The Loss of Sony/ATV: What Does It Mean For Michael’s Legacy? And For Us?

“I’m leaving Sony a free agent…owning HALF of Sony!”-Michael Jackson, 2002.

sony

With those bravely defiant words, many wondered if Michael had, indeed, signed his own death warrant back in 2002.  An asset worth billions, the Sony/ATV catalog became both his greatest asset and biggest liability. It was undeniably the greatest coup of his business career and the crowning achievement of his business acumen. It also became the source of his biggest torment, as the rest of his life became an obsessive struggle to hold onto and to maintain this asset at all costs-even, perhaps, that of his own life.

Michael’s Famous Anti-Sony Speech From 2002:

“They want my catalog and they will kill me for it”-Michael Jackson.

sony2The news that came down from the estate last week hit like a thunderclap, and has shaken to the core the faith and goodwill of even many estate supporters.  Here is the official statement released by the Michael Jackson estate on March 14, 2016:

STATEMENT FROM THE ESTATE OF MICHAEL JACKSON TO THE FANS:

“As you may recall, last October Sony triggered the “buy-sell” clause in the partnership agreement which provides for one partner to buy out the share of the other at the highest possible price. As has now been announced, the Estate and Sony have signed a memorandum of understanding for Sony to purchase the Estate’s interest in Sony/ATV. A copy of the official press release is also being sent to you. In the intervening months, we explored several options that would have positioned the Estate as the buyer, rather than Sony, and we had substantial interest from potential partners to work with us in doing so. Ultimately, however, Sony’s offer was in the best interest of Michael’s children and we made the difficult decision to accept that offer. The arrangements will further secure the financial future of Michael’s heirs. The amount that Sony is paying, $750 million, is a substantial premium on the Estate’s interest in the company after taking into account the debt of the company, the Purchase Option and other adjustments required under the partnership agreement. It is also a huge testament to Michael’s business acumen that his original investment appreciated so substantially over the last 30 years.

There are several reasons that led to our decision. We will use a portion of the proceeds to repay the loan balance on monies borrowed by Michael and secured by his interest in Sony/ATV which means that after starting with more than $500 million in debt seven years ago, the Estate is now completely debt free with substantial assets in cash and other property. The balance of the proceeds from this sale, after taxes, fees and expenses, will be held by the Estate and ultimately will be transferred to a trust for the benefit of Michael’s beneficiaries. Furthermore, the transaction allows the Estate to diversify assets which, to date, have been highly concentrated in music intellectual property.

We would like to underline that the sale has no effect whatsoever on the 100% ownership of the publishing on all of the songs that Michael wrote, which all remain part of Mijac Music, as well as those songs written by many of Michael’s favorite songwriters, that he acquired outside of Sony/ATV. These songs include “After Midnight”, “Love Train”, “I Got A Woman”, “When A Man Loves A Woman”, “People Get Ready”, “Great Balls of Fire”, “Runaround Sue”, the entire Sly and the Family Stone catalog and other songs. The Estate also continues to own its 100% interest in all of Michael’s solo master recordings and short films. There is no intention of selling any of these wholly-owned assets.

While the sale of Michael’s interest in Sony/ATV is bittersweet for all of us – especially for those of us involved in helping Michael create this company back in 1995, the fact that we are even in this position in the first place further validates Michael’s foresight and genius in investing in music publishing. As we noted in the official press release, Michael’s ATV catalogue, purchased in 1985 for a net acquisition cost of $41.5 million was the cornerstone in the 1995 formation of Sony/ATV and, as evidenced by the value of this transaction, is still considered one of the smartest investments in music history.

We are aware that some fans were hoping that the Estate would be the buyer of Sony’s share in Sony/ATV, rather than the reverse. That was our goal as well when we started on this path last year, but ultimately, Sony’s offer made more sense for the reasons outlined above. We are dedicated to protecting and growing Michael’s legacy, and maximizing the value of his Estate for the benefit of his children. This sale allows us to protect the assets most dear to Michael (his own songs and those he acquired and retained outside of Sony/ATV), close out his debts, and continue to grow his legacy for future generations.”

For the past nearly seven years, we have witnessed some incredible triumphs on the part of the estate, but there have also been a number of disturbing lows, as little by little we have seen many of Michael’s most valuable assets being siphoned off. Sure, the estate has generated millions in profit since Michael’s death, and Branca and McClain have done a mostly admirable-if albeit occasionally controversial-job of keeping the Michael Jackson brand alive and well as a contemporary commercial commodity. And they have had to do an admirable job of maintaining this ship despite a slew of continuous lawsuits. That’s the good part. But then have also been the low points-the loss of Neverland (an asset that Michael had maintained despite no plans to ever live there again), the gradual siphoning off of many of his personal belongings (when fans have clamored for years to have a permanent museum for these items) and an IRS debt of over $750 million which remains for many a  troubling and suspicious question mark, especially for an estate that is easily worth that much and which has supposedly been debt free for over four years. How did such a discrepancy occur, and why is it that the amount for which the catalog was sold back to Sony-750,000,000-almost exactly matches the amount that is allegedly owed to the IRS? (Granted, it is still to be determined in court if the estate will actually have to pay this amount).

THE JACKSON STAKE IN SONY/ATV ” IS NOT FOR SALE ” JOHN BRANCA, 2010

2013 60 Minute Interview In Which Branca Declares, “We Are Not Sellers!”

Throughout the last week I have read all of the arguments from both sides of the pro and anti estate camp.  I am still honestly not sure exactly what to make of it all, as I am certainly not in any position to know what it’s like to juggle multi-billion dollar assets, or to unravel all of the finagled intricacies of running a music corporation or a multi-million dollar estate. However, I do know what I feel in my heart and in my gut, and I have not been able to settle either with this decision. I will just suffice it to say that it feels like a very sad day, and I can take little consolation in all of the media attempts to somehow spin this into a positive, or as some sort of grand coup for the Michael Jackson estate. However, even with that being said, I would like to wade through, for a moment, all of the raging anti and pro estate sentiments to get to the actual truth of the matter-what this sale actually means (and doesn’t mean) for the sake of Michael Jackson’s artistic legacy, the future of his estate, and the benefit of his heirs.

If you look at all of the headlines that have been spun over the past week, it would sound as if the Michael Jackson estate just gained over 750 million dollars to add to its already estimated 700 million value. Most of these articles are focusing on the obvious-that a 47,000,000 investment in 1985 has now netted over sixteen times that original investment. On paper, this certainly looks impressive-and it is.

However, that “profit” has come about due to the sale of an asset that was worth billions. I am no genius at math, but even my bonehead mathematical skills have a hard time wrapping themselves around exactly how the loss of a multi-billion dollar asset (one that contained the publishing rights of over 2,000,000 songs including many of today’s top selling artists) can in any way be construed as a profit. Although $750 million is certainly a staggering sum that most of us, even in our wildest fantasies, could hardly fathom, it is a mere drop in the bucket compared to a money making monster like the Sony/ATV catalog that, ideally, would continue generating a profit for as long as all of the music of its nearly 600+roster of music artists are selling. And which, considering that this roster includes many of music’s most legendary performers as well as many of today’s hottest selling artists, that would be for a very  long, long time to come. Seriously, has anyone ever bothered to actually look and see just how many music artists whose music publishing Michael Jackson owned a stake in? The list I linked to above is far too long to paste here, but even a casual glance at it is enough to blow any music lover’s brain! If one went by most of the media reports, one would conclude that the biggest names Michael “owned” in the industry were The Beatles, Eminem, Taylor Swift and a few token others who occasionally get mentioned in media articles about the Sony/ATV catalog. That is a gross under estimation. Michael’s music publishing empire meant that he not only had a stake in The Beatles’ publishing (arguably the biggest commercial selling act of all time) but also their arch rivals The Rolling Stones (arguably the richest white musicians on the planet!) and “The King” himself, Elvis Presley! This would mean that Michael Jackson-the only black American entertainer whose name is routinely grouped with these white legends as a serious contender for “Top Artist”  essentially “owned” a piece of all of them, as well as having complete control of his own songs and music publishing. The list goes on to include country legends like Willie Nelson and Patsy Cline (perennial sellers) to jazz legends Duke Ellington and Miles Davis, from James Brown to Little Richard (to whom Michael famously returned his own stolen song rights) and, finally, all the way up to today’s biggest selling contemporary acts such as Coldplay, Pharrell Williams, Taylor Swift and Lady Gaga. This meant that Michael Jackson was essentially earning a profit every time a piece of music from any of these artists’ songs  was bought, played, or licensed out, and in death, that was money that continued to be generated for his estate and its beneficiaries.

Which is why it is even more mind boggling to think that a cash sellout of 750 million-no matter how impressive that sum sounds-could begin to compare to the gross worth of the Sony/ATV catalog!

