BRAND STRENGTH, REVENUE AND ROYALTY RATE: HOW IT'S CALCULATEDBrand Finance calculates the values of the brands in its league tables using the ‘Royalty Relief approach’. This approach involves estimating the likely future sales that are attributable to a brand and calculating a royalty rate that would be charged for the use of the brand, i.e. what the owner would have to pay for the use of the brand if it were not already owned.
1) Calculate brand strength on a scale of 0 to 100: the Brand Strength Index (BSI) captures the ability of clubs to drum up popular interest and then convert interest into support and custom.
2) As brand has differing effects on each source of income, we then split revenues down into three streams: matchday, broadcasting and commercial.
3) Calculate royalty rate. The brand strength score is applied to the royalty rate range to arrive at a royalty rate. For example, if the royalty rate range in a brand’s sector is 0-5 per cent and a brand has a brand strength score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4 per cent.
4) Determine brand specific revenues estimating a proportion of parent company revenues attributable to a specific brand.
5) Determine forecast brand specific revenues using a function of historic revenues, equity analyst forecasts and economic growth rates.
6) Apply the royalty rate to the forecast revenues to derive brand revenues.
7) Brand revenues are discounted post tax to a net present value, equal to the brand value.
West Ham are another club to benefit from the windfall. The Hammers’ 86 per cent growth puts them in the top 20 for the first time, with a brand value of $209m (£137m). And they are set to get even bigger over the next few years as they prepare for a move to the Olympic Stadium in 2016.
― The Fields of Karlhenry (nakhchivan), Monday, 8 June 2015 16:26 (eight years ago) link