Character Merchandising
and Brand Valuation
Dr. Guriqbal Singh Jaiya
Director
Small and Medium-Sized Enterprises Division
World Intellectual Property Organization
www.wipo.int/sme
Character Merchandising 1
The commercial exploitation of the names and images of both, famous
personalities and fictional characters has become a highly lucrative practice in
the 1990s.
Character merchandising refers to a marketing technique by which products are
associated with well-known characters, since such association effectively
enhances the commercial value of the products. Modern society is "celebritydriven," which means that famous personalities can greatly influence the public.
Two distinct forms of activities are usually encompassed by the term “character
merchandising”.
Firstly, there is merchandising, where the name or more usually the image of a
person or character is applied to goods to make those goods more attractive to
consumers.
Secondly, there is endorsement, where the name or likeness of a well-known
personality or character is associated with a product or business, usually in its
advertising. The endorsement value of superstars appears to be on the increase.
If they endorse it, consumers will generally buy it.
Character Merchandising 2
• Character merchandising is defined as the use
of popular children’s characters to promote the
sale of consumer goods.
• Characters themselves typically derive from
television, film, toys, books, comics, and
computer games.
• Children (especially the “under tens”) are the
key audience for character merchandising,
although adults are the principal purchasers.
• Thus, character merchandising is used by
manufacturers to trigger a response among
children, who then implore their parents to buy
on their behalf.
Character Merchandising 3
It is becoming recognized by the law that someone
well known has a ‘persona’ that is marketable in its
own right, regardless of the original reason for the
fame.
This has an economic worth to the well known
individual, such as a famous movie-star or sportsperson, so the individual should be able to use it as
he or she pleases, and prevent others from using it
without permission and payment to promote their
own interests.
The marketing of name or image for monetary gain in
this manner is known as ‘character merchandising’.
Two Basic Models 1
In practice, one can distinguish between two basic models
in the use of advertising symbols.
a) Popular and famous characters derived from mass
media (cinema, television and literature, including
comic books), such as Mickey Mouse, Asterix,
Superman, James Bond, Playboy, E.T., Bee Maja,
Smurfs.
Here sales appeal is due to identification with the character
used in the advertising, or its global image, and partially the
general attraction of the media event behind it, of which one
is reminded at the point of purchase (Star Wars). In an
individual case the concrete motive to purchase appears to
be that one likes to be reminded of the character or event,
as well as the consideration that because the works behind
them were "well done," the products marketed under the
respective names must also be or are of good quality.
Two Basic Models 2
b) At first glance, the second group of
"product patronage" appears to be of a more
objective nature, because the person used in
the advertising or his name conjures up a
particular image of quality. The names of great
fashion designers, actors, etc., belong in this
category, under whose names a variety of
luxury products are marketed, whereby the
qualitative prominence of the fashion
creation or cinematic flair is supposed to be or
is transferred to the product designated as
such. But a certain (subjective) "snob appeal"
may also play a role here.
Appropriation of Personality
The problem of appropriation of
personality is commonly discussed
as an aspect of ‘character
merchandising’, with a distinction
usually being drawn between real
persons and fictitious characters,
although the problem is also
commonly referred to as ‘personality
merchandising’, or endorsement.
Interests in Personality
A broad division may be made between
first, economic or pecuniary interests in
personality, and second, non-pecuniary or
dignitary interests.
(1) Economic interests:
(i) existing trading or licensing interests
(ii) other intangible recognition values
(2) Dignitary interests:
(i) interests in reputation
(ii) interests in personal privacy
(iii) interests in freedom from mental distress
Economic Importance 1
Statistics from the U. S.A. show what commercial
significance character merchandising has already
achieved.
Thus, the range of products marketed under the
Mickey Mouse mark already includes 50,000 items with
approximately 200 licensees at any given time.
Published figures for 1978 show that Walt Disney
earns $ 21 million per year in license fees on a
turnover for the licensed products of $ 427 million.
According to these statistics, turnover for articles
under the film title "Star Wars" also reached a total of $
400 million.
Merely on the basis of the announcement of the
Superman film, license agreements were concluded
with 100 licensees even before the film was shown.
In 1982, turnover for character merchandising was
estimated at $ 14 billion in the U.S.A. alone.