However, as a working American, I can also vouch that in the end it doesn’t matter how much your gross income may be. What ultimately matters is the net pay you are able to pocket. The money generated from such a massive asset can only be of value provided it is money that is in the clear-in other words, if it is actually generating profit. It’s no secret that Michael used the Sony/ATV catalog as constant leverage in most of his business dealings throughout the last fourteen years of his life.  But supposedly all of those debts had been cleared long ago. At least, that was the spin being given. Consider this Forbes article published in 2012, which assured us then that the last of Michael’s personal debts had been paid off and that his estate was in the financial clear.

Yesterday a representative of the singer’s estate confirmed to FORBES that, on Monday, the estate paid off the last dollars on a loan connected to Mijac Music, the catalog that’s home to many songs composed by the King of Pop, including hits like “Beat It” and “Billie Jean.”

The payment means that the estate has eliminated the last of Jackson’s outstanding personal debts (FORBES reported last month that Jackson’s personal debts would be paid off by the end of the year). That’s no small feat, considering the pile obligations–roughly half a billion dollars–left behind by the singer when he passed away in 2009.

Jackson’s estate has been able to pay off that debt earlier than expected thanks to the enduring popularity of the King of Pop and his work, which spurred earnings of $145 million over the past year alone-Excerpted from “Michael Jackson’s Personal Debts Paid Off, Just in Time For Bad 25” by Zack O’Malley Greenburg. 

So…were they just blowing smoke at us back then, or was the estate truly debt free? If the estate was  debt free in 2012, then why the excuse of selling the catalog now as a means of putting the estate in the financial clear? Certainly any additional debts accrued since 2012 can’t be blamed on Michael Jackson. So if the estate has gone into debt since allegedly being in the clear in 2012, just whose debts are they?

As for the media spin about what a smart coup and financial windfall this $750 million purchase represents for the estate, consider what Tim Ingam says in his piece “Sony’s Historic Buyout of Sony/ATV: Five Things You Need to Know”:

3) THE MICHAEL JACKSON ESTATE DID A GREAT BIT OF BUSINESS…

When announcing the sale of the Sony/ATV stake, John Branca and John McClain, Co-Executors of the Jackson Estate, made sure to note how smart a deal this was for all concerned.

In a joint statement, they said: “[Michael’s] ATV catalogue, purchased in 1985 for a net acquisition cost of $41.5 million, was the cornerstone of the joint venture and, as evidenced by the value of this transaction, is considered one of the smartest investments in music history.”

Simple maths shows they have a very solid point.

Buy for $41.5m. Sell for $750m.

That’s an 18-times return on investment.

Shamone.


4) … BUT NOT AS GREAT AS SONY

So why did Sony pay such a seemingly inflated figure for the ATV catalogue?

Because it’s considerably grown in value since 1985 – that much is obvious.

But what’s also missed out in Branca and McClain’s statement is the fact that the value of this catalogue is still growing – and fast – thanks to the changing shape of the music market… particularly streaming.

Just look at the annual revenues of Sony’s music publishing business over the past three years alone.

SonyMusicrev

Yes, publishing is dwarfed by recorded music income… but out of the two sectors, publishing is actually growing faster.

Consider that Michael himself could have easily alleviated much of his own financial debt in his lifetime by simply selling out his share of Sony/ATV, and certainly by doing so he could have also alleviated much of the burden of stress that had come with its ownership. That he chose not to do so in his lifetime certainly wasn’t for lack of interested buyers! This is from a 2004 USA today article by Gary Strauss, quoting Charles Koppelman. And keep in mind that all figures quoted here are reflective of the catalog’s worth over twelve years ago!

Jackson borrowed nearly $200 million from the Bank of America in 2001, using his stake in Sony/ATV as collateral. Industry experts value the catalog at $600 million to $1 billion, based on sales of rival catalogs in recent years. Koppelman, a veteran music industry executive, says $1 billion is more reflective of Sony/ATV’s worth.

“Buyers would be lining up around the block if it were ever put up for sale,” Koppelman says. “And I’d be in the front of the line.” 

Song publishing rights are lucrative because of their increasing use in film, commercials, video games, TV shows and other venues. Like homes in hot markets, music catalogs with prime holdings continue to rise in value.

It should be noted here that Koppelman was one of the original bidders for the catalog in 1984. He was well aware of its value then, and certainly more than well aware of its value twenty years later in 2004.

As for Michael using the catalog as collateral on his loan, it was perhaps this transaction in 2001 which gave rise to a media rumor that Michael was planning then to sell the catalog. But he made his own intentions clear in a well documented 2001 press statement:

 “I want to clarify a silly rumor: the Beatles Catalogue is not for sale; has not been for sale and will never be for sale,” Jackson said in a statement released today (May 9).

The Historic Day of Signing. Michael Merges His ATV Catalog With Sony To Become One Of The Richest Performers In The Business-And Perhaps Its Most Powerful.
The Historic Day of Signing. Michael Merges His ATV Catalog With Sony To Become One Of The Richest Performers In The Business-And Perhaps Its Most Powerful.

And, true to his word, Michael fought a heroic battle throughout his remaining decade of life to maintain his stake in Sony/ATV. It was an asset he had fought to keep as fiercely as Scarlett O’ Hara in Gone With the Wind  fought to keep Tara, and perhaps, not surprisingly, for much the same reason-it wasn’t just its net worth that mattered to him. For Michael, that 50 percent stake in Sony’s publishing represented everything he had fought and bled for, a tangible symbol of his accomplishments in an industry in which every odd had been stacked against him as a black performer who had come up from literally nothing. For him, it represented both who he was, and everything he had fought to achieve. And it is exactly for this reason that the selling out of his stake in Sony/ATV is such a bitter pill for fans to swallow.

The story is well known, but deserves repeating. Michael originally bought the ATV catalog in 1985 for what was then a mere $47.5 million, after being advised by Sir Paul McCartney that investing in music publishing would be the wisest move for the newly massively rich young entertainer to make with the millions he was generating from his massive selling Thriller album. At twenty-seven, an age when most newly rich young pop stars are blowing their money on cars, houses, drugs and women (and that is provided they live to see their twenty-eighth birthday) Michael was investing in music publishing. John Branca was instrumental then in negotiating that deal, albeit reluctantly (reportedly advising Michael at the time that it was too much money and the competition he would be facing too tough). However, Michael was adamant that this was something he wanted. It was Branca who reportedly went to McCartney’s attorney to make sure that the ex-Beatle himself had no plans to purchase the catalog. MJ fans often claim that Paul was “too cheap” to buy the catalog, but apparently there may have been a more altruistic reason as well: In a 1990 press conference, McCartney stated that he could have purchased the catalog in 1981 but refused to do so because he thought it would make him appear “too grubby” to own both his and John Lennon’s share of the songs.

Michael Didn't "Steal" Those Songs From His Friend McCartney. As He Would Say Years Later, "I Just Did Good Business."
Michael Didn’t “Steal” Those Songs From His Friend McCartney. As He Would Say Years Later, “I Just Did Good Business.”

At any rate, contrary to the popular media spin, Michael Jackson certainly didn’t “steal” the catalog from the Beatles. Both McCartney and Yoko One were given advance opportunities to purchase the catalog, and both parties declined. This meant that when Michael made the purchase in 1985, the ATV catalog was clearly available to the highest bidder-and that bidder was Michael Jackson. Media reports that snidely comment on Michael having “outbid” Paul McCartney are blatantly false. The truth was that Sir Paul never even entered a bid for the catalog.

In 1995, long before his relations with Sony soured, Michael made a monumental business decision by agreeing to merge his ATV catalog with Sony’s publishing in exchange for a 50% share of Sony’s publishing, thus forming Sony/ATV. The deal was further sweetened by the additional purchase of Famous Music in 2007, which essentially (to cut a long story very short) ensured Michael and his heirs a stake in music for films from all of Viacom’s holdings, including Paramount Pictures and DreamWorks (so, yes, it appears that in the end, Michael even had the last laugh on Spielberg and Geffen who screwed him over with DreamWorks years before!). This was also the acquisition that provided him rights to Eminem’s back catalog, as well as Beck, Bjork, Boyz To Men, Shakira, and even alternative rock acts like Modest Mouse and P.O.D. Reports on exactly how much money Michael received as a result of the Sony merger vary, but are usually quoted as somewhere between 90 to 100 million dollars. That meant that his original 47,000,000 investment  had, within ten years, already yielded an approximate 50,000,000 profit!

How much did the acquisition actually enable Michael to pocket off of the commercial use of these songs? A Los Angeles Times report , quoted in Taraborelli’s book, broke it down thus:  If “Yesterday” earned 100,000 in royalties, the Lennon and McCartney estates would receive fifty percent, which of course would be divided into 25,000 apiece. Michael would receive the remaining fifty thousand.

