us watch_us watch 12/07/2013 17:19 Page 1
US WATCH
When brands matter and how to value them
According to Larry Gerbrandt, brand definition carries significant weight in the entertainment industry.
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recent interview in The Hollywood Reporter with Alan Horn, celebrating his first year as chairman of Walt Disney Studios, got me thinking about when entertainment brands matter…and how much they actually contribute to selling a product. Horn noted that the Ben Affleck movie Argo, a successful film he green-lighted when he was running Warner Bros., could not have been made under the Disney banner (mostly down to Argo’s rough language). “The Disney logo does signify certain constraints,” noted Horn. “We occupy a special place from a brand standpoint with our audience and that’s hard to get and that’s valuable.” A case could be made that not only has ‘Disney’ created a sharply defined brand expectation but that with the Pixar, Marvel and now LucasFilm brands under a common corporate umbrella, the Mouse House stands alone in terms of Hollywood studio branding. While certainly the Fox, Paramount, Warner, Universal, Sony and MGM logos are universally recognisable—and their owners have spent billions of dollars over the years promoting them—they don’t stand for any particular kind or even genre of movie. Even at relative newcomer DreamWorks SKG, a production being labelled a ‘Spielberg’ film carries far more brand definition than a ‘DreamWorks release’. Brands are not only extraordinarily powerful in terms of
their ability to repeatedly create value—Apple has shown an uncanny ability through a product design ethos that it has transferred from computers to music players to smartphones
and its unique bunny logo have proven to have global licensing appeal across a broad range of products and lines of business far from its publishing roots. Those are the most straightforward to analyse, with the calculations based on finding the present value of a future stream of licensing income and is known in the appraisal trade
more conceptual than empirical and may involve consumer surveys and other behavioural research. Circling back to Hollywood, we can also see what it takes to create name recognition from scratch: even a limited movie release is often accompanied by $15m-$25m in advertising and the tent-pole summer movies can cost upwards of $150m most of it spend over a period of a few weeks prior to theatrical release. In success, a global brand is created with title recognition that may last a decade or more. Yet despite the extraordinary prowess of modern day marketers, armed with focus group feedback, attractive products and nearly unlimited ad budgets, as The Lone Ranger showed in its opening weekend, in the age of instant global communications, nothing can counteract bad word-of-mouth.
and sometime soon (if rumours and trademark filings are correct) to the iWatch. On the other hand, Sony, which plays in the same consumer electronics space and has an equally recognisable global brand, has failed to come up with a major product category hit in decades. Even overwhelming brand success has proven notoriously difficult to transfer, as we’ve witnessed in the US with Oprah Winfrey, who dominated the daytime talk show genre for a couple decades but has yet to see the same kind of viewer loyalty for her 24-hour basic channel, the Oprah Winfrey Network. Despite this quixotic pattern of success, there is no denying the ability of a brand to confer and create value. As a media and entertainment financial analyst, I’ve been tasked on numerous occasions to put a value on a brand. The challenge is separating the brand from its management or ownership as well as how broadly it can be transferred. Brands such as ‘Playboy’
as the ‘royalty relief’ approach. In recent years, we have seen the emergence of an entirely new class of ‘brands’: celebrities, both living and not so much. The best known examples are Elvis Presley and Marilyn Monroe and include James Dean and, in the US, legendary sports heroes such as Babe Ruth and Mickey Mantle of baseball fame. The limits of the perfume endorsement industry are now being explored with recent news reports of colleges and universities allowing their brands to be associated with scented products. Eau de Harvard anyone? The bigger challenge comes in brands that have not proven (or are not suitable) for straightforward licensing. One approach is to estimate the percentage of a company’s turnover can be attributed directly to the brand (5% is sometimes used as a baseline starting point) but separating the brand from product attributes, marketing spend and management expertise is where the financial exercise becomes
Larry Gerbrandt
[email protected] has been a media analyst for more than 25 years with companies such as Kagan and Nielsen. He is a principal at Media Valuation Partners, which provides strategic consulting, research, valuation and expert witness services and is a managing director of Janas Consulting, which provides management consulting, valuation and investment banking services.
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