Economic Importance 2
• Licensed toys represent one of the most
important segments of the character licensing
industry. In fact, licensed toys typically represent
about 25%-35% of all annual toy sales. Sales are
significantly driven by movies, with the two
biggest licensing properties in 2004 being SpiderMan 2 and Shrek 2.
• Food tie-ins are another lucrative channel for
character merchandising license holders. Two
examples of agreements include Burger King’s
promotions using Spider-Man 2 merchandise, and
Baskin Robbins offering Shrek’s Swirl Sherbet.
Tort of “Passing Off”
Passing off protects the proprietary right of the plaintiff in the
goodwill or reputation of a business likely to be injured by the
defendant’s misrepresentation. However, the action of passing
off requires proof of a reputation within the jurisdiction. Passing
off action not only protects the goodwill in a trade, but also
protects promotional exploitation of a name, personality or
reputation. Traditionally passing off cases required a
representation that the defendant’s goods were those of the
plaintiff. However, it would appear that the action of passing off
now extends to enjoin any deceptive connection or association
between the defendant’s business and the plaintiffs or their
business induced by the defendant’s misrepresentation. It
protects the plaintiff’s relationship with lines of business other
than those actually engaged in by the plaintiff at the time. The
defendant does not necessarily, therefore, have to represent his
goods as being those of plaintiff, it suffices that he makes a
representation, which links him with the plaintiff or his goods.
The public may well be aware that the goods in question are the
defendant’s, but they are deceived into thinking that the plaintiff
is associated with them.
Anne of Green Gables: literary
description of the character
“Matthew was not looking at her and would not have seen what she
was really like if he had been, but an ordinary observer would have
seen this: A child of about eleven, garbed in a very short, very tight,
very ugly dress of yellowish-gray wincey. She wore a faded brown
sailor hat and beneath the hat, extending down her back, were two
braids of very thick, decidedly red hair. Her face was small, white
and thin, also much freckled; her mouth was large and so were her
eyes, which looked green in some lights and moods and gray in
others.
So far, the ordinary observer; an extraordinary observer might have
seen that the chin was very pointed and pronounced; that the big
eyes were full of spirit and vivacity; that the mouth was sweet-lipped
and expressive; that the forehead was broad and full; in short, our
discerning extraordinary observer might have concluded that no
commonplace soul inhabited the body of this stray woman-child of
whom shy Matthew Cuthbert was so ludicrously afraid.”
Background Legal Issues
• Unsettled law regarding:
–IP protection afforded to fictional
literary characters
–Overlap between copyright and
trademark
–Reach of official marks
IP protection afforded to
fictional literary characters
• Not settled re copyright
protection for fictional
characters independent of the
work
• Not settled whether trade-mark
is appropriate protection re
merchandise
IP protection afforded to
fictional literary characters
• Controversy goes to underlying doctrine
supporting IP protection in each case
– Copyright: protects rights of authors to control the
reproduction and distribution of the expressive
features of their works under certain circumstances
for a limited time
– Trade-mark: protects consumers against confusion
as to the source of wares or services; owners
rights generally limited to words and symbols that
are capable of indicating a distinct source
• Character rights tend to be seen as stretching
these rationales
IP protection afforded to fictional
literary characters: Copyright
• Courts in the US have dealt with this
issue extensively, and have
developed two tests for whether a
character deserves copyright
protection apart from the story
• Canada has very limited case law on
the subject
IP protection afforded to fictional
literary characters: Copyright
• United States:
–Two tests:
•“developed character” test
•“story being told” test
IP protection afforded to fictional
literary characters: Copyright
• United States:
– “developed character” test (Nichols, 1930
– Abie’s Irish Rose): character only
deserves © protection if sufficiently
developed (i.e., an “expression” rather
than just an idea) – articulated in course of
discussion of “substantial similarity” re
characters
IP protection afforded to fictional
literary characters: Copyright
• United States:
– “story being told” test (Warner Bros.
