26 Sep 2011  HBS Cases

HBS Cases: Lady Gaga

What goes into creating the world's largest pop star? Before her fame hit, Lady Gaga's manager faced decisions that could have derailed the performer's career. A new case by Associate Professor Anita Elberse examines the strategic marketing choices that instead created a global brand. Key concepts include:

  • In 2009, rapper Kanye West canceled plans to coheadline a big arena tour with Lady Gaga, just weeks before launch.
  • The case discusses the pros and cons of possible next steps for team Gaga: continue the arena tour without West, design a solo tour with smaller venues, or cancel plans to tour entirely.
  • Her hands-on approach to social media helped cement a bond between Lady Gaga and her fans.

 

Celebrated for both her outré style and musical prowess, the recording artist known as Lady Gaga is not only one of the world's biggest pop stars, but also one of the most recognized brands. She's garnered five Grammys, holds two spots in the 2011 Guinness Book of World Records including "Most Searched-For Female," as recorded by Google, and made international headlines for donning a dress made of red meat, which Time Magazine called the top fashion statement of 2010.

"Gaga is a marketing phenomenon"

So it's almost shocking to recall that in the autumn of 2008, Lady Gaga, born Stefani Joanne Angelina Germanotta in New York City, was merely a supporting act in a reunion tour of the erstwhile-boy band, New Kids on the Block.

"When you tell that to people now they look at you like you must have your dates mixed up," says Harvard Business School Associate Professor Anita Elberse. "That was just three years ago, and now she is, by many measures, the biggest celebrity on the planet. Gaga is a marketing phenomenon."

This fall, Elberse will teach a case on Lady Gaga's meteoric career in her popular second-year MBA course, Strategic Marketing in Creative Industries, which focuses entirely on the media and entertainment sector, and which includes sessions on basketball star LeBron James, online video aggregator Hulu, the NFL, and the Metropolitan Opera, among other cases. The first part of the new case, dubbed Lady Gaga(A), places students in the shoes of the pop star's manager, Troy Carter, who faced the daunting and sudden task of launching the performer's first major solo concert tour in 2009.

Elberse developed the case based on extensive interviews with Carter and several other executives who are part of team Gaga, including Interscope Geffen A&M Vice Chairman Steve Berman, Live Nation's global touring CEO Arthur Fogel, William Morris Endeavor agent Marc Geiger, and producer Vincent Herbert.

Go big or go home?

In the autumn of 2009, Lady Gaga was set to go on the road with rapper Kanye West for a multimonth coheadlining arena concert tour, "Fame Kills." The event was supposed to launch in November but, on September 13, West famously stormed the stage at the MTV Music Awards, just as the young country star Taylor Swift was accepting the award for Best Female Video. West grabbed the microphone from Swift to announce, "Yo Taylor, I'm really happy for you, and I'mma let you finish, but [fellow nominee] Beyoncé had one of the best videos of all time." Millions of viewers were turned off by his impulsive bullying, and Carter and Lady Gaga, both in the audience, knew instantly that West's actions could threaten their plans for "Fame Kills."

Sure enough, a media attack ensued. West pulled out of the painstakingly planned tour. And Carter had to mull a decision that would have major implications for Lady Gaga, for concert promoter Live Nation, and for her publicity arm, the William Morris Endeavor agency. Should the performer continue with the arena tour solo? Should she develop a small tour for smaller venues? Or should she cancel the concert series entirely?

The case, which Elberse coauthored with Michael Christensen (HBS MBA '11) and which also benefited from research assistance by Kimball Thomas (HBS MBA '11), prompts an evaluation of the pros and cons of each possibility.

"Above all else, I hope the case will help students understand the economics and intricacies of the concert business," Elberse says. "When it comes to touring, the risks increase as the venues get larger, but the potential rewards increase, too."

"The risks increase as the size of the venue increases, but the potential revenue goes up as well"

With arena performances, the Gaga team was looking at some $12 million in start-up production costs alone. And for someone who had never played such large halls, jumping headfirst into a solo tour would be a huge challenge. On the other hand, with ticket prices averaging $100 to $125 each, the prospect of a sold-out 20,000-seat arena was tempting.

