It was announced today that Jose Mourinho’s move to Manchester United has been delayed by negotiations over image rights.
Image rights have become increasingly significant sources of revenue to celebrities and sports organisations in recent year. Jon Elphick, Tax Director at Mark Davies & Associates, answers some of the most common questions on this highly lucrative aspect of the multi-billion dollar sports industry.
What are image rights?
“This is the right to use the celebrity’s image for commercial purposes. Companies such as Siemens or Adidas who want to exploit the images of certain individuals will have to negotiate a licence to use the person’s image rights.”
What is their significance?
“It’s a hugely valuable market. In this day and age, the exposure of, for example well known footballers is global, which means more and more companies are looking to tap into that value – via endorsements, commercial sponsorship deals and so on.
The amounts will vary wildly depending on how in-demand that person is, but as a starting point we estimate that roughly 20% of some high profile celebrity’s annual fixed earnings can be attributed to image rights, depending on who they are and where they stand in global media.
By way of example: Manchester United earned in the region of a billion dollars last year from commercial revenue. A large proportion of that will have been generated by using the images of the top players in the team. Without the player, the brands value can be significantly decreased.”
Why has this dispute arisen?
“It’s the first time we’ve seen a dispute like this arising over a football manager’s image rights but in the context of football it’s easy to see how it arose. When you arrive at a club, that club will ask you to sign an agreement giving the club exclusive rights to exploit your rights for the benefit of the club, and they will compensate you accordingly. Mourinho has been between clubs, and as a free agent he has been able to secure various personal endorsements, which are now posing a problem to Manchester United because they conflict with their commercial partnerships.”
Tax planning and image rights
“This has been a big growth area and most stars will try to manage the tax planning as efficiently as possible.
Wayne Rooney is well known to have a corporate vehicle, Stoneygate, which effectively owns the right to licence and endorse his image, so that the company received all his money.
Where these corporate vehicles will be registered will be a matter of choice for the star and their advisers, but we are seeing an increasing number of people managing their image rights through Malta, which provides both tax and commercial benefits for the star. That could change with a Brexit but would depend on how far the UK government wanted to move away from the current position.”
To see the article on ePrivate Client.com click here.