Michael's Finances & Catalogues

The King’s Ransom

Though years of excessive spending had left Michael Jackson deep in debt, the star's estate should eventually be profitable.
By Johnnie L. Roberts | Newsweek Web Exclusive
Jun 26, 2009

Michael Jackson died this week while preparing for a 50-night schedule of shows at London's 02 Arena that were scheduled to begin in July. The concerts would have been Jackson's first since 2001, and he was doing them in part for a simple reason: he desperately needed the money.

During his life, Jackson sold hundreds of millions of records, and his musical legacy should easily have led him to amass one of the greatest fortunes in show-business history. But instead, a history of bad management, excessive personal spending, and big legal bills left him, at his death, facing continual rumors that he might file for bankruptcy. "After all is said and done, he was almost broke," one close associate told NEWSWEEK. "He needed to do this tour."

In the hours after his death, NEWSWEEK spoke with three sources who'd been close to Jackson and involved in his finances, and though their views differ in some respects, they agree that the crisis-ridden financial life he left behind is almost certain to remain as murky and complex as it's been since the mid- to late 1990s.

Jackson's financial problem stems from the fact he continued to spend tens of millions of dollars a year even as his musical output—and his income—slowed down. (His last album, Invincible, was released in 2001.) In recent years Jackson financed these personal debts by borrowing against assets, and by some estimates his total borrowings at his death may have exceeded $400 million.

And it wasn't all personal spending: according to record-industry executives, Jackson would drop as much as $30 million recording an album over two or three years in his quest for perfection. His videos cost as much as $8 million. While Sony picked up part of the tab, Jackson was responsible for a hefty portion. "I hold everyone around him responsible," says a former associate. "No one said no. They said, 'Yes, Michael, yes, Michael.' "

According to two of Jackson's former advisers, Sony Music Group, his most pivotal business partner and record label, will likely end up owning his most valuable musical asset: his share of Sony/ATV Music Publishing. A joint venture that Jackson and Sony formed 14 years ago, Sony/ATV owns 750,000 era-spanning hits and classics; its most prized asset is the song rights to most of the works of the Beatles, which Jackson managed to stealthily purchase in 1985 for $47.5 million—a deal that destroyed his friendship with Paul McCartney.

In the music industry's 1990s heyday, Sony/ATV might have been worth as much as $1.5 billion, according to the Jackson associates who spoke with NEWSWEEK. Its value in today's recessionary global economy is anyone's guess. One of Jackson's associates says Sony/ATV's value might have plunged to $500 million; a second simply says it's worth "a big number."

Jackson's share of the joint venture, in which both he and Sony once had equal stakes, may now be less than 25 percent, one of the associates told NEWSWEEK.

Compounding his woes, the lucrative publishing catalog of Jackson's hits, MiJac, is also encumbered by massive loans, one of the confidants told NEWSWEEK. MiJac is administered by Warner Chappell, a division of Warner Music Group.

Jackson's business associates and family aren't officially commenting on his financial affairs. A spokesperson for Sony/ATV declined to speak on any financial matters beyond describing the publishing operation as a 50-50 joint venture.

Expressing his condolences in a prepared statement, Martin Bandier, Sony/ATV's CEO, called Jackson "a trusted and passionate partner, who was very proud of our accomplishments." As for the status of Jackson's stake, the spokesman would only say, "There are specific beneficiaries of that asset."

In a statement, Jackson's attorney, Joel Katz, commented generally on his business affairs, noting that Jackson was involved extensively in the preparations for the London concerts. "Michael Jackson was a perfectionist, and his business affairs are worldwide," Katz said. "Many of them are quite ongoing and will be dealt with appropriately."

While there's no denying Jackson's grim financial circumstances, others in his financial life say future earnings from his recordings and assets may largely offset his debts and leave him with a significant estate. "His legacy has a better chance of being preserved for his estate than ever before," a key adviser said this morning. "I don't think people understand the significance of his assets." According to this source, Jackson's publishing assets generate $50 million to $75 million a year. He collects a share of it, which is split with his partners.

