With ratings and endorsement fees in decline, the TV antics are hitting a hard wall of reality as the COVID crisis crimps their style.
The Kardashians are famous because they’re rich and rich because they’re famous. That’s as precarious as it sounds.
At best the family inherited around $30 million when high-powered lawyer dad Robert Kardashian died nearly two decades ago.
Professional mom Kris parlayed that lifestyle into TV celebrity and each of the kids started buying mansions.
But there’s a problem. There are a lot of Kardashians and Jenners and while $30 million is a lot of money, it doesn’t stretch forever.
They’re still a working family. And when something like the COVID outbreak gets in the way of the cash flow, tough decisions need to be made.
Let’s see what Kris does after the current season is in the can.
Living large on leverage
The math speaks for itself. The Kardashians collectively have run up about $180 million in debt buying houses and jewelry while trying to get various side businesses going.
Their show remains the core meal ticket. In a good year, it pays about $30 million to split across five kids, various parents and hangers-on.
Again, that should be plenty of payroll, but living like you’re on the show is expensive.
The Kardashians don’t just need to be rich. They need to live like they’re rich in order to keep their aspirational audience tuning in.
That means flouting the normal rules of sustainable high-net-worth budgeting.
The Kardashians can’t just park millions in Treasury bonds and live forever on the interest when their entire existence amounts to an extended commercial for wealth itself.
They need to consume conspicuously. And that’s how they owe six times what they reliably bring in every year the show is on the air.
As long as the show is on and interest rates remain low, they can juggle that leverage. When the show ends, cash stops flowing.
Looking for the pivot
Of course the goal has always been to build something lasting around the show to replace it when it ends.
Kylie has built a cosmetics business worth $1 billion on paper. The other kids have made similar efforts on a smaller scale.
Most revolve around endorsements and using their massive social media presence to sell products.
Consumer advertising has collapsed. Luxury brands see no point in spending money on promotion when the boutiques are shut down.
And with a potentially deep recession on the horizon, a lot of people are nervous about marketing upscale lifestyles. You need hope and a little money to buy a dream.
If you can’t buy the dream, you can always watch the show. But the show is no longer as relevant as it was.
Ratings were eroding even before the virus hit. Episodes that once would have pulled in nearly 5 million viewers now draw barely 15% of that peak audience.
And the ads just aren’t there to chase that audience. Can the Kardashians go on without their show?
In theory, they can transcend television and simply exist as social media figures. However, that’s not how the numbers seem to flow.
Take “Poosh,” Kourtney’s effort to replicate Gwyneth Paltrow’s GOOP. Traffic to the site is down 20% in the last six months and more of it feeds back to Kourtney’s Instagram posts than to advertisers.
While the audience is there, a lot of these people only travel in circles. They never buy anything.
Kim has done really well here in the past. The other kids have largely stalled around the level their dad left them with.
They’re basically people on a TV show. When the show ends, they’ll start drawing down their existing net worth and those mortgages will become a drain.
The time to build businesses was years ago. They didn’t need to spend their time just being the Kardashians living the reality show lifestyle.
More than hype
They should have taken a cue from Kylie and invest in something with real enterprise value.
The Jenners are self-made. And the thing about a reality show is that reruns are not worth much. Every episode comes and goes.
People don’t go back and binge. It’s not surprising that the Kardashian show doesn’t really do well in a Netflix world.
Individual episodes are available on Amazon and iTunes. Otherwise you have to wait a year to watch it on Hulu, and not a lot of fans are that deeply invested.
Unless you’re selling tangible cosmetic products or apparel or anything else, you aren’t even getting a lot of residual income from downloads.
When the Kardashian buzz evaporates, there’s not a lot left to support the family capital structure.
I suspect a lot of the wealth around the family is more hype than hard assets. Even Kylie is vulnerable to a steep markdown if the paper value of her company is challenged.
What is that company really worth beyond its brand footprint? Maybe not $1 billion, but probably more than the lingering celebrity of someone who used to be famous.
COVID is changing television. It’s changing the economics of fame. People who don’t want to be caught in that process need to have sane and sustainable wealth management in place now.
