Brand Finance1, a leading brand valuation company, has helped in setting ISO 10668, an internationally recognized standard for brand valuation. It lays down the definition of 'Brand' as "a marketing related intangible asset including but not limited to names, symbols, logos and designs or a combination of these, intended to identify goods, services or entities, or a combination of these, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits/value."2
In layman's language, brand valuation is the process of calculating the value of a brand or the amount of money another party is willing to pay for the brand or the financial value of the brand. Before evaluating any brand, two questions must be considered, first, what is being valued - the trademarks, the brand or the branded business and second, what is the purpose of this valuation.
Trademark plays an important role in brand valuation
A trademark in its essence acts as one of the identifiers of the brand but does not reflect the entirety of the brand itself. A layperson may find it hard to distinguish between the two terms i.e. a trademark and a brand, particularly when the trademark represents the entire business like in the case of Google; but the amalgamation of the two terms is generally not advisable. For example- a business with a good reputation in the marketplace may enjoy an advantage over its competitor(s), even if it employs no trademark.3
Registered trademark has value
A registered trademark is an intangible asset for any business. A registered trademark can be pledged, sold, franchised or can earn royalty income. Hence, in the case of a business spending money and effort on brand development, it is important to apply for trademark registration at the earliest and obtain a trademark registration certificate.
Purpose of a strong brand
One may ask, what is the purpose for having a strong brand? The answer is simple, at least in the case of commercial brands - to earn money/profits. A strong brand attracts more customers, builds loyalty and also motivates the staff, and ultimately all of it helps in generating more revenues and profits, which is the ultimate goal for any business.
There are various methods for calculating the value of the brand, but this paper shall focus on the one – "Royalty-Relief Approach."
Leading brand valuation companies calculate the value of a brand by finding the present value of the estimated future cash flows attributable to a brand based on what the company without a trademark would have to pay to license it through a third-party broker.
"Brand strength is the efficacy of a brand's performance on intangible measures, relative to its competitors."4 Each brand is allotted a Brand Strength Index (BSI), which is a score out of 100 to help in the calculation of brand value. On the basis of this score, each brand is allotted a rating up to AAA+. The format for calculating brand strength rating is similar to the credit rating format. Three brand strength measures are indicative of brand's future successes, namely, a) marketing investment, b) stakeholder equity and c) business performance.
II. GOOGLE IT
It is important for a business not to underestimate its brand's value. The example of Google sums up this analogy. There was a lot of apprehension during the initial public offering that the term "Google" might become synonymous with "search", which would have in turn resulted in loss of trademark protection.5 According to a recent study done in the year 2018, Google as a Brand is worth $120.9 billion, which is a marked increase of 10% since last year6.
III. FAIRYTALES, THEY DO COME TRUE! - THE CASE OF DISNEY
The entertainment giant, Disney takes the lead spot as one of the largest media brands in the world.7 Disney currently has a brand value of $32.6 billion, which is a 5% decrease since 2017. Disney maintains its brand's appeal with an AAA+ brand rating by focusing on brand loyalty, investments in new technologies and expansion of its valued partnerships and divisions. The company operates in five segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive Media. With a brand strength index (BSI) score of 92.3, up from 91.3 last year; Disney is the one of the strongest brands and one of the most interesting to watch in the coming years.
Disney's expansion plan
Disney purchased a majority stake in 21st Century Fox, thus expanding its reach to consumers worldwide. Acquiring companies like Star India – which reaches hundreds of millions of viewers on the subcontinent, and Sky – with presence across the UK, Ireland, Germany, Austria, and Italy, as well as a 60% stake in Hulu –one of Netflix's biggest competitors; Disney can now leverage its greater international reach to establish its brand as much more than just a children's favorite.
Disney's recent trademarks8
Looking at the trademarks that Disney has recently got registered, we see just how vast the company's trademark holdings in the entertainment industry really are.
