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Keeping Up With the Kardashians

By: Karina Masolova,

Kim Kardashian launches her first direct-to-consumer venture in the fragrance category under her KKW Beauty brand. The limited-edition fragrances are first come, first serve—but the star also plans to release new scents in time for Valentine’s Day. Sales were exclusively digital, albeit with a small launch at e-commerce site Violet Grey’s store on Melrose Place.

Although she partnered with licensee Lighthouse Beauty for fragrance in 2012, this time, Kim is going it alone. And WWD reports that retail sales for Kardashian-branded fragrance are expected to exceed the $10 million estimated for 2012 and can reach up to $50 million from this launch and upcoming 2017 lines. TMZ reports that Kim sold $1 million worth of frangrance in the first hour, and $10 million in the first day—she’s expected to sell out 300,000 bottles for a grand total of $14 million in sales in under a week.

The Big Picture

Retail sales of licensed merchandise based on celebrities grew 1.9% in 2016, reaching $5.8 billion in licensed retail sales in the U.S./Canada. Growth in the property type is largely thanks to digital celebrities, who are in and dominate the “Other” category. Entertainers/models, the largest subsector at $2.6 billion, grew at a more modest 1.3% clip.

But growth in celebrity-based licensed sales isn’t necessarily representative of celebrity-branded sales generally. As it’s becoming easier, cheaper, and quicker to develop products alone, more celebrities are taking up the challenge.

While a star might make a foray into licensing deals at the beginning of their career, like the Kardashians, it is increasingly more likely that they won’t stay the course. One key reason (apart from a greater share of profits) is the fact that consumers are demanding greater control by the celebrity over products they endorse.

And here, the story behind Kim’s fragrance line was very personal. The crystal theme for the bottles was inspired by the actions of her friends after a Paris robbery where she was held at gunpoint—they would bring her healing crystals. Each purchase came with crystals in addition to the perfume. Developing the three scents—Crystal Gardenia, Crystal Gardenia Citrus and Crystal Gardenia Oud—was about “being calm and healing,” Kim told WWD.

That kind of storytelling power, coupled with Kim’s reportedly extensive input in the frangrance’s scent and design, was essential to driving sales. A limited run also reinforced the person connection between the star and her fans—and ensures that the frangrance will never be seen on clearance racks (But seen on eBay for surpringly relaxed prices? Sure.).

Take it Up With the Judge

I doubt the reality TV empire will go back to a licensed business model—after all, one of the Kardashian’s previous deals is still being litigated. In the latest update to the case, the 9th Circuit upheld the lower court’s temporary injunction against licensee Haven Beauty (a company of Hillair Capital Management) from continuing to use the Kardashians’ trademarks without shelling out royalties, even after the licensing agreement was terminated. See a video recording of the hearing here. 2Die4Kourt v. Hillair Capital Mgmt., LLC, 692 Fed. Appx. 366 (9th Cir. 2017). Some interesting points from the hearing:

Hillair’s lawyers offered up an interesting reason as to why the licensee did not pay up—if you recall, the licensing agreement included a provision that royalties would become due only when the Kardashians generated an invoice. Apparently, this clause was bargained for by the sisters because of concerns about when taxes were due on the royalty payments. As I noted previously, the lower district court did not cite this clause in the prior decision.

Here, the 9th Circuit considered an alternate provision in the agreement (stating that the failure to issue timely invoices wouldn’t nullify the duty to make payments generally) and the requirement of guaranteed minimum quarterly payments (which the Kardashians later gave up) to interpret the contract as requiring some regular, quarterly, form of payment. This is despite the fact that the agreement didn’t state when such payments were due, except within five days of an invoice.

Of course, this argument smells largely of the fabrications of lawyers—last year, Hillair sued the Kardashians for $180 million. Correspondence at the time indicates that the licensee was looking to offset those losses against royalty payments due. Either way, both sides were acting badly. The lawyer for the Kardashians blamed the fight on “both sides’ bad investment” fueling an “acrimonious … marriage of necessity.”

Under these facts and the terms of the licensing agreement, it’s hard to say that the court is standing on firm footing—but, understandably, it is hesitant to diverge from the established rule. Under California state law, once a license agreement is terminated, the licensee cannot continue using the mark. Even when a licensor improperly terminates an agreement, the licensee has only two options:

  1. Consider the contract terminated and stop performance, forfeiting the right to continue to use the trademark.
  2. Continue making royalty payments under the license agreement, continue using the trademark, and then sue for damages.

In the end, who knows what will happen. The case is just a small piece of the puzzle—the parties are duking out the bigger, central claims of fraud and breach of contract in an ongoing arbitration.

But that’s not the end of things—according to TMZ, the Kardashian’s former agency, Agency for the Performing Arts (APA), is suing the sisters for breach of an oral contract (why was it not in writing?) that gave the agency a 15% cut of all endorsement deals it negotiated. The Kardashians dropped APA in March 2015 “for being incompetent and breaching their fiduciary duties, which cost the Kardashians and Jenners hundreds of millions of dollars,” according to their legal team. Apparently, APA was the one responsible for issuing invoices in the Hillair case, amongst other things.

Regarding the KKW Beauty brand, a Danish makeup artist is suing the Kardashians for trademark infringement, claiming that KKW is confusingly similar to her own brand, KW, under which cosmetics, makeup, and skin care products are manufactured by licensee Kjaer Weis. For the Kardashians, Seed Beauty designs, manufactures, and distributes KKW Beauty products. Weis v. Kimsaprincess Inc., No. 17-cv-05471, 2017 BL 388118 (N.D. Ill. Oct. 30, 2017). If you thought it strange that the suit was filed in Illinois, the district court agrees—the case is moving out west to Los Angeles.

I would comment on the civil suits by and against the Kardashian clan—some of the complaints are absolutely savage—but will only note that they don’t seem to have much impact on retail sales of their branded goods.


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