Sales of his past recordings easily yield another $5 million annually. At one point, Jackson was spending up to $20 million a year, however, and his mountainous debt had to be serviced from the proceeds, too. With his death, that spending will end, of course.

At the same time, Jackson's estate is likely to be caught up in the mother of all probate cases. That, this source says, will help buy time "for things to right themselves," especially given the explosion of income that his assets will now begin to generate. The estate "will earn tremendous amounts over the next few years, as would be the case when any legendary talent like Michael passes," this person says. "He's an icon like Marilyn Monroe and Elvis," says Keith Estabrook of the public-relations firm Estabrook Group.

Larry Mestel, CEO and founder of music publisher Primary Wave, agrees. As lead of the Jackson 5, a quintet that included his brothers, and as a solo artist, Jackson "made some of the most incredible music," Estabrook says. "Like many of the greats, it will last for an enormous time." Jackson also leaves behind an uncounted trove of unreleased recordings, many of which may now be released.

Although the Los Angeles County medical examiner is conducting an autopsy to determine the exact cause of Jackson's death, his associates believe the financial pressures he faced were likely an indirect cause. Whatever health or substance-abuse problems Jackson had can't have been helped by the daily six-hour rehearsals he'd been doing for the upcoming concerts, which were made necessary by his frayed finances. "That had to be completely overwhelming," says one close associate.

In the past decade Jackson's deteriorating finances had assumed a prominent role—alongside the surgical masks, unending cosmetic surgeries, childlike behaviors, and alleged molestations—in Jackson's eccentric, troubled public persona.

In the hours after his death, Jackson would likely have been encouraged that most of the public focus has remained where he would have wanted it: on his music.

At James Brown's funeral a few years ago, standing alongside Al Sharpton at the open casket, Jackson spoke to the reverend about legacies: "When a legend dies, maybe he will get in death what he didn't get in life in terms of credit." Recalling that story today to NEWSWEEK, Sharpton added, "I hope that's true for Michael."
Find this article at http://www.newsweek.com/id/204011

Money to be made: Michael Jackson, like Elvis, ‘may be worth more dead than alive’
Ryan Nakashima June 27th, 2009

Jackson may be ‘worth more dead than alive’

LOS ANGELES — Michael Jackson spent the last years of his life buried in debt. But the King of Pop’s death is likely to yield a financial bonanza more lucrative than any comeback tour ever could, as fans snap up his music and memorabilia and perhaps one day get the chance to tour his Neverland home.
“Quite frankly, he may be worth more dead than alive,” said Jerry Reisman, general counsel for the Hit Factory, a recording studio where Jackson produced his best-selling album “Thriller.”

Jackson’s death at age 50 leaves a multitude of questions about a financial empire that included his own music, as well a 50 percent stake in a library that held the rights to songs by the Beatles. But Jackson reportedly had $400 million in debts, and it isn’t known yet how his estate will be divided and who the beneficiaries will be.
This much is clear: Jackson’s heirs, music labels and opportunists will probably be mining his legacy for decades to come.

In that way, his death may parallel that of the music industry’s original King — Elvis Presley, who died in 1977 at age 42.
Like Jackson, Presley hadn’t had a hit album in years. At the end of his life, he was mostly relying on royalties from his past hits and doing shows in Las Vegas. But in death he became a moneymaking phenomenon.
Presley’s estate was valued at just $4.9 million at the time of his death. In 2005, a company run by media entrepreneur Robert F.X. Sillerman paid $100 million for 85 percent of the estate and a 90-year lease on his Memphis mansion, Graceland.
By some estimates, Jackson’s estate could be worth more than $1 billion. Besides the master recordings of his own music, Jackson owned half of Sony/ATV Music Publishing, a jewel estimated to be worth $2 billion by itself. The 750,000-song catalog includes music by the Beatles, Bob Dylan, Neil Diamond, Lady Gaga and the Jonas Brothers.

