Top Three Lessons From The Woody Allen Lawsuit

Woody Allen wins the largest amount ever paid under the New York Right to Privacy Act from American Apparel. What lessons can be drawn from the $5 million settlement?

First Lesson: In a saturated advertising market, the need to stand out is extremely powerful. With the level of attention celebrities get in consumers’ minds, some advertisers succumb to the unauthorized use of celebrities, increasing the commercial gain. In this case, for the past two years, American Apparel brought significant attention to its brand, beyond the bounds of its target customer base, at a time when it became publicly traded and expanded publicity was welcome by investors. Even if an unauthorized campaign is “quickly” withdrawn, it will have reached the bulk of its potential audience. Legitimate brands pay top dollar for immediate recognition and attention-grabbing graphics.
Second Lesson: The fair market value of celebrity endorsements and advertising may be negotiable, but it is not getting any cheaper to use iconic celebrities. Few celebrities come to mind with greater iconic association as New York and Woody Allen. Despite its claims to the effect that Woody Allen’s negative publicity in the wake of his 1992 break-up would have reduced his commercial value, American Apparel ended up settling for a landmark amount rather than risk losing even more in a trial.
Third Lesson: Celebrity – Brand pairings work both ways. Associating any brand to a famous celebrity is not only commercial speech, but it also transfers the brand’s attributes and reputation to the celebrity. “A brand is much more than its products” is the mantra of marketing executives worldwide; it also includes attitudes and public reputation. The risk of tarnishing a celebrity’s image with unwanted associations will undoubtedly increase the fee, if not kill the deal.
The lawsuit was brought about because of the California-based clothing company’s unauthorized use of Woody Allen’s image and likeness for advertising purposes on billboards and the Internet. I had the opportunity of being asked to review the facts of the case and prepare a report quantifying the amount of damages due Woody Allen.
After performing an extensive value analysis of the celebrity advertising market, I was able to determine a fair market value range for the misappropriated advertising services. In most cases involving rights of publicity, a key challenge is defining the suitable market and obtaining relevant market data.
With the settlement, American Apparel avoided the risk of being found liable for punitive and other damages, in addition to the fair market value of the misappropriation. Given the characteristics of the market, I would expect Woody Allen’s fair valued fee to be no less than the third quartile of the market distribution, approximately $5 million, and may certainly be more considering the negative connotations of the unauthorized use.