Image Rights, The Valuation of
Image and Personality rights are becoming increasingly important in today’s commercial world. For many years, IP and Image rights lawyers have urged personalities with valuable image rights to protect their image by using conventional IP rights such as trademarks and copyrights, often bundled with licensing and enforcement programs that control and educate the use of their image. This is because although some jurisdictions legally define Image rights, some such as in Kenya and most jurisdictions in Africa, Image rights are recognized less formally, but sufficiently enough to form the basis of contracts, securitization arrangements, corporate structuring and tax planning.
For commercial and tax purposes, image rights are often transferred by outright assignment, or through various forms of licence, to corporate structures where they may be exploited effectively. In many instances where a personality’s image has an independent commercial value, or the prospect of such, the personality is advised to create an Image rights company and later assign their rights to this company. It is however important to note that a transfer to a corporate structure is a taxable, chargeable gain and thus, the Image rights to be transferred must be valued on the date of transfer.
When calculating the value of Image rights, and quantifying the earnings that they may generate, intangible assets present very unique nuances and complexities. An expert valuation professional, alongside a personality’s legal, tax and accounting advisors, will perform a careful due diligence analysis so as to ensure that the personality overcomes any pitfalls that they may come by when valuing their rights.
In the valuation of a personality’s image rights, one will often need the input of experts from the technological, marketing and science fields. The rights are mainly valued by discounting all future licensing incomes emanating from the rights to a net present value. In assessing growth rates and prospective new deals, experts may use current contracts and opportunities, expiring contracts and arrangements, and the likelihood of renewals.
When conducting a valuation, one must also assess personality-specific risks and the probabilities of dilution/increase of said rights. If forecasted arrangements are to be considered, then it is necessary to consider whether such arrangements are realistic and assessable prospects. Other factors, the impact of which one ought to consider, include:
i. other historical and prospective income streams.
ii. reputational damage
iii. injury or likely injury; more so for sports personalities
iv. renewal of ageing contracts, etc.
Thus, the ratios and analysis that are associated with determining the remaining useful life, probable life, actuarial life, and marketing longevity of image rights are essential considerations during valuation.
Proper valuation is necessary for optimum exploitation of image rights.
However, it is important to note that the value of image rights need not be fixed, but that they may fluctuate dependingly. A leading example is that of a famous golfer’s Image rights company. The golfer’s company owns and manages his lifetime image rights. Each year, the directors of the company review the value of these rights. The value the directors assign fluctuates in line with changes in the golfer’s operating environment. The directors have stated that a write-down in the value may occur following their assessment of the possible impairment of the company’s trademark and intellectual property rights at the end of each financial year.
In conclusion…
Considering the substantial sums a personality stands to gain(or lose) along with the tax implications, estate planning, societal impacts, related insurance coverages, and potential litigation disputes, it is important to seek the services of adept legal minds and qualified expert valuation professionals. It is crucial that Image rights contracts are set up properly, and within the provisions of the tax laws of the countries in which the personalities are tax residents. This is so as to ensure that they don’t face tax fraud issues.
When valuing, assigning, and/or transferring image rights, it is necessary to seek professional legal and valuation experts so as to ensure that that one is aware of all the pitfalls and risks involved; and also to ensure that the personalities have indeed protected themselves from said pitfalls and risks.
