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THENATION
lndebted Jackson to Sell Pad of Music Cataloo
IHOME EDITION]
LosAngelesTimes- LosAngeles,Calif.
Author:
ChadesDuhigg
Date:
Apr 14,2006
StartPage:
A.1
Section:
MainNews;ParlA; BusinessDesk
DocumentTypes:
News
TextWordCount:
1376
DocumentText
(Copyright(c) 2006 LosAngeles Times)
l\,,lichael
Jackson,who ruledthe popchartsbeforcst^rgglingwithmountingdeblsand legaltroubles,begandismantling
his empireThursdayby agreeinglo
sella porlionof his belovedmusicpublishingcataloglhatfeaturesh,lsby the Beatlesand dozensof otherstars.
To avoidforeclosure
on severalloans,Jacksonsigneda $325-millionrefinancing
agreemenlthatwouldrequirehimto sell haifof his 50%stakein
to partnerSonyCorp.wilhinthe nextfew years.Proceedswill payoff a largeporlionoflhe performer's
Sony/ATVMusicPublishjng
debl,owedprimarilyto
NewYorkhedgefund Fortresslnvestment
Grcup.
The dealjs a coupfor Sony,whichhas longhopedlo acquirea largerinlerestin the thousandsof copytightsownedby Sony/ATV,
whichinclude251
Beatlessongsand BobDylan's"Blowin'inthe Wind.'Peoplefamiliarwiththe deal,whoaskednol to be named,saidthatSonywas likelytopayJackson
about$250million.
The Sony/ATVcatalogis valuedat aboul$1 billion,but is expecledto be worthmorebylhe timeSonybuyshalfof Jackson'sstakebecauserevenuehas
grownby morelhan 10%in the lasttwoyears.
Repaesentatives
for Jacksonand Sony/ATVdeclinedto commenton the deal.
A slarsincehe wasa childpedormingwithhis brothersin lhe Jackson5, lhe singeis 1983soloalbum"Thrille/'rcmainsone of the top sellersof all lime.In
1990.Forbesestimatedhis nelworthat $175million.
Butas hiscelebritygrew,so did Jackson'soverhead.His lifestylebecamemoreexlravagant
and he acquiredlavishhomesand a collectionof exolic
animals-At the samelime,Jackson'smusicsalesslowedbecausehis publicpersonawas hurtby a civilsuitthat allegedhe had molesteda child.
Thatsuilwas settledoul of courtin 1994.Butin 2004,Jacksonwas indictedon criminalchild-moleslation
chargesinvolvinganotherplaintiff.Hewas
acquitledof thosechargeslaslyear.
The seedsof Thursday's
approached
Jacksonabouta loomingrepayment
deadline
agrcementlook roollastspring,whenBankofAmericarepresenlalives
on a $270-million
loancollateralized
by the singer'sinlereslin Sony/ATV.
his advisorsto negotiatea solutionthatwouldhaveerasedhis
Jackson,whowasthenawaitingtdalon the criminalchild-molestation
charges,authorized
in the negolialions.
As partof the agreement,
Sony
deblsand providedhimwithincomeof about$'10milliona year,accordingto someonewho participaled
Corp.wouldhaveplrchasedhalfthesinge/sinterestin Sony/ATVfor $200millionto $250million.
Butal lhe lastminute,sourcescloseto thosenegotiations
say,Jacksonbalkedat the deal.Overtheobjectionsof Jackson'sadvisors,BankofAme ca ihen
soldthe loanslo Forlress.
Whenthe Fortress-owned
loanscamedue in oecember,lhesingerlackedsufficientfundslo repaylhem.SonyofficiaisincludingChiefFinancialO'fficer
RobWiesenthal,
woniedthat FortressmightseizeJackson'sinterestin Sony/ATV,helpedlhe singernegotiatean extension.Butthe loan'sinterestrate
inc,easedto aboul20%a yearand the totalamountowedballoonedto morethan$300million.
Jacksonalsofelocatedto Bahrain,makingthe possibililylhathe couldjump-starthis recodingandtouringcareefevenmoreremote
On lhe adviceof Bahrainiand newLosAngeles-based
con5ullants,
JacksonnegotialedThursday's
deal,in whichthe singermayreceivelessthanwas
proposedlastyear.
Jackson,whoaccordingto 2005courttestimonywasspending$30 millionmorea yearthanhe earned,will stillcollectprofitsfromhis remaining25%share
in Sony/ATV,
andwill receiveroyaltiesfromhisowncomposilions,
whichremainseparalefromSony/ATV.However,lhe publlshingrighlsof thosesongswiil
be usedas collateralforthe refinancedloan,puttingthemat dskif Jacksondefaults.
Jackson'sparenls."He'ssellingever},thing
because
"There'sno morepeoplein the shadowsto helphimout."said DebraOpri,an attorneywhorepresents
no oneelsewillfinancehim.'
