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The Business of American Idol

7 lessons you can learn from this megasuccessful enterprise and put to work in your business
May 23, 2006
URL: http://www.entrepreneur.com/article/159644

Since its debut in the summer of 2002, FOX's American Idol has been nothing short of a cultural phenomenon, a perpetual ratings leader and a consistent sensation. The show made stars out of such anonymous performers as Kelly Clarkson, Ruben Studdard, Clay Aiken and William Hung, and the series is slated to be on television at least through 2011. Millions of fans bow down to the American idols on American Idol.

But if you're an entrepreneur, it's really the series more than the stars you should be bowing down to. After all, it's an enterprise disguised as entertainment--it's a business model that many of us would do well to emulate. Skeptical? Then take a look at the notes we've been taking during the series' super successful run. Just think of this as a class--American Idol 101.

Business Lesson #1: If you're looking for a business idea, remember that everything old is new again.

The Reality TV Way:American Idol may seem like an original idea, but this American TV series was based on entertainment entrepreneur Simon Fuller's British series Pop Idol, which basically borrowed elements from musical variety shows from the 1950s and 60s . . . which in turn were taking ideas from the radio shows of the 1940s and 1930s . . . which took ideas from 1920s vaudeville shows . . . which--well, you get the idea. The only sort of new idea Pop Idol presented was to offer a cash prize at the end of the series, but even that had been done recently in series like Who Wants to Be a Millionaire (another take-off on a British show) and as far back as game shows during the 1950s. Obviously, nobody has to invent the wheel--you just need to come up with a wheel that looks flashier than the last one.

Your Reality: Whether you want to start a business or already have one, there's always a twist you can bring to your company, no matter how removed from Hollywood entertainment it is. In Washington, DC, there's a dry cleaning service that--at least for a while--was known for playing matchmaker for its single customers. In Silicon Valley, there's an entrepreneur who has a hair salon that's does business in three buses so they can go to their customers' houses and clip and shampoo hair on the premises. In Dallas, the Café Izmar has no menu--when you go, you just find out what's cooking that day. And in California, the multilocation Legal Grind Café offers legal advice in a coffeehouse.

It's not hard to be creative. Just think outside the box: Start a maid service that specializes in only cleaning children's messy bedrooms. Or a petsitting service for fish. The key is to be useful and different with a pinch of fun--everything that American Idol arguably is.

Business Lesson #2: Spread the wealth. If you can get other companies to give you money and you help them get rich off your product, you're going to be very well off.

The Reality TV Way:American Idol has this lesson down to an art. Their show has millions of viewers dialing exclusive numbers on the Cingular Wireless network. Exactly what kind of money they're generating from this partnership isn't public knowledge, but Cingular is clearly doing well. For instance, in 2005, the voting system produced 41.5 million Cingular text messages. In the quarter that just ended in March, Cingular reported a 9 percent increase in revenue and a profit of $350 million, attributing that increase partially to American Idol. And no wonder. They sell ring tones of Idol performances as they happen, and they recently produced a service that permits the 70 million MySpace subscribers to sell their own Idol-style karaoke performances as ring tones through the MySpace site.

Meanwhile, Ford gives away cars on the show, and Coca-Cola is the official sponsor of the series. They're everywhere on the show, from the Coca-Cola Red Room where the remaining contestants meet after their performances to the cups of Coke placed inconspicuously throughout the program.

And while American Idol scratches Coke's back--like sending their contestants to NASCAR's Cola-Cola 600--Coke is also promoting American Idol. As Coca-Cola spokesperson Susan McDermott says of their relationship with the series, "It's given us a lot of opportunities to involve local markets and take the American Idol experience outside your TV screen."

Your Reality: No matter how big or small your business, you can always find a useful partner, and both of you can benefit from the alliance. Provided you're each serving the same market but offering different solutions for them, it makes sense to have a friend you can count on.

If you have a popular restaurant, for instance, you could offer to sell snacks or foods to a local bed and breakfast or hotel--at a reasonable discount--provided they talk up your place and hand out restaurant coupons. Or if you have a tutoring service, you might offer your city's biggest school free in-school tutoring once a week, or free seminars on how to study, provided that the schools are promoting you. If you own a pet store, you might want to team up with a local kennel or doggie day care. They need supplies, like dog bowls and leashes; you need more customers, which you'll get from the free promotion they'll give you. You would obviously promote their service in return.

Business Lesson #3: Foster enthusiasm among your customers.

The Reality TV Way: It's the viewers, not the judges or producers, who choose the winners of American Idol.

Your Reality: You can find ways to get your customers involved in your business. If you have an art gallery and willing artisans, you could offer customers the opportunity to pre-pay and have something custom created just for them, which could be as involved and expensive as having the artisan meet one on one with the customer or as fun and whimsical as having the customer fill out a multiple-choice quiz on what they're looking for and then wait to see what the artist creates for them.

