Next week, nominees for this year’s Emmy awards can expect the usual “gift basket” full of award season freebies: lavish jewelry, plasma TVs, Celine Dion backstage passes, gold-plated cellphones. But there will be a lump of coal at the bottom of each one: an IRS tax form.
Tax forms will be available at the Emmy “swag suites” too. “We’ll be giving them the necessary paperwork for what it’s valued at,” said Gavin Keilly of GBK Productions, who put together a suite at the Sofitel Los Angeles hotel where, starting Wednesday, selected celebrities can “shop” for free stuff, including special goggles for watching movies on an iPod, Lasik eye surgery and a $22,000 Caribbean cruise.
But after Thursday’s announcement by the IRS that it will seek out taxes on the swag that increasingly rains down on celebrities during awards season and at film festivals, merchandise valued at $100,000 will cost an A-list actor in the top tax bracket some $40,000 in taxes.
That’s a lot of change, even for multimillionaires.
Though marketers like Keilly are jumping to make compliance as easy as possible for their celebrity beneficiaries, the industry’s chattering class was split on whether the development would deal a fatal blow to Hollywood’s freebie mania. Many in Hollywood, meanwhile, expressed relief that a practice seen as part of an unsavory culture of greed would, if not fade out, at least diminish.
The swag machine works this way: High-end companies press free goods and services on stars with the hope of creating buzz, and ideally generating pictures in magazines such as Us Weekly or People, which will in turn spark sales. It’s hard to tell how many millions of dollars’ worth of product corporations actually shell out on celebrities, but one company estimates that the value of its gift bags for this year’s Emmy’s nominees will total $2 million -- and that’s just one purveyor at one awards show.
Giving out gifts to celebrities isn’t new in Hollywood, but competitive swag -- in which marketers compete to create increasingly outlandish gift baskets -- is a product of the last five years, as corporations desperately try to ride the public’s all-consuming interest in all things celebrity.
“I think it’s going to have a cataclysmic effect on a certain segment of the entertainment industry,” said veteran publicist Ken Sunshine, who represents Leonardo DiCaprio and Ben Affleck. Sunshine is advising all his clients to confer with their tax attorneys before accepting any more free gifts from marketers.
Already, the Academy of Motion Picture Arts and Sciences has announced that it is canceling the ultra-luxurious gift bags for Oscar presenters that have been a staple since the 1970s. Without saying whether money exchanged hands, the academy acknowledged that it settled any tax obligations its membership might have owed the government for bags received through 2005.
At the Sundance Institute, which puts on the annual Sundance Film Festival in Utah, Elizabeth Daly, the director of strategic development, was heartened by the news.
“People here are all happy,” she said. The festival in recent years has become a mecca for corporations looking to deck out young stars in their jeans and sunglasses, and swag suites are often assumed to be “part of the institute and part of the festival,” Daly said. “They are not.”
She said the IRS campaign “is one element in helping to change the tide.” A more difficult tipping point will come when celebrities are too ashamed to be seen making off with so much free merchandise.
“It’s become a joke already,” Daly said. “If celebrities become embarrassed by this, and it’s perceived to be not good for their careers, it will go away.”
One of Sundance’s main sponsors, Volkswagen, already has decided not to host a swag suite at the 2007 festival, Daly said. “They think it’s gotten to the point where it’s disgusting,” she said.
Corporate sponsors often outnumber films at the festival, and their logos dominate Main Street in Park City. Some celebrities skip the films altogether and just trek from swag suite to swag suite on special corporate shuttles.
Flacks often joke about the rich-and-famous swag-aholics, and part of the game is to make sure the media know who’s been shopping in the suites. In news accounts from 2005, “Desperate Housewife” Nicolette Sheridan took her dog, Oliver, browsing for diamonds at an Oscar gifting suite sponsored by the Platinum Guild, had a diamond healing massage performed at the Diamond Aquifer Oscar suite, and got her hair done at the Biolage/Glamour Golden Globes suite.
Of course, there are those in the industry who have begun to say no to the ostentatious gifting of the already rich. This year, George Clooney created a splash when he gave his Oscar presenter gift bag, often the most valuable booty of all, to charity.
Though the efficacy of such gifting is often debated (especially because so much usually ends up in the hands of the entourage rather than the celebrity), the vendors often claim satisfaction with the outcome.
Kenneth Loo, marketing director for the premium men’s sportswear line Blue Marlin, recalled that Paris Hilton grabbed a boatload of garments at the firm’s 2006 Sundance giveaway suite. A few days later, her then-boyfriend Stavros Niarchos became a veritable walking billboard for the company, wearing Blue Marlin garb wherever he went. “You want people to become fans of your brand,” Loo said. In that light, Loo added, the Sundance suite “was extremely successful.”
But in light of Thursday’s announcement, Loo isn’t so sure how much -- if any -- Blue Marlin loot he’ll be able to dole out.
“I am completely afraid of doing anything right now,” Loo said Friday. “I think most brands are looking at the tax consequences -- it’s a big concern.”
Others, particularly those whose business is swag, are optimistic that there’s no such thing as shame in Hollywood.
Lash Fary runs Distinctive Assets with partner Todd West, and has just finished putting the finishing touches on consolation gift bags for the 50 top Emmy Award nominees who don’t win a trophy.
He is “deeply saddened” that the lavish gift baskets his firm puts together will be threatened by tax collectors, but notes that no suppliers of merchandise or certificates for his Emmy bags or gift packages for November’s American Music Awards have withdrawn items. “No one wants to back out. They just want to know how it will impact them,” he said. “And the way it impacts them is that now there’s a lot more press. We’ve gotten 20 new media bookings in the last two days,” Fary said.
Besides, he said, the tax push will affect celebrities most directly, not the producers and aggregators of giveaways. “It’s like going into a restaurant and saying to a waiter after you give him a $20 tip, ‘You know that’s fully taxable, don’t you?’ Whether or not he reports it is anyone’s guess.”
Publicist Stan Rosenfield, whose clients include Emmy nominee Charlie Sheen, Robert De Niro, Hank Azaria and Clooney, said the IRS announcement hasn’t concerned any of his clients and, as far as he’s concerned, it shouldn’t. In fact, he said, on Wednesday night, he collected a sizable gift basket from an InStyle magazine party and handed it over to his daughter.
Many insisted that the IRS campaign may make things a little awkward for some celebrities, and it might even change the way the music, film and TV academies handle their gift giving, but it won’t slow the celebrity-dependent marketing juggernaut.
“It’s not going to stop anything,” Rosenfield said. “If you have a product, you’ve got to get your product out there. It’s called Marketing 101. There’s nothing wrong with promoting your product. Are these really taxable items? I don’t think they should be.”
Manager Joan Hyler, who represents Alfred Molina and others, said that, no matter how it looked from the outside, the intersection of celebrity and advertising was here to stay. “People will figure out another way,” she said, “to get their luxury brands into the hands of stars.”
Times staff writer Gina Piccalo contributed to this report.