v. CBS, 1954): situation where an
author sold a story (The Maltese
Falcon), then wrote another story with
the same main character (Sam Spade)
• more stringent – character does not get
© protection if it is merely a vehicle for
telling a story, must be the story
IP protection afforded to fictional
literary characters: Copyright
• United States:
– Tests used by different circuits
– So scope of protection of literary
characters independent of plot is unclear
– Turns on problems with drawing the line in
idea/expression dichotomy (i.e., when
does a character become an expression
rather than a mere idea)
IP protection afforded to fictional
literary characters: Copyright
• Canada:
– Preston v. 20th Century Fox Canada Ltd. (1990,
affirmed 1993) – “Ewoks” case
• To deserve © protection, character must be sufficiently
clearly delineated in the work subject to copyright that
it has become widely known and recognized
• Draws on Nichols
• Problematic because extent to which known is not a
factor in copyright infringement – slips over into
passing off
Anne of Green Gables
Trade-Mar
IP protection afforded to fictional
characters: Trade-mark
• Protection of literary characters in trade-mark in
Canada:
– Name (I’ll focus on this)
– Pictorial representation
– Distinguishing guise
• Trade-marks are perpetual, provided they are used
continuously (and the registration is regularly
renewed)
• Common law trade-mark rights (i.e. protection against
passing-off) extends only as far as it is known/the
owner has a reputation to protect
• All linked to consumer protection from confusion as
to source
IP protection afforded to fictional
characters: Trade-mark
• Protection of literary characters:
– Name:
• s. 12 of Trade-mark Act re registrability
• Can’t be name or surname of individual living or
who has died in the last 30 years
– the prohibition has been loosened in recent years, due to
celebrities trade-marking their names (uneven application
of the prohibition)
• Should depends on whether people may think this is
an actual person’s name:
– Mickey Mouse has been registered in Canada since 1930
on the following wares: “Motion pictures, cartoons, pictorial
representations, and books”
IP protection afforded to fictional
characters: Trade-mark
• Protection of literary characters:
– Name:
• Query however whether use of a character
name in a TITLE of a movie or book is
really “use” in the trade-mark sense, and if
so, whether the use by someone else of
the same character name in a title would
constitute “confusion”
IP protection afforded to fictional
characters: Trade-mark
• Protection of literary characters:
– Name:
• “Use” is a term of art in trade-mark law, set out in
section 4:
– “A trade-mark is deemed to be used in association with
wares if, at the time of the transfer of the property in or
possession of the wares, in the normal course of trade, it is
marked on the wares themselves or on the packages in
which they are distributed or it is in any other manner so
associated with the wares that notice of the association is
then given to the person to whom the property or
possession is transferred”
IP protection afforded to fictional
characters: Trade-mark
• Protection of literary characters:
– Name:
• “Confusion” is a also term of art in trade-mark law, set out in
section 6:
– “use of a trade-mark causes confusion with another trade-mark
if the use of both trade-marks in the same area would be likely
to lead to the inference that the wares or services associated
with those trade-marks are manufactured, sold, leased, hired or
performed by the same person…”
• Protection limited to wares and services in association with
which the mark is used (Pink Panther case)
IP protection afforded to fictional
characters: Trade-mark
• Protection of literary characters:
– controversy over “merchandising rights” and related
controversy over scope of protection for “famous
marks”
– That is, right to protect a trade-mark as an object (i.e.,
property per se) instead of as an indicator of source
• Has come up quite a lot in the U.S. with regard to sports team
logos, university logos
• Only started to be litigated in the 1970s when the value of the
market for merchandise bearing team or college logos
expanded
– Canada has more limited protection for famous marks
than the US
Larger Issues
• Should Copyright or Trade-mark Law be
expanded to protect an owners right to exploit
its IP just because it has value?
– Owners want protection to extend beyond specific
markets in association with which the mark has been
used
– In last 30 years, we’ve seen an expansion of the
concept of “goodwill” in trade-marks, so that the
emphasis is much less on consumer confusion and
more on protecting something of value to owners
Larger Issues
• Should Copyright or Trade-mark Law be
expanded to protect an owners right to exploit its
IP just because it has value?
– Value increasingly seen as potential to make money,
rather than something which has established meaning
(i.e., as indicator of quality, source)
– Litman: too strong TM protection “arrogates to the
producer the entire value of cultural icons that we
should more appropriately treat as collectively owned”
• Is this especially true for TMs based on cultural products?