Although it was only a media rumor that Michael had somehow done this huge smarmy thing by “outbidding” Paul McCartney on the catalog-the media, as usual, would take their potshots at him in any way they could, as a means of deflecting his accomplishments-there is no doubt that some of Michael’s business decisions with the songs, such as licensing “Revolution” out to Nike, caused some bitter feelings on Paul’s end.

When Michael Began Licensing Beatles Music Out For Commercials, It Was A Controversial Move-But Certainly Not A Decision Out Of Step With The Times.

However, Michael looked at it from a very justifiable end-that Paul had his chance to purchase his songs, and chose to not take advantage of that opportunity. Also, we have to remember that by the late 1980’s, the licensing of classic rock songs-and even current hits-to commercials had become a booming business. From Eric Clapton to Phil Collins, to Whitney Houston and even Neil Young, the commercialization of familiar rock and pop jingles had become a staple of TV advertising (a trend that continues to this day). Despite reservations of his own, Michael had licensed his own music for use in Pepsi commercials. This was essentially the clash of the 60’s generation and their values vs. the 80’s generation, in which the 60’s had already become a romanticized era ripe for commercialization (especially as the baby boomers aged into the target demographic for many advertisers). Michael may have been born on the cusp of the baby boomer generation, but he was essentially a product of Generation X and, as such, very much a child of the 80’s. The sixteen year difference between his and McCartney’s respective ages was probably never better pronounced than in the rift that occurred over those Nike commercials. Michael believed that keeping the songs fresh and relevant for current youth by tying them to visible commodities was, in the end, a mutually beneficial arrangement, and in this regard, Michael was essentially no different from most of his 80’s contemporaries as evidenced by the proliferation of musicians turning to ad pitchmen during this era.

Just Like His Videos, Michael's Pepsi Commercials Were Some Of The Most Memorable TV Commercials Of The Era
Just Like His Videos, Michael’s Pepsi Commercials Were Some Of The Most Memorable TV Commercials Of The Era

To this argument, I suppose there is really no “right” or “wrong” way to view these matters-it is simply a difference of generational ideology, as the chasm that divided the political 60’s from the 80’s MTV generation grew wider. (It may, then, be somewhat ironic that thirty years later fans would protest the similar licensing out of Michael’s songs by his estate to companies like Jeep for TV and radio ads).

Determining how to make the best and most profitable use of these songs was, of course, part of the inherent risks and responsibilities that came with owning the catalog. But it may be worth remembering that Michael only invested in song publishing when the songs and artists in question had great personal meaning for him. From The Pop History Dig, it is quoted:

Jackson continued his search for more music catalogs to buy, but only those with songs that meant something to him.  He was shown dozens more catalogs, approaching 40 or so, but he only bid on a handful of these.

Little Richard. One Of Many Artists Whom Michael Returned Their Publishing Rights.
Little Richard. One Of Many Artists Whom Michael Returned  Publishing Rights That Had Been Stolen From Them Years Before.

When Michael did choose to bid on a catalog, it was always either because they were songs and artists he personally admired, or out of an altruistic desire (as he did in many cases with artists like Little Richard and Sly Stone) to return the songwriters their rightful profits which unscrupulous record companies had stolen years before.  This was an additional goal of Michael’s music publishing acquisitions that often goes under reported in the media, yet Michael was responsible for rescuing many black artists from dire poverty and returning them their rightful profits.

I don’t think we can even begin to under estimate what this accomplishment meant for Michael as a black entertainer and business entrepreneur. It represented a symbolic “taking back” of all that had been stolen from black artists-not just financially, but culturally and musically as well. And even if he did love The Beatles’ compositions, the sheer fact that none of these artists would have acquired their level of fame had they not ridden off the backs of under appreciated black artists could never have been too far from his consciousness.

It Was About More Than Just Money. Ownership Of The Catalog Represented A Symbolic "Taking Back" Of All That Black Artists Had Lost.
It Was About More Than Just Money. Ownership Of The Catalog Represented A Symbolic “Taking Back” Of All That Black Artists Had Lost.

The real question that has to be asked here is a very simple one, although unfortunately it isn’t a simple question that bears a simple answer: Did the estate have a real choice in this matter? In October, it was reported that Sony had triggered the clause in the contract which enabled one party to buy out the other’s share of the Sony/ATV catalog, and in the official statement from the estate, they also mention this action as one that forced their hand in this matter. Since I admittedly know little about the intricacies of legal documents, I did some research on exactly what the terminology means to “trigger” such a clause. In a nutshell, without going into a lot of legal jargon, it simply means when an agreement has been entered into between two or more parties that is contingent upon certain conditions being met, usually within a specified period of time. If those conditions are not met, then one party has the legal right to “trigger” their option to close, buy out, or take over as the case may be. From the Lexology website, a “trigger clause” is explained partly in this excerpt:

MANY contracts include a clause which provides a trigger for the activation of that contract.A common example is the clause stating that an agreement for the sale of land or property is conditional upon the approval of bond financing.Another example would be a clause rendering a contract conditional upon the passing of a shareholders’ resolution on the part of one of the contracting parties. Such a clause is referred to as a condition precedent or a suspensive condition.  

The effect of fulfilment of that condition precedent is that the whole contract becomes enforceable.This enforceability operates retrospectively as if the contract had been unconditional from the outset.Non-fulfilment of a condition precedent normally renders the contract void.  

During the period after signature of the agreement and until the fulfilment of the suspensive condition, the rights (and concomitant obligations) of the parties are held in abeyance, but there is a binding agreement between them, which neither party may renounce, pending fulfilment of the condition.  

The suspensive condition may apply to all of the rights and obligations of the parties or only to some of them.Those that are not suspended must be met, regardless.  

Where the parties have not expressly fixed a time period for the fulfilment of a suspensive condition, it is implied that it must be fulfilled within a reasonable time.What is reasonable will depend on the circumstances of that particular case. If the condition is not met within a reasonable time the contract will be void, subject to the principles which are discussed below.

In this instance, the “trigger clause” existing in the contract between Sony and Michael Jackson (and hence Michael Jackson’s estate) dates back to 2006 and a move that Michael himself initiated at that time. Despite Michael’s own defiant words against Sony in 2002, the truth is that he did do business with Sony again, although I personally believe it was more an act borne out of desperation than one of good will or, as they say, having “buried the hatchet.” The agreement that led to the clause enabling Sony the option of buying out his share of the Sony/ATV catalog was reached in 2006 when the company reportedly bailed him out of bankruptcy.

The deal, negotiated in Mr. Jackson’s suite at the Burj Al Arab hotel, saved the singer from bankruptcy. In return, Sony took greater operational control of Sony/ATV and received an option to buy half of Mr. Jackson’s share.-excerpted from “Jackson Assets Draw the Gaze of Wall Street” by Andrew Ross Sorkin and Michael J. de la Merced. 

And, quoting again from Pop History Dig:

  By April 2006, Jackson was living temporarily in Bahrain after his child molestation trial.  Needing money, Jackson again turned to the Sony/ATV/Beatles catalog to help with creditors.  It appeared he would have to sell some portion of his share in the catalog to raise funds.  Instead, Sony came to the rescue and sent two executives to Bahrain.  The Sony executives negotiated a deal for Jackson that resulted in Jackson getting a lower interest rate on his $300 million debt through a refinancing arrangement.  In return, Sony gained more authority to operate Sony/ATV/Beatles catalog, and also retained an option to buy a further half of Jackson’s share.  This meant, if the option was exercised, Jackson would then only retain a 25 percent share of the Sony/ATV/Beatles catalog.

We Know How He Felt THEN. But Did Desperate Times Call For Desperate Measures? And If So, Could This Help Explain What Has Happened Now?
We Know How He Felt THEN. But Did Desperate Times Call For Desperate Measures? And If So, Could This Help Explain What Has Happened Now?

While I certainly do not buy the media spin of Sony as knights in shining white armor sweeping in to “rescue” Michael from his financial straits, the fact remains that Michael agreed to these terms in 2006. If he had indeed filed for bankruptcy in 2006 (although to my knowledge it has never been confirmed that this was ever his intent; media reports, as always, must be taken with a heaping grain of salt) he would have certainly lost his share of the catalog, anyway. By agreeing to this deal, it enabled him to maintain this asset, but under much more precarious conditions. Not only did it mean a potentially lowered share (25% as opposed to 50%) but it also means that Sony could have opted to buy out his share at any time in the last ten years. However, despite a flurry of interest from many prospective buyers in 2009 who had their hungry eye on this golden prize, Branca remained adamant that Sony/ATV was “not for sale” -a sentiment he has expressed many times throughout the last six years. However, many fans-especially those among the anti-estate faction, are quick to point out one of Branca’s most glaring conflicts of interest-while serving as co-executor of the Michael Jackson estate, he is also a senior advisor of Sony. Certainly this would play a major hand in determining how it is that Sony-the corporation Michael hated so much that he was willing to put his life on the line to go on a major campaign against it-somehow always seems to have its hooks in him one way or another. One can only imagine how much it must have galled him to sign to those terms in 2006. But if the only viable alternative was to lose the catalog, then his decision makes perfect business sense in hindsight. Even if it came from a point of desperation, it was a decision that enabled him to keep his stake in the catalog, ensuring that himself and his children would continue to benefit from it. As usual, he was probably thinking far ahead, imagining that at some future date, he would be “back in the saddle” and in a position to dictate better terms. The agreement to this clause, while he had to have known the risks, served the purpose that was needed at the moment-it bought him valuable time. Ever optimistic, I am sure he was thinking of this as a temporary measure that would get him through the present emergency, as Michael was always certain that his next big project would put him back in the financial clear. But in so doing, it also gave him further just grounds to mistrust Sony’s motives, and contributed much to the loss of peace of mind that characterized his remaining years.

