Doug Bania Rights of Publicity Name Likeness Damages Expert

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Celebrities are struggling to protect their names and likenesses from unlicensed usage of their voices, names, signatures and photographs. Once their names and likenesses have been misrepresented, there is a possibility that damage has occurred.

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Doug Bania Rights of Publicity Name Likeness Damages Expert

  1. 1. TOTAL LICENSINGCelebrities are struggling to protecttheir names and likenesses from un-licensed usage of their voices, names,signatures and photographs. Oncetheir names and likenesses have beenmisrepresented, there is a possibil-ity that damage has occurred. Theestimation of damages and arrival atan appropriate measure of fair mar-ket value for usage of the intellectualproperty varies greatly from one ce-lebrity to another, depending on in-dustry, marketplace, the celebrity’sendorsement history, professional ac-complishments and public image.This article looks at one of the waysto determine the appropriate financialcompensation for the unauthorizeduse of elements of a celebrity’s per-sona in an advertising campaign. Wewill review the basic outline and for-mat of unauthorized usage by a mediacompany, in using and exploiting thecelebrity’s name and likeness in its ad-vertising campaign (the “Campaign”).We subsequently quantify the differ-ent components of the financial com-pensation for the unauthorized use ofthe name and likeness and associatedgoodwill.This case involves a celebrity whospent his entire life maintaining hisimage in both his public and privatelife by being heavily involved in chari-table, civil and social activities and bynot subjecting himself to situationsthat might damage his clean cut andmoral reputation. Consequently, theCelebrity is known as a forthright buteminently moral figure.The media company participated inunauthorized usage of the Celebrity’sname and its associated goodwill dur-ing the running of the Campaign. TheCampaign made a play on the Celeb-rity’s name in a sexual fashion, whichwould in all likelihood,be seen as anti-thetical to the Celebrity’s reputation.Thus, the damage identified extendsbeyond the conventional Fair MarketValue of the rights, and may encom-pass damages relating to mental andemotional distress.Product Endorsement HistoryThe merchandising of intellectualproperty rights has been a key busi-ness strategy as far back as 1870.Withthe rise of mass communications sincethe early years of the 20thcentury, en-tertainers began endorsing consumerproducts in advertisements. Subse-quently, businesses have been willingto spend a significant portion of theiradvertising budgets in acquiring therights to use celebrities because theystand to gain benefits.In the 1970s, Gallup and Robinsonreported that 15 percent of prime-time advertising featured celebrities.In the following decade, advertisersused celebrities even more often, andthis trend continued into the nineties,when empirical studies estimated ap-proximately 20% of all advertisementsuse some form of celebrity endorse-ment. A more recent estimate indi-cates that nearly 25% of all commer-cials involve celebrity endorsementstrying to inform and persuade. Thecost of these endorsements, on theother hand, is more difficult to ob-serve given the privacy in which suchagreements are kept. Nevertheless,the advertising trade publication “IEGEndorsement Insider” claimed celeb-rities directly received licensing feesamounting to more than $800 millionin 2001.Multiple Approaches toEstablishing Fair Market Valuefor DamagesWhen valuing intangible assets, it isprudent to consider the different val-uation methodologies in light of theinformation available and the currentsituation in order to determine thebest method or methods of ascertain-ing the fair market value of the assetsin question.An overview of several valuationmethodologies commonly used to de-termine fair market value is presentedbelow:Cost ApproachThe historical cost to develop the as-set is sometimes used to determineits value. According to economic the-ory, this is not an accurate approachbecause the cost to develop the assetand the market value are not neces-sarily the same. Keeping in mind thedefinition of fair market value, a pur-chaser of the asset will only pay anamount that will enable him to earna reasonable return based on the ex-pected revenue and expenses that willresult from utilizing the asset. Gener-ally, this