- U.S. Trademark No. 862075578;
Trademark - "Flavors of Africa"
This recently registered character mark reflects a decision to increase the food items made available through the Boma Flavors of Africa marketplace, situated in Walt Disney World's Animal Kingdom. This trademark was registered specifically in relation to coffee products.
- U.S. Trademark No.
This design mark consists of an illustration drawing, featuring a tilted Mickey Mouse head outline with a large checkmark sign running through it. The trademark was developed for use on a website featuring and providing information on health and nutrition.
- U.S. Trademark No. 86121929;
Trademark - "Radio Disney"
Disney's operations over the radio airwaves can be more effectively licensed to broadcasters, owing to the registration of this trademark.
- U.S. Trademark No. 86261266;
Trademark - "ScoreCenter"
This trademark is used in relation to electronic scoreboard service for athletic events which is distributed to computers and wireless devices by means of a global computer network. ESPN, the owner of this trademark, is a Disney subsidiary.
IV. MOST VALUABLE INDIAN BRANDS
Even though US brands lead the lists of most valuable brands, Indian brands are making sure they are rising to the competition. With a billion-strong population, India caters to one of the largest consumer groups, and Disney's acquisition of Star India is a sign that Indian brands are a force to be reckoned with.
Fastest growing IT brand in the world9 Tata Consultancy Services (TCS) with a brand value of $10.391 billion, a 14.4% growth since 2017, has become the world's fastest growing IT brand and is one of the top three most valuable brands in the global IT services sector along with IBM and Accenture.
In a world that is obsessed with innovation, technology and rights, brand valuation plays a major role in the growth of businesses. Trademarks form the very basis of brand-building, while contributing to the goodwill/reputation of the business/company; they also contribute immensely in terms of profits/revenues. Companies expand their businesses in unchartered territories by leveraging their reputation in other market sectors. Disney is a significant example of a company that has leveraged its reputation in numerous sectors and has become one of the largest media brands with a brand value of $32.6 billion in the year 2018. With technological advancements in place, internet has also played a vital role in the growth of brands.
The founder of "Amazon", Jeff Bezos, had once said that the brands are more important online than they are in the physical world; and the success story of Amazon speaks for itself. The ecommerce giant, Amazon, has become the world's largest internet business and is currently the world's most valuable brand ahead of Apple and Google with a brand value of a whopping US$150.8 billion, with a year on year increase of 42%.10 Also, Amazon has moved beyond digital space, by leveraging its brand reputation to other sectors, which is evident through its takeover of Whole Foods for US$13.7 billion11. Brand, hence, plays a major role in business expansion and revenue generation.
1. Brand Finance, See http://brandfinance.com/ (last assessed on May 24th 2018).
2. Brand Finance, "The annual report on the world's most valuable media brands", February 2017.
3. John E. Elmore, "The Valuation of Trademark- Related Intangible Property", See www.willamette.com.
4. Brand Finance, "The annual report on the world's most valuable media brands", February 2018.
5. P.T. Shravani, "Trademark valuation: The vital importance of knowing what your mark is worth", YourStory.com, See https://yourstory.com/mystory/4320d8211f-trademark-valuation-the-vital-importance-of-knowing-what-your-mark-is-worth (last assessed on May 19th 2018).
6. Jessica Tyler, "The 10 Most Valuable Brands in 2018", inc.com, See https://www.inc.com/business-insider/amazon-google-most-valuable-brands-brand-finance-2018.html (last assessed on May 19th 2018).
7. Supra Note 4.
8. Steve Brachmann, "Disney leverages entertainment IP for business success", IPWatchdog, See http://www.ipwatchdog.com/2015/05/22/Disney-leverages-ip/id=57608/ (last assessed on 29th May2018).
9. Brand Finance, "TCS ranked as the fastest growing IT services brand in 2018", Tata Consultancy Services Ltd., See https://www.tcs.com/tcs-fastest-growing-it-services-brand-finance-2018 .
10. Brand Finance, "The annual report on the world's most valuable brands", February 2018.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.