Licensing trends reflect society’s cultural preferences, and are phenomena that continue to grow. Especially in today’s digital world, with the exponential rate in the growth of information sharing, the expansion in consumers’ awareness of brand personalities and their licensed products is sure to continue to skyrocket.
Brand personalities include those of celebrities, characters, and athletes.
As this segment of the licensing industry grows, we need to remember that the celebrity brand is their personal asset and intellectual property. We call this type of intellectual property the owner’s right of publicity. Right of publicity is generally defined as the right of a person to control the commercial exploitation of his or her identity, and to prevent unauthorized commercial use. Each celebrity, athlete, and character is unique, and that uniqueness is valuable.
The History of Celebrity Licensing
First, let’s look at the roots of celebrity licensing. The concept of licensing has been around for hundreds of years. Earliest examples would include those during the Middle Ages when there was the common practice of using papal or royal warrants. The Pope or royal family member would grant to a local entrepreneur a warrant or license to collect taxes, with a certain percentage paid back to the royal family. This is where the term “royalties” originated from. Moving on to the 1700s, the British nobility began to license their name under covenant to various manufacturers and retailers in return for a fee. So as we see today, companies such as Harrod’s and Turnbull & Asser carry royal warrants on their letterheads.
In the early 1900s, we began to see the licensing of individuals who we would define as celebrities. Shirley Temple started her career at the age of 3 in 1932, and after winning an Academy Award in 1935, soon began licensing out her name and image. By 1936 she was reported to have made more than $200,000 in licensing royalties.
Later, Ideal Toy was granted a license to create dolls based on her likeness, which by 1941 had sales of more than $45 million.
Soon thereafter, we saw the growth of character licensing. Superman was created in 1932 by Jerry Siegel and Joe Shuster, and eventually sold to DC Comics. By the 1940s, licensed Superman products included the popular comic books, puzzles, trading cards, and toy figures.
As we see today, superhero types of products continue to be a heavily licensed category. The increasingly popular Comic-Con International convention, held in San Diego each summer, is a testament to the big business of character licensing.
Fast forward to today, and examples of celebrity, character, and athlete licensing are everywhere. You walk into a large department store and you see Justin Beiber fragrances, Jessica Simpson clothing, and Rachel Ray cookware. Due to the growth of licensing in general, a whole industry was created, including licensing organizations such as the Licensing Industry Merchandisers’ Association (LIMA), and its annual Licensing Show in Las Vegas, where many in the industry gather each year.
What Are Rights of Publicity?
Since the popularity of buying products licensed out by celebrities, characters, and athletes continues to grow in popularity, those working in the licensing industry will most likely eventually work on some sort of celebrity-related deal. That is why it is important to understand the concept of rights of publicity.
As mentioned in the introduction, a general definition of rights of publicity is that it is a right of a person to control the commercial exploitation of his or her identity, and to prevent unauthorized commercial use. And as we see in the number of celebrity-based licensed products, there is value in the commercial exploitation of those celebrities.
Our discussion of celebrities includes popular characters and athletes, because they, too, have developed their own persona. In the case of characters, the holder of those character’s rights should treat those characters as individual celebrities.
Licensing professionals should also be concerned with those rights of publicity even after a celebrity’s passing. Postmortem rights of a celebrity can be very valuable, possibly even more so, than during their lifetime. We can quickly look to examples of post-mortem licensing deals for the estates of Elizabeth Taylor, Elvis Presley, and Dr. Seuss.
How Do You Value These Rights?
In order to continue to negotiate these types of licensing deals in an educated manner for all parties, it is important to know what has value, and how value can be determined. As you know, and what you want to promote, is that each celebrity is unique. That uniqueness is what makes a person become a celebrity in the first place, and why their licensed products are attractive to the consumer.
People look up to, and want some affiliation with, that celebrity.
Uniqueness also brings about many challenges in determining value. We face these challenges everyday in our valuation practice. At CONSOR, when valuing a celebrity’s right of publicity, we understand that value will vary from usage to usage. The same goes for licensing deals—there are many factors that need to be considered.
