Brands are directly impacted whenever artists they have advertising contracts with become embroiled in scandals. As a result, when controversies arise, it’s often inevitable for partnerships to be terminated, and even compensation for damages may follow.
The higher the fee, the greater the penalty
According to Fastercapital, leveraging the influence of celebrities to promote products and boost sales can be a double-edged sword. On one hand, it can attract fans of those celebrities, but when a controversy involving a star breaks out, brands often feel the first impact. Consumers may lose trust and respect for the brand and even boycott its products or services.
Meanwhile, Segye reports that today’s consumers are not easily appeased. When a celebrity involved in a scandal appears in an advertisement, consumers quickly turn to social media or the brand’s website to voice their complaints. They openly express their dislike for seeing that particular star in ads. Thus, advertising brands become more sensitive than anyone else when a celebrity scandal breaks. The most common action taken is to terminate contracts, remove advertisements, banners, and change the homepage displays.
SBS states that one of the most important indicators of a star’s popularity is their advertisements. Yoo Ah In, one of the most famous actors in his 30s, is a leading model in this area. The actor can receive between 800 million to 1 billion won for each advertising contract in a year. Before the drug scandal broke, Yoo Ah In was the face of about 10 brands, including fashion, food, beauty, pharmaceuticals, and outdoor activities. Not only in South Korea, but he was also a model for a clothing brand in China.
After the drug scandal emerged, brands quickly severed ties with Yoo Ah In. Ads featuring the “photo emperor” were taken down or replaced, according to SBS.
A typical advertising contract often includes a clause stating that the celebrity must pay a penalty if they engage in any behavior that damages the brand’s image or reputation. Each contract stipulates different behaviors and penalties. However, DongA reports that the more valuable the star’s advertising appeal, the larger the penalty if they become embroiled in a scandal. SBS estimates that Yoo Ah In’s advertising penalty alone could reach approximately 8 billion won. However, due to the varying terms and conditions of each company’s contracts, the penalty may increase or decrease.
It is anticipated that a lawsuit against Yoo Ah In will occur in the future. The actor may be required to compensate for advertising penalties. However, as the police investigation and legal repercussions against Yoo Ah In are still ongoing, this matter will require more time.
The controversy surrounding Han So Hee earlier this year was not as severe as Yoo Ah In’s case. However, it was significant enough to cause some brands to turn their backs on her. This illustrates how scandals can affect, and even ruin, a star’s career in South Korea. The same has happened to many other stars, such as Soojin, Lee Na Eun, Seo Ye Ji, T-ara, and Lee Soo Geun.
After the success of “It’s Okay to Not Be Okay” in 2020, Seo Ye Ji became a model in various fields, including masks, cosmetics, dietary supplements, fashion, jewelry, and games. It is estimated that her annual modeling fee ranges from 500 million to 1 billion won. However, the controversy surrounding Seo Ye Ji’s manipulation of her boyfriend led many brands to remove her images. According to MBN, industry insiders estimate her penalty to be around 2-3 billion won.
Paying the price for scandals
In any market outside of South Korea, the punishment for celebrities after a controversy, especially in advertising, is difficult to avoid. In connection with the ongoing investigation into the multi-level marketing group The iCon Group, which is causing a stir in Thailand, popular MC and actor Kan Kantathavorn has had many of his assets seized. Notably, his management company and an electronics brand also announced the termination of their contracts with him. Kan Kantathavorn and 17 others, including actress Min Pechaya, were arrested on October 16 and are currently in custody.
At the end of 2022, Kanye West lost his billionaire status after Adidas ended their partnership due to his controversial statements. A brand representative stated that they “do not tolerate anti-Semitism or any other forms of hateful speech” and described Kanye West’s comments as “unacceptable, hateful, and dangerous.”
Adidas and Kanye collaborated on the Adidas Yeezy line, famous for its expensive sneakers and clothing. According to the New York Times, the deal was estimated to be worth billions of dollars and brought huge profits to both parties. In fact, Adidas reported that the decision to terminate the partnership with the rapper resulted in a loss of $246 million in sales in the fourth quarter of 2022.
In the Chinese market, the penalties can be even more severe. Due to the scandal involving surrogacy and abandonment, Zheng Shuang not only faced brand rejections but also had awards stripped away, according to HK01. After Prada, Aussie, and other brands announced the termination of their partnerships with Zheng Shuang, the organizers of the Huading Awards also declared the revocation of her awards for Best Actress in Modern and Contemporary Chinese Television at the 19th ceremony and Best Actress at the 13th ceremony. All of Zheng Shuang’s award certificates and trophies were rescinded.
At that time, representatives of the award organization stated, “The incident has caused Zheng Shuang’s character to collapse immediately. She brought this consequence upon herself, which goes against our original intent in awarding her. Everyone was shocked to hear that she used a surrogate. This behavior tramples on citizen rights and corrupts human morals. This cannot be tolerated.”
