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Global 500 2016 - Star Wars Sends Disney’s Brand into Hyperdrive

01 February 2016
This article is more than 4 years old.

· Disney is the world’s most powerful brand, thanks to Star Wars’ record-breaking success

· Despite slowing sales, Apple is the world’s most valuable brand, up 14% to US$145.9 bn

· VW brand value falls by US$12 billion following emissions scandal

· 4 of the 10 fastest growing brands are Chinese

· Strongest brands’ shares outperform the S&P 500 average

Every year, leading brand valuation and strategy consultancy Brand Finance puts thousands of the world’s top brands to the test. They are evaluated to determine which are the most powerful (based on factors such familiarity, loyalty, promotion, marketing investment, staff satisfaction and corporate reputation) and which are most valuable and ranked in the Brand Finance Global 500.

Disney is the world’s most powerful brand. Disney’s strength is founded on its rich history and original creations, however its now dominant position is the result of its many acquisitions and the powerful brands it has brought under its control. ESPN, Pixar, The Muppets and Marvel are all now Disney owned, but perhaps its most important acquisition of all has been Lucasfilm, and thus Star Wars.

Star Wars Episode VII ‘The Force Awakens’ has broken countless box office records, becoming the fastest to take US$1 billion, enjoying the most successful opening weekend ($529 million) and based on its total box office gross of nearly US$2 billion is Disney’s most successful film ever. Meanwhile Star Wars toys have generated over US$700 million.

Brand Finance has estimated the value of the Star Wars brand to be US$10 billion, dwarfing the US$4.05 billion Disney paid for Lucasfilm in 2012. Though this might suggest that Disney engineered a very favourable deal, it has undoubtedly contributed to the growth of the Star Wars brand. Disney is managing to exploit the Star Wars concept both rapidly and sensitively, a difficult feat to pull off. Disney styles itself as ‘the happiest place on Earth’. That has proved true not just for its customers but for investors too.

Lego Loses Out

Lego has lost its position at the top of the table. Though it remains a very powerful brand and retains its AAA+ brand rating, the Danish company has been beset by a series of controversies of late which threaten to affect its wholesome image. It has been fined by German regulators for attempting to prevent retailers from discounting its products. It was also accused of colluding in censorship for trying to prevent dissident Chinese artist Ai Wei Wei from using Lego in his work. Lego has since reversed its policy of restricting purchases to be used for political ends following widespread condemnation (including from Ai Wei Wei himself).

Brand strength/power is only the initial part of Brand Finance’s analysis however. Using its Brand Strength Index assessment, Brand Finance determines a royalty rate for each brand, which is then applied to revenue information to calculate the brand’s value.

Apple Not Rotten Yet

In terms of brand value, Apple comes out on top. Apple has maintained its dominance at the summit of the Brand Finance Global 500. Brand value is up 14%, thanks to the huge success of the iPhone 6 and recently released iPhone 6s. Revenue for Q4 of the fiscal year 2015 was a record-breaking US$51.5 billion with profits at US$11.1 billion while revenues for the year were US$233.7 billion. This huge surge is partly responsible for recent disappointing sales growth (the slowest since the iPhone was launched in 2007). However with 74.8 million handsets sold in the last quarter in a saturated market, assertions that Apple has gone rotten are premature. Apple Pay is beginning to generate traction, potentially heralding the brand’s long-anticipated expansion into the broader arena of financial services, to say nothing of its rumoured foray into the auto industry.

China’s Fantastic 4

Chinese firms are among the top performing from any sector; four of the top ten are Chinese including all four of the top performing brands. WeChat is a good example. Its user base grew over 40% between late 2014 and late 2015 and is now over 650 million, with 70 million outside China. It is often compared to the more familiar (at least in the West) Whatsapp. However WeChat is much more than a messaging app and offers video-gaming and payment services. Brand value is up 83% to US$6.5 billion. Evergrande Real is the fastest growing brand this year, having added 112% to its brand value between 2015 and 2016. While the continued rapid growth of Chinese firms is to be welcomed and lauded, the presence of a real estate brand at the top of the list could be grist to the mill of those claiming that China’s property market is overheated and its economy as a whole set for a shock.

VW Goes into Reverse

Volkswagen is also amongst this year’s worst performing brands. This may come as little surprise given the scale of the scandal that has engulfed the brand, following revelations that it programmed its diesel vehicles to activate their optimal emission-reduction settings only when being tested and that, driven under normal conditions, they would emit up to 40 times the more nitrogen oxide. In December Brand Finance estimated that VW may see brand value fall by as much as $10 billion. In fact the affair has turned out to be even more damaging than that. Brand value is down by US$12 billion to US$18.9 billion leading to a fall in rank from 17th to 56th.

Brand Value and Share Price

In December of 2015 Brand Finance took a retrospective look at the share price of the world’s most valuable brands and the subsequent stock market performance of the businesses that own them, revealing compelling evidence to suggest that highly branded businesses and those with strong brands can outperform the market.

Between 2007 and 2015, the average return across the S&P was 49%. However by using Brand Finance’s data, investors could have generated returns of up to 97%. Investing in companies with a brand value to enterprise value (BV/EV) ratio of greater than 30% would have generated returns of 94%. Investing exclusively in the 10 companies with the highest BV/EV ratios would have resulted in a 97% return.

115 of the top 500 brand in the 2016 list fall into this category. The group includes luxury goods businesses that one might expect to be highly branded such as Burberry, Gucci and Ralph Lauren, well-known consumer brands such as Audi, Land Rover, Dove, Ikea and Nestle, but also financial and B2B brands such as Shinhan, Fujitsu and Allstate. It will be interesting to see whether these brands deliver similarly impressive investor returns over the coming years.

ENDS

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Media Contacts

Konrad Jagodzinski
Konrad Jagodzinski
Communications Director
Brand Finance
Florina Cormack-Loyd
Florina Cormack-Loyd
Senior Communications Manager
Brand Finance

About Brand Finance

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.

Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Methodology

Definition of Brand

Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand Strength

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Valuation Approach

Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast 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 Discount post-tax brand revenues to a net present value which equals the brand value.

Disclaimer

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.

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