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Michael Jackson

AEG Drops $17.5 Mil

Insurance Claim

9/11/2012 7:25 AM PDT BY TMZ STAFF
breaking news

0911_mj_aeg_01
The concert promoter behind Michael Jackson's ill-fated "This Is It" tour has dropped its claim to collect on a $17.5 million insurance policy for the singer ... after the insurance company claimed AEG hid the extent of MJ's extensive drug and health issues.

AEG announced the move last night ... claiming the company has been contemplating the decision for months and it has nothing to do with the discovery of new emails that show AEG had doubts about MJ's health around the time the company applied for the insurance policy.

FYI -- the insurance company, Lloyds of London, had sued both AEG and Michael Jackson LLC in the wake of MJ's death to cancel out the policy. L.O.L. has claimed AEG and MJ were not forthright about the singer's drug addiction and failing health at the time they applied for the policy.

Now, a rep for Lloyds tells CNN ... "In exchange for AEG withdrawing its insurance claim, underwriters agreed to dismiss AEG from the case and to waive any costs recoverable from AEG."

Lloyds says it's NOT dropping the case against Michael Jackson LLC -- explaining they will press on seeking "rescission of the policy due to nondisclosures of Michael Jackson's prior drug use."

168 COMMENTS

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46.

Pegasus    

“If he pulled out of the tour, AEG would take control of his company and its catalogue of songs”
September 8, 2012
tags: AEG, Michael Jackson, O2 Arena, Power of Attorney, Promissory Note, Randy Jackson, Randy Phillipsby Vindicatemj (Helena)
.The above headline concerning Michael Jackson is a quote taken from a newspaper article recently published by musicweek.com. One of the readers accused me of not quoting the reference sources, so here it is (to read the article please click on the link).

A valuable discussion about AEG is now taking place in the post about Randy Jackson, however since it does not belong there I decided to shift some of the comments into a new post. These comments are my replies to Susan Joyce’s and other people’s questions about AEG.

If any other readers besides Susan have the same questions let me explain the way I’ve always seen the situation with Michael Jackson’s valuable assets and a possibility of AEG getting hold of them as a result of their “contract” with Michael. Of course this is my opinion only, but it is based on an extensive research I’ve made of the subject.

Susan Joyce raised this question twice:

“AEG could only be reimbursed what they had paid out to date in production and advances to Michael. If MJ’s musical estate (ATV and Mijac) together were worth say…..$800 million and Michael owed AEG a total of $100K, that is all AEG could collect. AEG would never own any of Michael’s musical estate.”

… I will try and explain it using an example this time. If you owned a company with a net worth of $1 million and you defaulted on your home mortgage which carried a first loan of $200K and second loan of $100K, the mortgage company could only sue you for the total amount of loans only i.e., $300K. The mortgage company, by law, has no legal standing to take your $1 million business and could NEVER act on your behalf or your sole representative

Susan,


Report by the Estate filed on 17.02.11 says that after Michael’s death they owed AEG the sum in excess of $40 mln. The actual advance to MJ was only $6,2 mln. while the rest must have been the expenses on producing “This is it” show borne by Jackson (click to enlarge)
The overall sum which the Estate repaid to AEG on behalf of Jackson was in excess of $40mln according to their first financial report. This was the sum which Michael would have had to return had his contract with AEG been severed. Those millions were made up of the $6,2 advance given to Michael under the Promissory Note and production costs which were fully placed on Michael’s shoulders (which is a complete outrage in and of itself).

Under pressure from Chernoff Randy Phillips admitted at Murray’s trial that all production costs were full Michael’s responsibility.

Now let us make a sort of a projection of the events that would have taken place in case of cancellation of that “contract”.

AEG reserved the O2 Arena for Michael and would have surely claimed compensation for their losses in connection with their arena being vacant during the period of those 50 concerts. They would have claimed loss of anticipatory profits, and this we can be sure of.

How much is that alone? One third of a billion? Half a billion? More? To get to the right figure we need to know the sum AEG got from the tickets sold plus the anticipated profit from the shows including all related merchandize, the film footage released, etc.

“Michael’s death is a terrible tragedy, but life must go on. AEG will make a fortune from merch sales, ticket retention, the touring exhibition and the film/dvd” [Randy Phillips]
In fact Randy Phillips said it himself in one of his emails that they would make a fortune out of all the events related to Michael’s concerts, and this is true not only for the situation arising from his death but the tour cancellation as well.

One more possibility of a lawsuit against Jackson is that they could have sued him for “fraud” as regards his health and their payment for the multi-million insurance policy from Lloyds.

Add to it minor things like the $150,000 monthly salary to Murray which they would have also charged to his account (multiplied by several months) and the same with the $100,000 monthly salary to Tohme (initially payment to Tohme was their responsibility, but as a result of a trick with production costs it also became Michael’s business) – and I think that now everyone will understand that after adding up all those sums it is simply impossible to calculate the resulting multi-million amount which Michael would have had to pay back.

Sorry, I forgot the legal fees for the many months of litigation with AEG.


Paul Gongaware, an AEG Live executive who knew Jackson, emailed colleagues a strategy memo. Wear casual clothes, he told them, “as MJ is distrustful of people in suits” and expect to talk “fluff” with “Mikey.
Inevitable as those lawsuits were, even without them AEG had full access to everything Michael had. According to their Promissory note for the advance of $6,2 mln. if Michael delayed payment by 5 days a major default would occur and Michael would pass to AEG everything he had or would ever have.

There are three interesting points as regards this default event:

1) the default of payment was to be declared if the Artist filed for Bankruptcy . The fact of bankruptcy did not release Michael Jackson of the obligation to pay all his advances back.

2) the default of payment could arise in case Michael did not pay at least one monthly repayment installment. It is interesting that the “contract” never said a word about any monthly repayments of the advance money, however the Promissory note mentions them, but somewhat in passing. What these installments are and how are they to be paid is a huge mystery because there is no schedule showing how much each installment is and what the dates of repayments are.

But let us suppose that a monthly repayment was to be $1 mln. If Michael was unable to pay this $1mln, five days later a full default of payment was to be declared, as a result of which Michael was to pay the full sum which was in excess of $40mln.

3) if Michael’s company could not pay (which of course it could not), the “contract” had a tiny reservation for such a case hidden in some funny miscellaneous clause which said that AEG would have access to all Artist’s assets as an individual. This was a direct road to all other Michael’s assets, even his ATV catalog, shielded by two Trusts.

Since the catalog was well protected, access to it could be made only as a result of a lawsuit. However this was no problem as the above projection shows it.

The Promissory Note also said that as a result of a default AEG would become the full Attorney-in-fact acting on behalf of MJ Company LLC. AEG was to receive full rights and receive them irrevocably (the rights were never to be returned).

Let me say it again that though the Promissory note emphasized that the matter concerned only Michael’s company and not the Artist individually, the contract contradicted this point and said that it did concern Michael as an individual (and therefore covered all his belongings).

734 days ago
47.

Pegasus    

There is a short piece I wrote about it in this post summing up AEG’s contract:

We can argue over the value of the Michael Jackson Company LLC as the Collateral in 2009 or in the future, but it doesn’t really matter much. Out of the many points specified in the Promissory Note the major one is that if it came to the worst AEG was to become an attorney-in fact for Michael Jackson’s company with “full authority” to take any action – up to “filing financial statements relative to the Collateral without the signature of the Holder” (Michael Jackson).
What we see here is a full Power of Attorney provided to AEG. It could enable them to act not only on behalf of MJ Company LLC, but according to the contract (remember that “miscellaneous” clause?) represent him where the Artist had “an interest in” as an individual. And this could include other Michael Jackson’s assets, probably even his ATV catalog…
Here is part of the Promissory Note speaking about the collateral (over here it looks like it is limited to Michael Jackson’s company only, while in reality it is not):


Page 4 of the same Promissory Note mentions for the first and last time certain “regular scheduled monthly payments required until the Note is paid in full”. No schedule is provided – either here or anywhere else.

To our great surprise we find the point about repaying the money in “Prepayment” clause:

The Miscellaneous clause from the Promissory Note you see here is not the same as the Miscellaneous clause in the “contract”. Over there it is the crucial part of the whole do***ent on which everything depends. This is what I earlier wrote about point 16.3 of the contract Miscellaneous clause:

But point 16.3 outplays them all. It ties together Artistco (MJ Company LLC), the Artist (the individual) and a lien (one of its meanings is “the possibility to arrest the assets of the other party”).

It says that to secure the obligations of the Artist and his company AEG is granted rights to Collateral which gives them a Lien (right to arrest) the property and assets of the Artist’s company ”wherever located”, owned “now or acquired later” and investment property, securities, claims and all other payments of money in which the Artist’s company and the Artist have an interest:


Point 16.3 of the Miscellaneous clause from AEG’s “contract” with MJ (click to enlarge)
“To secure the faithful performance of Artistco of Artistco’s and Artist’s obligations under this Agreement (including to repay the Advances), Artistco hereby grants Promoter a lien in all Artistco’s right, title and interest in, to, and under the following properties, assets and rights, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (all of the same being hereinafter referred to collectively as, the “Collateral”): contract rights or right to the payment of money in which Artisco and /or Artist has an interest, insurance claims and proceeds, commercial tort claims, securities and all other investmenet property, and all general intangibles (including all accounts receivable and payment intangibles). Artistco shall reasonably cooperate with Promoter in its efforts to perfect such security Interest”.
The main idea of the above is that the Artist’s company is responsible for both itself and the Artist. Therefore the Collateral pledged as a guarantee of their obligations includes everything the Artist’s company and the Artist had or will ever have.

734 days ago
48.

Pegasus    

Another detailed conversation about AEG took place with Ivy of MJJCommunity exactly a year ago, in September 2011. You’ll find it in the comments section to this post: http://vindicatemj.wordpress.com/2012/03/03/branca-aeg-and-karen-faye/

The order in which the comments were made at the time has now been slightly changed in order to group them together by subject. Some have also been shortened. Ivy’s comments are in quotes.

We discuss the issues of tremendous importance.

Helena,

As you know I am one of the people that believes Michael’s catalogs was never collateral. Although we cannot list what MJ Co LLC owns, we can show the entities that owns Sony/ATV and Mijac and it’s not MJ Co LLC. I’ll do it as soon as I can – and post a link to it- by using 2006 Prescient lawsuit (lawsuit about 2006 refinancing of the loans) as well as recent probate fillings. It will show the ownership structure of the catalogs from 2006 to this date. And Lyton Guest is right that the catalogs (and assets) are divided and put into trusts to protect them from creditors. You’ll see that in the Prescient lawsuit , the 2006/2007 formed New Horizon Trusts will be referred as “bankruptcy remote structure”.