approach is better suited topatents and technology that have notbeen developed commercially sinceit reflects the cost a company couldavoid by purchasing,rather than dupli-cating, a similar research and develop-ment effort.Income ApproachThe Income Approach is utilized forvaluing intangible assets with a signifi-cant history of use. This approach isbased on determining the projectedfuture income stream attributable tothe asset under consideration. Thisapproach is one of the most widelyused methodologies in intangible as-set valuation because the informationrequired is relatively accurate andoften is readily available.The informa-tion necessary to utilize this methodincludes the following:1. Future income stream2. Duration of the income stream3. Risk associated with thegeneration of the income streamThe value of the asset is calculatedby taking the net present value of therevenue stream associated with theuse of the asset. This method utilizesa forecast of revenue based on fac-tors such as historical results,industry84DECEPTIVE PRODUCT ENDORSEMENT:Unauthorized use of aCelebrity’s Name andLikenessBy Doug Bania
  2. 2. TOTAL LICENSING85trends, and the competitive environ-ment. The Income Approach is notappropriate in this instance becausethere is no significant history of useof the Celebrity’s name as it relatesto this campaign.Relief from RoyaltyThe Relief from Royalty method isa variation of the Income Approachthat establishes the value of the in-tellectual property as the capitalizedvalue of the royalties that the com-pany is relieved from paying due to itsownership of the assets. This methodprovides a measure of the value bydetermining the avoided cost. Thismethod is appropriate to use whenthe assets in question have indirect ordirect comparable licensing informa-tion to utilize.Relief from Royalty is calculated byassuming that the business does notown the intellectual property, andthus has to pay a royalty for its use.Essentially, the fair market value is thepresent value of those avoided royal-ties. The Relief from Royalty methoduses royalty rates that are based onmarketplace transactions and uses aforecast of revenue as in the IncomeApproach.Market ApproachWith the Market Approach, intellec-tual property and intangible assetsare valued by comparing the assetsin question to transactions involv-ing similar assets that have occurredrecently in similar markets. This ap-proach is best if an active market ex-ists that can provide several examplesof recent arm’s length transactionsand includes adequate informationon their terms and conditions. Mostintangible assets are not traded fre-quently enough to be able to establishcomparable market value. Moreover,it is very difficult to get enough detailon the comparable transactions to becertain that a truly comparable situa-tion exists.Method EmployedBased on the information availablein this case, we determined that theMarket Approach is the most appro-priate methodology for calculatingthe fair market value for the celebri-ty’s use in the Campaign. In addition,we must look to the market for simi-lar personalities with the celebrity’sstatus, who have used their name andlikeness in similar endorsements.Extent of Unauthorized UseThe right to choose whether,and how,one’s identity is used for commercialpurposes is a highly valuable propertyright particularly to celebrities whotrade in it. Because the Celebrity isnot a “willing seller,” it is not relevantfor us to examine the Celebrity’s cur-rent and past endorsement deals be-cause he was/is a willing participant inthose endorsements. In determininga proxy amount for the Celebrity’suse in this Campaign, we must exam-ine the extent of the Celebrity’s use,the Celebrity’s overall marketabilityand particularly focus on comparabledeals with similar celebrities to calcu-late the fair market value for the useof the Celebrity’s name and likeness.For the purpose of this assessment,the extent of use is defined in termsof the number of consumer impres-sions through various print and out-door media (e.g. magazines, bus ad-vertisements and subway kiosks) thatthe Campaign generated during therelevant time period. Exhibit 1 aboveEXHIBIT 1 - Campaign ImpressionsMedium Type Period Impressions(Thousands)Glamour mag 1 pg 4 col ad 1 monthly issue 2,362Cosmopolitan 1 pg 4 col ad 1 monthly issue 2,996Vanity Fair 1 pg 4 col ad 1 monthly issue 1,181O (Oprah) mag 1 pg 4 col ad 1 monthly issue 2,721Shape magazine 1 pg 4 col ad 1 monthly issue 1,618Lucky magazine 1 pg 4 col