They’re all closed.
Movie Theaters. Bars. Nightclubs. Arenas. Cafes. In New York, Broadway and museums are shuttered. In San Francisco it’s even more dire. Across the country and the world, cities are shutting down, leaving humans from Seattle to Shanghai without traditional ways of finding distraction.
The mandate for social distancing that has proven essential at slowing the spread of the coronavirus will cut about $12 billion of entertainment revenue from the U.S. if the shutdown lasts until July, as President Trump signaled. Billions more are not being spent on creating new content as film and television production is frozen.
Things could get a lot worse.
“This is definitely unprecedented and turning everyone’s lives completely upside down,” says Ryan Borba, managing editor at concert tracker Pollstar.
The concert and live event industry brought in $34 billion last year, according to market research firm IBISWorld. Simple math suggests that a three-month shutdown at this time of year could cost that industry $7 billion of lost revenue. Any longer and it starts to cut into the popular summer concert season, which for LiveNation, the world’s biggest concert promoter, is when 70% of its attendance begins passing through the turnstiles. That’s bad news for the producers, songwriters, technicians and the 269,025 concert employees, including janitors, security personnel and ticket collectors. That’s not to mention the world’s top-earning musicians, all of whom make the majority of their money performing.
“We’re beginning to see it affect the entire music ecosystem,” one prominent artist manager who told Forbes on the condition of anonymity. “We’re getting calls from our agents about promoters canceling individual shows. Songwriters and producers have canceled flights into L.A. for sessions, so it’s starting to trickle down to the songwriting and production communities as well.”
On New York’s Broadway, where all 41 theaters are closed, the hit could be about $600 million, based on the amount they pulled in between mid March and July of 2019. During the 2016-2017 season, those theaters also supported more than 87,000 jobs and contributed $12.63 billion to New York City’s economy, according to Broadway League.
The effect on movie theaters is far more drastic. A complete shutdown across the U.S. will mean a $4 billion hit on the box office if they remain closed until July. On March 18, less than a month into the crisis, the national association of theater owner requested a bailout from the government.
“From the point of view of studios they are hemorrhaging money on the movie side,” says Mike Bloxham the senior vice president of global media and entertainment at research firm Magid. “There is a lot of money disappearing in China while 70,000 theaters are still closed.”
Once they do reopen, distributors will begin battling to squeeze a large number of films into a limited number of opening dates, including some major releases that include the latest James Bond movie, Disney’s Mulan and Marvel’s Black Widow, all of which have been pushed back.
“No one can precisely predict when public life will return to normal, but it will return,” Patrick Corcoran, the president of the National Association of Theater Owners, said in a statement on Match 17. “When those titles are rescheduled, they will make for an even fuller slate of offerings than normal as they are slotted into an already robust release schedule later in the year.”
Last year, entertainment companies spent $121 billion to create original content and they were expected to spend even more this year as new platforms, like short-form video platform Quibi, emerge and streaming giants like Netflix and Amazon Prime continue to plow through cash to produce new shows that lure in subscribers. Disney, Netflix, Universal and a number of other studios have all but shut down U.S. production. In California alone, that activity supported more than 722,000 jobs and $68 billion in wages, according to the Motion Picture Association of America. In New York City, television and film production support about 10% of total employment, whether directly or indirectly, and generates almost $9 billion each year.
“Right now, we’re working to keep everyone safe, support the industry and find ways to help it come back stronger than ever,” a spokesperson for Mayor’s Office of Media and Entertainment said.
The sentiment mirrored that of Colleen Bell, the executive director of California’s Film Commission who said, “The entertainment production industry in California has overcome challenges in the past, and it will endure this sudden shutdown. Until the COVID-19 situation improves, the focus is rightfully on the public health crisis. After that’s behind us, the industry will once again thrive here in the Golden State.”
While those logistics will reverberate widely across show business sectors, consumers may be in for even bigger, long-lasting changes.
For TV shows, the near-term effects could be disappointing for fans looking forward to fresh episodes of their favorite shows. FX’s Fargo has shut down production and will have to delay new episodes. More series are sure to follow. Streamers have already changed the way we watch TV—introducing binge-watching and slowly eliminating cable subscriptions—and the more that cable and broadcast series are delayed, the more likely we will continue to move away from the appointment viewing of television’s past.
In film, a far more dramatic shift just happened: consumers may no longer need to fight crowds at movie theaters on opening nights. Universal Studios announced Monday that it would begin releasing films like Invisible Man, Emma and The Hunt available for in-home, on-demand rentals despite the fact that these films were only recently released, blowing up the entrenched windowing schedule that gave theater chains exclusive rights to show movies first before they were released to in-flight entertainment, rental platforms and then television. Sony followed, releasing Vin Diesel’s Bloodshot for digital purchase only 11 days after its theatrical release.