Ivy,

I’ve looked up what the Estate’s report says about Michael’s ATV share. Here it is:

“Sony/ATV. Michael had also pledged his fifty percent interest in Sony/ATV as security for a loan issued by Barclays Capital***.
***The loan is also administered and serviced through two bankruptcy remote trusts which Michael Jackson established in connection with his financing transactions. Michael Jackson’s interest in Sony/ATV is owned by a Delaware statutory trust (“Trust II”). Trust II is intended to be only a security device. The beneficial owner of Trust II is another Delaware statutory Trust (“Trust III”). The Trustee of Trust II is Wells Fargo Delaware Trust Company. The Estate is the sole beneficiary of Trust III.”
The Executors successfully negotiated with UBS to refinance the loan secured by the Estate’s interest in Sony/ATV. The negotiations resulted in an amended agreement with Sony to the benefit of the Estate, and a new loan at a substantially lower interest rate for the Estate, which is locked in for the period of the loan.
I was not sure how trusts operate and looked it up. Trusts date back to the times when knights left their valuables to someone “in trust” so that these people would take care of their heirs in case they do not return from a battle. This explains the idea of trusts pretty well, however I wondered whether the guarantees provided by them were indeed that solid. One site says that the guarantees are uncertain (so that creditors can still claim those assets):

“You considered establishing a Trust and have some of your assets transferred to it in order to secure yourself, but the fees are huge, and the benefits quite uncertain.” http://freedomfromtaxes.com/AssetProtection/
Here is an article which says that only one type of a trust provides a full guarantee against creditors – if it is irrevocable and made for another beneficiary:

“Is Property in a Trust Safe From Bankruptcy?
By Mary Frazier, eHow Contributor | updated May 29, 2011

There are many different types of trusts, and whether trust property has protection from bankruptcy depends on the type of trust. The broad category types of trusts that have issues with bankruptcy are revocable and irrevocable trusts.

Revocable Grantor Trust
When a grantor establishes a revocable trust he creates a taxable entity and places assets in the trust. A revocable trust grantor has the right to amend, modify or revoke the trust at any time. Because of this, the trust grantor by definition is the owner of the trust assets, and owns the trust property from a legal and tax standpoint. Since the revocable trust grantor owns the trust assets, the trust property has no protection from bankruptcy. For example, a person cannot place $2 million in a revocable trust, file bankruptcy and expect that the assets in trust are bankruptcy protected.

Irrevocable Grantor Trust
When a person places assets in trust and creates a trust agreement that is irrevocable, the person as the trust grantor effectively gives up control of the trust assets. The trust grantor can no longer modify, amend or revoke the trust assets. Some trust grantors create irrevocable trusts, where the grantor is the trust beneficiary that receives a benefit from the trust for his lifetime. If an irrevocable grantor trust structure is proper, it is possible to afford bankruptcy protection. However, this type of trust is complicated to create and difficult to enforce creditor protection. A person with creditor issues cannot create an irrevocable grantor trust, file bankruptcy and expect the assets to be safe.

Irrevocable Beneficiary Trust
A trust created by a trust grantor for the benefit of another person typically has protection against bankruptcy of the grantor and the trust beneficiary. The grantor no longer owns the property and the trust beneficiary never owns the trust property. A trust beneficiary has a benefit of some type from the trust, such as receiving trust net income for his lifetime. Proper creation of an irrevocable trust protects the trust assets from beneficiary bankruptcy.

Spendthrift Trust Language
In order for any trust to have proper protection against bankruptcy, the trust agreement must contain specific verbiage known as spendthrift language. Spendthrift language varies by legal drafter, but the basic components state that trust assets cannot be pledged, assigned or alienated by a beneficiary or his creditors. This language is critical in the trust agreement, since it prevents bankruptcy creditors from attaching trust assets to settle beneficiary debt. http://www.ehow.com/info_8507634_property-trust-safe-bankruptcy.html

The Estate says that Trust III is the beneficial owner of Trust II, so the way I understand it Trust II “created another trust for the benefit of another person” – and this is how Trust III came into being. So if it is “properly created”, has “spendthrift language”, and is actually made for the benefit of another person [not MJ?] then it does protect the catalog well, which is good. Only I am not sure that Michael would have trusted his catalog to anyone else.

On the other hand if the Trust protects the catalog so well from anyone, why was all this fierce campaigning against Sony then?

Helena,

My understanding and please correct me if I’m wrong, It protects the catalog from bankruptcy and third-party creditors but not from defaulting on the loan payments. So although Michael was highly unlikely to lose his catalog for a $40M debt to AEG, he could have lost it due to non-payment of the loans. Michael’s “they are after my catalog” statement was based on the belief that they were creating accusations about him to hurt his income capabilities so that he would default on the loans and Sony would get the first dibs to purchase his half.

Update - I think that losing the catalog due to non-payment of the loans does not rule out the possibility of losing it also through paying hundreds of millions of dollars to AEG in settlement of their “losses’.

In case of default on the loan payments it would be the bank who would have the right to Michael’s share, and not Sony. Sony would simply have the right to be the first to buy it, nothing else.

Sony had the right to obtain half of Michael’s share (or 25% of the catalog) any time anyway, but never used this possibility either when Michael was alive or dead.

Helena,

…The main concern or misconception of the fans is that if Michael didn’t perform and cancelled the deal, AEG could have gotten his catalog. It’s important to correct that misconception if we have been mistaken.

Ivy,

My claim that Michael could lose his catalog due to his association with AEG isn’t a misconception. What I asserted and continue to assert is that AEG’s various contract papers are structured in such a way that at any time of a default they could lay their hands on all belongings of Michael’s company LLC. It didn’t have anything at the time – $5,5mln. listed there now look like the sum later returned to it by Tohme but apart from that it was zero, I guess.


Kathy Jorrie, AEG’s attorney
But even if the company had a zero on its accounts in case of a default AEG was becoming Michael’s attorney-in-fact with huge rights to acquire his other property. In fact the “advances” were for a sum bigger than $40mln. and this is what they wanted back (most probably with compensation of their damages, interest, loss of profit, etc. plus the fees of the attorneys as the Promissory Note said). It could have been a huge trial of the century with lots and lots of millions involved. To prove whether Michael could or could not lose his catalog as a result of that we need a huge team of lawyers to look into this matter and make a sort of a reconstruction of possible events.

However the first assignment of these lawyers would be to check the validity of the AEG contract at all. In my opinion the contract was not valid, and that is why in reality AEG could not acquire the catalog (this is what I reassured my readers of). So all we can analyze are the intentions of AEG – after all they consider their contract valid, so their papers are worth analyzing as they show the train of thought of these people.

Considering that Tohme was regarded as the manager of MJ’s company LLC (all confirmations were to be sent through or by him) and that he obtained two Powers of Attorney from Michael (as we learned just recently) but was actually working for AEG, we absolutely cannot rule out that he wouldn’t have devised a fraudulent scheme to reconsider the terms under which the catalog was kept in those trusts.

I don’t know what Tohme was up to but all this dirty mess around Michael proves that there was some game at play. The irregularities we see in the AEG papers are not made just for nothing – there must be a reason for them. It would be best if AEG and Tohme themselves told us what they were up to, but if they do not, we will have to analyze the situation ourselves. If it wasn’t his catalog another goal could be ruining Michael altogether and making him work for them until the end of his life, and this is why I think we should not necessarily focus on the catalog only.

You seem to be analyzing the situation as if the papers and people around Michael were absolutely clean – which is the worst misconception of all. The validity and correctness of AEG papers leave much to be desired. Tohme was supposed to be working in Michael’s interests as he was his manager, but the contract says his services were to be paid for by AEG (!) – so who did he work for then? Later, in the attachment to contract, the AEG corrected this point by placing all production costs on Michael’s shoulders (while the contract had different stipulations about this matter). The production costs included Tohme’s salary, so by this single move Tohme suddenly began “working” for Michael again.

The whole thing is a complete mess, which could be created only intentionally. I repeat, only intentionally and in such dirty waters it was easy matter for Tohme to do some dirty business behind Michael’s back and probably even reconsider the terms under which the catalog was kept by those trusts. Remember that he had those two Powers of Attorney….

To make my position clearer to everyone I will repeat that since I consider the contract invalid, Michael’s catalog was not in danger. However the AEG contract (even if it is void) does show the company’s intentions, and there are strong signs that these intentions were far from honest.

Helena:

I believe they are becoming “attorney-in-fact of the Artist’s company” and not Michael Jackson. Again all their reach and control is to limited to MJ Co LLC and what it owns. Details are important.

Ivy,

Yes, details are important. So please do not forget that the contract refers to both the Artist’s company and/or the Artist as the responsible parties (while the Promissory Note speaks of the Artist’s company only). It is one of those innumerable discrepancies between different parts of the AEG deal which give a reason for thinking that it was not quite valid.

However, valid or not, point 16.3 of their contract says that “as a security” AEG will have rights to everything the Artist has in terms of assets and debts:

“all Artistco’s right, title and interest in, to [ ] assets and rights, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (referred to collectively as, the “Collateral”): [ ] right to the payment of money in which Artisco and /or Artist has an interest, insurance claims and proceeds, commercial tort claims, securities and all other investmenet property, and all general intangibles (including all accounts receivable and payment intangibles).”.
Helena:

“Also the good thing about being in 2012 is that we have new information that we can add and make corrections. Yes recently we learned that Tohme had 2 Power of attorneys but we also learned that Michael had cancelled his power of attorney’s in April 2009. So Tohme was no longer a threat in regards to fraudulent schemes including transferring Michael’s assets and/or signing up Michael for never ending concerts.”

Ivy:

We are discussing the AEG contract and not the drastic measures Michael took to save the situation (like Tohme’s dismissal, cancelling the Powers of Attorney and rehiring Branca). I’ve noted it already that the contract papers should be regarded only as a kind of evidence of the intentions the AEG and Tohme had towards Michael Jackson. In life, especially with Branca handling this business, everything could have turned out totally differently.

.. But why is it only the catalog that everyone is focusing on? What we should look at is the reason why the “contract” with AEG was made in such a way that it was totally unclear who, for example, would pay the production expenses – the contract implied AEG and the Definitions (listed in a separate attachment) stated that they were Michael’s responsibility. Considering the amount of those production expenses the matter was crucial for Michael! And let us not forget that artists are not obliged to put in their money in the show at all because if they do, what will they need producers for?

Helena:

Actually I wouldn’t say “at all”, because you would see different cost sharing according to the artist’s popularity and demand. Even for example the Immortal tour is a 50-50 cost sharing between MJ Estate and Cirque.

Ivy,

The Immortal project is different – Cirque du Soleil is a production company which could do without the Estate and then the Estate would receive only royalties for the music rights. But the Estate chose to invest their money in order to share the profit too and the profit might be huge here, so their decision was absolutely correct.

But when a single artist (like Barbara Streisand for example) makes a show she is not obliged to invest her own money into it. Each is doing his own job – she sings, the producer puts in money and arranges the whole thing. Otherwise all singers would be producing their shows themselves or arranging them through agents who would order the arenas, take care of the tickets, advertising, etc. There might be variations here, but generally producers do put in their money, don’t they?

If the words “at all” are not too accurate I can withdraw them as I myself said in my posts that there should have been a certain agreed budget between Michael and AEG and if it was exceeded due to the artist’s “ideas” he would be the one to pay for them. The producer is not responsible for every artist’s ‘whim’ as they also have their limits.

734 days ago
49.

Pegasus    

But in this case ALL production costs were Michael’s responsibility – with nothing to be borne by AEG! AEG was acting only as a kind of a bank which provides the money and does its own accounting – while Michael was supposed to pay for everything they spent. He was supposed to check their expenses later, but was there a way to check up whether they quoted the best price for each service and found the best subcontractors? What if they charged him double for something which cost twice as little?

