strategist and social media manager.

Touring also incurs expenditures. Rental equipment, booking venues, lodging and meals, gas, airfare, insurance, salaries, promotion, and commissions for the booking agency all add up pretty quickly. This is why having a finance and accounting team is extremely important, as well as teaming up with an established live events company like Live Nation. With the help of these professionals an artist will end up generating money and not losing it.

Future Opportunities to Create Revenue

Justin Timberlake has a diverse business portfolio. His personal brand allows him to venture off into territory that many artists cannot. After reviewing his current business model, I believe I have identified two future opportunities for him to create even more revenue. One capitalizes on his festive personality and the other revolves around his involvement in the entertainment industry.

Owning a nightclub would be a great business endeavor for Justin Timberlake. He is an extremely popular celebrity that many other stars are drawn to. His music and personality have the power to drawn in the female demographic, which will in turn attract the males into the nightclub as well. This would be a great opportunity to promote and sell his Sauza 901 liquor brand as well. He can create specialized drinks and an entire menu completely off the beverage, while playing many of his hits throughout the night. I think this would be a great chance for him to generate more income and stay true to his brands.

Another business venture I believe can serve him well is establishing a Film Production Company. He has proven his love for film and music, so why not take it up a notch and create a full-fledged movie production company. If writing scripts isn’t his forte, he can source it out to various talented directors in the industry, which will allow him to focus on the soundtrack and music composition for the film. I certainly feel like this move would be natural and make a lot of sense. He could be a brilliant director or producer, with the right partnership of course.

JT is a brilliant artist and businessman. He’s had his moments away from the spotlight, but if one examines closely they’ll discover he’s always been involved; somewhere behind the scenes composing for films or writing songs for other artists. He’s on a career high right now and has found his second wind. In the era of social media, I see JT’s personal brand skyrocketing. There’s no limit to what he can accomplish and how much he can earn.

References

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Block, S. (2017, September). Learn from the daily habits of wealthy individuals. Retrieved from https://www.kiplinger.com/article/saving/T064-C000-S002-thomas-corley-on-the-rich-habits-of-the-wealthy.html

Brown, A. (2017, February 12). Justin Timberlake’s ‘Can’t stop the feeling!’ wins for visual media. Next stop, Oscars? Retrieved from http://www.latimes.com/entertainment/la-et-grammys-live-updates-justin-timberlake-wins-for-best-song-1486934428-htmlstory.html

Charity Buzz. (n.d.). 6-8 week internship at William Morris Endeavor in Beverly Hills, CA! Retrieved from https://www.charitybuzz.com/catalog_items/6-8-week-internship-at-william-morris-endeavor-in-318465

Chan, S. (2016, November 18). Justin Timberlake’s clothing line William Rast is back. Retrieved from https://www.billboard.com/articles/news/7581289/justin-timberlake-clothing-line-william-rast-returns

Forbes. (2018, February). Memphis Grizzlies team value. Retrieved from https://www.forbes.com/teams/memphis-grizzlies/

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Halperin, S. (2013, May 7). Justin Timberlake’s acting agency, WME, locked down all of the star’s future business. Retrieved from https://www.billboard.com/biz/articles/news/legal-and-management/1560784/justin-timberlakes-acting-agency-wme-locks-down-all

Hanlon, G. (2015, April 9). The perks and perils of owning a small share of a sports team. Retrieved from http://observer.com/2015/04/the-perks-and-perils-of-owning-a-small-share-of-a-sports-team/

IFPI. (n.d.) Record companies discover, nurture and promote artistic talent. They are by far the largest investors in artists’ careers. Retrieved from http://www.ifpi.org/how-record-labels-invest.php

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Live Nation Entertainment. (n.d.). Retrieved from http://www.livenationentertainment.com/

Live Nation Entertainment. (2018, January 8). Justin Timberlake announces “The Man of the Woods Tour.” Retrieved from http://investors.livenationentertainment.com/news-center/news-center-details/2018/Justin-Timberlake-Announces-The-Man-Of-The-Woods-Tour/default.aspx

Lockie, M. (n.d.). Celebrity endorsements make parents jobs harder. Retrieved from https://newlifehouse.com/celebrities-endorse-liquor-advertisements-make-parents-jobs-harder/

Salary.com. (2018, March 2). Accountant I Salaries. Retrieved from https://www1.salary.com/Accountant-I-Salaries.html

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Sauza 901. (n.d.). Retrieved from https://www.sauza901.com/#/home

Schlossberg, M. (2016, August 27). Brands are playing a ‘deadly game of Russian roulette’ with celebrities that’s costing them millions. Retrieved from http://www.businessinsider.com/celebrity-endorsements-can-be-dangerous-2016-8

Spotify. (2006). FutureSex/LoveSounds Deluxe Edition. Retrieved from https://open.spotify.com/album/0tcExuDWMQdBbwSpqN8Ku2

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Stephens, B. (2017, January 31). 9 songs you didn’t know were written by Justin Timberlake. Retrieved from https://www.popsugar.com/entertainment/Songs-Written-Justin-Timberlake-38816787?stream_view=1#photo-38816813

Pennsylvania State University, College of Information Sciences and Technology. (2015, June 16). Instagram behavior for teens different than adults. ScienceDaily. Retrieved from www.sciencedaily.com/releases/2015/06/150616155028.htm

Peter, J. (2018, February 31). ‘Nipplegate’ revisited: What really happened between Janet Jackson and Justin Timberlake? Retrieved from https://www.usatoday.com/story/sports/nfl/2018/01/31/nipplegate-revisited-what-really-happened-between-janet-jackson-and-justin-timberlake/1083557001/

Willis, J. (2018, January 31). Justin Timberlake is rehearsing 8 to 10 hours a day for Super Bowl Halftime Show (exclusive). Retrieved from http://www.etonline.com/justin-timberlake-rehearsing-8-10-hours-day-super-bowl-halftime-show-exclusive-95492

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