Creditors will get first crack at the estate.
“I think the first question is, ‘Is there anything left after you pay off the debts?’” said Robert Rasmussen, the dean of law at the University of Southern California.
Jackson might have shielded some of his estate from creditors and ensured that his children were taken care of by placing a life insurance policy and other assets in an irrevocable trust, said Steve Hartnett, associate director of education for the American Academy of Estate Planning Attorneys.

The pop star left behind three children: Michael Joseph Jackson Jr., known as Prince Michael, 12; Paris Michael Katherine Jackson, 11; and Prince Michael II, 7. The elder children were born to ex-wife Deborah Rowe, while the youngest is his biological son, born to a surrogate mother.
Other potential beneficiaries include Jackson’s parents, his five brothers, three sisters and a long list of nieces and nephews. His children’s nanny was believed to be close to Jackson.
The contents of Jackson’s will have not been released. Typically, a will becomes public within about 30 days of a person’s death.

In a statement Friday, Joel Katz, Jackson’s entertainment affairs attorney, gave no clues to how Jackson disposed of his estate.
“Michael Jackson was a perfectionist, and his business affairs are worldwide,” Katz said. “Many of them are quite ongoing and will be dealt with appropriately.”

One big question will be what happens to Neverland, where Jackson surrounded himself with animals, rides and children. Jackson nearly lost the ranch to foreclosure in March, but billionaire real estate investor Thomas Barrack bailed him out, setting up a joint venture with Jackson that took ownership of the 2,500-acre (1,000-hectare) property in Santa Barbara County.
Barrack declined to comment.

Fans, meanwhile, are rushing to buy Jackson’s old songs in a scramble that began within minutes of his death. Both Amazon and Barnes and Noble reported selling out of Jackson’s CDs, and his music accounted for the most downloads at Apple’s iTunes store.
Amazon’s sales of Jackson’s albums and MP3s were 700 times higher on Thursday after news of Jackson’s death, and they were running at an even higher rate Friday, according to Bill Carr, the company’s vice president of music and video.
“It’s really hard to express what someone dying really means and how it absolutely brands that individual into the culture,” said Del Bryant, CEO of Broadcast Music Inc., which collects royalties for the use of “Beat It,” ”Billy Jean” and other songs composed by Jackson. “If you look at everyone from Patsy Cline to the Big Bopper to Buddy Holly … the effect on the catalog is tremendous.”
Bryant said expects revenue from public performances of Jackson’s songs to triple this year because of his death.

Sillerman’s company, CKX, controls licensing of Presley’s image, which has been slapped on dozens of pieces of merchandise, such as T-shirts, watches, belt buckles and figurines. In 2007, Presley’s brand earned $52 million — beating out living acts like Justin Timberlake and Madonna, according to Forbes magazine, which has put Elvis atop its list of top-earning dead celebrities for two years running.
Jackson’s heirs may similarly explore ways to make money from the singer’s likeness and art, perhaps through T-shirts, compilations of previously unreleased music, or stage productions based on his songs.

It’s also easy to envision Neverland becoming the next Graceland, said Steve Gordon, an entertainment attorney who worked at Sony Music during the 1990s.

The singer’s death could also boost business for the legion of Jackson impersonators. Adrienne Gusoff, who runs the New York-based impersonating agency Bubbygram.com, said she expects the dozen Jackson clones she represents to be about as much in demand as entertainers who impersonate stars like Frank Sinatra and Marilyn Monroe.
“I think his death will make him an even bigger star,” Gusoff said.
First, though, her Jackson impersonators will have to get over the loss of their hero. “One of my guys in New Jersey is devastated,” she said. “It’s like a family member died.’

Michael Liedtke reported from San Francisco. AP Business Writers Alex Veiga in Los Angeles, Stevenson Jacobs in New York, Rachel Metz in New York and Jessica Mintz in Seattle contributed to this story.
http://blog.taragana.com/e/2009/06/27/money-to-be-made-michael-jackson-like-elvis-may-be-worth-more-dead-than-alive-11849/