When we want to buy something we prefer to buy it ourselves, because our “agent” can go to the most expensive shop and make a purchase at an unnecessarily high price (at our expense!). However we won’t mind it if our partner buys something expensive but covers his expenses himself, right? And we won’t mind it either if we share the expenses too, because the fact that he is also paying makes us sure that our partner looked for the best combination of quality and price, right?

The problem with AEG contract is that Michael most probably did not know (at least initially) that he was to bear responsibility for all production costs. This becomes clear to us from the discrepancies between the contract and attachments to it. The production costs are enumerated in the attachment only, which is not even signed by either of the parties. The contract on the other hand is rather vague as regards who is to pay for production.

Those production costs were also directly connected with the division of money between the parties. Roughly speaking AEG was to receive a fixed per cent of the gross money collected minus their small expenses, while Michael was to receive what remained after 1) AEG deducted the money due to them 2) the production costs were deducted from profit and returned to AEG. Michael was probably to receive not even the whole of what remained after all those deductions, but only 90% of it (the rest would go to AEG again).

Firstly, the fact that AEG deducted their percent from the revenue collected from tickets made them interested in selling a bigger number of shows, because their share only increased after collecting a bigger amount of money, while Michael’s share decreased after that (the production costs for a bigger number of shows grow considering the salary of the whole staff, their accommodation, taxes, travel expenses, etc.).

Secondly, AEG were interested in boosting the production expenses. The more they spent the less Michael ultimately received, while the amount of the production expenses per ce did not really matter to AEG – all production expenses were to be returned to them by Michael in full anyway.

Wasn’t it much more fair to 1) share the production expenses and 2) deduct production expenses from all money collected and only then divide the profit as all normal people do?

Since the above crooked division of profit becomes clear only after you read the attachments to the AEG contract I think it was something Michael either never saw, or saw much later. The Definitions attachment where the whole thing is stipulated is not signed by either of the parties.

… The contract in general is made in such a way that one might think it is not a contract, but an ultimatum. Add to it the facts of discrepancies between different do***ents and a grave suspicion in forgery, and you have a complete picture of a huge set up.

The question is why? Why did they do it that way? If it wasn’t the catalog (which was so well protected that even Sony could not evidently obtain it, right?), then what was the reason?

Did AEG want to put Michael into slavery for the rest of his life and does this reason sound better than their desire to get his catalog?

Helena:

Why would Michael be in slavery for the rest of his life?

Ivy,

To answer your question I need to write a new post about point 14 of the Definitions attachment to AEG’s contract (the attachment is not signed by the parties either). Point 14 is called “TERM”.

I will retype it here with practically no comment for everyone’s individual scrutiny first. It is mind-boggling to imagine that the Expiration date of the term of AEG’s “cooperation” with Michael Jackson was due only half a year ago, on December 31, 2011 (!) and even after that AEG still had the right to prolong the term and in their own discretion at that!

14. “Term” means the execution date through December 31, 2011, or the conclusion of a Worldwide touring cycle which includes Shows throughout the major touring territories of the World as mutually selected by Artisco and Promoter, whichever occurs later (“Expiration Date”), provided however, Promoter shall have the right , in its sole discretion, but not the obligation, to (a) extend the Term beyond the Expiration Date by written notice (a) until such time as Promoter recoups one hundred percent (100%) of the Advances; or (b) end the Term prior to the Expiration Date, in which event the Term shall be defined to and on the date(s) selected by Promoter, notwithstanding the Expiration Date.
To exercise its right to extend the term under the foregoing provision, Promoter must give written notice of its desire to extend the term prior to December 31, 2011. For the avoidance of doubt, Artistco and Promoter shall have all of their respective rights and obligations under this Agreement with respect to any mutually approved Shows that have been scheduled prior to the Expiration Date and are to be performed after the Expiration Date as the result of Promoter’s decision to extend the Term regardless of whether or not Promoter recoups one hundred percent of the Advancesprior to the completion of such Shows.
Notwithstanding any of the foregoing, in the event the Term is extended by the provisions of the paragraph beyond December 31, 2011, Artistco shall have the right to end the Term on the New Expiration Date (defined below) by giving Promoter written notice by facsimile transmission (the “Buy-Out Notice”) of Artistco’s desire to end the Term on the New Expiration Date, which Buy-Out Notice may be given on December 31, 2011, or any date thereafter, and upon receipt of such Buy-Out Notice, the Term shall then end on the later of (a) the date of Promoter’s receipt of the Buy-out Notice, or (b) the completion of any mutually-approved Shows previously scheduled (such later date being refined to as the “New Expiration Date”), but only so long as Artistco pays to Promoter an amount equivalent to any unrecouped portion of the Advances as of such New Expiration Date by no later than ten (10) business days from … (the last line is missing).
Did you notice any rights belonging to the Artist? (I didn’t)

And how do you like the “Buy-out Notice”? Nice wording, isn’t it?

Did you notice that Promoter has the right to unilaterally prolong the term at their desire (by just notifying the other side)?

Did you see that they can notify the Artistco of their “desire” prior to December 31, 2011, but Artistco has the right to submit the “Buy-Out Notice” only on December 31, 2011? The Artist’s rights begin only on that date instead of prior to it with AEG having a priority?

And the Artist will be released of his obligations only after he completes all the shows “mutually approved” and “previously scheduled” by ArtistCo and AEG, won’t he?

And who is Artistco by the way? Michael Jackson or Tohme who was deciding everything for him at the time?

Could the shows “previously scheduled” mean that Artisco would approve, say, another 50 shows after the AEG’s “desire to prolong” expressed prior to Dec.31 (before the Artist’s “Buy-Out Notice” sent on Dec.31 only)?

So that the Artist has to complete these new added shows even after December 31, 2011 because what he says on the day of Dec.31, 2011 does not matter any longer?

And only when he fulfils his new obligations he will be finally free, and this will be called a new expiration date?

If he is alive of course by that time?

And he cannot get his freedom before the New Expiration Date even if he repays all the advances back?

And this is because “..shows that have been scheduled prior to the Expiration Date and are to be performed after the Expiration Date as the result of Promoter’s decision to extend the Term regardless of whether or not Promoter recoups one hundred percent of the Advances prior to the completion of such Shows?

And the territories for such shows will be again selected by Artistco and Promoter (and not the Artist)?

But it will be his company which will bear all costs for transporting the equipment, travel and accommodation of the staff, etc. because all “rights and obligations” will remain the same for the period of January, 2009 up to December 31, 2011 and an indefinite period after that?

Helena:

“Did you notice that Promoter has the right to unilaterally prolong the term AT THEIR DESIRE ”

— I guess we are reading it differently. My understanding is that they have the right to extend the date UNTIL one hundred percent (100%) advances are recouped. In my opinion it’s an conditional extension ability. It even includes that it can end earlier than that and that artist can do a “buy out” meaning pay the remaining advance balance and not do the concerts. They estimated Michael to earn $2 Million per concert (Murray restitution number). So it seems like he could have paid advances + production costs by doing 20 shows. So I don’t think he would be slaved for life.

As for the contract I actually do agree that it’s not a favorable contract for Michael for things such as making him pay all the costs , delayed payments to him etc. but also at the same time I don’t think it was to the point of making him work with no end in sight or would put him on the street with no assets.

Ivy:

This is why I said the point called “Term” needed a full post, and not just a comment. Taken separately one sentence can mean that they had the right to extend it unilaterally until 100% of the advances was paid. But AEG’s papers are made in such a way that one thing contradicts the other and numerous points allow opposite interpretation. For example, the sentence you referred to is followed by a sentence which allows a different interpretation of the same thing:

“Artistco and Promoter shall have all of their respective rights and obligations under this Agreement with respect to any mutually approved Shows that have been scheduled prior to the Expiration Date and are to be performed after the Expiration Date as the result of Promoter’s decision to extend the Term regardless of whether or not Promoter recoups one hundred percent of the Advances prior to the completion of such Shows.”
Helena:

It even includes that it can end earlier than that and that artist can do a “buy out” meaning pay the remaining advance balance and not do the concerts.

Ivy:

This is a highly negative point! What it essentially says is that the Promoter has the right to unilaterally terminate the contract before the expiration date whenever they want to! They terminate it, and Michael is forced to pay all the advances back without making concerts and without a possibility to earn money!

And as regards the Buy-out notice it means that the Artist could be free if he repaid the advances but only after he performed all the shows, including the newly added ones:

“upon receipt of such Buy-Out Notice, the Term shall then end on the later of (a) the date of Promoter’s receipt of the Buy-out Notice, or (b) the completion of any mutually-approved Shows previously scheduled (such later date being refined to as the “New Expiration Date”), but only so long as Artistco pays to Promoter an amount equivalent to any unrecouped portion of the Advances”
You say that,

“They estimated Michael to earn $2 Million per concert (Murray restitution number). So it seems like he could have paid advances + production costs by doing 20 shows. So I don’t think he would be slaved for life”.

I regard it as the Estate’s not too far-sighted approach to the matter. They wanted the restitution to be big and didn’t focus on the numerous obstacles hindering Michael in making money under this ‘contract’. By saying that MJ could earn that much they practically said that the contract was valid, with which I categorically don’t agree. Fortunately they dropped that restitution altogether. Probably they understood the mistake made.

* * *

This discussion was closed by Mona who asked me to send her a link to the contract as a whole and whatever other do***entation I had on this.

Here is a link to the do***ents containing AEG’s contract with Michael Jackson, AEG’s contract with Murray and all related papers. The source is Joe Jackson’s suit against Murray and AEG (which is now dismissed as a double to Katherine’s). Double or not, but it has all the do***entation we need on the subject:

http://www.scribd.com/doc/59105659/Notice-of-Motion-and-Motion-for-Leave-to-File-First-Amended-Complaint-FULL-AEG-CONTRACT-P43

On pages 43-70 you will find the full AEG contract with attachments to it. There are many other interesting do***ents in this package – for example, Conrad Murray’s correspondence with AEG people (beginning with page 71), his expenses allegedly covered by AEG (page 76), the search warrant of Murray’s premises dated August 7, 2009 (only 7th of August!) and Murray’s contract with AEG (p.119 and p.137).

* * *

Following the recent new developments with AEG emails and prior to the civil court hearings of Katherine Jackson’s case against AEG the media (suddenly for me) began to confirm what I’ve been writing about all along:

If he reneged, AEG would take control of the debt-ridden singer’s company and use the income from his music catalogs to recoup its money. http://www.latimes.com/news/local/la-me-aeg-jackson-20120902,0,6711027.story
Jackson faced debts of $300 million and, if he pulled out of the tour, AEG would take control of his company and its catalogue of songs. http://www.musicweek.com/news/read/leaked-aeg-emails-describe-jackson-as-an-emotionally-paranoid-mess-ahead-of-comeback-tour/051632
Time will show what’s what. Considering the super power and influence of our opponent let us hope for a miracle to help us. Let Michael Jackson’s true supporters from all over the world pray for the truth to be finally uncovered.

In God we trust.

734 days ago
50.