By developing a smaller schedule for smaller venues, the financial risks would decrease, but so would the financial incentives; ticket prices would likely vary between $60 and $100, with seating capacity maxing out at 8,000 per theater. The team also would face the challenge of redesigning a scaled-back tour in a matter of weeks. And her one previous headlining experience, a one-month circuit called "Fame Ball," involved small venues and was not profitable.

If they flat-out canceled the tour, team Gaga could certainly prevent losses beyond the $4 million already spent on "Fame Kills." But in delaying concerts indefinitely, they risked the prospect that Lady Gaga's star might fade without a tour to guide it.

"This became a crucial bet on the development of the artist Lady Gaga," Elberse says. The decision was vital because concerts are not only a great publicity tool for recorded music, but also an increasingly important source of income in their own right. As revenues from recorded music steadily declined from 2004 to 2008, concert revenues steadily rose, according to data presented in the case.

"Advances in digital technology have had a strong negative impact on recorded-music revenues," Elberse says. "That makes it all the more important for managers in the music industry to understand how to effectively manage touring."

As is the way of HBS cases, Lady Gaga(A) ends with a cliff-hanger, laying out the manager's choices without revealing which path he chose, so students can relive the decision process. However, it is no secret that Lady Gaga's star has continued to shine and thrive. A follow-up case, Lady Gaga (B), focuses on the release strategy for her latest album, Born This Way, and the brand partnerships that were born in the wake of her successes—including a sponsorship by Virgin Mobile, an opportunity to develop "Gaga-esque" products for Polaroid, and a spot in MAC Cosmetics' "Viva Glam" advertising campaign.

Connecting on social media

Lady Gaga's success was built on more than just her considerable abilities as a master entertainer, the case notes. Carter and his client saw early on the power of using popular social media avenues such as Facebook and Twitter to build a strong support base, fan by fan.

Starting in March 2008, to publicize her first single "Just Dance," Lady Gaga took to the social media airwaves with a decidedly handcrafted approach: she wrote (and continues to write) her own Tweets, and maintained close control over her other social media accounts.

Team Gaga's social media strategy also included syndicating her content—from videos to social messaging—for other media to point to, setting up personal interviews with influential music bloggers (the interviews generated 10 million impressions in a short time), and recording "webisodes" with low-budget flip-cams that followed her behind the scenes.

It all worked, but only because the passion between herself and her fans is genuine, a bond that social media helped forge. "They feel a sense of ownership," Carter says about Lady Gaga's fans. "They rally around her."

For entertainment executives reflecting on how the digital age is changing the ways they market their clients, Lady Gaga might represent a winning strategy from which to learn, Elberse believes. As Interscope's Vice Chairman Steve Berman observes in the case:

"[Lady Gaga] could be a chief marketing officer for a big corporation, because she understands the brand, and how important it is to stand by that brand."

About the author

Carmen Nobel is senior editor of HBS Working Knowledge.

Comments

    • Anonymous

    Great topic, fantastic to see a business case being written on one of the creative sectors of the economy!

     
     
     
    • Inderjit Sarao

    The case looks really exciting and this is just one of the cases. Envious of the group who will take this course.

     
     
     
    • David Wallace
    • gamechange LLC

    'Go Big or Go Home' is a lesson in itself. Too many 'play-it-safe' decisions actually delay the need for a major change in operations, marketing, product mix. Too often, a crisis is the only turning point that demands bold action.

    Good for Gaga.

     
     
     
    • Laura Homar
    • owner, Laura Homar Media Group

    I had been wondering when the Gaga phenomenon would be studied. She's a great case study.

     
     
     
    • Jonathan Kranz
    • Principal, Kranz Communications

    I would think that they would have to go big. It's simply impossible to imagine Lady Gaga's schtick working on a small scale: her show isn't about intimacy or the illusion of intimacy, but about spectacle, about being conspicuously and unapologetically OTT. A giant venue is a necessary part of the brand; anything less and she'd look silly rather than sensational.