Others will likely do same and if they do, it could lead the Academy of Motion Picture Arts and Sciences to change their theatrical-release rule, which only allows films that open in a theatre and stay there for seven days to be considered for Oscars. It may also prompt Netflix to tighten its grip on the entertainment business with the purchase of a theater chain of its own. In 2018, the streaming giant looked at buying Landmark Theatres, but Cohen Media Group beat Netflix to the arthouse chain.
“If this continues for a long time, that will cause a change in how we consume content and allow newer titles to get to home video much faster,” says Asaf Ashkenazi, the COO of Verimatrix, a technology company that works with distributors in Hollywood. “If it’s a new title, you can delay it, continue to follow the traditional system and just wait. Or you can be more experimental and go directly to selling or renting online, which will allow more people to access it and get the revenue now.“
Other businesses are also turning to streaming, including concert-streamer StageIt. The startup, which offers concerts from the likes of Jon Bon Jovi and Sara Bareilles, is on track to have revenue of $250,000 this week—about the same as its best month until now—and added 10,000 subscribers in two days while hosting virtual festival “Shut In & Sing.” Even New York’s Metropolitan Opera is in on it, streaming nightly performances.
The stars themselves are also shifting their approach to how they entertain and communicate with fans. “Together, at Home,” a new series of online concerts presented by the World Health Organization (WHO) and Global Citizen, has recruited Chris Martin and John Legend to give casual concerts from their living rooms via Instagram Live, taking requests from fans and singing songs like David Bowie’s “Life on Mars.” Using Instagram, pop star Lizzo led a meditation, Frozen’s Josh Gad read kids a story, and, on Twitter, Yo-Yo Ma played a “song of comfort.” Entertainers have already fully embraced this kind of direct connection with fans and the pandemic may only accelerate that.
Inside Kylie Jenner’s Web Of Lies—And Why She’s No Longer A Billionaire
Earlier this year, Kylie Jenner sold half of her cosmetics company in one of the greatest celebrity cash outs of all time. But the deal’s fine print reveals that she has been inflating the size and success of her business. For years.
More than a decade into their fame, the Kardashian-Jenners tend to induce eye-rolls and sighs among jaded media consumers. But when it comes to their wealth, even critics of reality TV’s first family are intrigued; the Kardashian-Jenner machine—and the cash it generates—has been the subject of articles, podcasts, even books. But no one cares more about the topic than the family itself, which has spent years fighting Forbes for higher spots on our annual wealth and celebrity earnings lists.
So when the youngest of the clan, Kylie Jenner, sold 51% of her Kylie Cosmetics to beauty giant Coty in a deal valued at $1.2 billion this January, it was a watershed moment for the family. One of the greatest celebrity cashouts of all time, the transaction seemed to confirm what Kylie had been saying all along and what Forbes had declared in March 2019: that Kylie Jenner was, indeed, a billionaire—at least before the coronavirus.
“Kylie is a modern-day icon, with an incredible sense of the beauty consumer,” Coty chairman Peter Harf gushed when announcing the acquisition in November.
But in the deal’s fine print, a less flattering truth emerged. Filings released by publicly traded Coty over the past six months lay bare one of the family’s best-kept secrets: Kylie’s business is significantly smaller, and less profitable, than the family has spent years leading the cosmetics industry and media outlets, including Forbes, to believe.
Of course white lies, omissions and outright fabrications are to be expected from the family that perfected—then monetized—the concept of “famous for being famous.” But, similar to Donald Trump’s decades-long obsession with his net worth, the unusual lengths to which the Jenners have been willing to go—including inviting Forbes into their mansions and CPA’s offices, and even creating tax returns that were likely forged—reveals just how desperate some of the ultra-rich are to look even richer.
“It’s fair to say that everything the Kardashian-Jenner family does is oversized,” says Stephanie Wissink, an equity analyst covering consumer products at Jefferies. “To stay on-brand, it needs to be bigger than it is.”
Based on this new information—plus the impact of COVID-19 on beauty stocks and consumer spending—Forbes now thinks that Kylie Jenner, even after pocketing an estimated $340 million after tax from the sale, is not a billionaire.
As with other Kardashian ventures, Kylie’s business began as a way to cash in on a minor scandal. The youngest of the family, she spent more than a year denying tabloid speculation that she was using lip filler injections before eventually finally fessing up to it in May 2015. Far from embarrassed about being caught in a lie, she—and her shrewd mother, Kris—seized it as a marketing opportunity.