Pegasus    

JOHN BRANCA and RANDY JACKSON. Two advisors, two outcomes for Michael Jackson’s finances
August 28, 2012
tags: Beatles, EMI, John Branca, Michael, Michael Jackson, Randy Jackson, Sony, Sony/ATV Music Publishingby Vindicatemj (Helena)
.The eve of Michael Jackson’s birthday is not the best moment for an article like this, but I still decided to post it before the birthday as after it would be even worse – let the time and our attention afterwards be spent on something better than this subject.

The information I am presenting here will start with a comment I made in reply to a screenshot taken by Shelly from the 2007 Prescient lawsuit against MJ http://i.imgur.com/JAU1Y.png :

Forget about the lawsuit itself for a moment – all we need from it now is the text which is retyped here:

“Since inception of Sony/ATV, which was originally valued at $930,000,000, the partners have agreed to acquire about $400,000,000 of additional music catalogs. The MJ Trust has borrowed a total of $272,500,000 to support the purchase of additional catalogs at Sony/ATV, and to support other various working capital needs. Sony has provided the lenders to MJ Trust a credit enhancement (for which Sony receives additional payment of $9,000,000 annually).”
1. ASSUMPTION
This quote made me come to an assumption which is now in the comments section and will be repeated here because this is where this post started from:

The above confirms what I thought all along. So when the Sony/ATV joint venture was formed Sony and Michael agreed they would supplement their catalog with additional songs and buy more and more. From what we read about it the idea was that the money for those purchases would be generated by the joint catalog itself – they would acquire more songs from the profits the catalog made, not needing any more money input. So when Michael later bought Eminem’s songs it was within their initial plans.

The idea was not bad as it meant to turn Michael into a major musical publishing rights tycoon (with Sony being the other half) and it would have worked perfectly well in case Michael’s success had continued and no financial disasters had taken place. But they did take place – in the form of the 2003 case, the trial and many other projects which failed due to the extremely negative media which nipped each of his projects in the bud.

While Michael was fighting the unjustice Sony evidently went on adding new songs to the catalog and paying their share. I’ve read that they were even paying Michael’s share of the expenses, most probably out of the profit Michael was to receive from his 50% in the joint venture. This must have created constant tension between the partners, because surely Michael would have preferred to have cash instead of having to invest it into more songs. What looked like a good idea in 1995 turned into a big financial burden for him later.

The joint venture was evidently John Branca’s idea. He suggested it instead of selling Michael’s Beatles catalog which was advised by other Michael’s advisors in 1993 when Michael had to pay damages to Marcel Avram for canceling the Dangerous tour and huge costs on litigation with the Chandlers. It was then that the crisis started and Michael first faced the need to sell his Beatles catalog.

Now he could have got out of this joint venture again and by the same method too – by selling his share and at a higher price this time, however he still preferred to fight the cir***stances.

I don’t remember the details now but at a certain point things became so bad that Michael was in a danger of losing to some creditors half of his share in the joint venture (or 25%), but his partner Sony helped him to avoid it. They evidently supplied him with some financing in return for the right to be the first to buy those 25% in case Michael had to sell it.

As a result Michael kept his 50% but was still involved in tremendous loans he had to take most of which were spent to fulfill his commitments under the joint venture project (and not on his “lavish style” as the media likes to portray it).

All of the above explains very well Michael’s feelings in respect of Sony – it was like sharing a home with someone you no longer love and even fight, but cannot part with due to the common property you share.

However life proved that Sony as a partner was not that bad after all – they had the right to acquire the 25% share of Michael’s catalog but never used it as Michael still keeps his half in the project.

If my understanding of the situation is correct, than the current merger of Sony/ATV with EMI and creation of a new giant holding music publishing rights this way is very much in line with the original idea Michael liked and went for. He could have sold the catalog long ago, but he still preferred to keep and expand it further – even at a tremendous financial cost and even sacrifice for himself.

If the new project is successful it will turn Michael’s children into tycoons of music publishing rights, but for it to be successful it will again require some money to service Michael’s commitments arising from it. That merger must have required a lot of money already, and this is where some of those millions from Michael’s Estate must have gone.

In short it isn’t ‘embezzlement’ – it is investment of the money, and probably wise investment too because it is meant to generate more money than the sums already spent on it. From the point of view of Michael’s siblings it is unwise of course because 1) it doesn’t bring immediate profit 2) leaves some of MJ’s debts still unpaid 3) will prove its worth in a somewhat distant future.

But from the point of view of Michael’s legacy and the future of Michael’s children the idea is good. I personally would very much like to see Michael’s children to benefit from other people’s songs. Somehow it feels like just the right outcome after all that their father had to endure.

This is my understanding of the situation, though of course the matter should be studied and studied thoroughly.

A few days passed since the time I wrote it and by now I have studied the matter further, so let me present to you the absolute minimum from the mountain of information collected.

2. A BIT OF HISTORY
Since everything revolves around the Sony/ATV famous catalog we need to refresh some basic facts about the way it was started. With a few slight exceptions Wiki paints a pretty accurate picture of how it began:

Sony/ATV Music Publishing is a music publishing company co-owned by the Estate of Michael Jackson and Sony Corporation.[1]In December 1995, ATV Music Publishing merged with Sony Music Publishing, a division of Sony Corporation, to become Sony/ATV Music Publishing.

Sony/ATV Music Publishing
Type Limited liability company
Industry Music Entertainment
Founder(s) Lew Grade
Headquarters New York, United States
Key people Michael Jackson
Services publishing
Revenue 1.9 billion (2011)
Owner(s) The Estate of Michael Jackson(50%)
Sony (50%)
Website www.sonyatv.com

Jackson was first informed that the ATV catalog was up for sale in Sept. 1984 by his attorney John Branca, who had put together Jackson’s earlier catalog acquisitions. Warned of the competition he would face in buying such popular songs, Jackson remained resolute in his decision to purchase them.[2][4]

Branca approached McCartney’s attorney to query whether the Beatle was planning to bid. The attorney stated he wasn’t; it was “too pricey”.[2][3] According to Bert Reuter, who negotiated the sale of ATV Music for Holmes à Court, “We had given Paul McCartney first right of refusal but Paul didn’t want it at that time.”[16] Lennon’s widow, Yoko Ono had been contacted as well but also did not enter bidding.[3]

McCartney had previously attempted to purchase the catalog alongside Ono in 1981.[2] He was offered the catalog for £20 million ($40 million USD) and proposed the pair would each pay £10 million.[3][5] Ono refused as she thought it was too high a price. McCartney spoke about the offer at a press conference in April, 1990, explaining that Ono “actually said ‘I think we can get it for 5.’ So I said, ‘Well ok, you know, let’s see what we can do.’ And we couldn’t.”[5] Not wanting buy the songs himself and potentially be seen as being “grabby” for “owning John Lennon’s bit of the songs”, McCartney let the offer fall through.[3][5]

The competitors in the 1984 sale of ATV Music included Charles Koppelman and Marty Bandier’s New York-based The Entertainment Co., Virgin Records, New York real estate tycoon Samuel J. LeFrak, and financier Charles Knapp.

The two sides began drafting contracts in Jan. 1985 and follow-through meetings began on Mar. 16. Jackson’s team described the negotiations as frustrating, with frequent shifts of position by the other side. One Holmes à Court’s rep described the negotiations as a “game of poker.” Jackson’s team thought they had reached a deal several times but new bidders would enter the picture or they would encounter new areas of debate. The prospective deal went through eight drafts. In May 1985, Jackson’s team walked away from negotiations after having spent hundreds of hours and over $1 million.

In June 1985, they learned Koppelman/Bandier had made a tentative agreement with Holmes à Court to buy the catalog for $50 million.[4] But in early Aug., Holmes à Court contacted Jackson and talks resumed. Jackson only raised his bid to $47.5 million but he had the advantage of being able to close the deal faster, having completed due diligence of ATV Music prior to any formal agreement.[4] He also agreed visit Australia as a guest of Holmes à Court and appear on the Channel Seven Perth Telethon.[4][16] Holmes à Court included some more assets and agreed to established a scholarship in Jackson’s name at a U.S. university.[4] Branca closed the deal and purchased ATV Music on Jackson’s behalf for $47.5 million on Aug. 10. 1985.[2][4]

Ono was pleased that Jackson had acquired Northern Songs and called it a “blessing”.[2] Speaking in November, 1990, Ono stated, “Businessmen who aren’t artists themselves wouldn’t have the consideration Michael has. He loves the songs. He’s very caring.”[2] She added that if she and McCartney were to own the songs, there would certainly be arguments. Ono explained that neither she or McCartney needed that. “If Paul got the songs, people would have said, ‘Paul finally got John’. And if I got them, they’d say, ‘Oh, the dragon lady strikes again’”.[2]contract provision to visit Perth, Western Australia and appear on the telethon, where he spoke briefly and met with two children.[4][16]

In 1995 the Japanese corporation offered Jackson $90 million for 50% of ATV Music Publishing.[19][20] [other sources name $100mln. and more]

Jackson gladly accepted; [I am not sure of it] he had essentially acquired half ownership of the Beatles’ songs for a large profit.[19] Jackson’s own songs were not included in the deal.[18] Having been merged, the company was renamed Sony/ATV Music Publishing and became the second largest music publisher in the world.[19] [according to other sources it was third or forth world publisher].

Michael P. Schulhof, President and CEO of Sony, welcomed the merger and praised Jackson for his efforts in the venture. “Michael Jackson is not only the most successful entertainer in history; he is also an astute businessman. Michael understands the importance of copyrights and the role they play in the introduction to new technologies.”[18] He added that Jackson recognises Sony’s “leadership in developing and realizing new technologies that serve to expand the creative horizon of artists such as himself”.[18] Administrative expertise was provided by Sony, who installed Paul Russell as chairman. Jackson was a company director and attended board meetings regularly.[19] As each party in the arrangement held the power of veto, both sides would have to agree on a decision before it could be made. If neither party agreed on a decisions, they would not be implemented.[19]

Michael Jackson was the first in everything he did, so it doesn’t surprise us that according to his own words he wanted to establish the largest music publishing company in the world:

Merging of ATV with Sony establishes our commitment to create one of the largest music publishing ventures in the world. We have been working on this for over a year and, now, with the two of us together, the sky is our only limit. (Michael Jackson, 1995)[18]
Immediately after the merger Sony/ATV’s mentioned its two main competitors:

“Sony said its new catalog will be the 3d biggest in music publishing. The largest is Time Warner Inc’s Warner – Chappell, followed by EMI Music Publishing” – The Jet, November 1995.
So let us make a mental note that in 1995 the Sony/ATV catalog was the third biggest in music publishing business. Its main competitors were Warner Chappell and EMI Music Publishing.

Today we can very well state that both of them have given up their rights – partially or fully – to Sony/ATV.

734 days ago
51.

Pegasus    

3. THE DEAL WITH EMI MAKES SONY/ATV A NEW GIANT
Recently Warner Chappell lost its rights to administer Michael Jackson’s own songs which were passed over to Sony/ATV. In a second move a Sony-led group of investors bought the full music catalog from the British EMI Music Publishing, and this now makes Sony/ATV the biggest music publishing business the world over.