Some customers don't want to be involved in your business--they just want what you have to offer and want it fast or cheap. But a lot of people are creative, and if you can offer people the opportunity to be involved--and even better, offer an experience--they'll actually you pay you more. Why do you think people go to farms to pick out their own pumpkins or strawberries? It may be backbreaking work to the laborer who has to do it all day, but for the family who wants to spend a few hours in the sun, it's fun. You may design handbags and see it as work, but your customer might love the chance to help create the look of their own purse.

Business Lesson #4: Get your employees to talk reverently about your business.

The Reality TV Way: Everyone involved in American Idol, from the show's host Ryan Seacrest to judges Paul Abdul, Randy Jackson Simon Cowell talk about the series whenever they get the chance, even when they're working on other projects.

Your Reality: You can have your employees talking about your business, too, but it obviously needs to be in their best interest to promote your company at all hours of the day. Since that's in your best interest, too, come up with some reason for them to love your business, whether it's offering some form of profit-sharing, or simply having pizza parties once a month or even once a week when sales are up. And keep in mind that what you choose to do for them will really depend on the age of your employees: A fully salaried middle-aged man with a family is going to have different interests than a teenager who waits on customers just a few nights a week.

Business Lesson #5: Get the public to talk about you.

The Reality TV Way: Paul Abdul's alleged affair with one of the shows contestants, Simon Cowell's withering putdowns, the controversy around the fairness of phone call judging--the news out of American Idol may not always be good, but people are talking about the show, and watching it, and purchasing the products involved with the series.

Your Reality: We're not suggesting you try to become embroiled in a scandal, but publicity is certainly important to spread the word about your business. It often comes when your business can offer a new twist on an old idea (see Business Lesson #1), but there are dozens of other ways to get people talking about your company.

Get involved in community projects. Or get a local celebrity to endorse your business in some way. Offer a free or low-cost seminar or workshop that draws people in. Provide your employees with an unusual perk, like letting them bring their pets to work on Fridays (which could just be the talk of the town, if your company is in a small town). Or paint the outside of your business bright pink or green or orange, or all of the above, depending on the message you want to send. The important thing is to make sure that your business isn't invisible.

Business Lesson #6: Brand yourself.

The Reality TV Way:American Idol owns all the licensing and trademarks associated with the show, and they have every contestant under contract for three months after the series ends. Meanwhile, there are American Idol clothes, thermos mugs, watches, iPod carrying cases, clocks, track bags, videos, DVDs--and numerous other products for sale at the American Idol online store. The point is, as much as possible, American Idol controls its image and makes sure its name is out there for the public to buy.

Your Reality: You may not be able to get the public to buy T-shirts or thermos mugs featuring your auto supply store on them, but you can still make sure that everyone knows your business is the best. You could have a contest for your customers: Ask them to write about the best experience they've had at your store, and give the winner a free tank of gas, or more, if you can afford it. Then send the winning essay and list of winners and runner-ups to your local newspaper, and use the essays in your ads. Considering how valuable gas is these days, you might get a lot more attention than you've ever dreamt of.

The critical thing to remember is that you need to get your name out there, attached to what your business does, in a creative way. If you can enter competitions or get your name positively mentioned by your peers--at a trade show, for instance--that can be even more helpful. You want to be the driving force in branding your business, but if you can have the public or your peers saying you're a great company, your credibility and brand are going to be even stronger.

Business Lesson #7: Once you have your idea up and running, keep thinking of new twists to add to the mix.

The Reality TV Way: The show's creator, Simon Fuller, could have said, "I'm satisfied with Pop Idol," and just called it a day. Instead, he spun that show off into American Idol--and also created Indian Idol, Indonesian Idol, Malaysian Idol, Latin American Idol--and many, many more. More than 100 versions of Idol exist around the world.

Meanwhile, host Simon Cowell started his own production company, creating series that are arguably similar in vein to American Idol, like ABC's American Inventor and the upcoming NBC summer series, America's Got Talent. Ryan Seacrest is constantly reinventing himself as a host. And Paula Abdul has recovered some of the popularity she once had as a pop star. In fact, many of the people behind American Idol are constantly dreaming up new ways to expand their empires. Partnering with Sony, American Idol has albums that showcase its contestants talent, and they have a summer concert tour.

Your Reality: Franchising is one of the best and most tried-and-true ways to expand your empire--and that's just what Idol is doing around the world. If you don't want to franchise, though, there are always new markets to find. If you own a car wash, for instance, you could eventually expand to wash buses and large trucks. You could send crews to individual homes or neighborhoods to personally wash cars. You could develop your own brand of automobile soap and start selling it to other car washes and auto stores. You could write a book about washing antique cars. You could have a car show at your car wash once a year and draw in thousands of people.

Of course, it costs money and time to pursue new ways to bring in income, but if your product or service is the best in town--and if you have the imagination--there's no reason the public won't rally to your cause. If you want to have business students at your local high school or university bow before you, you, too, can be an American idol.

Matt Robinson is a freelance writer based in Brookline, Massachusetts. Geoff Williams is a freelance writer based in Loveland, Ohio.