With $250,000 of her earnings from modeling, endorsements and Keeping Up With The Kardashians appearances, Kylie launched her first batch of 15,000 lip kits, consisting of a lip liner and matching lipstick, in November 2015. Thanks to clever Instagram marketing, the $29 kits were gone in less than a minute. “Before I even refreshed the page, everything was sold out,” she later told Forbes.
By the end of 2016, Kylie had dozens of new products and a reputation as a skyrocketing new entrant in the cosmetics industry. A few months after her sister Kim Kardashian West scored a Forbes cover in July 2016, Jenner publicists began a campaign to “get a Forbes cover for Kylie.” Revenues were $400 million over the business’ first 18 months, they said, with a personal take-home of $250 million for Kylie. Pressed for proof, they opened up their books. During meetings at Kris Jenner’s palatial Hidden Hills, Calif. estate and the family accountant’s office nearby, Forbes was shown tax returns detailing $307 million in 2016 revenues and personal income of more than $110 million for Kylie that year. It would have been enough to put her at number two on the Celebrity 100 list, behind Taylor Swift, the accountant was quick to point out. But the documents, despite looking authentic and bearing Kylie Jenner’s signature, weren’t exactly convincing since the story they told, of ecommerce brand Kylie Cosmetics growing from nothing to $300 million in sales in a single year, was hard to believe.
After speaking with a handful of analysts and industry experts who also found the Jenners’ claims implausible, we settled on a more reasonable estimate for our 2017 Celebrity 100 list: $41 million in overall earnings for Kylie, good for the No. 59 spot. Kris was “so frustrated,” the Jenners’ PR flack shot back. “We’ve done so much.”
Two months later, a story appeared in WWD, a trade publication known as “the bible of fashion,” using the exact numbers the Jenners first tried to give Forbes. “There has been raging speculation about the size of her business, with guesstimates ranging from $50 million up to $300 million,” the story reads. “Well, here’s the bad news for more-established beauty players: Jenner’s surpassed the higher figure with ease. Kylie Cosmetics actually has done $420 million in retail sales—in just 18 months—Kris Jenner revealed…” It was the first time the Jenners publicly disclosed the size of the business, the story boasted—“and they provided WWD with documentation.”
That sky-high revenue number—repeated everywhere from People to CNBC and Fortune—took hold. By the summer of 2018, when Forbes set out to calculate Kylie’s net worth for our list of the richest self-made women, the industry’s opinion of Kylie’s business had shifted. Those huge revenues were “totally possible,” said one analyst, adding that she had heard similar numbers herself. Another suggested revenues were around $350 million. The estimates kept climbing. Revenues were $400 million, according to a Piper Jaffray research note in 2018. An Oppenheimer report projected sales would top $700 million by 2020.
The Jenners offered us their own number: 2017 revenues were up 7%, they said, to $330 million. “No other influencer has ever gotten to the volume or had the rabid fans and consistency that Kylie has had for the last two and a half years,” an executive at ecommerce platform Shopify, which manages Kylie’s online store, told Forbes at the time. Based on her rapid success—certified by industry sources plus those 2016 tax returns—Kylie appeared on the cover of Forbes magazine in July 2018, ranking 27th on our listing of the richest self-made women. At age 20, she was worth $900 million, we estimated, and would soon become the youngest self-made billionaire ever.
“Thank you for this article and the recognition,” Kylie Instagrammed. Kim Kardashian West tweeted her congratulations—twice. “I am SO proud,” Kris Jenner wrote, finally pleased.
The next month Kylie celebrated her 21st birthday at West Hollywood nightclub Delilah, in a Barbie-themed blowout complete with a pink ball pit, performances by Travis Scott and Dave Chappelle—and bartenders in black t-shirts with Kylie’s Forbes cover printed on them, her face plastered next to the words “America’s Women Billionaires.” By early the next year, she officially crossed the ten-digit threshold.
Any doubts that Kylie wasn’t a billionaire were seemingly erased in November 2019, when $8.6 billion (revenues) Coty announced it was snapping up 51% of Kylie Cosmetics for $600 million, effectively valuing the business at about $1.2 billion. The deal gave the struggling, 116-year-old Coty a hip, social media-savvy brand to help turn around its sagging balance sheet. It gave Kylie a major chance at expansion, plus a boatload of cash and apparently clear proof of her billionaire status.
In a call with stock analysts, Coty’s chief financial officer heralded the deal as “a compelling financial equation” that would help “make Coty a modern, growing and profitable beauty payer.” The analysts were immediately skeptical. It looked like Coty was paying way too much for a celebrity brand that could prove to be just a fad, one charged. Another asked how Coty could be sure Kylie will remain committed to promoting the business in the years to come.
