Name, Image, and Likeness

Name, image, and likeness (“NIL”) are three separate components that form essential rights of publicity. Public figures who have become famous for a particular skill or act rely on their reputations to earn money and promote specific causes. These goals can be sidetracked by unwanted or unauthorized use of a celebrity’s NIL. Social media and evolving digital technologies have exacerbated these instances, introducing complexity and raising the stakes for individuals and organizations involved.  

Celebrities and those in the public eye have experienced infringement and legal battles both in life and in death. Given the proprietary nature of most licensing contracts and the potential for widely divergent perceptions among interested parties, it can be challenging to determine the appropriate value associated with an unauthorized use of an individual’s NIL. Depending on the perspective of a stakeholder, valuations can vary significantly from one institution to the next. Outside of the parties immediately involved in a dispute, typical stakeholders may include the Internal Revenue Service, financial institutions, creditors, debt collectors, professional service providers, and family members. 

Further, there is no consistency of enforcement across the United States, as publicity rights are governed at the state level. Approximately thirty states recognize publicity rights and offer protection from unauthorized use. Certain states that are heavily influenced by large populations of famous and wealthy citizens, like California and New York, provide a relatively substantial amount of protection when it comes to publicity rights. 

NIL appraisals are essential but often overlooked until the need arises. Common reasons for obtaining an appraisal include evaluating damages for violations, calculating estate taxes, and negotiating transactions for endorsements or licensing deals. Valuations are most contentious during litigation proceedings in connection with damage claims and estate taxes. In both instances, the division of assets may rely in part or in full on the valuation performed. 

The Valuation Approach 

The value of a celebrity’s NIL is typically determined by a combination of the income and market approaches. While the cost approach can potentially provide some helpful context and tangible metrics, it is often challenging to apply to the valuation of publicity rights and therefore receives the least amount of weight and consideration. 

The income approach is performed by determining the net present value of future expected cash flows attributable to the rights of publicity. This calculation can include a portion or all of the earnings from promotions, endorsements, sponsorships, personal appearances, and other similar activities. The most contentious aspect of this approach is determining the magnitude of expected future cash flows. Unlike a traditional operating business with stable cash flows (for example, a medical manufacturer), the future value of an individual’s rights of publicity can change dramatically due to highly unpredictable consumer sentiment and behavior. What might be considered a fad, trend, or viral content today may not be so five years from now, or even six months from now. As such, some might argue that the royalty rates a celebrity has received in the past may not necessarily be a good proxy for what is achievable in the future. 

The market approach is often used to complement the income approach, and it can be used to help derive reasonable expectations for the future. This approach benefits from looking at real world agreements achieved by either the individual in question or other public figures with similar status and characteristics. A market approach is especially useful for determining the useful life of an individual’s rights of publicity; that is, the duration over which a celebrity can expect to receive cash flows, even after death. There are also circumstances in which a market approach can stand on its own, such as determining the damages payable because of a specific infringement.     

Proven Industry Leaders in Intellectual Property Valuations 

With over 30 years of experience and highly credentialed professionals, Appraisal Economics is an industry leader in providing accurate intellectual property valuations. We are committed to providing a robust, defensible opinion of value in a well-organized appraisal report, and in a timely manner. 

Please contact our professionals regarding your NIL valuation needs or other valuation related services that we provide.