Forever Young: How CGI Could Raise a Celebrity’s Estate Tax

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

By Allyson Versprille and Matthew Beddingfield

Advancements in computer-generated imagery are allowing the rich and famous to stay young forever, but because the technology could boost revenue in both life and death, it may require celebrity estates to think about tax implications.

Paul Muratore, former president and chief executive officer of Talent Partners Commercial Services LLC, in 2014 valued the business of the marketing, licensing and commercial use of dead celebrities at $3 billion. Today, visual effects studios and research labs are using more cutting-edge three-dimensional scanning technology to create digital doubles of actors in blockbusters like “Furious 7" and “The Jungle Book,” which could mean substantial growth for that market.

CGI technology has the potential to exponentially increase the value of a deceased celebrity’s right of publicity—the right over control of the commercial use of a celebrity’s name, image and likeness, said Richard Marks, a partner at The Point Media, an entertainment law firm. “The computer-generated celebrity can be in two places at once, so the deceased celeb could earn more than a comparable live one,” Marks, whose clients include entertainment and media companies New Regency, DirecTV and Relativity Media LLC, told Bloomberg BNA in an e-mail.

The increase in the value of a dead celebrity’s right of publicity—which is an inheritable asset in some states—could prompt the Internal Revenue Service to argue for higher estate tax.

“This will certainly open the door for the IRS to assess higher values on celebrity image and likeness,” Jeffrey E. Nusinov, managing attorney of Nusinov Smith LLP, told Bloomberg BNA. Nusinov represented the estate of best-selling author Tom Clancy in a 2016 case against the IRS.

However, while estates can expect auditors to take a closer look at image and likeness valuations, “we are still a number of years away from such emerging technologies, CGI and others, significantly driving up estate tax valuations” because it’s unclear whether these types of images will capture the market’s long-term interest, Nusinov said in an e-mail.

Intriguing Question

CGI technology is being used primarily by film studios for specific projects, and the studio—not the celebrity—owns the image rights, said Kathleen Haase, producer for the Graphics Lab at the University of Southern California’s Institute for Creative Technologies. ICT’s research has been used to create photoreal digital actors in films such as “Avatar” and “Superman Returns.” “We’re not seeing any preemptive scanning” by celebrities outside the film studio, but it’s something that’s likely imminent, Haase said.

The institute currently has a project called “Conversations with Heroes & History,” which combines a participant’s 3-D scan and audio commentary, that may encourage celebrities to have their own scans done. The project would allow future generations to have a “full-on experience of interacting with a dead celebrity and having conversations with them” using virtual reality headsets, Haase said. So far, the lab has been working with Holocaust survivors, but anyone—including celebrities—"who has a legacy to leave should be considering to have their data fully captured,” she said.

Jeffrey K. Eisen, a partner at the Los Angeles office of Mitchell Silberberg & Knupp LLP, said that if celebrities start paying for their own 3-D scans, can the IRS argue that the celebrity contemplated exploitation and therefore considered that heirs could profit on the image after death? That’s the most intriguing estate tax question, he said.

“It might take away your estate’s argument that, ‘Well, the decedent never really intended all of this to happen; this was not foreseeable,’” which is at the heart of a U.S. Tax Court trial over Michael Jackson’s name and likeness, said Eisen, who currently represents Muhammad Ali’s estate trustee and previously represented the Farrah Fawcett estate.

During the Tax Court trial, which ended Feb. 24, the estate argued that Jackson’s image was worth $2,105 at the time of his death, because of the allegations of child abuse that crippled his reputation. The IRS insisted the value was closer to $161 million.

Market Potential

While dead celebrities have been used in commercials and films for many years—Diet Coke ran a commercial featuring Louis Armstrong, James Cagney and Humphrey Bogart in the early 1990s—new CGI technology “does open new doors in this industry,” said Mark Roesler, an attorney and CEO of CMG Worldwide, an agency that represents celebrity estates and handles licensing and intellectual property for deceased celebrities. The company’s client list includes cultural icons like James Dean, Bettie Page, Jackie Robinson, Jean Harlow and Neil Armstrong.

“We fully expect that eventually, with the current pace of advances in technology, several of our clients may be approached with offers to ‘recreate’ celebrities using graphics technology in various forms—perhaps the celebrities would make ‘appearances’ in a commercial or film, instead of being featured only via photograph,” he said.

Alex Thomas, creative director at British company Framestore, which has done visual effects work for box office hits like “Doctor Strange” and “Fantastic Beasts and Where to Find Them,” echoed Haase’s comments about 3-D scanning being used primarily for specific projects.

“But if an athlete or artist owned a high quality digital double asset of themselves, or even multiple versions through different periods of their careers, it is easy to see the business benefits of that, in terms of future product endorsement or even performances,” Thomas said in an e-mail.

Limiting Factors

There are a few limiting factors that may impact the degree to which estates can profit from a CGI boost to the value of a celebrity’s postmortem image—one of the biggest being who actually owns the rights.

As Haase said, most of the imagery from 3-D scans today is owned by the film studio that pays to have the actors scanned. A celebrity would have to pay for the scan himself or herself in order for the estate to profit, and even then there could be copyright issues .

Additionally, advertisers or filmmakers wishing to use a deceased celebrity’s image may not want just an ordinary shot of the actor or actress, Eisen said. They may prefer an iconic image from a popular film, such as that of Marilyn Monroe in “The Seven Year Itch” standing on a subway grate with her skirt blowing up around her, he said. This image would likely be owned by the studio, Eisen said.

The ability to profit also depends on the celebrities themselves.

“You have to be a cultural icon to have that kind of worth to be recognizable to multiple generations,” said Rebecca Lieb, an independent media analyst.

“Advertisers are looking for eyeballs, and if the image of a celebrity is meaningless because a generation or two has passed,” it’s not as valuable, she said. People like Marilyn Monroe and Frank Sinatra transcend celebrity, she said, adding that Michael Jackson and Prince would also fit that mold.

To contact the reporters on this story: Allyson Versprille in Washington at aversprille@bna.com and Matthew Beddingfield in Washington at mbeddingfield@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.