Then there were Kylie’s financials. Revenues over a 12-month period preceding the deal: $177 million according to the Coty presentation—far lower than the published estimates at the time. More problematic, Coty said that sales were up 40% from 2018, meaning the business only generated about $125 million that year, nowhere near the $360 million the Jenners had led Forbes to believe. Kylie’s skincare line, which launched in May 2019, did $100 million in revenues in its first month and a half, Kylie’s reps told us. The filings show the line was actually “on track” to finish the year with just $25 million in sales.
“I think everybody was surprised,” says Wissink, the Jefferies analyst, who was on the call. “The negative that came out of that announcement was that the business was a lot smaller than everybody had expected.”
So much smaller in fact, that there’s virtually no way the numbers the Jenners were peddling in earlier years could be true either. If Kylie Cosmetics did $125 million in sales in 2018, how could it have done $307 million in 2016 (as the company’s supposed tax returns state) or $330 million in 2017?
One explanation: Kylie’s business quietly fell by more than half in a single year. If so, Coty paid up for a “high-growth” brand that is actually a much smaller business than it was just a few years ago. (Coty would not answer any questions about Kylie Cosmetics for this story.) Data from ecommerce firm Rakuten, which tracks a select number of receipts, suggests there was a 62% decline in Kylie’s online sales between 2016 and 2018.
Still, virtually every industry expert polled by Forbes thinks the business couldn’t have collapsed by so much so quickly. “It seems unlikely that much revenue could have evaporated overnight,” says Evercore analyst Omar Saad. “There doesn’t seem to be any evidence the business has cratered,” adds cosmetics veteran Jeffrey Ten, who has led companies like Note Cosmetics, Nyx and Calvin Klein Beauty. “If so, why would Coty buy it?”
More likely: The business was never that big to begin with, and the Jenners have lied about it every year since 2016—including having their accountant draft tax returns with false numbers—to help juice Forbes’ estimates of Kylie’s earnings and net worth. While we can’t prove that those documents were fake (though it’s likely), it’s clear that Kylie’s camp has been lying.
There’s also the issue of profit: Forbes had been estimating that her business, which has little overhead, was notching 44% net margins. But Coty’s filings indicate that Kylie’s profits are likely lower than we figured, since her EBITDA margin—which factors in some, but not all, of her expenses—is only around 25%.
For years the Jenners insisted that all of those profits went directly to Kylie because she owned the business outright. But Coty’s purchase agreement specifically lists a “KMJ 2018 Irrevocable Trust,” controlled by Kristen M. Jenner, as owning a profit interest in Kylie Cosmetics. Upon the sale, the document says the trust would get a capital, or ownership, interest in the company. The Jenners initially told Forbes that the trust holds money Kylie Jenner earned before she turned 18 and that Kylie is its beneficiary. But the trust appears to have been created well after Kylie turned 18, and the Jenners declined to offer any proof to back up their claims. Given the lack of clarity—and the history of lies—we’re erring on the side of caution and assuming that the trust belongs to Kris Jenner. That means Kylie Jenner owns an estimated 44.1% of Kylie Cosmetics, rather than 49%.
“You have to remember they are in the entertainment business,” says Ten. “Everything in entertainment has to be exaggerated to get attention.”
Taking all this new information into account and factoring in the pandemic, Forbes has recalculated Kylie’s net worth and concluded that she is not a billionaire. A more realistic accounting of her personal fortune puts it at just under $900 million, despite the headlines surrounding the Coty deal that seemed to confirm her billionaire status. More than a third of that is the estimated $340 million in post-tax cash she would have pocketed from selling a majority of her company. The rest is made up of revised earnings based on her business’ smaller size and a more conservative estimate of its profitability, plus the value of her remaining share of Kylie Cosmetics—which is not only smaller than the Jenners led us to believe but is also worth less now than it was when the deal was announced in November, given the economic effects of the coronavirus.
Coty’s share price has fallen more than 60% since the deal was struck, and even better-performing competitors like Ulta Beauty and Estee Lauder are still down single digits. Add that to the fact that Wall Street tends to think Coty paid too much to begin with and there is no way to realistically peg Kylie’s net worth above a billion—despite her massive cashout.
As usual, we asked the Jenners for input on our numbers. But pressed for answers on the many discrepancies, the typically chatty family did something out of character: They stopped answering our questions.
Additional reporting by Chloe Sorvino.
Kendall Jenner Settles Fyre Festival Instagram Post Lawsuit For $90,000
TOPLINE Trustees working to claw back money owed to investors, lenders and attendees of the 2017 bankrupt music extravaganza Fyre Festival settled a lawsuit with model and influencer Kendall Jenner for $90,000—less than half of the $275,000 she was sued for in connection to a promotional Instagram post.
