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Michael Jackson: Secret Business Genius?
Jan. 25 2011 - 7:44 pm | 2,364 views
By ZACK O'MALLEY GREENBURG
Michael Jackson: Getting down to business.
In 2010 http://www.forbes.com/profile/beyonce-knowlesMichael Jackson earned $275 million — more than Beyoncé, Lady Gaga, Madonna and Jay-Z combined — despite the fact that he was no longer alive.
Though much of that total can be attributed to the swell of nostalgia that boosted sales of all things Michael in the months following the King of Pop’s death, a sizable part is the product of his underrated business acumen.
To be sure, Jackson’s spending habits could put a Russian oligarch to shame. He blew 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 Jackson’s strong suits. But piling up stacks of it — and finding unusual ways to ensure that more would follow — was one of his many talents.
Perhaps the best move of Jackson’s financial career was one that had nothing to do with his own music. In 1985, he shelled out $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 a joint venture called 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. 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. The estimate marks a 3,000% increase in value from the catalog’s initial purchase price — better than the 1,650% return on Class A shares of Warren Buffett’s Berkshire Hathaway since 1990.
“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, told me 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 best 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 a remarkable job with the singer’s estate thus far. Many praise Jackson for bringing in Quincy Jones to work on Thriller, but it was Branca who scored the industry-leading royalty rate that The Gloved One enjoyed at the time (nearly $2 per album sold), allowing him to reap untold profits from what turned out to be the best-selling album of all time.
Throughout his career, Jackson also sought the advice of other shrewd businessmen, including billionaires David Geffen and Ron Burkle. The latter 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 Jackson and Burkle.
Another good move: Buying the Neverland Ranch for $20 million in 1987. The property is now estimated to be worth as much as $90 million. A bad move: Spending $35 million in improvements to the property, including a go-kart track, a zoo and a railway line large enough for a full-sized antique steam locomotive.
So how much of Jackson’s know-how 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 absent-minded demeanor that Jackson exuded gave little indication of the 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.”
Unfortunately for Jackson, his spending habits vastly overwhelmed what financial shrewdness he possessed. If he’d been able to control his impulsive spending, he would have been a billionaire on the strength of the Sony/ATV catalog alone before he passed away. Instead, he died nearly half a billion dollars in debt.
http://blogs.forbes.com/zackomalley...ackson-secret-business-genius-music-business/
Jan. 25 2011 - 7:44 pm | 2,364 views
By ZACK O'MALLEY GREENBURG
Michael Jackson: Getting down to business.In 2010 http://www.forbes.com/profile/beyonce-knowlesMichael Jackson earned $275 million — more than Beyoncé, Lady Gaga, Madonna and Jay-Z combined — despite the fact that he was no longer alive.
Though much of that total can be attributed to the swell of nostalgia that boosted sales of all things Michael in the months following the King of Pop’s death, a sizable part is the product of his underrated business acumen.
To be sure, Jackson’s spending habits could put a Russian oligarch to shame. He blew 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 Jackson’s strong suits. But piling up stacks of it — and finding unusual ways to ensure that more would follow — was one of his many talents.
Perhaps the best move of Jackson’s financial career was one that had nothing to do with his own music. In 1985, he shelled out $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 a joint venture called 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. 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. The estimate marks a 3,000% increase in value from the catalog’s initial purchase price — better than the 1,650% return on Class A shares of Warren Buffett’s Berkshire Hathaway since 1990.
“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, told me 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 best 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 a remarkable job with the singer’s estate thus far. Many praise Jackson for bringing in Quincy Jones to work on Thriller, but it was Branca who scored the industry-leading royalty rate that The Gloved One enjoyed at the time (nearly $2 per album sold), allowing him to reap untold profits from what turned out to be the best-selling album of all time.
Throughout his career, Jackson also sought the advice of other shrewd businessmen, including billionaires David Geffen and Ron Burkle. The latter 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 Jackson and Burkle.
Another good move: Buying the Neverland Ranch for $20 million in 1987. The property is now estimated to be worth as much as $90 million. A bad move: Spending $35 million in improvements to the property, including a go-kart track, a zoo and a railway line large enough for a full-sized antique steam locomotive.
So how much of Jackson’s know-how 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 absent-minded demeanor that Jackson exuded gave little indication of the 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.”
Unfortunately for Jackson, his spending habits vastly overwhelmed what financial shrewdness he possessed. If he’d been able to control his impulsive spending, he would have been a billionaire on the strength of the Sony/ATV catalog alone before he passed away. Instead, he died nearly half a billion dollars in debt.
http://blogs.forbes.com/zackomalley...ackson-secret-business-genius-music-business/