Michael's Greatest Asset...And Biggest Curse. It Brought Him Enormous Wealth and Leverage, While Systematically Destroying His Peace Of Mind.
Michael’s Greatest Asset…And Biggest Curse. It Brought Him Enormous Wealth and Leverage, While Systematically Destroying His Peace Of Mind.

 

 

 

 

accept-five

 

 

 

 

The Sony/ATV catalog became, in short, his greatest blessing and biggest curse, a metaphoric cross he carried on his back until his dying day. And many still maintain that he gave his life for it-a belief that certainly hasn’t been alleviated by this latest turn of events. For sure, the Michael Jackson estate as it currently exists has lost much of the goodwill and faith of the fan community as a result of this action. and it is going to be a long and difficult road for them now to gain it back-if they ever do. For fans who know how passionately Michael felt in his drive against Sony, and who lived with him through his fight to maintain this asset at all costs, there is no reconciliation. I understand because I have been feeling exactly those same emotions ever since the story broke. It is galling indeed to think that all of Michael’s struggles-the sheer physical, emotional and mental anguish he put himself through in order to hang onto this asset-were in vain; that in the end, it all went back to Sony, anyway.

It Was Truly David vs. Goliath...
It Was Truly David vs. Goliath…

Perhaps it was inevitable that the Goliath would eventually win out over David in the end. Michael always knew, deep down, what he was pitted against. And even though many of us like to think we can second guess what his exact future plans and moves would have been, the truth is that none of us are really in a position to make that call. Michael had known since 2006 that Sony could trigger their option to buy him out, or vice versa, at any time. Given that choice in 2016, would he have opted to hang onto the catalog-even if it meant dipping into his own cash revenue and perhaps even incurring an additional debt-or would he have opted to cash in at a 700,000,000 profit over his original investment in 1985?

...And David Won, For A Little While.
…And David Won, For A Little While.

The answer seems logical until we consider, again, the potential long term earning revenue of the catalog as opposed to a lump sum which, no matter how impressive sounding on paper, can be run through pretty quickly in the music business-all it takes is one bad business decision-one bad investment or one massive debt, to wipe it out. The truth is that we don’t know how Michael would have handled this situation, or what his future actions might have been in regard to the catalog, but if consistency is any indication, we know that he was always looking ahead to the bigger outcome. And if life circumstances had cornered him into a situation where he was forced to take the short term solution, we know it was only due to those circumstances-not because it was what he wanted, or what he knew was ultimately in his best interests. If it had been left up to Michael, he most likely would have moved proverbial heaven and earth to keep from giving up his share of Sony/ATV. I think I can speak for many of his fans when I say what hurts the most, perhaps, is simply how these matters reinforce the fact that Michael is not here to make these decisions for himself, and that it is left to others whom we can only hope are acting in the best interests of his wishes and of his children-and that, of course, is always going to be a fragile faith with few guarantees.

Ironically, in an uncharacteristic statement of support, even Joe Jackson put in a good word on the estate’s behalf:

On behalf of my wife Katherine and myself, I would like to personally thank the Executors of my Son’s Estate for a Job well done. Selling the Music catalog at the high end of today’s Market value of over 750 Million US Dollars, has secured many times over the financial future of Michael’s children: Prince, Paris and Blanket.

It is every fathers dream to secure the financial well being of his children. That is what drove me to work 2 jobs in my youth while struggling to make it through the Entertainment world.

Today, although my son Michael Joseph Jackson is no longer with us, I know he is looking down on his children from heaven as a proud father would, knowing he has secured a lifetime financial foundation for each of them.

This is certainly a very different tune from the one he was singing in this 2013 interview with Piers Morgan!

 But again, if we look at the long term prospects, the children’s future just got a whole lot shakier. On a brighter note, Prince and Paris are both entering adulthood, and will soon be able to take control of executive decisions on their behalf. An infinite source of revenue has been replaced by a finite sum that can and will run dry eventually-unless the children have inherited an ounce of their father’s business savvy, and let’s hope for their sake that they have.

Over it all, I think what most of us are truly feeling is an overwhelming sense of helplessness. I know it is what am feeling-a sense that, no matter how badly we wished for a different outcome, that we are fighting a futile battle against something much more powerful than ourselves-corporate entities and their billions of dollars. The pride that Michael took as the proverbial David who had essentially taken on and “owned” a piece of that  Goliath was a vicarious pride that reflected in all of us who admire and love him. The acquisition of Sony/ATV was more than just the greatest business coup of Michael’s career-it was, as I stated previously (but it bears repeating) the symbolic representation of what can happen when the underdog truly achieves the American Dream. One can point to any number of other such symbolic milestones in Michael’s career, from album sales to awards won. But many artists have accomplished these milestones. What Michael Jackson achieved with the acquisition of this catalog was something much greater-it promoted him from merely a phenomenally successful music entertainer to that of a powerful business icon. From that point forward, the press could belittle and mock him if they chose-but they could not ignore what he had accomplished, try to play the fact down as much as they might. The fact was, he “owned” a goodly percentage of the music industry-they all knew it, and feared it. As one fan stated on Twitter, presumably in response to a question about why it meant so much to fans for Michael to have this ownership, “because we can tell all the stans of other artists that Michael owned their asses.”

One fact that I can offer, even though I know it is of little consolation right now, is to say this-that the loss of Michael’s share in Sony/ATV in no way changes the fact that he did  own it, and that it is an accomplishment of his life and great career that is forever etched in stone. All we have to do is look at the slew of articles that have come out since the news dropped to reach one unarguable fact-one which no media outlet has been able to deny-and that is the fact that no matter how one feels personally about Michael Jackson’s move in purchasing that catalog in 1985, it was one helluva business move.

What He Accomplished Is Now Part Of Posterity. No One Can Take That Away!
What He Accomplished Is Now Part Of Posterity. No One Can Take That Away!

How his legacy will ultimately be impacted by its sale remains to be seen. Like I said, it doesn’t change “HIStory”-the world knows what he did, and what he accomplished. That is the good part. Also, we have to keep in perspective that even had Michael lived, the maintaining of this asset and its profits was never an absolute guarantee. Michael would have been well aware of the 2006 terms he signed that enabled Sony to buy out his share at any time (although in all likelihood he signed it convinced that either this condition would never be triggered or that he would be in a position to buy out Sony’s share if/when it happened). Also, there is is the issue of the Copyright Act of 1976 which would enable The Beatles and many other classic acts in the catalog to begin reclaiming their full song publishing rights as of  2013. So far, I don’t think there has been a mass exodus of artists from the catalog, but no doubt the impact of this copyright act will begin to take its toll on the catalog’s profitability, unless there is a never ending supply of fresh talent signed to Sony who are equally as profitable as these classic acts have been (however, let’s not forget that this includes streaming rights, which as of right now is the wave of the future).

 I know it is not a reassurance that will sweeten the bitter gall of feeling that Sony has somehow had the last word and last laugh, after all. To that end, I can offer nothing except to say I share the frustration, anger, and indignant helplessness that many fans are feeling right now. I don’t think that is going to alleviate any time soon. Michael wasn’t just another super rich celebrity. He was a celebrity who had worked hard and, through dent of his own determination and drive, had built a business empire. It was an empire that had remained, even though burdened with much debt at the end, an assets-rich empire, mostly because Michael had fought and struggled to maintain many of those assets even when a cash payout on any of them could have been the easy route to take. One could argue that even his signing of that 2006 agreement with Sony-bartering with the devil, so to speak-was a last ditch effort to hang onto control of this asset, by whatever means he had to undertake to do it. This is exactly why it is so frustrating now to witness what many fans can only perceive as the gradual dismantling of that empire. If we go strictly by the legal terms of the agreement Michael signed in 2006, then his estate cannot really be faulted for Sony’s decision to trigger its buy out clause. But that still leaves three very troubling questions that fans are rightfully asking, namely how does Branca’s conflict of interest as a Sony board member figure into it; is this cash payout simply intended to settle the estate’s IRS debt, and could the estate have afforded to exercise their right to buy out Sony’s share if they had really wanted to? For the latter question, we would have to consider if the millions it would have taken for the purchase-which would have come directly out of the pockets of Michael’s beneficiaries-would have been worth the investment. Michael might have said yes, but we can’t really know and, tragically, he isn’t here to make those decisions. As for whether this is money that will go towards settling Branca’s tax debt-rather than directly benefitting Michael’s heirs-only time will tell. For that matter, just how an estate worth 700 million which was supposedly debt clear only four years ago has ended up with such a hefty IRS audit remains a troubling question as well.

