What’s the difference between aggressive marketing and a sales scam?
The aftermath of the 2017 Fyre Festival explores this question, and lawyers are debating the answer. Was the event a wayward business venture, or a get-rich-quick scheme? The festival’s originator, entrepreneur Billy McFarland, claims honest intentions, but blames faulty planning and bad circumstances for the festival’s demise.
Over-promise, then don’t deliver. Embedded within the debate lies a festering boil, epidemic in sales: the gap between a company’s marketing speil, and what customers get. With the Fyre Festival, though, it’s not a gap, but a chasm. Some question whether McFarland even had the wherewithal to deliver the flamboyant sales vision he created. Was he committed to keeping his promises? There are at least eight lawsuits pending against McFarland and his company, Fyre Media, and the courts will sort out the answers. The Fyre Festival has become “the focus of a criminal investigation, with federal authorities looking into possible mail, wire and securities fraud,” The New York Times reported on May 21st. This is not your run-of-the-mill business belly flop.
What was promised. In 2016, McFarland promoted a mega-party scheduled for April, 2017 featuring music, celebrity chefs, gourmet food and luxury accommodations. Fyre Media showcased the venue as an island in the Bahamas called Fyre Cay – which doesn’t exist. One ticket package, the “Artist’s Palace,” was offered for $400,000, and provided four beds, eight VIP tickets and dinner with one festival performer.
To prospects, McFarland scrupulously maintained the festival’s high-end image. Rapper Ja Rule (whose real name is Jeffery Atkins) was touted as a celebrity business partner. Advertising listed musical acts by G.O.O.D Music, Major Lazer, and Migos. Fyre Media targeted millennials, and they sold about 8,000 tickets. To pump up revenue, the company also encouraged customers to pay $1,500 in advance for a digital Fyre Wristband to facilitate cashless transactions for “incidentals.” That added nearly $2 million to the top line.
But a few weeks before the event, as the Fyre hype engine was rocking at full throttle, a harrowing story was unfolding behind the scenes. According to a May 21 article in The New York Times, In Wreckage of the Fyre Festival, Fury, Lawsuits, and an Inquiry,
“Expenses were swelling: Bed frames and beach chairs were rush-ordered; beach umbrellas had to be flown in, rather than shipped, because of late payments, according to three production staff members. Essential production tools, like walkie-talkies, never even arrived. Back at Fyre Media, the company credit cards were being declined for everyday office purchases.
Employees said they feared that their boss was using funds from their booking app to fund the festival. But Mr. McFarland reassured them in April when he said that Comcast Ventures, the investment arm of the cable and media giant, had agreed to invest up to $25 million in Fyre Media. In fact, Comcast had considered a deal, the company said, but passed ‘after conducting thorough due diligence.’ Mr. McFarland did not tell his employees.
As the festival date neared, the production crew’s wages, paid by wire or cash, arrived late, or short, and then stopped altogether, five members of the crew said.”
“As late as that Thursday evening [before the first weekend of the festival], Mr. McFarland and Ja Rule had continued to assure talent agents that all systems were go. But by Friday morning, both weekends of the festival had been cancelled. Within a few days, Mr. McFarland and the rest of his executive team had left the island, their site strewn with mattresses, empty Champagne bottles and other detritus.”
On April 1st, McFarland was still scrambling to find a location to accommodate the prospective partiers, scheduled to arrive on the 27th. McFarland finally secured a venue, Roker Point on Great Exuma Island. It was too little, too late. The festival was doomed.
What was delivered. Instead of luxurious digs and lavish buffets, arriving customers got tents, and cheese sandwiches on white bread. And lots of horseflies. Vendors lost money, too. Luca Sabatini claims his Miami-based company, Unreal Systems, lost about $10 million. Adding to the dismal ambience, a storm dumped heavy rain on the disappointed partygoers.
