Article Authored by James Ashe, Partner-in-Charge, Advisory Services, Stephen Lassar, Tax & Business Services Partner and Daniel Roche, Advisory Services Manager, "Valuing Publicity Rights and Other Intangible Assets of Authors"
James Ashe, Stephen Lassar and Daniel Roche
The “Right of Publicity” is in the news again, this time in regards to the high-profile “image and likeness” asset of Michael Jackson. One of the issues at hand is the valuation of the Estate of Michael Jackson’s rights to the intellectual property related to Michael Jackson’s image and likeness. This issue of intangible value has developed over the years with respect to other well-known individuals such as Marilyn Monroe and Elvis Presley, where marketing rights to the decedants’ estates continue long after their passing.
As you can imagine, valuing such an asset can be a difficult endeavor, wrought with assumptions and speculation. While this article does not provide a solution to the issues facing the court in the Michael Jackson case, it does provide a look into publicity rights, along with a discussion of the landmark Estate of Virginia C. Andrews v. United States, 850 F. Supp. 1279 (E.D. Va 1994) (the Andrews case) and the methodologies utilized in the appraisal of the intangible assets that are typically seen in the estates of literary authors.
Right of Publicity
The right of publicity in the United States relates to each individual’s right to exploit his or her identity or identifiable aspects. Rights of publicity are not protected at the federal government level; rather, these rights are protected, to varying extents, by state statutes. For instance, New York state defines a violation of a “Right of Privacy” as:
A person, firm or corporation that uses for advertising purposes, or for the purposes of trade, the name, portrait or picture of any living person without having first obtained the written consent of such person, or if a minor of his or her parent or guardian, is guilty of a misdemeanor.
Currently, 47 states recognize rights of publicity (19 through statute and 28 through common law). Further, the IRS has recognized the existence of the right to publicity asset, specifically in the Andrews case, and the need to appraise this asset for estate tax purposes.
‘Estate of Michael Jackson’
In Estate of Michael Jackson v. Commissioner of Internal Revenue (the Jackson case) the value of Michael Jackson’s image and likeness is one of the hotly contested issues, as there was a significant difference between the estate’s valuation and IRS valuation of this asset. The estate placed a value of $2,105 on the image and likeness asset; the IRS valued the same asset at approximately $434,264,000! In fact, the difference in the overall value of the Jackson estate between that calculated by the estate and that by the IRS is so large that the IRS is seeking to impose a substantial understatement penalty allowed under the Internal Revenue Code.
There is an obvious lack of comparable assets to Mr. Jackson’s image and likeness to utilize as a valuation metric, which makes the appraisal of this asset very difficult. While there is evidence of a famous person’s image and likeness generating income post-mortem (Elvis Presley, Marilyn Monroe), it begs the question of how to project the extent and value of the earnings stream related to this asset. We would think that this issue would be one of the major issues in the Jackson case.