It is easy to feel frustrated and helpless in times like this because we all have taken pride in Michael’s accomplishments, and these losses hit us in a very personal way that I honestly do not think is shared by many celebrity fan bases. When a little piece of Michael is lost-or, as in this case, a very big piece-it somehow feels as if we have lost a tiny bit of ourselves along with it. I get that. I am feeling it, too. But looking at the overall bigger picture, fans also have to understand that when it comes to the power of corporate entities and their interests (and, yes, their greed) there is very little we can do to control that process. So (big sigh here) I have reconciled myself to taking the philosophical approach to it all. We can either expend a lot of energy ranting and raving,  feeling angry and bitter over things we can’t control, or we can focus our energy on those positive things we can control. I will stress as I always have, that the best way we can move Michael’s legacy forward is twofold-to continue to celebrate his music (which will last forever) and to carry forth his work for the planet. Those are the only real certainties we have left, and in the grander scheme of things, perhaps all that truly matter. Michael’s assets, like all material possessions of any kingdom, were bound to go the way of Ozymandias sooner or later. Just as Graceland and Strawberry Fields will one day be dust, so, too, will Neverland. What will endure will be his art; the magic he gave us, and the music we will still be discussing for at least a few hundred years to come. No amount of corporate greed can ever take that away. I know these are words that sound like poor consolation right now, and they won’t drive the bitterness away over what’s been done. Nor are they intended to appease the troubling questions of whether Michael did, indeed, die for his assets. As much as there is a part of me that still likes to believe in the basic goodness and intent of human nature, I have to keep it real. We are talking the music and entertainment business, after all-and, no, contrary to the popular media spin, I do not think for a minute that Michael’s fears of being murdered for his catalog were mere paranoia. Those fears were borne out of a reality he knew, and experienced, all too well.

I guess what I am really trying to say is that as fans, there is really only so much we can control, and it is pointless to waste fruitful energy crying over those things that are beyond our control. Many fans are now saying that the loss of Michael’s share of Sony/ATV was an inevitable conclusion. We were never going to be able to fight the interests of Sony; even Michael couldn’t, not completely,  for all that he gave it a valiant and courageous attempt. On this, there are essentially two schools of thought, both of which have been discussed quite a bit in the last week-one being that the catalog, as a representation of everything Michael had fought for, should have been retained at all costs; the other being that, as the very thing that had caused him so much torment, is perhaps better off gone.

It’s hard to know what to feel, exactly, as I can see the wisdom in both sides of this argument. And it is impossible to second guess what Michael’s own decision might have been. Some say without blinking that Michael would have never sold out; however, he did put the catalog up as collateral time and again, knowing full well the risks that would entail. Time and again, he was bailed out of those situations, but often at a cost that only meant more incurred debts-and, in the end, still no ironclad guarantee that the catalog couldn’t be taken at any time. If Michael had never signed that agreement with Sony in 2006, Sony wouldn’t have had its current option to trigger its option to buy out his share-but then, if he hadn’t signed, he stood to lose his share in 2006, anyway. It was a no-win situation that, in the end, simply appears to have bought him more time. This, of course, in no way alleviates those questions we must still ask about why the estate claimed to need this money in order to help get the estate out of the red, when they had claimed that the estate was totally in the clear four years ago. And it still doesn’t answer the troubling question of why the amount agreed upon matches, almost to the dollar, the amount that is claimed to be owed to the IRS. We might argue, of course, that none of Michael’s assets or cash would be of value to anyone, least of all his heirs, if seized by the IRS. But that only leads to even more troubling questions regarding the management of the estate, and I do think we owe it to Michael to not turn a completely blind eye to these matters. With that being said, however, I also know that it is impossible to move forward with a heart weighed down by bitterness over what’s been done, over those things we can’t control, and with vision that has been narrowed to a tunnel focus. As stated before, the only guaranteed permanent thing we ever had was Michael’s art, and this is what will be carried forth for future generations long after all the rest has been forgotten. And it is to this end that we must continue to focus the bulwark of our energy and effort.

Although my heart is heavy over this decision, there is still so much to celebrate. In Brussels, after the latest round of terrorist attacks, people gathered to sing “Heal The World.”

This bright spot in an otherwise troubled week reminded me of Michael’s unconquerable spirit, as well as the  beautiful resiliency of musical legacy which continues to bring hope to a troubled world.  In a week in which I learned of this crushing development from the MJ estate on top of personal tragedy (I lost a dear friend in a car accident) and in addition to the tragic news coming out of Brussels, it was a sight and sound that helped ground me, once again, in my faith and its unshakable belief that ” this, too, shall pass.”

His Triumphs Were Our Triumphs, Too!
His Triumphs Were Our Triumphs, Too!

Still, it is with bittersweet feelings that I write this. Michael made his stamp on the world. What he achieved, he achieved. What he accomplished, he accomplished. I think what many fear is that this latest development will somehow diminish his accomplishments and the power he once held in the music industry to a mere footnote. That is not apt to happen. Nor is this likely to have any immediate impact upon the wealth of his estate any time soon, as per Zach O’ Malley Greenburg’s most recent Forbes article:

It’s that acumen that helped Jackson earn more than $1 billion during his life and more than $1 billion after death, even before the Sony/ATV sale. His haul this year is already the highest annual total for any entertainer measured by FORBES. When the dust settles, Jackson’s total earnings could soon surpass $3 billion on both sides of the grave.

While I agree with everything Greenburg says about Michael’s business acumen, however, I’m still not so convinced of all the glowing accolades of this sale as a win-win.  For sure, these assurances still do not take away the bitter sting of knowing that the stake Michael once held in a multi-billion dollar asset will now go back to a company he deemed long ago as “the enemy.”

Inevitable, perhaps. Justifiable? That’s where it gets a whole lot murkier.

 

41 thoughts on “The Loss of Sony/ATV: What Does It Mean For Michael’s Legacy? And For Us?”

  1. One thing missing in this explanation is that the Jackson Estate still retains the Mijac music catalog that includes all of Michael’s music which has a high value, upwards of $100 million. In addition, the estate has a 10% interest in EMI music publishing which is valued at $2.2 billion plus making the estate’s share around $220 million. That is still a very healthy stake in music publishing. While selling the Sony/ATV catalog is unfortunate, diversifying the assets of the estate could be a very wise business decision . Buying the entire catalog would, in essence, have put the estate’s eggs all in one basket.

    Based on what I have read over the last couple of years, the estate only claimed personal debt was clear. They have clearly stated that the $250 million loan on the catalog had been renegotiated to a more favorable interest rate. Contrary to fan belief, the estate never lied about this.

    There is a lot of bad information out there regarding the financial dealings of the Estate. Emotional reaction is okay but too much fact is ignored. I am sorry to see that. Even your piece alludes to pro-estate and anti-estate. There should really not be sides, only recognition of fact. Too many people don’t understand the facts, so base their opinion on emotion. It feels like an uphill battle to have a reasonable discussion about it. We have fought a battle for years in getting people to understand facts about Michael vs media controlled negative messages about Michael. It is discouraging that we can’t have reasonable discussions. Just because some of us understand the business aspect doesn’t mean that we are estate employees, an accusation thrown out too quickly and too often.

    1. Yes, I am aware that the estate still maintains those holdings. I think what many fear now, which is an understandable concern, is just how secure those remaining assets are. But for now, at least, the estate still holds control of them and that is good.

      That is a good point made about the $250 million loan on the catalog which is well taken.

      I certainly don’t wish to contribute to the lack of reasonable discussion on the issue. That is why I wanted to get past all of the pro and anti estate sentiments to look at the facts, including how the trigger clause came to be in the first place. Still, it is an emotional subject so I guess it’s kind of hard to leave emotion out of it completely. But I get what you’re saying, which is why the door to civil discussion is never closed here.

    2. Very balanced article thank you. May be we could also take into account the millions that Michael would have generated in the course of the ‘This Is It’ tour had he lived on. May be he would gave entered into fresh negotiations with Sony regarding the catalogue overriding the terms and conditiobs of 2006. Who knows.

      1. I believe this was always his ultimate goal, maybe not necessarily from TII but I think he always believed that eventually he would be in a position to renegotiate those terms.