- Jenner is among entertainers such as Blink-182 and Pusha T who were paid for their involvement in the festival—which promised days of parties, luxury accommodations and gourmet food, but was instead a complete flop, and generated multiple lawsuits.
- Bankruptcy law allows trustees to recover, or claw back, payments made before a company filed for bankruptcy, and Jenner and other entertainers were sued by Fyre Festival trustees to recover money for creditors.
- According to court documents, Jenner was allegedly paid $250,000 to promote the festival in a single, now-deleted Instagram post, along with an additional $25,000 a few days after the post went live.
- “So hyped to announce my G.O.O.D Music Family as the first headliners for @fyrefestival,” Jenner wrote in the deleted post, according to court documents. “Use my promo code KJONFYRE for the next 24 hours to get on the list for the artists and talents afterparty on Fyre Cay.”
- The lawsuit alleges that Jenner did not indicate she was paid for the Instagram post, and “intentionally led certain members of the public and ticket purchasers to believe” her brother-in-law Kanye West, G.O.O.D’s founder, could attend or perform at the festival.
- Jenner, who has 129 million Instagram followers, denied any liability connected to the lawsuit, according to court documents; the settlement still requires a judge’s approval, and, as the Wall Street Journal reported, will avoid spending more time and money on litigation.
Over $26 million. That’s how much money Fyre Festival investors ultimately lost, according to the U.S. Attorney’s Office.
Fyre Festival—which promised attendees (who paid anywhere from $500 to over $250,000) a two weekends-long party full of marquee music acts and models like Jenner and Bella Hadid—was a failure. The reality, as chronicled in two documentaries and mocked extensively, involved FEMA tents, cheese sandwiches in foam containers and stranded festival-goers. None of the promised entertainers showed. The Fyre Festival fallout resulted in multiple lawsuits. Its founder, Billy McFarland, is serving a six year prison sentence for multiple fraudulent schemes. He requested compassionate release in light of the coronavirus pandemic. It was denied.
In 2019, Forbes reported that Jenner held 34 U.S. trademark applications among the over 700 owned by the Kardashian clan (that’s Kim, Kanye, and sister Kylie, along with Kendall).
As TikTok Takes Over America, It’s Making A Disney Executive Its New CEO
TikTok, the ultra-popular short-form video app, has hired a top Walt Disney DIS Co. executive to be its new CEO.
Kevin Mayer, who ran Disney’s video-streaming business, will also serve as the chief operating officer of ByteDance, the Chinese-owned parent company of TikTok. Mayer was seen as a favorite to get the top job at Disney but was passed over to replace Bob Iger in favor of Bob Chapek earlier this year.
“Kevin has had an extraordinary impact on our company over the years,” Chapek said in a statement. “Having worked alongside Kevin for many years on the senior management team, I am enormously grateful to him for his support and friendship.”
Disney has been badly damaged by the pandemic as Covid-19 forced it to close its lucrative parks and cruise line businesses. Iger has taken back some control over the company—he remains the executive chairman—while Disney rushed to assemble a $6 billion debt offering in March. It has furloughed workers and cut pay with Chapek agreeing to halve his salary and Iger agreeing to forgo one entirely.
Mayer could not be leaving for a more different environment. TikTok was already a big hit before lockdown—and has seen its popularity soar since. It was downloaded more than 315 million times in the first quarter, according to data from SensorTower, which tracks app downloads. That figure represents the most downloads in a single quarter that SensorTower has ever counted up.
Mayer was the deals guy at Disney, acquiring Pixar, Marvel, Lucasfilm and Fox. And there was nothing more important to Disney recently than the expansion of its streaming business, which has proven a success. Disney+ launched last year and was downloaded 14.1 times in 2019, more than even Netflix NFLX (11.9 million) or Hulu (8.1 million). Disney said it would spend $1 billion in the first year alone on original content for the streaming service, building out a line-up that already includes the Star Wars series The Mandalorian and soon a recorded version of the musical Hamilton.
Mayer will face some challenges ahead at TikTok. It has become an off-and-on-again target of criticism that its Chinese ownership makes it a security risk. And a group of 20 advocacy groups last week filed an FTC complaint that it hadn’t lived up to a deal reached with regulators last year to better protect children using its app.
He replaces Alex Zhu, one of the founders of Music.ly, the China-based app that ByteDance bought in 2017 and turned into TikTok. Zhu had made efforts to do what Mayer will now have to do: convince America that TikTok isn’t a threat.
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