Anotherbeneficiaryofthe
agreemenlis LosAngelesmusicattomeyJohnBranca,who has beenaliernately
embracedand spurnedby the mercuial
Jacksonthroughout
muchof the singe/scareer.BrancahelpedstructureJackson'spurchaseof the Beatles'and others'copyrights
in 1985for $47.5million.
Today,thoseassetsareworlhmorethan 10timesthal,andsourcessayBranca,who owned2.5%of the Sony/ATVventure,hasakeadypocketedas much
as $20 millionwhenJacksonboughtout hisshareas partof Thurday'srefinancing
agreement.
Citinga confidentiality
agreement,
Brancarefusedto discussJackson'sreflnancing
orlhe lermsof hisagreementwilh lhe singer.
WhenJacksonfirslpurchasedthe copydghtsthai havenowsparedhimfromdefaullingon his debts,few imaginedhe wouldeverneedsaving.
In '1983,afterreleasing'"Thriller,"
the singermelwithBrancain the denof lhe Jacksonfamilyhomein Encino.He toldthe lawyerthathe wantedto slart
the copyrights
acquiring
of famoussongs.
Jacksonhadrecentlydinedwilh formerEeatlePaulMcCartney,
who explainedthatcopyrighlownerstypicallygeta portionof revenuegeneratedby a song.
A few monthslater,BlancatoldJacksonthal a companyowninothe copyrights
on hundredsof Beatlestunes,including"Yesterday'and"Let lt Be,"wason
the market,andthe singerjumpedat the chanceto buyit.
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Thatcompany,an entertainment
conglomerate
namedATV,had purchasedthe Beatles'publishingcompanyin 1969as well as copyrights
on morethan
4,000songsby otherartists.
Jacksontoldhis advisorshe wanledATV as muchforemotionalas financialreasons.
to buythe songs,'saidGaryStiffelman,
a musicaltomeywhohelpednegotiateJackson'spurchaseofATV.'He feelsa real
"Michaelwasverydetermined
connection
lo the masterpieces
and be wanledto ownthe legacy."
Brancastructured
the ATV acquisition
and contjnuedto representJackson,negotialing
sponsorship
dealslhat werethensomeoflhe richeslin hislory.But
in 1990Jacksoncut hislies to the attorneyal the urgingof otheradvisors.JacksondismissedBrancaby passinga noteto an associatethat said,'Tell John
Brancaand Karena paralegall'm sorryandI lovethem."
Wilhinthreeyears,Jacksonwas in a downwa.dspiral.In 1993,aroundthe timehe publiclysoughttreatmentfor addiction,JacksonofferedBranca5% of his
futurepoecls if he wouldagainrepresenthim.Brancabeganincreasing
ATV'Sholdingsby acquiringthe copyrights
of ElvisPresleysongsand suchtunes
as "GreatBallsof Fire,"'Whena Man Lovesa Woman'and 'LoveTrain."
In 1995,JacksonmergedATVwithSonyMusicPublishing.
Sony,betlingthal lhe singerand the songshe ownedwouldbe popularfor years,paidhim$1'15
millionand agreedto contdbutefuturecompositions
by otherartists.As a Gsult,todayJacksonprcfilsfromthe tunesof Destiny'sChildandWillSmith,
amongothers.The Sony/ATVcataloggeneralesan estimaled$80 millionin yearlyrcvenue,abouthalffromBeallessongs.
AfterJacksonwasaccusedof childmoleslaiion
for the secondlime in 2004,he againdistancedhimselffromBrancaand otheradviso.swho hadguidedhis
careerfor years.
BythenJacksonwasspendingmostof histimein seclusionon his2,600-acre
NeverlandRanchin the SanlaYnezValley.His legallroubleswere
multipling.ln the twoyearssince,Jacksonhas beenBuedal leaslfourtimes,accusedoffailinglo pay$3.3 millionin overduebills.
Sincehisrelocaiionlo Bahrain,JacksonhasshulteredNeverland
and soldor removedmanyoflhe tigersand otheranimalsthal llvedthere.He alsoagreed
to paymorethan$300,000in backwagesto the dozensof Nevedandslafithatwerelaidoff.
Bul as Jacksoncutsbackon his expenses,the mostpainfulbelt tighleningmaybe the lossof halfhisownershipstakein lhe Beatlescalalog.
'There'sno questionit'sthe mostvaluablethingl\4ichael
hasleft,"saidStiflelman,
the musicatlorney.The songs,he added,"holdenormousemotional
value."
lustratlonl
Caption:Pl'lOTOrADVISOR:MichaelJacksonwas aidedby L.A.musicatlorneyJohnBranca,righl,in his 1985purchaseof lhe catalog.:PHOTO:
ADVISOR:MichaelJacksonwasaidedby L.A.musicattomeyJohnBranca,right,in his 1985purchaseof lhe calalog.
Credit:TimesStaffWriter
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