  2. Raven, I have seen fans say that the Estate claimed in 2012 that all debts were paid many times on social media and on forums in the past days but it’s just not true.

    The Forbes article that you cite from 2012 never claims ALL debts are paid. In fact, it explicitly states the following:

    “There are still some business debts left for Jackson, namely a loan that FORBES estimates at $280 million, connected to the Sony/ATV publishing catalog.”

    So there is the answer as to whose debts they were. They were MJ’s and no one said ALL the debts were paid by 2012, only all personal debts, but the same article also noted that this business debt on Sony/ATV still exists.

    BTW, how much Sony/ATV generated for the Estate is an interesting issue. People look at the revenue which is $600 million a year and from that they imagine that it generated profit in the $100 millions. Well, it did not according to accounting documents and the leaked Sony e-mails in 2014. The profit is surprisingly small. By the time they pay the artists around $84 million remains of that $600 million. Then there are costs and at the end both Sony and the Estate got $23 million each from it, acc. to the leaked Sony documents.

    Acc. to the Estate’s last accounting they got around $17 million a year from the Sony/ATV catalogue (the difference between the $23 million vs. $17 million may be gross vs. net) and all of it immediately went back to paying the debt. So basically it created zero profit for the Estate.

    Interesting to note that MiJac – relatively speaking – is a LOT better business. Although it only contains about 1000 songs (vs. Sony/ATV’s over 2 million) it made $12 million for the Estate acc. to the last accounting. And it doesn’t have debts to pay. There are several factors why that is so: it is mainly MJ’s music, so the Estate does not have to pay out as many other artists and songwriters as Sony/ATV. They don’t only get the income for publishing, but also for the performer and in most cases songwriter as well. Also MiJac has a lot less administrative costs. And Sony/ATV itself has its own debts on the catalogue (not only MJ had debts towards them) that they too have to pay. And of course, we as fans, can take pride in the fact that MJ’s music is still a strong seller both in the record stores and on streaming services.

    When selling the catalogue, the choice for the Estate wasn’t between just keeping it or selling it. Acc. to the articles it was between either selling their own half or buying Sony’s due to a so called shotgun clause in the contract between MJ and Sony. So basically the choice was between getting all debts paid at once and getting $750 million or acquiring another $750 million debt additionally to the already existing $250 million. There may be several decades until the Estate could pay back that much debt and before the catalogue could start producing genuine profit for them. Or they can get debt-free, take the money and put it in other investments that will produce profit all along. Considering that, from a strictly financial POV to me the choice seems like a no-brainer, to be honest.

    Now, I have seen arguments like “if it’s worth for Sony to buy it why isn’t it worth for the Estate”? Well, the Estate and Sony aren’t in the same position as business entities. I am sure Sony bought it because they expect it to do well (although they weren’t quite sure about the catalogue’s potential in the leaked e-mails in 2014, they actually contemplated selling it), but Sony is a huge multinational company with billions of dollars of profit a year, for which another $750 million loan is not as big of a burden as for an Estate. They also have many legs to stand on if this business does not turn out how they expect. For the Estate it would be putting all their financial resources into this one buisness and what if it doesn’t work out? The music industry is kind of a questionmark right now. Sony obviously has hopes for the streaming business, but records don’t sell as they used to any more. Streaming may indeed prove to be big business, but what if not? Sony can take that risk, an Estate cannot and should not IMO.

    Also, don’t forget that Sony already has all the infrastructure to market these rights (record company, movie companies, huge administration etc.). The Estate does not have these means. Building some of that up would cost additional money.

    So putting aside the emotional element, to me the decision makes sense.

    I know it meant a lot to MJ, but he is gone, so to me it does not have as much significance any more. It’s just an investment that can be replaced with another investment. MiJac is a different issue. That’s MJ’s own music. That should remain forever in the possession of his heirs.

    BTW, I think a lot of the emotional issue to MJ was about “owning the Beatles’ music” and due to a certain law half of the Beatles’ music soon will go back to Paul McCartney, anyway. McCartney already started the process on 178 songs: http://www.musicbusinessworldwide.com/revealed-the-178-beatles-songs-paul-mccartney-is-reclaiming-from-sonyatv/

    1. “Now, I have seen arguments like “if it’s worth for Sony to buy it why isn’t it worth for the Estate”? Well, the Estate and Sony aren’t in the same position as business entities. I am sure Sony bought it because they expect it to do well (although they weren’t quite sure about the catalogue’s potential in the leaked e-mails in 2014, they actually contemplated selling it), but Sony is a huge multinational company with billions of dollars of profit a year, for which another $750 million loan is not as big of a burden as for an Estate. They also have many legs to stand on if this business does not turn out how they expect. For the Estate it would be putting all their financial resources into this one buisness and what if it doesn’t work out? The music industry is kind of a questionmark right now. Sony obviously has hopes for the streaming business, but records don’t sell as they used to any more. Streaming may indeed prove to be big business, but what if not? Sony can take that risk, an Estate cannot and should not IMO.”

      I wondered about this, also, because again if we look at this as a situation where one party or the other has to buy out, who was obviously in the better position to do so? On the estate’s end it would have meant pouring all of the resources into this one basket. Do I believe Michael himself would have fought tooth and nail to keep it? Yes. But who knows at what personal and financial cost? (He did this for years, which is a big reason why his finances were in the shape they were in by 2009). So I agree we do have to look at this from many perspectives, not just the emotional one that obviously cringes at the thought of Michael’s ultimate prize going back to Sony.

      Also, as you pointed out, music publishing most likely will not remain as profitable as it was in the past, largely because the business has changed. In 1985, people still bought physical albums and singles, which is now being mostly phased out by streaming and digital sales-and we don’t yet know the full implications of these trends as potential business models (for example, most of the profit from streaming and digital sales is coming from singles rather than album sales). Also, as more artists begin exercising their option to have their publishing rights returned, as per the Copyright Act of 1976, that also would certainly have its impact on the catalog’s continued profitability. I didn’t know that McCartney had already initiated this process, but it certainly doesn’t surprise me.

      I would imagine, however, that music licensing will remain big business, as there is no shortage of demand for music in commercials, movies, and TV shows.

      The most troubling question that remains, I think, is that of the pending IRS case. A lot of fans are wondering if this sell out was a means of settling that debt. It is a justifiable question, given the close match of the sums. For that answer, we will simply have to wait and see how this plays out.

  3. i would also like to add that this sales is not a done deal yet,it still has to go through abitrattion and if the deal is not honestly it çould still be voided.besides katherine and mj3 i.e the kids could still raise objection over the sales.

    1. It is possible, although from a legal standpoint I think it is pretty much a done deal in all but the paper signing. Given recent statements, Katherine will most likely sign off on it. I don’t know about the kids. Paris has been pretty outspoken against Sony recently; if any objections are raised, it will most likely come from her. And she will be eighteen in just a couple of weeks.

  4. What I really want to know is how the exact formulation of this „buy-sell“ clause is. I only get explanations of the media or fans about this, but not the real part of the contract. Don’t we have to ask why Sony triggered it now and not in the years from 2006 – 2009, when Michael was still alive? He was in a stressed finacial situation in those last years, so he could have never be able, to buy out Sony’s share of the ATV back then. So if Sony triggered the clause in those years, they probably would have succeeded in getting the whole catalog. But they didn’t, and I ask why? Maybe the clause doesn’t explicit say, „you have to sell your half“ then the other party triggers it? For me it sounds like an odd clause when it gives one party the opportunity to just force the other party to sell at any point they want to aquire their half. It’s like extortion, because in case you don’t have the financal background you will lose your share. On that condition, Michael’s ATV share would have been at Sony’s mercy since 2006. And given all those facts, that Sony always wanted to get hold of the complete catalog, I just wonder, why they didn’t trigger the clause and get it back then. So I can’t help but think, that there’s a reason for them to do it now, because they (Sony) knew that they can get it from the Estate more easily than from Michael. But that would mean, that they couldn’t have forced Michael to sell, but negotiate with the Estate, or Branca, will finally proceed according to their plan – and it did.

    1. Yes, it definitely WOULD be interesting to see the exact terms of this contract. Unfortunately I, too, was only able to piece the story together from media accounts, which obviously do not give us the full story. But I think the knowledge Michael had that he had given Sony this leverage was a big part of his torment for the last three years or so of his life. From a rational standpoint, it had to have been. I agree that Sony would find dealing with the estate executors much more amicable than in the old days of dealing directly with Michael-for all the obvious reasons. As to why now in particular, however, it could be because of many reasons, not the least being that Michael died at the height of a great economic recession that we are only just now starting to come out of. I’m not sure if that could be a factor, but it would certainly be a plausible one from a business perspective.