The subject of, and explanation of, valuation methods is a far more technical discussion than can be summarized in this article. In general, when we prepare a formal valuation, we look to three primary valuation methodologies, which can simply be described as the following: • Cost Method: the economic principle of substitution, used for benchmarking • Income Method: the present value of future economic benefit, used for determining unjust enrichment or lost profits • Market Method: the value based on similar assets, used for comparable transactions and benchmarking While many times these valuations are requested after some sort of dispute, it is important to get a general idea of what can be considered in a formal valuation.
Prior to entering a license agreement, parties should be aware of comparable transactions when negotiating for terms and conditions. Knowing about comparable transactions will help drive the compensation in these types of licensing deals.
There are additional compensation drivers that can determine licensing value, such as: • Level of celebrity: How well-known is the individual? Is the person a local celebrity, or an international superstar? • Level of involvement: What is required from the celebrity? Will stock photos be used, or will live appearances for promotion be required? Will the celebrity be actively designing the product? • Level of use: Where, when, and how often will the celebrity’s likeness be used? The name only? The name and likeness? Demonstrations? • Level of affiliation: Is the celebrity closely associated with the product? Is the product related directly to an athlete’s sport? Does the musician use those instruments in concert? You can deduce that the closer the product is to the celebrity’s own personal brand, the more valuable that licensed product becomes. Slapping a celebrity name on a product doesn’t always work. The relationship between celebrity and product needs to make sense.
A simple formula we use is: Context + Time = Value.
How and when a celebrity decides to license a product can determine its success. Is licensing out your likeness on a box of cornflakes, right after winning an Olympic gold medal, valuable? It was for gymnast Gabby Douglas.
While we at CONSOR prepare much more detailed valuation reports for our clients, licensees and licensors can use this simple technique when entering negotiations.
It is not to say that celebrities no longer have value when they are not actively performing or in the limelight.
Britney Spears’ perfumes continued to sell, prior to her latest resurgence, and Michael Jordan-branded products are constantly being introduced, even though he no longer plays basketball. Depending on the celebrity, the time factor in the equation may be long lasting.
When something is valuable, including someone’s persona, there are going to be others who will try and capitalize on that value, meaning someone is going to try and steal their persona. And it’s not just celebrities who should be concerned—official licensees should be concerned too. You want to keep the value of your product high. Not only should all official parties be on the lookout for outright counterfeits, but they should also watch for products making an unauthorized use of a celebrity’s image or those claiming a false endorsement by that celebrity.
One example is the use of Woody Allen’s image by a well-known apparel company. An image of his likeness of a movie character was used as part of the design on shirts. It falsely insinuated that the shirts were a licensed product by either Woody Allen or the movie. Whether or not a celebrity cares to license his or her image out on certain products doesn’t matter. Celebrities and their license holders should both be on the lookout for these unauthorized products.
Even such small oversights by companies can be costly. Paris Hilton’s unauthorized image was portrayed in a greeting card. Although it was a relatively inexpensive product, with a small audience for sales, it still has value and damages were claimed by Hilton. We point this out because if you happened to be a competitor of this greeting card company and you were pursuing a licensing agreement with Paris Hilton, you would not want her image already being used on a similar product.
Protecting a brand, celebrity or otherwise, should be of utmost importance to all parties involved.
Another issue to remember is that it doesn’t matter whether that celebrity, athlete, or character’s owners ever wanted to license out in a certain product category in the first place. If someone is using your client’s right of publicity without consent, they are taking value away from your client. And value can come in many forms—financial value, reputational value, future value, etc.
Context + Time = Value. So take the time to keep your context valuable.
Celebrity Licensing Today
The value of licensing celebrities, characters, and athletes in the right context and time is a win-win for both licensees and licensors. Taking the right product and attaching it to the right celebrity can be a windfall.
We expect to see growth in all areas of celebritylicensed products. Not only do we see growth in products using celebrity names and likenesses, but also celebrities taking a greater role in creating products, and using those products to help their personal causes. Nicole Richie took a very active role in creating her fragrance collection. She drew upon her childhood memories of her mother, who would create fragrances by layering bath oils, lotions, and perfumes. Additionally, the bottle design reflects Richie’s personal style.
