Was MJ Secretly A Business Genius?
(26-1-2011) In 2010 Michael Jackson earned $275 million — more than Beyoncé, Lady Gaga, Madonna and Jay-Z combined — despite the fact he's no longer with us.
And though much of that total can be attributed to the swell of nostalgia that boosted sales of all things Michael in the months following his death, a sizable portion is the product of his much-underrated business acumen.
It is no secret that Jackson's spending habits put him in a great deal of trouble. He blew through the profits from sales of 750 million records on extravagances ranging from $10,000-a-night hotel stays to the construction and upkeep of his sprawling Neverland Ranch. Keeping money was not one of the King of Pop's strong suits. But piling up huge stacks of it — and finding unusual ways to ensure that more would follow — was one of his many talents.
By far the best move of Jackson’s financial career was one that had nothing to do with his own music. In 1985, he paid $47.5 million to buy a publishing catalog that included 250 Beatles songs. Ten years later Sony paid Jackson $90 million for half the rights, forming the joint venture, Sony/ATV.
Today, the Jackson Estate and Sony share ownership of the catalog, which now boasts half a million songs including titles by Bob Dylan, Elvis Presley, Eminem and other artists. Industry insiders place the catalog’s value somewhere in the neighborhood of $1.5 billion, based on estimated proceeds of $50 million to $100 million per year. That estimate marks a 3,000% increase in value from the catalog’s initial purchase price.
“You’re talking about the greatest catalog in existence,” Ryan Schinman, chief of Platinum Rye, the world’s largest buyer of music and talent for corporations, said shortly after Jackson’s death. “When you have that many No. 1 hits in a catalog, you almost can’t put a price on it.”
One of Jackson’s smartest business habits was to keep shrewd advisers around him. Perhaps the best example is superstar entertainment attorney John Branca, who negotiated many lucrative deals for Jackson and has done an amazing job with the singer’s estate so far. It was Branca who scored the industry-leading royalty rate that Jackson enjoyed at the time - earning him nearly $2 per album sold - allowing him to reap untold profits from what turned out to be the biggest-selling album of all time.
Throughout his career, Jackson also sought out the advice of other shrewd businessmen, including billionaires David Geffen and Ron Burkle. It was Burkle who urged Jackson to keep his stake in the Sony/ATV catalog at all costs, even when the singer was in dire financial trouble during the 2000s. The catalog’s value today is a testament to the wisdom of both men.
Purchasing the Neverland Valley Ranch for nearly $20 million in 1987 was another smart investment on Jackson's part. The property is now estimated to be worth as much as $90 million. The only bad part was spending $35 million in improvements to the property, including the amusement park, the zoo and a railway line large enough for a full-sized antique steam locomotive.
So how much of Jackson’s business sense was actually his own, and how much belonged to his advisers?
“I think it was a combination of both,” says entertainment attorney Donald David. “Predominantly it was his own business sense. I once sat and talked to him for over an hour and he just knew the music business front to back. And he had good instincts. He had really good instincts.”
The eccentric and often flighty demeanor that Jackson exuded gave almost no indication of the shrewd mind on the inside.
“He was not the kind of person people portrayed him to be,” David explains. “He would play the game and use that high squeaky voice. Underneath it all, he was a very intelligent, very savvy individual, one of the smartest artists I’ve ever dealt with.”
The bottom line is that, if he had been able to control his impulsive spending, Jackson would have been a billionaire just on the strength of the Sony/ATV catalog alone before he passed away. Unfortunately, he died nearly half a billion dollars in debt.
Source: MJFC / forbes.com