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Right of Publicity

In the last several years, the deaths of some very famous singers/song writers – Michael Jackson, David Bowie and Prince, to name a few – has brought to the "public light" the value of the individual's post mortem persona or right of publicity. The value of this right has never been an asset of the taxable estate, until Michael Jackson's case.

In the Michael Jackson estate case, the difference between the estate's appraisal ($2,501) and the IRS value ($434 million) is a titanic discrepancy. Likely, one of these parties is very wrong. Stay tuned to see if criminal tax evasion charges are proffered by the government.

One of the key issues to be settled is whether the IRS can pursue post-death estimated earnings as part of the estate valuation. And, this is the very first time that the IRS is stalking estate taxes for right of publicity (or name and likeness) value after death. The IRS is valuing Jackson's image and licenses based on subsequent events.

The valuation process for right of publicity has been established for the celebrity estates of Ray Charles, Marlon Brando and Marilyn Monroe. Those analyses formed the basis for setting the licensing fees to use the likeness in film and advertising, among other venues. The keys to this valuation are the following:

  1. Public image of the celebrity at the time of death, and whether any negativity (drug overdose, etc.) can and will be outweighed by the nostalgia of losing an idol.
  2. Identifying the most likely and realistic uses of this IP right.
  3. Developing financial models to estimate net income from the defined uses above.
  4. Attributing probability measures to each potential income stream. Monte Carlo simulation is a viable mechanism to sort through the many assumptions and risk factors.
  5. Performing sanity checks on all of the various outcomes utilizing IRR calculations.
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