Interesting how it falls in line with the words of Michael Jackson who said that the sky was the only limit to their plans?

It is also interesting that the EMI acquisition was made by the Sony-led investors despite competition from the same Warner Music Group who was and is Sony’s main competitor. Warner fought for the right to obtain another arm of the EMI business – the recorded music (not publishing rights) but lost in a competition with Universal who got the deal.

In the cir***stances of so fierce a competition and the stakes being so high (billions of dollars) one cannot help thinking that it isn’t only Michael Jackson’s haters who work against Michael’s fans, but most probably the Sony/ATV competitors in the first place too. Same as Michael’s detractors, they don’t want Michael’s joint venture with Sony to succeed and hold the key role in the music publishing business.

Knowing that Michael has half of Sony/ATV I think that it would be extremely unwise on the part of Michael’s fans to fight the only real company which is operating in the interests of Michael and his children (and is doing it in a superb way).

I am not saying that those who are in a constant battle with Sony/ATV are necessarily working for its competitors, but when Michael’s fans unwittingly or deliberately undermine Sony/ATV they should at least realize that they are playing into the hands of Michael’s competitors – no more, no less.

And Sony/ATV’s competitors did fight the deal with EMI tooth and nail. The price of the deal was determined at an auction and ranged from $2,1 from a competitor to $2,2 from Sony. The matter was more or less decided in November last year:

Citi to sell EMI for $4.1B to Universal, Sony

By CLAIRE ATKINSON

November 11, 2011

Citigroup has reached a deal to split up and sell iconic UK record company EMI to Vivendi’s Universal Music Group and a consortium of investors lead by Sony Corp.

Citi will sell EMI’s recorded music arm to Universal for $1.9 billion, and the publishing business to Sony group for around $2.2 billion.

The Sony consortium now includes Hollywood heavyweight David Geffen, who is still negotiating his investment in the bid, along with private-equity firm Blackstone and Abu Dhabi-owned investment fund Mubadala, sources said.

Both bids ended up higher than analysts and rival suitors had expected heading into the auction for EMI, home to acts such as ColdPlay, Katy Perry and The Beatles.

Len Blavatnik’s Warner Music Group bid was believed to have bid in the region of $1.5 billion for the recorded music unit, while KKR-backed BMG Rights were offering $2.1 billion for publishing.

The deal will cement Universal’s position as the largest music company in the world, though it will likely have to divest assets outside of the US.

EMI’s share of the recorded market in France and Germany is in the region of 75 percent, while in the UK it is between 40 and 45 percent. In the U.S, EMI’s market share is less than 10 percent.

http://www.nypost.com/p/news/business/citi_set_to_sell_emi_for_to_universal_vPGGqLNKiNoFmsRMwslnEJ#ixzz1dPegA3q4

For the new acquisition not to go counter the anti-trust legislation (which fights monopolies and ensures competition) Sony had to approach the European Union in March 2012 as well as the US regulators. To the European Union they had to make a concession by selling its rights to some of its other labels.

In April Sony got the approval from the European Union to purchase EMI’s music publishing unit, but only after it agreed to sell its rights to the chart hits by Robbie Williams and Ozzy Osbourne, as well as its rights to the Sony/ATV portfolio which was agreed to be kept separate in the deal.

This looks like a very interesting point to me (if I understood it right) because it shows that the Sony/ATV joint venture is not the same entity as Sony proper and is separate from it.

However if Sony sold its right to Sony/ATV doesn’t it mean that Sony/ATV had to buy it? And at an additional cost to the money paid to be part of the EMI deal? If this supposition is correct than the amounts paid should have been quite substantial to say the least. And this at the time when the debt of $300 mln. to the Barclays’ bank still remains unpaid?

If my understanding of the situation is correct the above means that the Michael Jackson Estate is making further investments even though it is still indebted to the Barclays’ bank. Whether the risk is wise or not is a matter for dispute of course, but something tells me that had Michael been alive he would have readily gone for it. He was a very far-sighted businessman and was always looking into the day after tomorrow instead of a mere today.

The very least this situation tells us is that all those millions generated by the Estate are probably going in the direction of this deal. And of course also into financing the great Cirque du Soleil worldwide shows which is the biggest project undertaken by the Estate now.

The deal with EMI faced opposition not only from some Michael Jackson’s fans who oppose every Sony’s step since the time Tommy Mottola was fired ten years ago, but from Warner Music Group as well, and also Impala, an independent group of record labels.

Sony-Led Group Wins EU Approval To Buy EMI Unit

Apr 19, 2012

…. Sony Corp.-led group won European Union approval for its $2.2 billion purchase of EMI Group’s music publishing unit after it agreed to sell rights to chart hits by Robbie Williams and Ozzy Osbourne.

The European Commission approved the deal after the Sony group offered to sell the global rights to EMI’s Virgin catalogs and Sony/ATV Music Publishing’s Famous U.K. portfolio, the regulator said in an e-mailed statement.

The deal will give the Sony group control of EMI’s publishing rights to classics such as “New York, New York” and “Stand By Your Man,” adding to a portfolio of songs by Elvis Presley, the Beatles and Bob Dylan. Sony/ATV, the joint venture formed in 1995 that is co-owned by Sony Corp. (6758) and Michael Jackson’s estate, will oversee the new business.

The Sony group’s offer to sell the song catalogs eliminated antitrust concerns about the company’s control over online rights for chart hits by British and American artists, the EU said.

Dylan Jones, a spokesman for EMI, and Warner Music Group, an unsuccessful bidder for EMI, both declined to comment. Impala, a Brussels-based group of independent record labels that opposed the deal, is convinced that “the impact of this merger on the livelihood of authors has been underestimated, while the ability of the remedies to secure future competition has been overestimated,” Helen Smith, the group’s executive chair, said in an e-mail.

http://www.bloomberg.com/news/2012-04-19/sony-led-group-wins-eu-approval-to-buy-emi-music-publishing-unit.html

You can practically feel the fear of the author of the next article who says that the deal will give Sony/ATV too much control and even dominance as it will become the biggest music publishing business the world over – the news which I personally welcome very much.

It also mentions that in order to make the deal Sony had to sell the famous UK catalog to the Sony/ATV venture.

734 days ago
52.

Kimbo    

Flying donkey!

Yawn, too long, who will have the time to read that, and who cares???


what if MJ went to jail, he would have been still alive. What can you do with a truck load of money and millions of rabid fans in hell???

734 days ago
53.

Pegasus    

3. THE DEAL WITH EMI MAKES SONY/ATV A NEW GIANT
Recently Warner Chappell lost its rights to administer Michael Jackson’s own songs which were passed over to Sony/ATV. In a second move a Sony-led group of investors bought the full music catalog from the British EMI Music Publishing, and this now makes Sony/ATV the biggest music publishing business the world over.

Interesting how it falls in line with the words of Michael Jackson who said that the sky was the only limit to their plans?

It is also interesting that the EMI acquisition was made by the Sony-led investors despite competition from the same Warner Music Group who was and is Sony’s main competitor. Warner fought for the right to obtain another arm of the EMI business – the recorded music (not publishing rights) but lost in a competition with Universal who got the deal.

In the cir***stances of so fierce a competition and the stakes being so high (billions of dollars) one cannot help thinking that it isn’t only Michael Jackson’s haters who work against Michael’s fans, but most probably the Sony/ATV competitors in the first place too. Same as Michael’s detractors, they don’t want Michael’s joint venture with Sony to succeed and hold the key role in the music publishing business.

Knowing that Michael has half of Sony/ATV I think that it would be extremely unwise on the part of Michael’s fans to fight the only real company which is operating in the interests of Michael and his children (and is doing it in a superb way).

I am not saying that those who are in a constant battle with Sony/ATV are necessarily working for its competitors, but when Michael’s fans unwittingly or deliberately undermine Sony/ATV they should at least realize that they are playing into the hands of Michael’s competitors – no more, no less.

And Sony/ATV’s competitors did fight the deal with EMI tooth and nail. The price of the deal was determined at an auction and ranged from $2,1 from a competitor to $2,2 from Sony. The matter was more or less decided in November last year:

Citi to sell EMI for $4.1B to Universal, Sony

By CLAIRE ATKINSON

November 11, 2011

Citigroup has reached a deal to split up and sell iconic UK record company EMI to Vivendi’s Universal Music Group and a consortium of investors lead by Sony Corp.

Citi will sell EMI’s recorded music arm to Universal for $1.9 billion, and the publishing business to Sony group for around $2.2 billion.

The Sony consortium now includes Hollywood heavyweight David Geffen, who is still negotiating his investment in the bid, along with private-equity firm Blackstone and Abu Dhabi-owned investment fund Mubadala, sources said.

Both bids ended up higher than analysts and rival suitors had expected heading into the auction for EMI, home to acts such as ColdPlay, Katy Perry and The Beatles.

Len Blavatnik’s Warner Music Group bid was believed to have bid in the region of $1.5 billion for the recorded music unit, while KKR-backed BMG Rights were offering $2.1 billion for publishing.

The deal will cement Universal’s position as the largest music company in the world, though it will likely have to divest assets outside of the US.

EMI’s share of the recorded market in France and Germany is in the region of 75 percent, while in the UK it is between 40 and 45 percent. In the U.S, EMI’s market share is less than 10 percent.

http://www.nypost.com/p/news/business/citi_set_to_sell_emi_for_to_universal_vPGGqLNKiNoFmsRMwslnEJ#ixzz1dPegA3q4

For the new acquisition not to go counter the anti-trust legislation (which fights monopolies and ensures competition) Sony had to approach the European Union in March 2012 as well as the US regulators. To the European Union they had to make a concession by selling its rights to some of its other labels.

In April Sony got the approval from the European Union to purchase EMI’s music publishing unit, but only after it agreed to sell its rights to the chart hits by Robbie Williams and Ozzy Osbourne, as well as its rights to the Sony/ATV portfolio which was agreed to be kept separate in the deal.

734 days ago
54.

Pegasus    

This looks like a very interesting point to me (if I understood it right) because it shows that the Sony/ATV joint venture is not the same entity as Sony proper and is separate from it.

However if Sony sold its right to Sony/ATV doesn’t it mean that Sony/ATV had to buy it? And at an additional cost to the money paid to be part of the EMI deal? If this supposition is correct than the amounts paid should have been quite substantial to say the least. And this at the time when the debt of $300 mln. to the Barclays’ bank still remains unpaid?

If my understanding of the situation is correct the above means that the Michael Jackson Estate is making further investments even though it is still indebted to the Barclays’ bank. Whether the risk is wise or not is a matter for dispute of course, but something tells me that had Michael been alive he would have readily gone for it. He was a very far-sighted businessman and was always looking into the day after tomorrow instead of a mere today.

The very least this situation tells us is that all those millions generated by the Estate are probably going in the direction of this deal. And of course also into financing the great Cirque du Soleil worldwide shows which is the biggest project undertaken by the Estate now.

The deal with EMI faced opposition not only from some Michael Jackson’s fans who oppose every Sony’s step since the time Tommy Mottola was fired ten years ago, but from Warner Music Group as well, and also Impala, an independent group of record labels.