ad 1 monthly issue 971Essence magazine 1 pg 4 col ad 1 monthly issue 1,057Latina magazine 1 pg 4 col ad 1 monthly issue 358TOTAL MAGAZINEIMPRESSIONS 13,264Outdoor King Sized 4 weeks 22,988Poster ontrain50 showingsOutdoor Transit Shelter 4 weeks 52,88950 showingsOutdoor Subway Platform 4 weeks 196,560Poster (half)TOTAL OUTDOORIMPRESSIONS 272,437TOTALIMPRESSIONS 285,701Personalities One of my Very Good Fair Total Positive NegativeFavorites Good Poor Familiar Q Score Q ScoreThe celebrity 13 19 23 15 69 18 21All Athletes 6 8 13 9 36 14 24All performers 6 6 12 8 33 16 25EXHIBIT 2 The Celebrity’s Q Score ComparisonSource: Nielsen Media Research,Viacom outdoor,Audit Bureau of Circulations
  3. 3. TOTAL LICENSING86shows the number of impressionsgenerated, with details of the adver-tising media utilized. The number ofconsumer impressions is significant,approximately 286 million. We usedthis number of impressions to guideus in choosing comparable endorse-ment deals for our Market Approachassessment.The Celebrity’s MarketabilityMarketing Evaluations’ Q Scores haveprovided clients with data to aid intheir marketing,advertising and mediaefforts for over 40 years. Q Scoresare one of the industry standards formeasuring familiarity and appeal ofperformers, characters, sports andsports personalities and broadcastand cable programs, as well as com-pany and brand names. When com-panies are in the process of choosingthe right personality to endorse theirproducts, they will often rely on QScores to obtain consumers’ reac-tions to that particular individual. Ahigh Q Score is a strong indicator thatconsumers will accept the personalityendorsing the product.Exhibit 2 shows that the Celebrity’sscores favorably when compared toover 160 athletes and over 3,000performers, who were part of the QScore test. This information indicatesthat the Celebrity commands a highdegree of marketability in terms ofpotential commercial uses of his nameand persona. Although we must lookat other personalities involved withsimilar endorsement deals for theMarket Approach because the Celeb-rity was not a willing participant, it isimportant to know that he is a per-fect candidate for analogous endorse-ments, if he chooses to participate.The Celebrity’s EndorsementHistoryAlthough the Celebrity has engaged inendorsement activity using his perso-na for commercial purposes for manydecades, he asserts that he would notagree to participate in this endorse-ment regarding the Series.As a result,it is necessary to examine transac-tions involving comparable celebritiesand comparable uses to properly ac-cess fair market value.The fair market value of the use ofthe Celebrity’s name and likeness forcommercial purposes is establishedwith reference to comparable trans-actions entered into on a mutuallyvoluntary and informed basis. In therecent past,the Celebrity has licensedhis publicity rights in business to pro-mote his name in various commercialventures. Yet the comparability is notdirect, as important elements, suchas the scope of outdoor advertisingmedia, and the combination of per-formance fees and publicity rights aredifferent. Consequently, other trans-actions involving comparable publicpersonalities must be considered toarrive at a complete analysis of com-parables, which incorporate the keyelements of an advertising campaign,similar in scope to the Campaign.Calculation of DamagesFrom our research of comparabletransactions,we identified fees paid toa variety of other celebrities for prod-uct endorsements who command alevel of compensation comparable tothe Celebrity. Exhibit 3 shows eightdifferent examples of celebrities whohave provided commercial endorse-ments ranging from Chevy trucks toCallaway Golf equipment. It is inter-esting to note, the minimum fee iden-tified was $1.0 million and the maxi-mum fee was $40.0 million, which, inevery case, represents compensationpaid to a willing participant.When calculating the damages forthe unauthorized use of a celebrity’sname and likeness, it is important tounderstand the celebrity’s endorse-ment history, professional accom-plishments and public image. Forinstance, when valuing Kobe Bryant’sname and likeness, you need to lookinto his professional career as well ashis personal life.The purpose of this analysis is to illus-Endorser Product/ Fees TermCompanyAnna Multiway Sports $8.0 million 4 yearsKournikova Bra/ShockAbsorberXSN Sports/Microsoft’sJames LeBron Nike, Coke and $10.0 million 6 yearsUpper DeckTrading CardsNike $90.0 million 3 yearsSprite $10.0 million 4 yearsDavid Beckham Adidas $12.15 million 4 yearsCal Ripken Jr Chevy trucks, $9.0 million 1 yearFram oil filtersand StarterapparelJim Furyk Hershey/Reeses $2.0 million 2 yearsArgent $1.5 million 1 yearExelon energy $1.0 million 1 yearMichael Callway/Golf $1.5 million 1 yearCampbell EquipmentYao Ming United $3.0 million 3 yearsTelecomm CorpKobe Bryant Nike $40.0 million 5 yearsEXHIBIT 3 - Celebrity ComparisonsSource: Internet research of publicly availabledocuments performed on Lexis Nexis