The Fyre Festival became a safety crisis. Many attendees could not leave readily. As they struggled to make arrangements, Fyre Media provided them this message on their website:
“Fyre Festival set out to provide a once-in-a-lifetime musical experience on the Islands of the Exumas. Due to circumstances out of our control, the physical infrastructure was not in place on time and we are unable to fulfill on that vision safely and enjoyably for our guests. At this time, we are working tirelessly to get flights scheduled and get everyone off of Great Exuma and home safely as quickly as we can. We ask that guests currently on-island do not make their own arrangements to get to the airport as we are coordinating those plans. We are working to place everyone on complimentary charters back to Miami today; this process has commenced and the safety and comfort of our guests is our top priority. The festival is being postponed until we can further assess if and when we are able to create the high-quality experience we envisioned. We ask for everyone’s patience and cooperation during this difficult time as we work as quickly and safely as we can to remedy this unforeseeable situation. We will continue to provide regular updates via email to our guests and via our official social media channels as they become available.”
The Fyre Festival provides an iconic recipe for a business fiasco: combine a shaky business model, lame assumptions, empty promises, opaque management, unpaid workers, stiffed vendors, jilted customers, and environmental wreckage. Blend and pour. Top off with a generous dollop of management arrogance. Serve.
Selling the vision is the easy part . . . Was McFarland dishonest in selling something he didn’t yet have? Before you answer, remember that selling things before they are available is not new or uncommon. Real estate agents sell resort property “under development,” and companies in many industries sell future services like maintenance plans, for which they may not have capabilities to provide. Lately, Tesla accepted deposits for its solar energy roof tile systems pending future installation. I’m not sure if anyone batted an eye.
What drives sales of not-yet-available products is the abiding hope that vendors will deliver what’s expected. That – and legal contracts. Contracts are created to protect sellers and buyers, and that helps facilitate transactions. But customers must never forget that when vendors write contracts, they prioritize and protect their own interests. Always. Check the fine print: customers generally bear whatever risks the vendors don’t want or can’t afford, and absorb the costs when they come home to roost. The truth about whether the Fyre Festival’s terms of sale offered adequate – or any – protection to its customers will unfold in the coming weeks.
McFarland’s “killer skill.” Customers of McFarland’s earlier entrepreneurial venture, Magnises, “complained that offers, like Beyonce tickets, never materialized, and that annual dues were charged to their credit cards months early . . . Still, he had a way of engendering trust.”
This irony galls me. But I shouldn’t be surprised. It’s rare to find anything written about strategy, tactics, and best practices that’s coupled to maintaining moral or ethical foundations. It’s all about money. We worship revenue production and profit performance. We laud “audacious risk takers” and developers of “the next great thing.”
We enthusiastically offer them advice and encouragement, but we don’t scrutinize their premise, motives, or intent. Senior managers fire functionaries for what they deem misbehavior or “not living up to the company’s ideals,” but they don’t banish their peers after they exploit customer trust. Had the US government not stepped in, Elizabeth Holmes, who admitted that the blood analysis company she founded, Theranos, is a fraud, would still be enriching herself while imperiling her customers. Now she has been forbidden from running another lab for . . . two entire years!
The same apathy allowed a company like SwanLuv to get launched. And the same apathy enabled Billy McFarland, a checkered serial entrepreneur, to execute a harebrained venture like the Fyre Festival, and sell 8,000 tickets. As long as there’s a pot of gold at the end of the entrepreneurial rainbow, who cares if people get hurt or die as the result of someone’s misguided aspirations?
“We’ve moved from an industrial economy to a consumer economy to a service economy to an information economy to what you might call a flagrant-exploitation economy – one in which branding and ‘storytelling’ have replaced advertising and possibly even reality. It’s not just that we’re being sold the sizzle more than the steak. It’s that we’re being sold the sizzle instead of and at the expense of the steak,” Carina Chocano wrote in a New York Times article, False Front.