Sony-Led Group Wins EU Approval To Buy EMI Unit

Apr 19, 2012

…. Sony Corp.-led group won European Union approval for its $2.2 billion purchase of EMI Group’s music publishing unit after it agreed to sell rights to chart hits by Robbie Williams and Ozzy Osbourne.

The European Commission approved the deal after the Sony group offered to sell the global rights to EMI’s Virgin catalogs and Sony/ATV Music Publishing’s Famous U.K. portfolio, the regulator said in an e-mailed statement.

The deal will give the Sony group control of EMI’s publishing rights to classics such as “New York, New York” and “Stand By Your Man,” adding to a portfolio of songs by Elvis Presley, the Beatles and Bob Dylan. Sony/ATV, the joint venture formed in 1995 that is co-owned by Sony Corp. (6758) and Michael Jackson’s estate, will oversee the new business.

The Sony group’s offer to sell the song catalogs eliminated antitrust concerns about the company’s control over online rights for chart hits by British and American artists, the EU said.

Dylan Jones, a spokesman for EMI, and Warner Music Group, an unsuccessful bidder for EMI, both declined to comment. Impala, a Brussels-based group of independent record labels that opposed the deal, is convinced that “the impact of this merger on the livelihood of authors has been underestimated, while the ability of the remedies to secure future competition has been overestimated,” Helen Smith, the group’s executive chair, said in an e-mail.

http://www.bloomberg.com/news/2012-04-19/sony-led-group-wins-eu-approval-to-buy-emi-music-publishing-unit.html

You can practically feel the fear of the author of the next article who says that the deal will give Sony/ATV too much control and even dominance as it will become the biggest music publishing business the world over – the news which I personally welcome very much.

It also mentions that in order to make the deal Sony had to sell the famous UK catalog to the Sony/ATV venture.

So if I understood it correctly while some bloggers are constantly telling us that Sony/ATV will sell Michael’s share to Sony, exactly the opposite scenario is taking place now – Sony sold its rights to the Sony/ATV joint venture and it seems to be a much more independent entity now than it used to be before:

Thursday April 19th, 2012 12:48

The European Commission will today green light the bid led by Sony to buy the EMI music publishing business, a takeover which will give Sony/ATV control of the EMI song catalogues, making for the biggest music publishing business in the world.

As previously reported, the Sony-led consortium offered EC competition regulators a number of concessions during the initial stage of the European investigation into the proposed deal, which some say will give Sony/ATV/EMI way too muchdominance in the publishing sector, digital licensing and the collecting society system. And seemingly those concessions were enough to overcome opposition and concerns across Europe.

According to the Financial Times, the biggest concern for EC regulators was the dominance Sony/ATV/EMI would have over the Anglo-American catalogue in the UK market. The proposed sale of the Virgin-branded songs catalogue, plus the Famous UK catalogue and some key songs by prominent Anglo-American artists, was designed to specifically deal with those concerns. Seemingly some extra US-owned rights were also thrown in to further placate officials.

Although the Sony/ATV deal still needs approval in the US, and is also being investigated in Australia and Brazil, having secured approval in Europe with just a one-stage investigation is a considerable achievement, not least because it’s European regulators who are often hardest to please.

The entertainment conglom does not own Sony/ATV outright – the Michael Jackson estate owns the other half – meaning the Sony recording and publishing businesses have never been as closely aligned as at the other major music firms.

Meanwhile Sony and the Jackson estate will each be only minority shareholders in EMI Publishing, meaning the new acquisition will remain an autonomous entity, albeit controlled and managed by Sony/ATV day to day. This slightly complicated structure seemingly enabled Sony to persuade EC regulators to be less tough than they were with Universal in 2006 when it bought the original BMG publishing company.

Needless to say, pan-European indie label trade body IMPALA expressed disappointment at last night’s reports that an EC all clear for the Sony transaction was incoming. http://www.thecmuwebsite.com/article/ec-to-green-light-sonys-emi-deal-as-marty-moves-to-allay-staff-fears/

In June 2012 the deal was finalized. Now the joint venture between the Michael Jackson estate and Sony will control over 2 million songs. If any MJ’s fans tell me that this is unwelcome news I will call these people hypocrites.

Sony purchases EMI publishing rights

June 30, 2012

Sony Corp. and the Michael Jackson estate said Friday they had purchased Britain’s EMI Music Publishing for $2.2 billion from Citigroup, creating the world’s largest music copyrights company with a catalog that includes hits from Motown, The Beatles, Jay-Z and Norah Jones.

Publishing has remained a steady business over the years, despite the onslaught of the Internet and the ongoing decline of compact disc sales, because of its diverse revenue sources. And by acquiring EMI, Sony/ATV, a 50-50 joint venture between Sony and the Michael Jackson estate, will control just over 2 million copyrighted songs. The new entity is estimated to capture nearly a third of publishing revenue in the world.

The Associated Press http://www.thenewstribune.com/2012/06/30/2200109/sony-purchases-emi-publishing.html

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The Associated press even calls the EMI catalog managed by Sony/ATV the world leader now.

Associated Press – Fri, Jun 29, 2012

WORLD LEADER: Sony’s partnership with the Michael Jackson estate, Sony/ATV, will manage the EMI catalog, which has songs from Kanye West, Rihanna and Norah Jones. The entity’s No. 1 market share is about 31 percent, compared to 22 percent for Universal Music Publishing Group.

http://finance.yahoo.com/news/news-summary-sony-buys-emi-publishing-2-2b-214052409–finance.html

Others call the new consortium a giant force. This article explains in detail the way it will be run:

June 29, 2012, 9:08 AM

Sony Closes Its Acquisition of EMI Music Publishing

By BEN SISARIO
An investor group led by Sony closed its $2.2 billion acquisition of EMI Music Publishing on Friday, creating a giant force in music publishing, the unglamorous but lucrative side of the music business that deals with songwriting rights.

The deal will give Sony control over a catalog of more than two million songs, and a global market share of about 31 percent, nine points above that of Universal, its closest competitor, according to an estimate by the trade publication Music and Copyright.

Sony’s new catalog will include the 750,000 tracks — including 251 by the Beatles — that are controlled by Sony/ATV, the company’s joint venture with the estate of Michael Jackson. It will also include 1.3 million from EMI, with Motown hits, chestnuts like “Have Yourself a Merry Little Christmas” and songs by contemporary stars like Norah Jones, Kanye West and Amy Winehouse.

The deal just completed between Sony and EMI Publishing reunites Mr. Bandier, the chairman of Sony’s current publishing arm, Sony/ATV, with the EMI catalog, which he ran until 2007.

The financial structure of the deal is complex, and while Sony will administer the EMI catalog through Sony/ATV, its deal with Jackson requires that EMI Publishing remain a separate company. Sony and the Jackson estate will have a 38 percent stake. The other investors are the sovereign wealth fund Mubadala of Abu Dhabi, Jynwel Capital of Hong Kong, Blackstone’s GSO Capital Partners and the Hollywood mogul David Geffen.

The royalties and licensing fees from publishing rights are often seen as the most stable side of the music business, offsetting the more tumultuous fortunes of record companies.

“Music publishing, along with the rest of our entertainment companies, has been a bright spot in our business portfolio, and we expect that trend to continue with this important acquisition,” Kazuo Hirai, Sony’s president and chief executive, said in a statement.

Sony’s deal was one of two reached by Citigroup in November, which took possession of EMI in early 2011 after the private equity firm Terra Firma defaulted on its debt.

In the parallel sale of EMI’s recorded-music division — which includes albums by the Beatles, the Beach Boys and hundreds of other acts — the Universal Music Group bid $1.9 billion. That deal is still under review in Europe and the United States.

Sony’s deal will also reunite Martin N. Bandier, the chairman of Sony/ATV, with the EMI publishing catalog, which he built over 17 years until he left the company for Sony in 2007. While Sony/ATV and EMI will be separate entities, Mr. Bandier made it clear in an interview that he intended to run them as one collection of songs.

http://mediadecoder.blogs.nytimes.com/2012/06/29/passing-final-hurdle-sonys-deal-for-emi-publishing-is-approved-by-u-s/

Let us make some conclusions now. The share of 38% makes up more than one third of the consortium and belongs to Sony/ATV. In this stake Michael Jackson’s Estate has a half. This means that the personal stake of Michael Jackson’s children and his mother is 19% or almost one fifth of the new music publishing giant which is now number 1 in the world.

And this share belongs to Michael Jackson? The man who only three years ago was condescendingly looked upon as a ruined bankrupt, faded star and as someone who was completely done away with from the point of view of people like Tom Sneddon and Diane Dimond? Do you remember the snide remarks from DD and Peretti in that ugly film about Jackson where they practically labeled Michael a finished man?

And now this man has become a giant of music publishing business worth billions? And his estate will now receive profit each time Tom Sneddon and Diane Dimond listen to anyone’s music? Because Michael’s joint venture has control over 2 million songs and Michael’s detractors surely can’t avoid listening to them when they go shopping, watch TV or listen to the radio?

Imagine the feelings of those who made their living by mocking at Michael but are now humbled into listening from every corner to his and everybody else’s music, knowing that each minute of it brings profit to the man they ridiculed so much and wanted to see in the gutter?

And this giant worthy of billions is also the same man who was only recently humiliated beyond measure by the slavery terms imposed on him by AEG? And who was dictated their terms in the so-called riot act which threatened to pull the (financial) plug if he did not abide by their rules?

And all this miraculous change happened within the last 3 years only? With the help of the Estate lawyers by the way?

Oh Lord, your ways are full of wonder indeed! The Heavens definitely put their hand to it – none of us could ever count on a powerful revenge like that. The mills of God grind slowly, but they grind exceedingly small…

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4. THE MIJAC CATALOG
As we know Sony/ATY will also administer the Mijac catalog which contains all Michael Jackson’s songs. The article below says that already half a year ago Sony/ATV had plans to take over the administration rights over Michael Jackson’s own songs from Warner Chappell.

What is exceptionally interesting in this information (dated February 2011) is that “according to sources, this arrangement was written into the MiJac contract with Warner Chappell years ago” which makes us think that Michael was well aware of the plans and probably even wanted it this way.

Another statement says that the process “would be triggered by the release of Michael’s next album–in this case, the recent ‘MICHAEL,’ and the repayment of loans”. Both of these terms have almost been fulfilled as the posthumous album was released and only $4 mln. of the initial loan pledged by the MjJac catalog is left to be paid.

Will MiJac Move To Sony/ATV?

Wednesday, February 16th 2011

Showbiz411.com have exclusively revealed that plans are developing to move MiJac Publishing away from it’s current administering company, Warner Chappell, and will become part of Sony/ATVMusic Publishing.

MiJac Publishing, owned entirely by Michael’s Estate not only owns all Michael’s iconic hits, but also those of Ray Charles, Curtis Mayfield and Sly and the Family Stone, to name but a few. Previously administered by Warner Chappell, in the face of the decline in the record industry, it could be that MiJac will leave them and become part of Sony/ATV Music Publishing, the company that the Michael Jackson Estate co-owns with Sony, and contains the Beatles Catalogue.

According to sources, this arrangement was written into the MiJac contract with Warner Chappell years ago. It would be triggered by the release of Michael’s next album–in this case, the recent ‘MICHAEL,’ and the repayment of loans.

