The giant luxury goods company LVMH is getting into the entertainment business. What are the opportunities and obstacles it faces?
A few days ago, luxury conglomerate LVMH announced that it was getting into the entertainment business. In a joint venture with Superconnector Studios (a consultancy):
LVMH will seek to bolster promotion of the group’s brands—which include fashion houses Louis Vuitton and Dior and jeweler Tiffany & Co—through projects ranging from advertising to product placement and original projects in TV, film, and audio that LVMH would co-develop, co-produce and co-finance. (Financial Times, $)
Antoine Arnault, eldest son of LVMH CEO Bernard Arnault, and LVMH’s North America head, Anish Melwani, will lead the new entertainment venture, called “22 Montaigne Entertainment” (the address of LVMH’s headquarters in Paris).
Reading between the lines of different articles, it looks like LVMH’s plans are still developing. In FT, Melwani said the group is “excited to formalize our approach to the promotion of our brands across entertainment formats… complementing [their] direct engagement activity.” However, in a Fortune ($) article, Melwani said: “This isn’t LVMH coming to Hollywood with a big checkbook to say, ‘we’re going to go make movies’…. That’s not the intention.”
Two pieces of background information help bring this initiative into focus.
First, LVMH has invested heavily in the upcoming Summer Olympics, as the Wall Street Journal ($) reported earlier this month:
One of its jewelers, Chaumet, is designing gold, silver and bronze medals for the Olympics and Paralympics. One of its fashion brands, Berluti, is creating the uniforms that French athletes will wear during a lavish opening ceremony on the Seine. Moët Champagne and Hennessy cognac will flow through every VIP suite. And Louis Vuitton leather goods, which are already used to ferry prizes such as the World Cup and the NBA Finals trophy, will be impossible to miss at the Games.
This tells us that LVMH is looking to fuse its brands with new sorts of media, beyond magazines and runway shows, including high end sports like the Olympics. So Hollywood is a small leap forward from that.
Second, last year François-Henri Pinault, LVMH’s competitor (he controls Kering and Groupe Artémis, with brands like Gucci, Puma, Yves Saint Laurent, Christie’s, and Balenciaga) took a controlling stake in talent agency CAA. (Pinault is married to CAA client Salma Hayek.)
LVMH does not want to be shut out of interesting, brand advancing collaborations with Hollywood talent.
There’s both good news and bad news around LVMH’s move into entertainment.
On the plus side…
The timing is perfect for LVMH to do this. With the decline of print (including the fashion magazines like Vogue where luxury goods traditionally advertise) and the fragmentation of TV viewing, luxury companies need new places where audiences can dwell with their brands, spending time and attention on them in fancy environments rather than ignoring algorithmically placed banner ads.
At the same time, the studios, after a few grow-at-all-costs years, are all now chasing profit, hurting for cash, and looking for new co-financing partners to underwrite the staggering costs of programming. Even though LVMH wants to avoid looking like a big bag of money landing on Hollywood (see Melwani quote above), it’s a buyer’s market for them to cut deals where characters sport Tag Heuer watches, spritz Givenchy perfumes, drink Ardbeg Scotch (yum), wear Christian Dior, and stay at Belmond hotels.
Sure, LVMH could simply advertise. The studios have broadcast and cable channels and have opened ad-supported cheaper tiers of their streaming services. However, the people with money (i.e., the people who can afford to buy LVMH goods) are more likely to DVR past ads and subscribe to ad-free streaming tiers, so moving luxury products deeper inside programming is a different approach, one that people cannot skip.
If you subscribe to AppleTV+, then you’ve already seen a version of this when characters in shows like Ted Lasso and The Morning Show almost always use iPhones and Macs. (La Profesora notices, which is handy because I don’t.)
On the down side…
The history of brands getting into entertainment has more debacles than successes. In part, this is because marketers can’t stop themselves from nattering about their products, which usually doesn’t make for compelling shows. Back in 2007, Anheuser Busch had a spectacular failure with BudTV, its YouTube-like online destination video channel that was age-gated because of its name (they should have called it Clydesdale TV). Nobody showed up. (Last year, the company started a new “DraftLine Entertainment” initiative that is focused more on distribution than destination.)
The biggest question is whether LVMH is willing to spend enough money for its entertainment initiatives to have an impact—either on the stories the studios make or on its own bottom line.
Since LVMH sells luxury goods, it will look to infuse its brands into stories about rich people in rich environments (Succession, The Crown, Bridgerton, Crazy Rich Asians), and those stories are expensive to make. LVMH is likely to experience eye-popping sticker shock when it sees Hollywood budgets, regardless of its $425B market cap.
Back in 2011, YouTube announced it would spend $100M on original content. Around that time, I was chatting with my friend Dave Morgan (Exec Chair and founder of Simulmedia). I mentioned YouTube’s investment, which was a staggering amount by digital content standards. Dave snorted. “Brad, do you know much CBS is spending on its fall TV lineup? Three billion dollars.”
Three billion was a big number in 2011, but it’s almost pocket change in 2024 when Netflix will spend $17B, and Disney will spend $25B on programing.
LVMH sells expensive luxury goods, but I predict that (ironically), when it sees how pricey Hollywood movies and TV can be, it will downshift into more conventional paid product placement, advertising, and merchandising tie-ins.
Over 60 years ago, Breakfast at Tiffany’s became the single greatest brand integration in the history of modern entertainment. Near as I can tell, while Tiffany’s (today part of LVMH) co-operated with the filming it had no official role and did not invest, but it has benefited from the association ever since.
That sort of relationship wouldn’t happen today.
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