“Cultivating authenticity” – the new watchword for marketers. “If everything lived up to its hype, the world would be burdened with far fewer bad movies, miracle vitamins and optimistic campaign promises,” Chocano says. “Wells Fargo employees spent five years creating millions of fake accounts for unsuspecting customers in order to charge them additional fees; the year before this practice was uncovered, a news release introduced the bank’s new brand campaign as one that would ‘eschew product promotion for storytelling.’ [President Trump] has agreed to pay millions in fraud settlements to thousands of students of his ‘university,’ with its $35,000 ‘Gold Elite’ program; his daughter, whom he has employed for much of her career, has published a book in which she writes about ‘cultivating authenticity’ and presents herself as an accomplished businesswoman. It’s a brand that she’s selling – the have-it-all sizzle of a self-actualized career woman and loving supermom in fashionable shoes. Who cares whether, somewhere behind it, there may be the equivalent of an undeveloped gravel pit and some unboxed disaster tents?”
Say it loud! I’m fake and I’m proud! Chocano believes that the scam economy might be entering its “baroque phase.” Even for the wary, it’s difficult to distinguish between real products and knockoffs, legitimate email from phishing, and honest companies from scammers. For the latest artifacts, check out Hoax Slayer or the US Federal Trade Commission website. Our culture and basic antipathy for commercial regulation has made the US fecund for “dissemblers, operators, and downright swindlers,” Duke University professor Edward Balleisen writes in his book, Fraud: An American History from Barnum to Madoff. “Some of the psychological impulses that show up again and again in the history of business fraud reflect widespread aspirations or anxieties,” Balleisen says. In particular, “the passion for easily attained wealth.”
If you want an antidote, ask a preschooler. The Muppets, featured on the children’s TV show, Sesame Street, help young children develop skepticism, and might inoculate them to scammers. In one episode, a character named Lefty offers to sell Ernie one of his products. “I got something you need, and I can sell it to ya real cheap,” he says. Ernie gives Lefty five cents for a bottle of air, which he accepts. After pouring the air into Ernie’s furry hands, Lefty keeps the bottle, explaining that Ernie’s payment did not include the packaging. Other episodes show Lefty selling Ernie similarly worthless products, including an empty box and the number 8. Kids as young as three understand Ernie’s folly. In just 15 years, however, a child’s skepticism gets neutralized. Blame it on powerful sales messages, clever “content marketing,” or the constant drumbeat of honors bestowed to those who got rich quick. It’s a shame such memorable consumer lessons are only offered to the very young.
“The big generational shift since [the ‘70’s],” Chocano writes, “is from cynicism and avoidance to an admiration of the hustle and an enthusiasm for all the enthusiasm, which has dovetailed perfectly with the new laissez faire. The more Wild West the business environment, the more the hustler is elevated to folk hero or legend, much the same way that the robber barons once were.”
What distinguishes aggressive marketing from a con artist is intent. A revenue-driven marketer who lacks moral scruples meets the criteria for the archetypal con artist. Companies should care about how they generate their revenue. So should the people who work for and support those companies. In the meantime, watch out for more Billy McFarland’s breathlessly hyping their digital snake oil online, and for more Fyre Festivals.
After the Festival debacle, Ja Rule, McFarland’s business partner, reportedly said in a Fyre Media Company meeting: “That’s not fraud, that’s not fraud . . . False advertising, maybe – not fraud.” Three denials in the same sentence – a scammer’s telltale tic. Lefty couldn’t have expressed it any better.
When I wrote this article almost two years ago, the answer to the central question I raised in the lead paragraph was a bit murkier. Two just-released documentaries – one on Netflix and one on Hulu – reveal the likely answer more clearly. (see https://mashable.com/article/fyre-netflix-review/#FtmI_HvdFSq4)
I just watched the Netflix documentary, and highly recommend it. It reveals the dangers that result from an organizational culture where the leader’s magnetic personality and alleged smarts create sycophantic followers. The phenomenon is not limited to Fyre and Billy McFarland (Fyre’s ex-CEO who was recently sentenced to six years in prison for his role in this fraud).
This issue of power exploitation and staff obsequiousness surfaces throughout the documentary. Not that there weren’t principled detractors, but mostly, the cautionary voices were systematically crushed. “We’re a solutions company, not a problems company!” Under this noxious edict, staff and contractors were continually flogged into performing logistical miracles and marketing chicanery to goose revenue in the unsustainable hope of averting a disaster.