  4. 4. TOTAL LICENSING87trate that the Celebrity is well in linewith the compensation being offeredin other product endorsement ad-vertising campaigns with comparablecelebrities.The advertising and promotion cam-paign that employed the goodwill, im-age and persona of the Celebrity wasa multi-media campaign, with advertis-ing found in multiple magazines and onliterally thousands of buses, as well ashundreds, if not thousands of kiosks,posters and other installations. Wehave established base numbers for useof a celebrity persona in various me-dia. Based on our research, we foundthat some comparable celebritiescharge anywhere between $75,000and $100,000 per image use and permedia placement. The correspond-ing celebrity advertising costs for theother media are shown in the Exhibit4 below. As a conservative estimate,for use in a single magazine a perfor-mance or endorsement fee of $75,000can be considered appropriate.• In this case, the Celebrity’s good-will and persona were used in at leasteight magazines, with approximately13 million consumer impressions.Therefore,eight endorsement fees foreight magazines at $75,000 each totals$600,000 (See Exhibit 4 & 5);• The Celebrity’s goodwill and per-sona were used in an intensive cam-paign using city buses. Based on me-dia research from leading advertisingagencies, we estimate that there wereapproximately 23 million consumerimpressions using the Celebrity’sgoodwill and persona in advertisingsupport for the Series. Fees for thistype of exposure are estimated at$175,000 (See Exhibit 4 & 5);• Finally, the Celebrity’s goodwill andpersona were used on bus stops,subway kiosks, posters, and possiblyother media, having a possible impactof over 249 million consumer impres-sions. Fees for this type of exposureare estimated at $1,524,000 (See Ex-hibit 4 & 5).• Therefore, the combination of thesevarious usages of his goodwill and per-sona,means that,in total,the Celebritywould have been justified in setting afee (if any fee were possibly accept-able to him) of approximately $2.25million (See Exhibit 4 & 5).Furthermore, the Celebrity shouldbe awarded damages in the formof corrective advertising. Correc-tive advertising is calculated as theadvertising costs necessary to rep-licate a multi-media advertising ef-fort in similar proportion to theCampaign. The purpose of this ad-vertising effort is to inform the pub-lic of the unauthorized usage of theCelebrity’s image and persona, andto show that the Celebrity does notendorse the Series and he has no as-sociation with the Series whatsoever.Whether or not the Celebrity electsto launch such an effort is irrelevant;he must be compensated in the eventhe elects to do so.Consequently, additional compensato-ry damages for corrective advertisingare estimated at the total media costof: $450,000 (See exhibit 4)ConclusionsBased on our analysis,it is our opinionthat circumstances and compensationsufficient to entice the Celebrity to beconnected in any way with the Series,would have called for compensation inthe neighborhood of $2.675 million.Media Units Impressions Media Cost Celebrity Total TotalThousands per Fee per Celebrity CampaignThousand Thousand Media Cost(a) (b) (c) (a) x (c) (a) x (b)Magazines 8 Monthly magazines 13,264 $ 9.62 $ 45.24 $600,000 $127,600Buses 1 Monthly run 22,988 $1.62 $7.63 $175,473 $37,317Kiosks/Shelters 1 Monthly Run 249,449 $1.30 $6.11 $1,524,849 $324,284$2,300,322 $489,201EXHIBIT 4 - Estimated Celebrity and Media CostsType of advertising media Cost per Thousand Impressions ‘CPM’(Adults 18+)Newspapers $23.32Half Page, B&WTV Spot $20.5430 Prime-TimeNewspapers $11.66Quarter Page, B&WTV Network $11.3130 Prime-TimeMagazines $9.624 Color 1 PageRadio $5.9260 Spot Drive-TimeTransit $4.87King Size Bus Poster (12 weeks)Outdoor $3.90Subway KiosksEXHIBIT 5 - Cost Per Impression in Various Media (in 2000)Source: OAAA, ORG (from:AAAA Media Matters, Harris Media Systems Ltd,ACNielsen, NTI, FCC, NAA, MPA

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