By Athena Constantinou, Managing Director, APC Sports Consulting Limited, Nicosia, Cyprus
Nowadays, an athlete’s brand, its development and the commercial exploitation of the resulting image rights have become an integral part of the athlete’s career.
The recent dispute of Mohamed Salah over the ‘unauthorized’ use of his image rights by the Egyptian national team has demonstrated this and brought to light a few controversial issues which will be commented on in this post.
Image rights are the expression of a personality in the public domain. The provision of image rights in law enables the definition, valuation, commercial exploitation and protection of image rights associated with a person. The right of publicity, often called personality right, is the right of an individual to control the commercial use of his or her name, image, likeness, or other unequivocal aspects of one’s identity. It is generally considered a property right as opposed to a personal right and, as such, the validity of the right of publicity can survive the death of an individual (known as post mortem rights – reputedly, on this basis, the wealthiest personality in the cemetery is Elvis).
The 26-year-old Liverpool forward, whose brand has grown exponentially in value during the past couple of years, has expressed his discontent and reported as feeling ‘insulted’ with the manner in which the Egyptian National team used his image without his consent.
The use of Salah’s image on the Egyptian national team’s plane, which was sponsored by WE, the official sponsor of the Egypt national team, was in direct contradiction with his own personal sponsorship deal with Vodafone. As a result, the ‘unauthorized’ actions of the Egyptian national team could have constituted a breach of Salah’s existing Vodafone contract.
The Salah case raises a couple of controversial issues regarding the use of a sports celebrity’s image rights as follows:
- The first issue concerns the use of image rights by sports clubs or national teams. Sports celebrities competing in group sports are part of a club and oftentimes they are part of a national team as well. To what extent do the clubs or the national teams have a right to use the sports celebrity’s image and how can teams ensure that the use of their players’ image rights is lawful?
- The second one concerns the use of international image rights structures by sports celebrities for the commercial exploitation of their image. The question posed by the public at large is whether the use of third party entities for the exploitation of personal image rights is considered customary and legitimate, especially from a tax point of view.
Use of the image rights of sports celebrities by their club and/or national team
National teams also have basic rights over the use of their players’ image, which, by no means, give them the freedom to commercially exploit their players’ image in the absence of a separate agreement. If a national team wishes to use the image of a star player for the benefit of its own sponsors, it has to obtain the express consent of the player, which usually comes in the form of a contract which, again, expressly defines the type of image rights usage and the corresponding compensation of such usage.
Use of international image rights structures for the commercial exploitation of the image rights of sports celebrities
It is customary for most sports celebrities to have corporate structures in place through which they commercially exploit their image rights. International Image Rights structures facilitate the exploitation of athletes’ image rights throughout their movement from team to team and from one country to another and also take advantage of their international exposure through sponsorships and endorsements in a number of countries and by a number of foreign brands.
The exploitation of an athlete’s image rights is normally undertaken by an image rights company in which the athlete transfers the rights to his image. In order to set up an image rights company, it must be clear that the individual has an image which has an independent value to sponsors. If the image has a value, and the athlete wants to hold this in a separate entity, in order to protect and separately manage those rights, the image should be professionally and independently valued (see the website at ‘www.sportsimagerightsexpert.com’ and, in particular, the ‘APC Brand Evaluator’) and the rights transferred to a company. Capital gains tax is typically due on the transfer of rights based on the market value of those rights. A tax charge will arise as the individual will dispose of the image rights held by him personally, so that it becomes an asset of the image rights company.
For international athletes, their image rights company is usually established in a suitably selected tax jurisdiction with a reasonable corporate tax rate and with a large number of bilateral tax treaties to cater for the athlete’s current and future international transfers. The athlete’s rights may be licensed out to either clubs, organizations or individual brands.
It is crucial that image rights structures are set up properly and within the provisions of the tax laws of the countries where the athletes are tax residents, otherwise the athletes may face tax fraud issues. The image rights entity should have real substance; have real professional staff; independent management besides friends and family; have a real infrastructure; and carry on the business of managing the sports celebrity. As long as such a structure makes commercial sense and has real substance, it is considered a bona fide one, for tax purposes.
Of course, in the recent Salah case, none of these legal matters needed to be established or proved in any legal proceedings, as the offending party agreed amicably and pretty quickly, following political intervention in Egypt at the highest level, to meet the player’s demands and to end the infringement without further ado.
So much for the strength and value of a sports person’s image!
Athena Constantinou may be contacted by e-mail at ‘firstname.lastname@example.org’