      However, let’s not forget the conspiracy theories. Many still believe that the AEG concerts were just a thinly veiled cover to murder Michael and get the catalog back. At that time, the catalog was again put up as collateral, in the event the shows fell through (which they did). Many expected then that Sony would immediately swoop in for the kill. but when that didn’t happen right away and the estate maintained control of the asset, those suspicions were somewhat mollified (but never truly appeased). And a huge reason those doubts were never fully appeased was due to Branca’s obvious connections to Sony. It is still a tangled web that has bred much of the mistrust of the estate and their intentions, and certainly this latest development has done nothing to appease those concerns-if anything, it has only inflamed them.

      1. Yes, economic recession could have been a reason for not triggering the clause earlier. But I just read your post again, and stopped by 2 media quotes you’ve cited, that say:
        >„In return, Sony gained more authority to operate Sony/ATV/Beatles catalog, and also retained an option TO BUY A FURTHER HALF of Jackson’s share.„<
        Thats interesting, because it means by triggering that clause Sony could only get one more quarter of Sony/ATV – but not necessarily Michael's whole share. (presumed the media report on this point is accurate). So with this clause, they possibly would have never gotten the whole thing while Michael was alive! Even if this clause really allows them to force him selling, it would have been only 25%. That could have been a factor for Sony to wait, either for Michael getting in more financial difficulties (maybe by not fulfilling his duties in the TII contract, for which the catalog was again put up as collateral, as you mentioned) or for someone else to negotiate, as it happened now. The whole thing seems to be so calculated.

  5. Raven, first of, happy to see your site back and kickstarted with another excellent article. Hope you are now well protected against hackers.
    What I will say has no legal standing whatsoever. It is just common sense and gut feeling.
    I also do not take seriously the self proclaimed oracles and “legal experts” of Michaels business affairs who deem anyone who criticizes the mismanagement of Michael estate as lacking business sense . Eventually much of what they say is worth just as much as any other opinion.

    Neverland and Michaels ATV share are not only symbolic assets. Neverland is cultural heritage, even black cultural heritage which is a rarety. Michales ATV catalog is an investment that sony would not buy if it was a burden to them.
    How come many fans predicted that it would happen . Yet a brilliant extremely well paid lawyer who happens to be the architect of the purchase of Neverland and the ATV catalog AND of Michaels will, let himself be surprised first by Colony Capital and now by sony with a clause that was triggered out of the blue ? The only justification for Branca to be back in Michaels life and unfortunately his death is because he was contracted by AEG for This is it, according to Randy Philips ‘because he knew where the bodies in sonys closet were buried’ And yet he did not know that this clause could be triggered?
    Can any legal expert explain what his self solicited position as a consultant for sony – outside the ATV board – really was in this game. No they cannnot, because if not for the leaked emails they would have ‘explained’ to us that no such thing would ever happen.

    Even if to Michael these were symbolic assets , it means that they represented more to him than monetary value . He was willing to do whatever it took to keep them and died trying. Now it feels even more that he died for nothing.
    Michael not only spent 47 mln on the purchase of the catalog, he also invested alot in expanding it and buying out Brancas share. I am disgusted by ‘fans’ who blame Michael for making debts while turning a blind eye on the executors created, totally unnneccesary , greed driven 730 million debt.
    My guess is that not the Colony Capital or sonys triggered clause, but the IRS looming claim forced the executors to make a move to secure the benificiaries inheritance and prevent the IRS from seizing it. The irony is that Branca had no intention to fund Katherine Jacksons trust.
    I am happy about two things, That Hayvenhurst is still in possesion of the family . And that Prince now has his own production company so that from now on no one including Branca can produce anything about Michael under their own name instead of under Michaels name and gather lifelong production rights with Michaels creative expression, that should have gone to the beneficiaries.

    1. And I think we will start to see both Prince and Paris taking a lot more active role in their father’s estate and affairs now that they are of age. Prince seems to have a good business head (albeit he is young and going through his “party phase” right now, but that will pass as he matures).

      I’m sure Branca was aware of the clause all this time. He would had to have been, as executor. He probably just didn’t know if or when Sony would make their move to buy out.

  6. Raven,
    You make a good point about fans and admirers owing it to Michael to not turn a blind eye to the management [or mismanagement] of his estate. Before reading your article I had reconciledmyself to it being none of my business. In other words, who am I? This is the Jackson family’s business. But, as I also posted on my Facebook timeline, this whole thing with the IRS is really suspicious to me and I haven’t been able to shake that feeling. It’s all to convenient. Whomever the executors used in the valuation of Michael’s worth made a huge mistake (whether accidentally or not) leading to the huge tax bill that opened the door for Sony to swoop in and grab the catalog that will generate millions for years to come, even without the Beatles. I just can’t get over how calculated this all appears. It is so troubling.

    1. I am not familar with the american justice and tax laws, but can´t the executors be hold responsible for the tax penalty, which is almost 200 m $ ? I hope the family sues them for the financial damage, they have done may it be intentionally or not !

      1. The executors certainly can be held responsible by the beneficiaries. However, any and all penalties incurred by the IRS would still affect the decedent’s estate and assets, including the right to seize those assets. I would imagine in the event of a case actually going to trial against the executors, it would depend on the ruling, but I would need to do more research into it before saying with certainty.

    2. This is the main thing that troubles me about it, also. But the bottom line is that there is really only so much we can control as mere fans, and the rest is out of our hands. I want to continue celebrating Michael’s artistic legacy, and I don’t feel I can adequately do that if I allow myself to be over burdened by concerns over things that are out of my control, anyway. The financial affairs of his estate are something we can’t control, and it probably doesn’t pay in the long run to lose too much sleep over these things. But I always go back to the dream I had about Michael’s death and the suspicion that there is a lot more behind it than we know. There is still a part of me that feels we can’t truly move forward until/unless we have the full answers about why he died. I don’t dwell on it unduly, but it is always in the back of my mind.

  7. Branca was put in place to assist in stripping Michael of his assets. He probably figured that since seven years have passed, fans would not get nearly as upset if he had turned the catalog over to Sony immediately.

    Branca lost Neverland because he failed to keep up the mortgage payments, which is one of the primary responsibilities of an executor. He entered into unprofitable arrangements with Sony for This Is It, and with Cirque du Soleil, where the grosses are huge, but the estate realizes no profits. He turned over millions to AEG based on a fraudulent document prepared by a manager Michael had fired months before, and Frank Dileo, who was actually in AEG’s employ.

    Branca himself has been on Sony’s payroll for many years. This is NOT an “arm’s length transaction” – Branca sold Michael’s holdings for millions less than they are worth. The Jackson children have a guardian ad litem, charged with protecting their financial interests, who has picked up a hefty paycheck for years, but evidently does no work. (Katherine Jackson can not sign off on this deal, and that “statement” supposedly from Joe Jackson is so phony it reeks.)

    I hope a judge puts a stop to this deal. The Jackson children should hire their own legal team and sue to stop it. Branca is either the world’s worst estate executor, or a crook.

  8. can someone please explain this IRS tax bill to me, if at the time of michael’s death even if the catalogue was worth 3billions dollars won’t michael’s share be 1.5billions and he has debt of 500mil on it does that not mean he actually is worth 1billion dollar before tax as at the time of death.Secondly according to the year-end estate financial report he was making between 17-23million dollars wish was used to pay down the debt.so how could the IRS Place a tax bill of 750mil on an estate worth 1billion dollars.when all the money that they were making was going to pay down the debt.

    1. The tax bill is a starting point. Competent executors would negotiate a settlement with the IRS for a much smaller figure. The key word is competent – Branca and Weitzman have been in negotiations with the IRS for some time, but as they have shown little regard for the Jackson children’s financial well being, and there are no fees to be realized for the executors, they might not be particularly effective.

    2. From media reports : IRS claims $505 million taxes, $197 million penalties, extra $30 million for gross undervaluation total $732 million.

      Executors vs – IRS valuation (the most significant misfilings)
      MJs Image according to executors $2,105 vs IRS $434. million
      ATV sony catalog $ 0 vs $469 million (To be sold to sony at $750, remaining debt in 2016 $ 250 million )
      MJJ ventures inc. 13,7 vs 81
      Jackson 5 masters 11, 2 vs 45.
      Interest in trust 2 vs 61
      Personal property 0 vs 48
      Encino 4.1 vs 5,5
      Neverland 0 vs 1,7
      Loyds insurance 0 vs 17, 5 ( insurance was $17.5 settled for ??)

  9. Whoever valued Michael’s assets for the IRS is trying – no doubt deliberately – to ignore the “Angel of Death” loophole in the tax law. If you’re not familiar, the AOD means that the estate should be taxed based on its value on June 25, 2009. All things Michael increased enormously in monetary value after his death, but for tax purposes, it doesn’t matter.

    The executors did a lousy job in their valuation, but the IRS is way off, too. While it was beyond price to us as fans, no way was Michael’s “image” worth $434, 000,000 on 6/25/2009. The IRS people seem to have been dazzled by the overwhelming world-wide reaction to the shock of his death. Considering that Branca sold Michael’s catalog for about half of its perceived value, the Jackson heirs have actually realized a loss.