     
     
     
    • Anonymous

    I remain very sceptical about this kind of thing in that it is not something that can easily be replicated. You can study it for sure but replicating it is impossible. The factors that made up the whole: from her connections in the music industry, to Kanye's impetuous act to the height and frenzy of social media, can never be repeated. If it is simply a look at decision making then great, if it is attempting to be a lesson in how someone can make it in the music industry etc forget!

     
     
     
    • Deepak Elandassery

    I haven't read the case yet, but it would be interesting to see what parallels Gaga has drawn from Madonna, Michael Jackson and Gwen Stefani. She also had the opportunity to study these stars and had the history of what they did right and where they failed. I agree the power of social networks for media and entertainment is huge and she has harnessed it the right way. In addition Gaga seems to have some economic, financial and strategy 101s when she takes these huge risks with her career, betting on big rewards. A nice case to study for everyone.

     
     
     
    • Anonymous

    Lady Gaga i is theproof that the model can be replicated. Think of the replicated original: Madonna!

     
     
     
    • Ben Buffa

    Seems to me HBS wrote a similar case study on Madonna, back in the early 1980's? It may be worth visiting a class in which this case is discussed!

     
     
     
    • Felisberto Capamba
    • EXECUTIVE DIRECTOR, HABITEC, S.A

    One important lesson from Lady Gaga performance is that more than a singer she developed a brand using her capacity and talent as singer. Companies should do the same create other values base in most important value they have.

     
     
     
    • Adriana Henao
    • Segment Manager, ETB SA ESP

    Great Topic, interesting in all ways. How do we get access to the full case study?

     
     
     
    • Anonymous

    Adriana, the case can be purchased and downloaded from this link: http://hbr.org/product/lady-gaga-a/an/512016-PDF-ENG?Ntt=lady%2520gaga

     
     
     
    • M. Clark
    • CFO, PMI

    Haven't read it yet, but am fascinated at the altered value proposition behind big time concerts. Less a promotional vehicle for album sales and more an end in themselves. Can musicianship alone sustain the risk of production costs for a less proven act absent the historic projected payoff in subsequent recording sales or will showmanship become the required major chord?

     
     
     
    • Anonymous

    This is an exciting topic. After having been fortunate enough to participate in a brief module with Anita Elberse in a leadership class I took recently, I know this will be a great class. Elberse is awesome. I am very envious of those students who will be a part of this.

     
     
     
    • Bode Akinboye
    • Vice Chairman, Firstindependent Global ltd

    The key lesson is about capitalizing on opportunities, knowing what to do and carrying out focused execution of the chosen strategy. Also playing very big pays off handsomely even with the risks involved.

     
     
     
    • K Ravindran
    • Professor, Edgewater College

    There are four vital aspects to this case: (a) Demand, (b) Publicity, (c) Revenue (d) Timing. Concert music is the only solution to the strategic risk taken here. Quality comes with a package, it cannot sell in isolation. Lady Gaga can't make it big in small venues. It's worth taking the risk to know which side you are.

     
     
     
    • Dr. S A Visotsky
    • Chairman & CEO, Vitech Group LLC

    She copied Brain Warner, of Marilyn Manson fame, full stop, there's a great lawsuit for him! Call me, Brian.

    She is well marketed I agree, but I think for her it's about reaching out to those who don't fit in, I am not sure if that is a good thing or not, but I do not think it is harmful to express oneself artistically, although you could end up bi-polar with the whole duality thing going on, and burnout sure to follow.

    We have seen the pattern, first a baby, then fat, failed comeback, ending in divorce. (Brittney, Cristina, J-Lo, yaddah yaddah) It sells magazines, or?

     
     
     
    • Maclin
    • HR Head, TTSL

    I do agree on this, In the current world its all about putting it innovatively and marketing it brilliantly. Success will follow for the talents.

