Altered images for top sports earners

By Bill Wilson
Business reporter, BBC News

Image caption,
The name that launched a thousand shirts, and many more, hopes Real Madrid

The value of sports image rights has come a long way since former Formula 1 driver Eddie Irvine secured a £25,000 payout from a radio station for using his photo in a 1999 advertising promotion without permission.

In those days, images of famous sporting people were largely seen as public property.

But as sport has developed into a global business, the importance of sports image rights as a marketing tool to promote and sell individual athletes and teams has grown into a huge industry.

David Beckham, Cristiano Ronaldo, and now Gareth Bale have all realised the massive earnings potential of using their image to sell everything from underwear to football boots.

"Sportsmen and women have realised the potential of developing their image rights," says Nigel Currie of sports brand experts Brand Rapport. "If you are looking at a period of sustained fame, they can be a huge potential earner.

"Image rights are anything that can be directly attributable or linked to an individual personality.

"The most obvious one is a name. If your name is Gareth Bale, and your name is on a football shirt, you have an intellectual right to that."

'Smart business'

Welshman Bale, 24, recently joined Real Madrid for £85m, is set to make millions via the image rights route, even though he has ceded 50% of these rights to the Spanish giants.

Image caption,
Cristiano Ronaldo's boots incorporate his CR7 logos

The club, meanwhile, will hope that leveraging their share of the image rights will help them to tackle a £507m debt, not least from the sale of Bale-branded replica shirts in the Asian market.

Bale has also cleverly incorporated the trade-marking of a logo of his "Eleven of Hearts" goal celebration into his image rights, much as Cristiano Ronaldo has done with his CR7 logo.

"As a player, he has a no-nonsense down-to-earth image, but this trade-marking showed smart business sense," says Andy Brown, editor of magazine World Sports Law Report.

Mr Brown says Bale's contract will clearly state the "image" work he has to do for Real Madrid as part of his normal duties, such as for team photos and official club commitments.

"However, if McDonald's was to launch a Gareth Bale action figure then that would be where Bale's image rights came into play and he and the club would split the revenues," he says.

"Trademarks are slightly different. It is not to do with a sportsperson's image per se, but can be a unique action, or goal celebration, or slogan, among others.

"But it is related to image rights, and if a computer game came out and a character did a certain familiar hand gesture, then Bale could say it referred to him and seek payment."

Tax probes

Image rights deals, which state where the player and his club have the right to use the player's image (as something separate from the normal terms and conditions contained in standard playing contracts) came to the fore at the start of the 2000s.

Image caption,
Gareth Bale is poised to exploit the earning power of his image around the world

They have mushroomed since then, but also come to the taxman's attention.

The suspicion was that athletes were avoiding tax on salaries by having a large amount of their remuneration awarded as image rights payments, which could be paid to a separate, player-connected, company. The star would then pay corporation tax at a lesser rate than income tax.

In 2006, HMRC launched a unit to look into image rights payments, with cricket, rugby union and rugby league under the spotlight. A cap of 15% of remuneration payable for image rights exploitation was agreed in rugby union.

The taxman had earlier lost a case involving image rights at Arsenal, but in 2009 many Premier League clubs were informed that HMRC was probing image rights payments to players from 2005 to 2008.

It has been reported that HMRC has since agreed with football clubs that image rights can only make up 20% at most of a player's total earnings, and only then if there is a real commercial benefit to the club.

Continued paydays

In an interesting twist, at the end of 2012, the Channel Island of Guernsey created the world's first registrable image right.

In Guernsey it is possible for a famous sportsperson to register a person's image, nicknames, videos, mannerisms and distinctive characteristics. Once the image rights are registered, any profits or royalties can be paid into a Guernsey incorporated company and take advantage of tax benefits there.

Image caption,
Heather Watson is one of the first athletes to move her image rights out of the UK

Guernsey-born tennis player Heather Watson has registered her image on the island.

Law firm Collas Crill IP was behind her move, and its spokesman David Evans says: "The sports personality earns income from doing their 'day job' but the bulk of their income will now be derived from endorsement deals and sponsorship.

"The payment for these deals will be based on the licensing of their image rights. Not only this, but that non-playing income has the ability to continue long after the playing income ceases."

Nifty footwork

Perhaps the prime mover in highlighting the earnings power to a top athlete - and also beyond their playing days - from an image rights basis, has been David Beckham.

He set up his Footwork Productions firm to handle all his image rights and trademarks.

"It was a hugely successful venture," says Mr Brown. "He really maximised the value of those image rights, and the figures speak for themselves."

Image caption,
David Beckham will continue to reap huge image rights deals despite retiring

For example, while he was at the height of his Real Madrid fame, accounts from Footwork Productions - which lists its principal activity as "the provision of the services of David Beckham" - reported a gross annual profit of £15.5m.

Since then, if anything, he has further increased the appeal of his global image, with high profile moves to LA Galaxy, AC Milan and Paris St-Germain.

"That last move was where he famously - for tax reasons - played for no salary, which was donated to charity, but reaped the benefit of huge merchandising and image rights deals," says Mr Currie.

More on this story