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In September 2009, Troy Carter has to decide what to do after Lady Gaga canceled a co-headlining arena tour with Kanye West. After the VMA incident between West and Taylor Swift and him taking a break from music, Lady Gaga needs to know what to do about the planned tour. Troy Carter presented three options that could help in this situation. Should they do the tour solo, adjust the tour to smaller venues, or just cancel it? What is the best strategy?
Anita Elberse; Michael Christensen
Harvard Business Review (512016-PDF-ENG)
July 22, 2011
Case questions answered:
- If you were Troy Carter, which of the three touring options would you pursue for Lady Gaga?
- How much money does Gaga stand to gain (or lose) under each option? In your view, do the potential rewards justify the investment? And can Carter do anything to mitigate the risks of pursuing a solo tour?
- Are Gaga’s main partners - Live Nation, WME, and her record label Interscope - likely to have the same preferences regarding the three options? Are their incentives generally aligned with Gaga’s?
- How would you evaluate Gaga’s launch as an artist up to September 2009? How can her team go about further developing her touring and record career going forward? And how can team Gaga vest leverage her social media presence?
- How important are the concert-ticket sales versus recorded music sales for an artist like Gaga? Where should team Gaga focus its efforts in the future?
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Case answers for Lady Gaga (A)
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Building a Brand – Lady Gaga
If I were Lady Gaga’s manager, I would go with the first option. I would continue with the large concert even though Kanye West will not be a part of it because it is the highest revenue-generating option. Other options, such as to continue with a Theater Tour or even to cancel the tour altogether, are not only not profitable, but would also incur losses for her and her team. Since Lady Gaga is an up and coming artist, she still has massive carry costs and other costs to cover. Since a fundamental part of her performance is to show the image of Lady Gaga, the expenses to maintain costs, such as the stage, remain high.
When first reading the case, I thought the Theater Tour would provide the best results, however, when the numbers are calculated, it is clear that a loss is generated. Even though the costs for this concert are $450,000, almost half of what they are with the Arena Theater, when all the fees and costs from the revenue are deducted, the loss is $1,640,000.
Furthermore, a loss is incurred even in the supposed situation that it would be feasible to sell 100% of tickets. Pursuing these options means that the production set would need to be altered, and this would bring about more costs. Furthermore, Lady Gaga is on the road to becoming a high profile artist and this option has the potential of affecting her visibility to a larger audience.
The last possible option, to cancel the concert completely, would result in a net loss of…
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