Overlap between
copyright and trademark
• Back to IP protection for literary characters:
– The above noted controversies in the
expansion of trade-mark protection become
particularly acute when a literary work enters
the public domain
– Entrance of work into public domain may be
thwarted by expanded trade-mark protection,
which may be perpetually extended
Valuing IP – similar process to valuing any asset
• The nature of an asset does not alter the core concepts of value
Cash flows
Time
•
•
•
•
The value of an asset is based on the future returns that are expected to
be generated by that asset
Returns in the future are worth less than returns now (“time value of
money”)
Future returns are uncertain (or ‘risky’)
Intangible assets can affect the returns and/or the risks of cash flows
Valuing IP – similar process
to valuing any asset
Identify asset(s) /
understand rights
 Copyright
 Database
 Trade mark /
passing off
 Patent
 Know-how / tradesecrets
 Design right
Determine
basis/context of
valuation
 Open market
value
 Value in use
 Fair value
 Liquidation
value
 Book value
Select and apply
appropriate valuation
methodologies
 Calculate the
incremental
value added
by the IP
Valuing IP – similar process to
valuing any asset, only harder
•
Intangibles are often composite assets. Value is realised in
combination with other assets (tangible and intangible)
e.g. brand – value in combination of
–
trade marks (registered; rights in passing off)
–
trade dress
–
copyright
–
logo
–
get-up
–
recipes/formulae
n.b. trade mark licence v. brand v. branded business
•
Value may depend on form and scope of legal rights protecting the
asset
•
Values can vary hugely depending on circumstances
–
–
–
•
between uses
between users
over time
Availability of information/incomplete data
Approach to Value
• Cost Approach
• Market Approach
• Income Approach
All IP valuation methods derive
from one of three approaches
Deprival Value
Lower
of
Value
£
Replacement
cost
Net
realisable
value
Valuation Approach
Cost
Market
value
Higher of
Net present
value/value in
use
Economic
Value (DCF)
Intangible Asset Valuation
Valuation techniques for Financial Reporting Overview
Valuation Techniques
Market Approach
Income Approach
Cost Approach
Current price on active
market
Relief from Royalty Method
Reproduction Cost Method
Most recent comparable
transactions / Multiples
Excess Earnings Method
Replacement Cost Method
Incremental Cash Flow
Method
Cost Approach
Premise of Value
“An investor will pay no
more for an asset than
the cost to purchase or
construct an asset of
equal utility!”
Cost Approach
• Cost does not equal value
• Difficult to identify and capture
all of the costs
• Used when future economic
benefits exist but are impossible
to measure accurately
Cost Approach
Cost approach methods
Reproduction cost method
Replacement cost method
“cost to construct an
exact duplicate”
“cost to construct
equivalent utility”
Using same materials,
production standards,
design ...
Using modern materials,
production standards,
design ...
Market Approach
Premise of value
“Prices from previous
transactions provide
empirical evidence for
the value of an
intangible asset”
Market Approach
• Compare subject to similar
transactions
• Unrelated parties
• Similar date
• Similar technology/brand
• Similar risks
Market Approach
•
Sources of Comparables:
– Licensing Executive Society
– Databases
– SEC filings
– Infringement law suits
– Newspaper articles
Market Approach
Active market for brands: not existing
Comparable transactions / multiples
Price
Fair value
Represents one specific
transaction only!
Adjustments to derive
fair value necessary!
• Changes in market conditions and legislation
Key value drivers:
• Marketplace conditions
• Future economic benefits
• Participant-specific influences & motivations
• Asset-specific risk
• Deal-specific issues, e.g. financing terms, tax
issues
• Remaining useful life
Income approach
Premise of value
“An intangible asset is worth what it can earn!”
Income Approach
• Discounted Cash Flows:
– The entire company
– Subject product
– Relief from royalty
• Direct Capitalization
Income Approach - Valuation Principles
1. Isolate the future cash flows an investor would expect the subject
intangible asset to generate
T
FV =
∑
t=1
Cash Flow t
(1 + Discount Rate)t
2. Discount future cash flows with an appropriate discount rate
Income Approach - Valuation principles
Step4:
Present
value
calculation
2007
2008
Step 3:
If applicable:
calculation of
terminal value*
Step 1:
Expected
future Cash
Flows
Asset-specific cash flows:
2009
2010
2011
....
Terminal Value
Asset-specific Weighted Average
Cost of Capital (WACC)
Step 2
Determination
of asset specific
discount rate
Present
Value
* for indefinite lived intangibles only
Relief-from-royalty method Concept
Ownership of the asset
e.g. trademark
relieves owner
from paying royalty rate
The royalty savings are the expected cash flows
for the subject intangible asset!