The move by MiJac to Sony/ATV is important for many reasons. With both WMG and EMI Music for sale, Sony/ATV could be checking out each company’s publishing divisions for purchase. But Warner Chappell might be less interesting to Sony ATV considering they’re already getting MiJac and without MiJac, Warner Chappell–which just had a down quarter–might not look so good to other potential buyers.

http://www.mjworld.net/news/2011/02/16/will-mijac-move-to-sonyatv/

The same Michael Jackson fans’ source posted the message from John Branca which enables us to finally place it correctly in time. When Branca’s letter recently resurfaced we thought that it was written in connection with the latest maneuvers of Michael’s siblings over the will – however now it turns out that this was said a year and half ago, probably because the threat to challenge the will haunted the Estate lawyers then and is haunting them now (and haunts them on a permanent basis despite the fact that Branca was named Michael Jackson’s executor in four Michael’s wills).

Branca’s letter confirms that as long as he and John McClaim are in charge of the Estate they will never relinquish the ownership of Michael’s catalog to anyone. Even if it were passed to Sony/ATV it would be for a limited time only and on unprecedented favorable terms too. The main thing he says is that the catalog will by all means be passed over to Michael’s children (which is all that matters, at least to me).

Mijac & Sony/ATV
Thursday, February 24th 2011

There have been numerous questions asked regarding the Mijac catalog and reports in the press of it moving to Sony/ATV. Below is an email from Co-Executor John Branca to Jeff Jampol, GM of the MJ Online team, clarifying some of what has been publicized through various media outlets.

Forwarded Message From: John Branca Date: Mon, 21 Feb 2011 15:18:31 – 060...0 To: Jeff Jampol

Subject: Michael Jackson/Mijac

Jeff, I understand that you are being asked a lot of questions about Mijac. Yes, there is a matching right that Michael granted to Sony/ATV but they only get to administer the catalog for a limited term AND only if they agree to unprecedented favorable terms. We will not relinquish ultimate control and ownership to anyone. We have favorably refinanced the loans on Mijac which will be paid off and the catalog WILL absolutely be passed to Michael’s children as long as we have anything to say about it. Sony/ATV is a great company and the Estate owns half of it but no one, not even Sony/ATV, will ever own Mijac while John McClain and I remain in charge. The current Sony team is the one Michael chose to work with on the ‘Thriller 25,’ release and they are good partners. As stated in the recent court filings, they worked with us to refinance the burdensome debt that had been placed on Michael’s interest in Sony/ATV to very favorable terms, an important achievement which insures that Mijac and Michael’s masters remain secure for the benefit of Michael’s children for years to come.

I would appreciate your sharing this with the fans that are asking questions. Thanks – John

John Branca Co-Executor, The Estate Of Michael Jackson, Los Angeles, CA

Source: MJOnline (The Official Online Team Of The Michael Jackson Estate) & MJWN http://www.mjworld.net/news/2011/02/24/mijac-sonyatv/

However let us pay attention to the phrase which is actually crucial for Michael’s ownership of the catalog – “We have favorably refinanced the loans on Mijac which will be paid off”. This phrase is indeed key to understanding the situation around the Mijac catalog of Michael Jackson’s songs.

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5. ENTERS FORTRESS INVESTMENT GROUP
If the loan for Mijac catalog had not been refinanced by Branca and McClain to a 4% interest rate it would have remained at the 16,5% it finally reached and would have required millions of dollars as monthly payments of the interest rate only.

And if the loan had had to be repaid at that outrageous interest rate Michael could have defaulted in payment and could have lost it altogether. In this case it would have gone not into Sony’s hands as everyone says, but into the hands of Fortress Investment group which acquired those loans from the Bank of America.

Here are some details about it from an article dated June 21, 2010. The article makes an important emphasis on the fact that the MJ Estate Executors are not actually “traditional executors” (who first pay the debts and then try to preserve whatever remains of the money). No, John Branca and John McClain are the people who are “aggressively managing Mr. Jackson’s affairs as a going concern”. The Estate Executives are not obliged to turn the Estate into a lucrative business, but they are nevertheless doing it and doing with much enthusiasm and fine professionalism.

From the article below we learn that the appalling interest rates which were to be paid for the loan backed by Mjjac catalog were handled in the most professional way and lowered to less than 4%:

Jackson Estate Steers to Next Challenge: Loan Refinancing

Since Mr. Jackson’s death last June 25, his businesses have been run by the singer’s longtime lawyer, John Branca, and a music-industry veteran and personal friend of Mr. Jackson’s named John McClain. Unlike traditional executors, Messrs. Branca and McClain are aggressively managing Mr. Jackson’s affairs as a going concern.

Mr. Jackson’s debts were spiraling out of control…. A loan backed by Mijac carried a crushing 16.5% interest rate, to be paid out of royalties generated by the company.

When the royalty payments fell short of the towering cost of servicing the debt, any unpaid interest was piled on to the principal. As a result, by the time of his death, the Mijac loan had reached $75 million, with $11 million due in annual interest, which was several million dollars more than the catalog was generating annually.

The loan has now been refinanced with an interest rate of less than 4%. And thanks to increased album sales since Mr. Jackson’s death and a new deal for public-performance royalties, the catalog is generating enough cash to pay off the refinanced loan a little more than a year from now.

http://online.wsj.com/article/SB1000142405274870343860...4575315364195884770.html

The outrageous interest rates must have been the doing of Fortress Investments – the company which acquired all Michael’s loans from the Bank of America where they were initially taken by MJ.

Roger Friedman tells us the story of how Michael’s loans turned out to be in Fortress’s possession. Friedman claims that passing them over to Fortress shocked Jackson and was an unexpected move on the part of the Bank of America. What is top important is that as a result of the deal Fortress became the first in line to the ownership of Michael’s 50% share in Sony/ATV publishing venture in case he defaulted on the $200 loan.

The Fortress also acquired Michael’s loan for $72,5mln, which was backed by the Mijac catalog of Michael Jackson’s own songs. Friedman says that the new 9,5% interest rate on the loan was not negotiated with Michael and he simply had to accept it (eventually it turned into 16,5%.)

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The above makes me ask Sony’s critics a question – who in their opinion presented a bigger danger to Michael Jackson in terms of losing not only one, but two catalogs, at least in the year 2005 – Sony or Fortress Investment Group?

When you read the article you’ll see that Roger Friedman thunders over Jackson’s rejection of the deal with Goldman Sachs and former advisors Charles Koppleman and Al Malnik who offered to buy half of his share (25%) to help him out of his liquidity crisis. Michael refusal shows that though this step would have solved his problems he was still intent on keeping his share intact (evidently to pass it over to his children).

In refusing Goldman Sachs Michael followed the advice of no other but John Branca. The press recently reported John Branca saying that it was him who advised Michael against selling half of Michael’s share, so Friedman is wrong in thinking that Branca sided with the others in the proposed deal.

Let us also disregard Friedman’s hostile tone (which is nothing new to us) and look at the factual side of the matter only:

FYI: Friedman – (Jackson) Shocked by Sale of Loans

From Roger Friedman’s column on May 5, 2005:

Michael Jackson was reportedly shocked Wednesday when he received word that Bank of America sold him out.

I can tell you exclusively that Bank of America has sold Jackson’s $270 million in loans to a private hedge fund. The group is called Fortress Investments, located in Manhattan. Their principals are Peter L. Briger Jr., formerly with Goldman Sachs, plus Wesley R. Edens, Robert I. Kauffman, Randal A. Nardone and Michael E. Novogratz — all with substantial backgrounds in finance.

Their specialty, according to their Web site, is rescuing “undervalued, orphaned and distressed investments throughout the United States, Western Europe and Japan.”

With this sale, Fortress now stands to become a 50 percent owner in Sony/ATV Music Publishing if Jackson should default on the loan.

Technically, he is currently in default. Furthermore, Jackson’s deal with Sony comes to an end this December, at which time the company can buy him out for $200 million if he can’t come up with a new buyer or enough money to pay back the loan.

The Fortress deal is also rumored to include a $70 million loan Jackson has on his own publishing catalog, called MiJac.

Jackson was apparently shocked, according to sources, when he got word about the sale on Wednesday morning from Bank of America. He had previously rejected a deal that would have netted him money, cleared debt and left him in good shape with people who were longtime friends. But now he’s in business with strangers.

Still in the equation, however, is grocery king Ron Burkle. He sent a letter to Bank of America several days ago saying that he needed 90 days to help Jackson refinance. Burkle could still be Jackson’s white knight and bail him out from Fortress, but so far he’s done nothing. Jackson remains cash poor in the meantime as he continues to stand trial for child molestation here in Santa Maria.

Michael Jackson has no one to blame but himself for what’s happened to him now. He can’t say record producer Tommy Mottola is a racist or that producer Charles Koppleman is out to get him. He’s cooked his own goose, with all the trimmings.

Jackson was severely taken aback to discover yesterday morning that Bank of America had sold his $270 million debt to a group of private investors. But why was he surprised at all? In the last few weeks, Jackson has done nothing but spit in the faces of the people who have kept him solvent for the last 20 years.

First there was his private banker at Bank of America, Jane Heller. Heller came with Jackson’s loan from NationsBank when it was merged into Bank of America. But the fact is, Heller has kept Jackson in carnival makeup and llama food for the two last decades.

Then there’s Al Malnik and Charles Koppleman. They’re not the Red Cross; they’re savvy businessmen. But they worked hard for Jackson over the last three years to help get his house in order and off the auction block. Jackson was frequent guest at Malnik’s Miami manse, bringing with him kids, nannies, etc.

In 2003, Malnik told Jackson that he should downsize his life, take stock and stop inviting children into his bed, before the current scandal broke in the fall of 2003. Jackson froze him out and the two have not talked since then.

Jackson also long ago stopped speaking to Koppleman and to his longtime attorney John Branca — two more advisers who kept him afloat. Instead, Jackson turned to a succession of con artists and hustlers who promised him the moon but simply mooned him.

There was also the brief infatuation with the Nation of Islam and the ill-fated association with Shmuley Boteach. To this day no one knows where the money went from the Feb. 14, 2001, Carnegie Hall event hosted by Boteach and Jackson “for children.”

But the one thing Jackson had with Heller, Malnik, Koppleman and Branca — besides a history — was affection. They cared about him even when he didn’t care about them. They protected him, too.

But last month Jackson refused a deal they offered that would have bailed him out of debt. He didn’t like it because he thought they would get something out of it. In his characteristic sneaky manner, he turned to grocery king Rob Burkle of Yucaipa Companies to save the day.

Malnik, properly insulted, quit. The bank, which considered Malnik their only link to reality, obviously had enough.

Who knows what the moneymen that bought out Jackson’s debt have in mind for the loan. One thing is for sure: The hedge fund’s major principle, Peter L. Briger, doesn’t know the former King of Pop and probably doesn’t want to.

Briger will function very well as a stranger to Jackson, dispassionate and businesslike as the clock counts down to December 20: the day when Jackson will have to either put up or shut for good. One thing’s for sure: He will get exactly what he deserves.

