Several months after Marlon Brando’s death in the summer of 2004, counsel and executors for his estate sought advice on publicity rights – whether they had value, and, if so, what was the residual value (if any) of the publicity rights of Marlon Brando upon his passing. In the case of individuals, where publicity rights may exist, the reason for the valuation comes directly from the IRC Section 2031, which defines gross estate as the following:
“The value of the gross estate of the decedent shall be determined by including to the extent provided in this part the value at the time of his or her death of all property, real or personal, tangible or intangible, wherever situated.” [1]
Therefore, the core task was to determine an appropriate method to estimate the fair market value of the intangible assets known as publicity rights, for the estate of Marlon Brando at the time of his death in July 2004, and then apply the appropriate methodology to establish a fair market value as of that date. In selecting a methodology, we considered the four most accepted methods – income, market, relief from royalty, and cost. In the end, we adopted a modified income approach.
One of the challenges was to establish to what extent Brando’s persona would continue to have appeal after his death, and also to determine for how many years there might be a market for use of his likeness. In addition, future income needed to be established, and was done so by looking at past income patterns for various movies, as well as his licensing activities including advertising, spokesperson appearances for companies as diverse as Budweiser Beer, Infinity Automobiles, and Lipton Tea – clearly Brando’s persona was being used in a number of different ways for a variety of different products. (However, it is useful to note that most of these were in one sense or another offbeat usages, typically involving some form of one of his characters as found in “The Godfather” or “On the Waterfront.”) As a superior actor, Brando may have had, at one time, the potential to earn a continuous stream of income by licensing his name, voice and likeness to endorse a broad range of products. However, he rarely exploited this avenue until very late in his life with most activity occurring after 1996, including during his creative decline.
With all of the above in mind, the most appropriate valuation methodology had to be determined. In general, the best method for valuing publicity rights with some history and pattern of use is the Income Approach. The Income Approach is based on future income streams that will be earned by the intangible assets – in this case, the post-death publicity rights of Brando. With the Income Approach, the goal was to establish the three appropriate parameters of value:
- The type and amount of future income;
- The remaining useful life/duration of that income stream; and
- The risk or discount rate to be applied to that income stream.
The establishment of publicity right values is also difficult with actors and performers because often a contract to use their persona has both a performance component and a publicity component to it. In general, performance values, which are typically calculated for any commercial use, are paid only to a person who is living. Thus, after death, any use of the Brando voice, likeness or image would be fully attributable only to publicity value and not to performance value.
In order to get future potential income, we looked at historical activity by Mr. Brando. He did not engage in a great deal of commercialization of his celebrity status at either the beginning or peak of his career. However, in his later years, he did begin to license his name and likeness. In fact, from the years 1997 to 2003, Brando received 15 different contract offers to use his name, likeness or voice in advertisements and/or commercial products. However, he chose to accept only six of those contracts and this ratio was important to our calculations as future potential income is based on that same ratio of acceptance. In Exhibit VI-8, each of the 15 offers is identified by name, the year the offer was presented, the venue, and type of use is also identified. Importantly, we also identify those offers that were accepted in order to calculate future value, given the span of time during which the offers were received (and given the future span of time during the remaining useful life of the publicity) a time adjustment to the dollar value must be made. In Exhibit VI-8, the fifth column provides that adjustment.
As Exhibit VI-8 illustrates, the total value of all the contracts offered to Brando during that six-year period (1997 – 2003) was approximately $4.3 million as measured in July 2004 dollars. However, he only accepted $2.7 million of those contracts or approximately 62%. In addition, it is noteworthy that the fees of contracts that were accepted split almost equally between performance fees and publicity fees; put another way, the value of the publicity rights portion as a result of these 15 contracts is 30% of the total (30% x $4.3 million = $1.3 million). This then was the historical amount of income received by Brando and the 30% ratio of publicity fees is used in our final valuation calculations as we projected future income. Therefore, the expected amount or value of Brando’s future publicity rights that will accrue to the estate will be 30% of the value of all the offers expected to be received over the estimated remaining life of the publicity rights.
Marlon Brando Estate Contract Offers Accepted
As to the remaining useful life for the publicity rights and appropriate discount rates, both were estimated based on observation of market conditions. In the case of remaining life, over time the roles that Brando was most associated with, such as the characters he portrayed in “The Godfather” or “On the Waterfront,” became part of common pop culture and are no longer identified with Brando the persona. As a consequence, the need for the use of his name, voice, and likeness will decline over time. It was estimated that the remaining life of his publicity rights was no more than 10 years. Beyond that point in time, any further projection of income would be too uncertain to even be considered in the valuation period. The discount rate used was relatively easy to develop using a risk-free rate of 4.5%, a risk premium of 7.5% for the intermediate horizon return on investment, and a small industry risk premium to reflect the uncertainty of the advertising and promotion business. In sum, the cost of capital was determined to be 14.75%, and this was the discount rate applied to the future income from rights of publicity.
Given the findings in Exhibit VI-8, which show that, on average, Brando had been receiving offers for use of his publicity rights of just under $200,000 per year; given a 10 year remaining life; and given a discount rate of 14.75%, it was determined that the value of his future publicity rights was $1.3 million.
This case study is intended to illustrate two things. First, intangible assets can take many forms such as publicity rights, and in the case of individuals (and some commercial entities), the value of that person’s or entity’s intangible assets can survive beyond the death or demise of said individual/entity. Second, this case study illustrates that even with uncertain events in the future such as publicity rights, a fair amount of certainty can be brought to the valuation of the assets by using carefully reasoned assumptions as to future activity, remaining life, and discount rates.
[1] US Code Title 26, subtitle B, chapter 11, subchapter A, part III, section 2031