    1. May I add, this is the first time the IRS has attempted to assess the value of the deceased’s image for the purpose of determining estate tax, which is patently unfair. No other celebrity’s heirs have been treated in this fashion. Only tangible assets have been taxed in the past.

  10. From what I understand the dispute is about the valuation of the intellectual property (Michaels own and his sony ATV catalog) which will be interesting now that it will be sold. But mostly it is about the (estate tax) value of Michaels image at the time of his death and what the valuation is based on.
    The difficulty is that like other unique assets ,(Neverland ,estate, art etc) image depends on the potential it has to generate money (when sold).
    It is absurd that the image of a man who was making a come back, sold out 50 concerts in no time, whose album sales had been steady even during the trials , who had many photo/fashion shoots in high end glossy and fashion magazines before he died , whose announcement of his concerts caused a frenzy all over the world, would be worth a measly 2000 dollars.
    I highly doubt that Branca would have inserted himself in This is it deal and ask AEG to be involved if he thought that Michaels earning/selling potential was that bad. If anyone knows how much Michael is worth, it would be him. The deals that spurred Michaels income after he died were all made before he died with the supposedly tarnished image, from This is it footage to Cirque and his own music. It was his image that triggered AEG to want to work with him.

    What is suspicious is that their low valuation of his image is supposedly based on the allegations and that just when the AEG case that would expose the IRS claim , was about to take off, out of the blue came Robson and Safechuck with their allegations.
    As someone else here said, it is all too calculated.
    But because it is also so transparant and we tend to only believe something if its complicated, it is hard for most people to phathom that this could be deliberate.
    Some say that the executors can be helt accountable for back taxes and penalties . But the way Michaels will is drafted, the executors have protected themself from all kind of liabilities. And start to think what a goldmine it is for a lawfirm to enter a years long battle with the IRS over an estate like Michaels.

    re my previous post : the 30 million extra was an omission on IRS side that they corrected.

    1. My point is that, for the purpose of determining estate tax, they should not have put a value on Michael’s image at all. Historically, the IRS has never taxed a celebrity’s image. When it comes to the Jackson estate, they’re just making up rules as they go along.

      1. It depends on provisions made in the will or trust.
        Here is an article about Robin Williams will
        http://www.hollywoodreporter.com/thr-esq/robin-williams-restricted-exploitation-his-785292

        Robin Williams Restricted Exploitation of His Image for 25 Years After Death

        “How Robin Williams made a move that Michael Jackson hadn’t — and what other celebrities can learn from it.”

        “First, the Trust restricts exploitation of Robin Williams’ right of publicity for 25 years after his death. That means, there won’t be any authorized advertisements featuring Williams until at least August 11, 2039. The provision also interferes with someone immediately doing, say, a hologram of a Robin Williams standup routine or digitally inserting him into a new film.”

        1. Provisions in a will or trust about exploitation of the deceased’s image have nothing to do with how the IRS determines how much is owed in estate tax, of at least it hadn’t until Michael died. If such usage results in income, then the heirs will pay income tax, which is not the same thing.

          1. Image and likeness are considered property and estate tax is a tax on property.
            .
            Property right—Use of name, voice, signature, photograph, or likeness.
            Every individual or personality has a property right in the use of his or her name, voice, signature, photograph, or likeness. Such right exists in the name, voice, signature, photograph, or likeness of individuals or personalities deceased before, on, or after June 11, 1998. This right shall be freely transferable, assignable, and li-censable, in whole or in part, by any otherwise permissible form of inter vivos or testamentary transfer, including without limitation a will or other testamentary instru-ment, trust, contract, community property agreement, or cotenancy with survivorship provisions or payable-on-death provisions, whether the will or other testamentary instrument, trust, contract, community property agreement, or cotenancy document is entered into or executed before, on, or after June 11, 1998, by the deceased individual or personality or by any subsequent owner of the deceased individual’s or personality’s rights as recognized by this chapter; or, if none is applicable, then the owner of the rights shall be determined under the laws of intestate succession ap-plicable to interests in intangible personal property. The property right does not expi-re upon the death of the individual or personality, regardless of whether the law of the domicile, residence, or citizenship of the individual or personality at the time of death or otherwise recognizes a similar or identical property right. The right exists whether or not it was commercially exploited by the individual or the personality during the individual’s or the personality’s lifetime. The rights recognized under this chapter shall be deemed to have existed before June 11, 1998, and at the time of death of any deceased individual or personality or subsequent successor of their rights for the purpose of determining the person or persons entitled to these property rights as provided in RCW 63.60.030.

            California publicity law
            http://www.dmlp.org/legal-guide/california-right-publicity-law

            Interesting read
            http://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi?article=1042&context=jbel

            Given society’s overwhelming fascination with celebrities, it may be of little surprise to learn that celebrities continue to earn money after they have passed away. While Elvis Presley topped the list for the second year in a row grossing $52 million,industry analysts predicted that Marilyn Monroe3 and James Dean—who generated $6.5 million and $5 million, respectively—have true staying power due to their “iconic fame” that has carried each through the decades. Although such right has not been implemented in federal law, a growing trend exists toward recognizing a postmortem right of publicity by statute or under common law.

            “States that recognize such right have analogized the right of publicity to property rights, which are clearly devisable “

          2. Sina, it held your comment in que because of the links. Sorry about that. I’ll catch up with the conversation soon.

          3. Yes, and that is a trend that will only continue to grow in this age of digital/CGI technology, holograms, etc.

    2. I really do not believe the estate was behind the Robson and Safechuck claims, although I have always suspected the timing of it just when the AEG trial was looming. But my suspicion has always been Wade’s connection to AEG. Would the estate have anything to gain by planting false allegations, and thus purposely lowering the earning potential of Michael’s music, brand and image? It would seem to me rather like someone shooting themselves in their own foot. But then, even Michael himself always had a suspicion that Sony was behind the allegations.

      The estimation of Michael’s image as being worth 2000 dollars was ridiculously low, and has never made sense to me.

  11. Like someone commented above, I will not be fully satisfied until we see what the contract actually said. I find it interesting that we have never seen that document, just like we haven’t gotten full details on the supposed options the Estate had that would make them the sole owner. I mean, they tell us everything else, but they can’t let us in on that?

    At this point, I’m not sure if that clause even exists in the contract, and I don’t believe they looked into any other possibilities for sole ownership. The whole idea from the get go was to get it into Sony’s hands.

  12. Sina, the IRS imposes Federal estate tax. The articles you cite refer to various state laws. For example, RCW is the Revised Code for the State of Washington, which has no connection to the IRC, the Internal Revenue Code. As Michael did not reside in the state of Washington, and apparently held no property there, their state laws do not apply to him.

    1. Washington is just as an example , check the CA link and everything else I sent you and read them in combination with the documents of the case that you can find on some fansites.

      Bottomline : Name and likeness are Property like other assets and represent taxable value .
      Difficulty is how to valuate intangible assets like name and image , intellectual property etc ,
      Why was Michaels set at 2000 for an artist of Michaels stature and does it make sense to blame it on a tarnished image /allegations , while there were so many who wanted to do business with him, including Branca, Colony Capital, AEG , Cirque and others, DESPITE the allegations.
      And why were his assets not protected under the will.

      There is some interesting discourse about valuation of image and likeness since Michaels case that you can google.

      1. Eta Estate tax is Federal , but not every state considers image as an asset or property , but California and some other states do.

  13. Raven, i thought i should bring to your attention this interview on MJCAST podcast concerning the Sony/Atv sale i thought was interesting,you should check it out.

  14. Raven, I don’t know how I missed this amazing post. Thank you for so clearly and compassionately articulating what the catalog meant to Michael and why the loss of it and Neverland meant so much to fans. This is the most level-headed and honest review of the situation I have seen to date. I also appreciate the discussion in the comments. You’re providing an incredible resource here for people who love Michael.

    Thank you also for noting the following:
    “We can either expend a lot of energy ranting and raving, feeling angry and bitter over things we can’t control, or we can focus our energy on those positive things we can control. I will stress as I always have, that the best way we can move Michael’s legacy forward is twofold-to continue to celebrate his music (which will last forever) and to carry forth his work for the planet. Those are the only real certainties we have left, and in the grander scheme of things, perhaps all that truly matter.

    I love this, and I’d add that we all see different parts of the picture, and have access to different information. If we all do what we feel called to do, then eventually the truth will have to come out.

    I know very little about the estate and the catalog, but am grateful to you and everyone else who has worked on this issues. Again, my thanks.

    1. Thank you, Keely. I wrote that, really, out of a sense of helplessness about an action I disapprove of, obviously, but which I know I can’t change. In the long run, I do feel we can best serve Michael’s legacy by pushing forward.

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