     
     
     
    • Beverly Murray
    • President, R+M Agency

    There is no doubt that Lady Gaga and her team have made some keen strategic decisions with her brand, but the most notable is her ability to authentically connect with the audience. She weaves a story that gives her followers hope and strength. This emotional connection is at the core of all successful brands be they entertainment or not. For example: Apple, we forgive you when you stumble (emotional connection to their buyers and creation of desired community). Is she sensational, yes. But, her success is only in part tied to this particular expression of her brand. Please be sure to peel back the onion to the core construct of her brand's success. It is in that emotional connection you will find the seeds of sustainability.

     
     
     
    • Jasper Ojongtambia MS,MBA,MFE
    • Ptresident/CEO, AEC Computer Division

    This is a great article and a lesson on quick decision making by her management team that were not afraid of take risk. It shows how managers have to evaluate the social responsibilities of their potential partners in our open world where information or negative behavor flies at the speed of light creating or leaving a positive or negative impact. Hence congratulation and lots of credit to lady Gaga mamagement team for going solo.

    Sincerely.

    Jasper Ojongtambia BS,MS,MBA,MFE

     
     
     
    • kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited

    Lady Gaga is an enigma considering her growth trajectory. Though she is an artist, she is at the same time a capable business woman having spread her wings globally leading to high reputation and of course wealth. Her story shows that if one follows a proper plan, utilizes all capabilities to the full and optimally utilizes each moment to touch the goals consciously set, there is nothing one cannot achieve. This gives highest satisfaction by touching the innermost core also.

     
     
     
    • Kathy Angeli
    • Private Secretary

    Very interesting reader comments.
    However, I think your article is extremely sad. The artist, musical or otherwise, should be regarded as a person and not a marketing tool, out of which to make the multi-millions. I suggest that you research monarch mind control and then judge for yourself how much influence lady gaga is herself allowed to have in the marketing and the brand. I believe you'll find it's less than one.

     
     
     
    • Marc

    Great! Gaga is a truly inspiring model. I really like how the author explain brand mgmt through Gaga's career.

     
     
     
    • Ron Cook
    • Program Director, Full Sail University

    A great story and compelling case study. The Music Industry 3.0 of today is far from the days of dominance by a few major labels and all about touring, social media and "the buzz". Few have created the frenzy of Lady Gaga (sorry, Bieber). With great risk often comes great rewards.

    Of course, it takes huge talent, and Lady Gaga clearly has that covered.

     
     
     
    • Sabina Ong

    There are two sides to Lady Gaga's success - externally, the social media that helps launch her to be publicly recognized and admired. But let us not forget the other side - internally, she is a very unique person (some people may call her strange) that really cares about others, a good person with a big heart. It will be nice if we can emphasize and point out more of those internal values that touch the hearts of people.

     
     
     
    • Grege Morris
    • CEO Sales/Host, Grege,llc

    Being of the music, and fashion entertainment genre, I can identify and understand this from a "real life" perspective. I live it. Trend setting and living a world of "entertainment" is one most view and would love to live. I think this is a wonderful course and am eager to hear how it evolves. I can offer some insight that one may never realize if ever needed. Being a brand is more than most may ever realize and is not as easily attainable for the masses yet can be learned and the new generation is tapping into the 'KNOW" rapidly. One can learn great insight through objectivity but may never truly have the answers. Executives would benefit from this lesson if they so desire to attain these levels.
    The truth is that, it comes from w/i and most never touch that level.

    About me? I was the first female rapper(sexy) on Capitol records, Eddie Murphy was my boyfriend for over 12 years affording me the "stardom process" first hand. The 1st model to be of ethnic origin in several ad campaigns, and the first to get Latin music on MTV Rocks and the list goes on. I lived as a brand. I am thankful music is now being taught as a lesson in life,marketing,movement and global cause. GREGE

     
     
     
    • adamj
    • manager, none

    One important lesson from Lady Gaga performance is that more than a singer she developed a brand using her capacity and talent as singer. Companies should do the same create other values base in most important value they have.

     
     
     
    • Tadashi Mizushima
    • Principal Officer, PNB Asset Management JAPAN

    Actually, I have never watched the performance nor video of Lady Gaga. I, however, know she is the first big star who came to Japan to cheer us up immediately after the great earthquake in March 2011. She has established the very clear image that she is really a person in need.