Source: MJFC / Fox News

Despite Roger Friedman’s highly emotional attitude and resentment towards Michael the news that Michael was in a serious risk of losing his Beatles catalog was correct. It was repeated by CNN who said that the loan for $200 mln. sold to Fortress by the Bank of American was due in December 2005 or only six months from the moment when this article was written:


Michael Jackson to lose Beatles catalog?

The cash-strapped pop star on trial for child molestation finds some of his assets threatened.
May 5, 2005: 3:53 PM EDT
By Krysten Crawford, CNN/Money staff writer (excerpts)

Two loans estimated at $270 million that are tied to the Beatles catalog and other assets have been sold by Bank of America, the nation’s No. 2 bank, to a private hedge fund, according to people familiar with the transaction.

Jackson’s financial troubles have been known for years. To secure the Bank of America loans in 2001, Jackson offered as collateral his 50 percent stake in a Sony partnership that holds copyrights to more than 200 Beatles songs. The loans were also backed by Jackson’s own music library and a partial deed on his Neverland ranch in Santa Ynez, Calif.

Technically Jackson has defaulted on loan payments, one of the sources said.

Typically, when a debtor defaults or is about to default on a loan, terms are renegotiated. Another option is for the lender to sell the loan — and the collateral that comes with it — to another party. Bank of America chose to sell the loans to the hedge fund, New York-based Fortress Investment Group.

Depending on negotiations with Fortress, the risk that Jackson could lose the copyrights to the Beatles songs as well as his own hit recordings is real.

An accountant testifying at Jackson’s child molestation trial this week told jurors that the rock star is in financial straits. Forensic accountant John Duross O’Bryan said Jackson is spending about $20 million to $30 million a year more than he earns.

Jackson, Duross O’Bryan testified, has liabilities of about $415 million. The result is “an ongoing cash crisis,” Duross O’Bryan testified.

To fund his lavish lifestyle, Jackson has borrowed against his assets. Duross O’Bryan said that one of the loans that Bank of America sold to Fortress, valued at $200 million, is due in December 2005.

Losing the Beatles rights could put into play one of the world’s most valuable song portfolios.

Jackson, 46, acquired the Beatles song catalog in 1985 for $47.5 million, outbidding ex-Beatles singer/bassist Paul McCartney. Jackson then sold a piece of his stake to Sony a decade later, creating a joint venture called Sony/ATV Music Publishing. The venture is now believed to be worth more than $400 million.

Royalty arrangements can be quite complicated. Basically, Jackson and Sony receive a fee each time one of the Beatles songs is played on the radio or a Beatles album is sold. Industry royalty rates for single-song plays can run under 10 cents, while rights holders typically earn a small percentage on each album sold.

Another major revenue stream for Jackson is Mijac Music, the copyright holder on all of his hits and other artists’ songs. Mijac is thought to be worth roughly $75 million, according to reports.

Hedge funds are largely unregulated investment vehicles that are designed for wealthy investors looking for big returns on riskier bets. According to InvestorForce, there are more than 4,000 such funds with more than $800 billion in assets.

A small fraction of hedge funds invest in what are known as distressed securities, such as debts like Jackson’s.

http://money.cnn.com/2005/05/05/news/newsmakers/jackson_loan/index.htm?cnn=yes

In almost every article of the period Roger Friedman’s exclaims that Michael was crazy to reject the deal from Goldman Sachs and his former advisors Charles Koppelman and Al Malnik who offered to purchase from him 25% of the Beatles catalog (or half of Michael’s share). For us Michael’s refusal is a sure sign of how terribly unwilling Michael was to part even with a fraction of his catalog though the dramatic situation and common sense were urging him to sell.

We also remember that Charles Koppelman always wanted to have the Beatles catalog and was one of the initial bidders for it, but lost to Michael in 1985, so I somewhat doubt the sincerity of his friendly gesture towards Michael Jackson.

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6. EVEN A PLEDGED CATALOG NEEDS EXPANDING
From another Roger Friedman’s article we find out that under the initial agreement with Michael Jackson Sony was to go on adding new songs to the catalog and do it even on behalf of Michael Jackson. However the burden of it was not supposed to affect Jackson as the cost of new acquisitions was to be covered by the money generated by the catalog itself.

The idea was very good, as I’ve said before, but at the time there was no way to know that Michael would need a tremendous amount of cash to solve his legal problems both in the 90s when he had to settle numerous suits from Marcel Avram for disrupting the Dangerous tour and other commitments arising from it and during the 2003-2005 non-stop litigation process (all in all Michael Jackson faced more than 1000 lawsuits in his life).

What looked like an effortless acquisition of more and more songs became an extra burden for Michael when he started fighting the cir***stances and those acquisitions could have well ac***ulated new debts for him – though “on paper only”, according to Roger Friedman.

Jackson Finances: CPA Got It Wrong (excerpt)

May 4, 2005

Readers of this column know we started generating stories here about Michael Jackson’s finances as long ago as 2001. This was after an excellent piece in Penthouse (of all places) by investigative journalist John Connolly. Later this material was picked up and repurposed without credit in Vanity Fair.

Yesterday, a CPA hired by the prosecution to analyze Jackson’s financial picture testified in the trial. This, of course, was District Attorney Tom Sneddon’s great revenge, to embarrass the King of Pop and show him as a pauper who lives beyond his means.

Unfortunately, the accountant assigned this task, while very nice, had no real experience evaluating song catalogs or entertainment portfolios other than, he said, some work on David Bowie’s finances. For example, a verbal fight ensued between John Durros Bryan, the accountant, and defense attorney Tom Mesereau over how much Jackson’s stake in Sony/ATV Music Publishing is worth. Even though Jackson has a 50 percent stake in the company, Bryan insisted he would get far less than that if the company were sold or if Jackson were bought out of his half.

If the company is worth $1 billion, Bryan claimed, Jackson would get only $200 million. Sony would get the rest.

Well, Mr. Bryan, you are — to quote Janet Arvizo — incorrect.

My sources, who have been right on the money about Jackson and Sony for a long time now, explain it this way: Jackson and Sony are in fact 50/50 owners of Sony/ATV Music Publishing. Sony often makes acquisitions for the company. They recently bought Acuff Rose Music Publishing, for example. But Sony’s deal with Jackson is that they must finance his half of such acquisitions. “That creates a debt on paper,” says my source.

But that debt, which is amortized over a 10-year period, is not counted against Jackson. That’s because the purchase of the acquisition turns a huge profit over the years to come, making money for everyone.

Jackson, in fact, has a $500 million stake in Sony/ATV. He has a Bank of America loan against it for $200 million. If the company is sold for a billion, or Sony buys him out, Jackson will be left with $300 million. Of course he has other substantial debts that would winnow that amount down considerably. But Bryan was wrong, my source says, when he testified that if Jackson sold his stake, he’d not only be broke but $40 million in debt because of his tax liability.

Frankly, the only thing Bryan said yesterday that was completely accurate was in response to Mesereau’s assertion that Jackson had offers to sell his stake for $400 million — thus bailing himself out of hock.

Said Bryan: “If that’s the case, then why doesn’t he do it?”

Responded my source, who knows Jackson well: “Because he’s crazy.”

Jackson, in fact, just rejected a deal from Goldman Sachs and his former financial angels Charles Koppleman and Al Malnik. The deal would have left Jackson with no debt at Neverland or on his own songwriting catalog, a 25% stake in Sony/ATV, $10 million cash and a $7 million-a-year income. Why? He just didn’t like it.

$38,000 to Pay $10 Million in Bills?

One true thing did come out of the long examination of Jackson’s finances yesterday. Schaffel, who was earlier identified as cashing checks for $1.5 million from a joint account with Jackson, clearly was reimbursing himself for money owed.

You may recall this column breaking the story of Schaffel’s civil suit against Jackson for $4 million. After John Bryan’s testimony yesterday, we know that around the time Schaffel was cashing those checks, Jackson had only $38,000 in cash for spending money. He had bills of $10 million.

It was hard to imagine when the story of the suit broke that Marc Schaffel was actually lending millions to Michael Jackson. But apparently Jackson’s lack of liquidity was so pronounced at the time — February and March 2003 — that Schaffel was loaning him money and advancing money for the production of Jackson’s rebuttal video and home movies, which were shown on Fox.

Source: MJFC / Fox News / Roger Friedman used with special permission.

734 days ago
60.

Pegasus    

Wiki confirms that Michael Jackson never wanted to part with his share in the Sony/ATV catalog and that new acquisitions to it were part of the plan from the very beginning of the joint venture. Michael Jackson said that his catalog would never be for sale:

In May 2001, Jackson denied rumours that he was planning to sell the Beatles’ song catalogue. Rumours had circulated that the singer was to sell them in order to finance the upkeep of Neverland Ranch and to cover legal bill expenses.[21] The singer announced in a statement, “I want to clarify a silly rumour – The Beatles catalogue is not for sale, has not been for sale and will never be for sale.[21]

Sony/ATV Music Publishing continued to acquire song catalogues in the 21st century. In November 2001, the company signed country singer Tony Martin to an exclusive songwriting and co-publishing deal. Through the deal, they acquired Martin’s Baby Mae Music catalog of 600 songs, which includes Joe Diffie’s “Third Rock from the Sun” and Jeff Carson’s “Not on Your Love”.[22]

In July 2002, Sony/ATV Music Publishing bought veteran country music publisher Acuff-Rose for $157 million. The venture included music publishing rights to 55,000 country music songs, including the music of Hank Williams, The Everly Brothers and Roy Orbison[23][24] as well as the master recordings of the defunct label Hickory Records. Sony/ATV revived Hickory Records as the in-house record label imprint in 2007, with distribution handled by Sony Music’s RED Distribution.[25] Sony/ATV also owns the masters of Dial Records, Four Star Records and Challenge Records.[26]

In 2006, Sony obtained an option to buy half of Jackson’s stake in the company at any time for a fixed price of $250 million.[27][28][29][30] Sony has not exercised the option.

Timeline of Sony/ATV Music Publishing



1955 Associated Television (ATV) is established by Lew Grade.
1957 ATV acquires Pye Records as a wholly owned subsidiary.
1957 ATV Music Publishing is created to exploit the songs owned by ATV.
1968 ATV Music and Lew Grade acquire the rights to the Lennon–McCartney song catalogue, Northern Songs.
1982 ATV Music Publishing and Pye Records are put up for sale. They are bought Robert Holmes à Court.
1985 ATV Music Publishing and its assets, Pye Records and Northern Songs, are again put up for sale. Singer Michael Jackson acquires them for $47.5 million.
1995 Jackson merges ATV Music Publishing with Sony. He earns $90 million in the venture.
May 2001 Jackson declares that The Beatles’ songs “will never be for sale”.
November 2001 Sony/ATV Music Publishing acquires Tony Martin’s Baby Mae Music catalogue of 600 songs.
July 2002 Sony/ATV Music Publishing buys country music publisher Acuff-Rose for $157 million. The venture includes publishing rights to 55,000 songs.
2007 Sony/ATV Music Publishing acquires theLeiber and Stoller catalogue, which includes the Elvis Presley hits “Hound Dog” and “Jailhouse Rock,” and Famous Music, a music publishing business with song catalogue of more than 125,000 songs.

734 days ago
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