Relief-from-Royalty; Valuation Steps
1.
Determine royalty rate for comparable asset
2.
Multiply with matching valuation base
3.
Subtract tax expenses
4.
Calculate present value of royalty savings
5.
Compute the tax amortisation benefit (TAB*)
* Tax amortisation benefit due to tax deductible amortisation of respective
intangible as element to finally calculate fair value
Relief from royalty: discounting projected
royalty flows to a present value
Range of
royalty rates
Forecast revenues
Incremental
cash flows
Present
value
Other costs
Taxation
Discount
rate
Incremental cash-flow method: Concepts
Incremental Cash-Flow Method
Cost savings
Incremental revenue
The intangible asset
allows the owner
to lower costs
The intangible asset
allows the owner
to earn incremental cash
flows, e.g. to charge a
price-premium
Incremental cash-flow method
Valuation steps
1.
Derive pre-tax incremental cash flows of subject intangible
2.
Subtract tax expenses
3.
Consider incremental contributory asset charges (CAC)
4.
Calculate present value of incremental cash flows
5.
Compute the tax amortisation benefit (TAB*)
* Tax amortisation benefit due to tax deductible amortisation of respective
intangible as element to finally calculate fair value
Incremental Cash Flow Method
Price Premium Method
Price
Brand
Premium
Price per bottle
€ 1,30
Price effect
Volume effect
Branded Product
Unbranded Product
Brand
Forecast
Volume
Branded sales
Price per bottle
€ 1,00
R (x)
C (x)
Total revenues
CP (x)
Brand
Risk
Consideration of brand
specific risks and present
value calculation
Brand specific revenues
Brand specific contribution to income
t
Incremental Cash Flow Method
Example
Company xyz
Valuation of brand
Valuation Date: January 1, 2007
Incremental cash flows
from
2007
mill. EUR
Fair value
Price effect
0.15 x 300,000
45.000
Quantity effect
EBITDA-margin (after CAC) @
1.65 x 50,000
55%
82.500
45.375
Pre-tax incremental cash flows
Corporate taxes @
After-tax incremental cash flows
Discount Rate @
Present value after-tax incremental cash flows
Tax amortisation benefit
Fair value
Step-up Factor TAB
35%
10%
90.375
31.631
58.744
0,9
53.403
16.021
69.424
1,3
Economic value methods –
illustrative brand valuation
Demand
side factors
Incremental
cash flows
Supply side
factors
•Consumer
•Business
Volumes
•Premium
services
•Mix
of services
x Prices
x Margins –
Brand
extension
•products / services
•channels
•sector / geography
Capex /
Working capital
Customer
acquisition /
retention
Supply terms
Staff acquisition /
retention
Brand extension
costs
Brand support
Economies of scale
Growth
Brand loyalty
•certainty of demand
Risk and return
Financial
Capital
Value
Economic value methods –
illustrative brand valuation
• Premium prices
– v.generic product
– adjust for quality/cost differences
• Premium profits (brand contribution)
– v.generic competitors/ utility provider of goods and services
– adjust for quality/cost differences
• Relief from royalty
– deprival value (value added/cost savings through ownership of
asset)
– discounted cash flow (“DCF”) analysis based on after-tax royalty
applied to projected revenues
– most commonly used approach by accountants/valuers/Courts and
regulators
• Excess return on capital
Economic value approach and royalties –
allocation of available profits
• Typically 25-33% of incremental profits are allocated to the
licensor (in situations where licensor has no presence in the
market to be licensed) as a royalty
• 50:50 split may be appropriate where licensee will compete
directly with licensor
• Allocation reflects inter alia relative risks borne by parties
– licensor: development of technology
– licensee: financial and marketing risks
• “Rule of thumb” split of profits: beware
– different interpretations
– different measures of “profits”
– application different forms of IP rights
Comparable royalties approach
• ‘Comparable’ licence agreements need to be adjusted to reflect
–
–
–
–
–
specific licence terms, such as duration, geographical coverage, exclusivity
lump sum and minimum royalty payments
extent to which asset contributes to market demand for the final product
the availability of substitutes
licensor’s anticipated profitability from use of the IP (including collateral or
ancillary sales/profits)
– state of development of the IP
• The circumstances in which a previous licence was agreed can be
significant
–
–
–
–
product of willing negotiations?
court-imposed solution
cross-licensing
uncertainty re validity of IP rights
• Interaction of royalty rate and royalty base: the “result”- must
reflect the underlying economic position
Excess return on capital
Cost of
tangible
assets and
other
resources
x
Rate of
Return
x
Discoun
t
Rate
Value
Brand
Others
Intangible
Operating profits
Tangible
Example: the method
used by Interbrand in
its “Top 100 Brands”
tables.