An example of a recent celebrity partnership is the relationship between Oprah Winfrey and Starbucks. Starbucks, which purchased Teavana in 2012, introduced a Teavana Oprah Chai Tea just in time for Mother’s Day this year. Winfrey helped develop the tea blend, which is a combination of cinnamon, ginger, cardamom, cloves, black tea, and rooibos. A percentage of sales will be donated to the Oprah Winfrey Leadership Academy Foundation. This new product is sure to be a win-win-win for all parties involved: Starbucks/Teavana, Winfrey, and Leadership Academy Foundation.
Celebrities and their representatives have gained a Summer 2014 The Licensing Book • 25 better understanding of the value of their personal brand.
With this knowledge, celebrities will be evermore on the lookout to find opportunities to expand their personal brand and to promote their personal causes.
The Communications Factor
A factor in the growth of licensing, and in particular celebrity licensing, is the level and ease in sharing information.
Through the use of social media—Facebook, Twitter, Instagram—people, and celebrities, can easily share information not only about their personal lives, but also about the products they use and promote. Followers can search and post using hashtag terms and you can see all the people and places where certain products can be found. Returning to our Oprah Winfrey example, a quick search using #OprahChai on Twitter brings up images of people drinking the product and where they were drinking.
Clearly, people are becoming obsessed with Oprah’s tea.
If a celebrity is active on social media—posting about their activities, what they are wearing, where they are going, who they are with—and if they have lots of followers, that celebrity can become more valuable. Every impression can carry value. Katy Perry may be on the top of the Twitter Counter board with more than 53 million followers, but her 5,600 tweets are far less than those of Justin Beiber, who has almost 29,000 tweets and more than 51 million followers. We noted earlier that Britney Spears continued to have a strong selling perfume line prior to her current resurgence. With more than 37 million Twitter followers, did keeping her name in the limelight for her products help boost her career in entertainment? In return, Spears is engaged with her audience, as she follows more than 400,000 Twitter users.
(Barack Obama follows more than 650,000.) As with successful social media campaigns, reciprocal engagement is crucial in promoting a positive brand persona.
As the ability to share, like, and post information continues to grow, so will the influence on consumer buying trends. Celebrity brands, or any brand, should keep on top of their social media in order to maintain cultural value.
While we are focused on the celebrities of today and the past, brands and licensees should keep an eye out for future “celebrities” to license. We increasingly see that celebrities are not only those who headline big budget movies or star on primetime television sitcoms, but also those who are discovered on YouTube, Netflix, or the gazillion number of reality shows on both the networks and cable channels. Whoever predicted the popularity of Duck Dynasty merchandise must be Happy Happy Happy indeed.
Successful licensing programs also exist for celebrities who are deceased. We have seen song releases and “appearances” by deceased rapper and actor Tupac Shakur. Technology continues to be a factor in how celebrities, characters, and athletes can advance their licensing potential. The use of 3-D technology, the abundance of communication platforms, and the personalities themselves, make this area of licensing a truly exciting and important industry in the global economy. The possibilities for celebrity brand extensions are headline news.
The bottom line is that there is a lot of potential in the licensing of celebrities, characters, and athletes. When there is value, there comes along with it the responsibility for maintaining that value. Make it a win-win proposition for all involved. Remember, once again: context.
Weston Anson is the co-founder and chairman of CONSOR Intellectual Asset Management, which has been a leader in intellectual property issues for more than 25 years. Anson is active in all of the major international trademark, intellectual property, and licensing associations as a speaker and an officer. Anson’s newest book, entitled Right of Publicity: How Much Is Your Client Really Worth?, will be released later this year, and published by the American Bar Association.
Jeff Anderson is the director of valuation and analytics at CONSOR. Anderson performs and manages valuations of intangible assets and intellectual properties for litigation and transactional purposes, including matters regarding brand, trademark, licensing, and right of publicity issues.
Anderson is a member of a number of trademark and licensing associations.
Jemma Samala is an analyst with CONSOR, focusing on licensing, litigation, and research. Samala is a frequent writer on licensing issues and writes the CONSOR blogs.