Valuation Concepts and Methods
Remaining Useful Lifetime and Nature
of Analysis (IAS 38.90)
•
Expected usage of the asset
•
Typical product life cycle for the asset
•
Technical, technological, commercial or other types of obsolescence
•
Changes in the market demand for the outputs from the asset
•
Expected actions by competitors
•
Level of maintenance expenditure required to obtain expected future
economic benefits from the asset
•
Legal factors (limitations)
•
Period of control over the asset
•
Dependence on the useful lifetime of other assets
•. . . if no foreseeable limit: apply indefinite useful life
Financial Statements Impacts
Brand with indefinite useful life – no amortisation
but annual impairment test
Brand
Value
Brand with
definite useful life annual amortisation
2007
2008
Which are the
key financial ratios
used for:
- investor relations
- benchmarking
- internal performance
measurement?
2009
2010
2011
2012
2013
2014
Absolute Profitability
EBIT
Net income
EPS
Relative Profitability
ROCE
ROA
ROI
Licensing Trademarks
• Twenty-five percent rule:
– 25% of EBIT to licensor
– 75% of EBIT to licensee
• 25% EBIT/ Revenue = Royalty
rate
Licensing Trademarks
• Commercial relationship:
– Competitors
– Unrelated parties selling in
different markets
– Franchisor / franchisee
– Manufacturer / distributor
Licensing Trademarks
• What is granted:
– Same use as owner – limited
use
– Field of use
– Territory
– Exclusive v. non-exclusive
– Sub-licensing
Licensing Trademarks
• Future profits derived from
use of the trademark will
determine the amount of the
royalty
– Method to use
• Income approach
• Market approach
Sport Trademarks
Trademark Royalty Rates -- Sporting Goods Industry
Trademark
Licensor
Licensee
Royalty
Rate (low)
Royalty
Rate (high)
Royalty Base
Exclusive or
Nonexclusive
1
Gary Player
Gary Player Group
Ajay Leisure
Products Inc.
3.00%
3.00%
Gross Wholesale
Sales
Exclusive
2
Nautilus
Nautilus Wear
International
Bollinger Ind. Inc.
5.00%
5.00%
Net Sales
Non-exclusive
3
Kemper
ImaginOn Inc
Jaysport Int. Inc.
3.00%
3.00%
Net Sales
Exclusive
sublicense
2.00%
2.00%
?
Exclusive
4
Victoriaville
Warren Amendola, Sr.
Les Equipements
Sportifs Davtec,
Inc.
5
NFL
NFL Properties Inc.
Oxboro Outdoors
Inc.
11.00%
11.00%
?
?
6
California Pro
Thunder
California Pro Sports
Playmaker
5.00%
5.00%
All sales
?
7
LPGA
LPGA
S2 Golf Inc.
1.00%
5.00%
Net Sales
Non-exclusive
8
Nancy Lopez
Nancy Lopez
Enterprises Inc
S2 Golf Inc.
3.00%
3.50%
?
Exclusive
7.50%
7.50%
Cost to licensee
Non-exclusive
1.00%
1.00%
?
Exclusive
Average Royalty Rate
4.15%
4.60%
Median Royalty Rate
3.00%
4.60%
9
Kemper
ImaginOn Inc
United
Merchandising
Corp.
10
Victoriaville
Warren Amendola, Sr.
USA Skate Co.
Concluding remarks
• The valuation of IP is, in principle, no different to a general
business valuation
– understanding the dynamics of the business and how it creates value
is critical
– the value derived from IP must come from increased prices or volumes,
lower costs, lower risk or greater “optionality”
• Valuation methods designed to estimate this incremental
value
– implicitly through royalty based or residual value calculations
– explicitly through economic benefits analysis
• Valuation is based on expectations of the future and
therefore contains significant uncertainty
– using multiple methods improves the rigour of the valuation