The Music Industry, Sony, MJ Estate and Sony/ATV catalog (2)

By The Last Tear (Lou)

In mid-March several newspapers wrote that Sony would buy Jackson’s share in Sony/ATV catalog. The Estate of Michael Jackson sent a statement and confirmed the information. The Japanese company will pay 750 million dollars to the Estate.

As soon as the announcement was made, we heard and read all kinds of reactions; some congratulate the Estate and some harshly criticized the Estate’s administrators. We at Nonlocal blog prefer to wait and study the matter before expressing any opinion.

Like the first part of this blog, I have gathered several articles and share them here with the readers. I have selected relevant paragraphs (in my eyes, of course) in some articles. They are in bold green! We will do a sort of recap based on the information given in these articles. As soon as new information will come up, our recap could change. Again, based on what we have read, we ask some questions about what could happen in the future.

Two articles written by Ed Christman (Billboard) on October 8, 2015 (this is an old one, already in the part 1) and on March 19, 2016 are interesting (please scroll down and read the articles. Do not forget to read the one about Paul McCartney. It is more complicated than we think).

In the first article (October 8, 2015), Ed Christman anticipated that Sony would be the buyer and the Estate the seller:

Of the two partners, its more probable that Sony will buy out the Michael Jackson estate (the “ATV” in Sony/ATV) than the reverse. While administrators John Branca and John McClain have returned the Jackson estate to solid financial footing, it’s likely that Jackson’s heirs would prefer to sell their stake in the company.

In the second one (March 19, 2016), Christman explains how the buyer-seller business is done and how the moves of the both parts (Sony-MJ Estate) were business strategy:

Typically, when an asset is up for sale the seller tries to inflate the price while the buyer attempts to lowball — but the buy-sell option triggered by Sony/ATV made it unwise to play that game, since both parties could have wound up on either side of the transaction.

Initially, the Jackson estate’s posture seemed to indicate that it wanted to be the buyer, and Sony the seller. But if the Jackson estate low-balled the valuation and Sony became the buyer instead, it would have hurt its return on the investment, and vice-versa. The same conundrum could occur with a overly generous bid also, if you became the buyer instead of the seller.

Consequently, the buy-sell process used a mechanism in which each side generated an independent valuation for Sony/ATV. If these valuations were close to one another, the difference would be split to come up with a final price tag. If they weren’t close to one another, a third independent investment bank was to be hired to come up with its own valuation, which would then be averaged against whichever valuation — Sony or the Jackson estate — was closest to it.

However, sources say the third independent investment bank was never brought into the deal and that the two sides negotiated the final valuation. 

Based on the information from these articles, we can recap:

  • In selling its stake to Sony, the Jackson estate will receive a $733 million lump sum payment and its last dividend from the company, which Billboard estimates to be $17 million — a total of $750 million. A memorandum of understanding has been signed with a definitive agreement due by March 31 and the deal expected to close either late this year or in early 2017.
  • The Jackson estate still has significant holdings in music. It was a minority investor in the EMI publishing deal, and still holds its interest in that catalog. It also has complete ownership of Jackson’s songs and recordings, as well as other publishing holdings that Jackson acquired in his lifetime, including songs by Sly Stone and early rock ’n’ roll classics made famous by Ray Charles and Elvis Presley.
  • The deal eliminates the estate’s remaining $250 million in debt and allows the estate to diversify its assets beyond the music industry, which is in upheaval as CD and download sales decline, and streaming grows. The sale also gives each of Mr. Jackson’s children more financial flexibility, preventing potential squabbles on what they might do with their shared asset, according the person familiar with the matter.

What could happen when the buy and sell business is done and Sony becomes the only owner of the ATV catalog? Would Sony keep it and live happily ever after? Would the Japanese company parcel the catalog out and sell each share to the highest bidder? Or perhaps another merger is in order?

Music history books tell us about recurrent crisis which have shaken the music industry several times. The era of small recording businesses has long gone. No one can survive unless you get bigger, larger and more powerful. Could Warner Music Group and/or BMG and/or Universal Music Group afford to buy Sony/ATV catalog? Or perhaps merge with it?

It appears that the business of owning music has been mostly limited to the America and the Europe. Perhaps a “more global” ownership of the music could/would be a solution to the crisis – at least for a while!? Could the EMI investors afford to buy the famous catalog?

Perhaps you remember the EMI music publishing sale! If not, let us to refresh your memory with this short quote:

Another complication in the process is that EMI, an even larger catalog that Sony/ATV administers, is not included in the deal. Sony, as a minority partner, helped buy EMI for $2.2 billion in an acquisition that closed in 2012. (The other partners in that deal were the sovereign wealth fund the Mubadala Development Company of Abu Dhabi, Jynwel Capital of Hong Kong, Blackstone’s GSO Capital Partners and the Hollywood mogul David Geffen.) The Sony/ATV and EMI catalogs are maintained as separate legal entities but are administered jointly by Sony/ATV; together, the catalogs contain about three million songs.

Let us see what the future brings!


Is Sony Really Trying to Sell Its Publishing Giant? Behind the Scenes of the Sony/ATV Deal

It appears that Sony Corp. has triggered a clause in its co-ownership agreement of publishing giant Sony/ATV, which it shares with the Michael Jackson estate, that allows for either party to initiate a buyout of the other, signaling that the beleaguered multinational is looking to either sell its half of the Sony/ATV joint-venture ownership to the Michael Jackson estate or buy Jackson out. The reasons for the trigger remain mysterious, though a problematic relationship between the partners is an oft-cited rumor. Whatever the outcome, the finish line on any deal remains far in the distance. The news was first reported by the Wall Street Journal‘s Hannah Karp.

Speculation is rampant that this process will end with Sony/ATV on the auction block, but the process could end more simply, with one partner buying out the other and the sole owner living happily ever after.

“The buy-sell process has been initiated, and it hasn’t been determined yet among the two as to who the buyer and who the seller is,” says one source with knowledge of the proceedings. “What happens after the process, when one of them owns the entire company, is unknown at this point.” Sony declined a request for comment.

Of the two partners, its more probable that Sony will buy out the Michael Jackson estate (the “ATV” in Sony/ATV) than the reverse. While administrators John Branca and John McClain have returned the Jackson estate to solid financial footing, it’s likely that Jackson’s heirs would prefer to sell their stake in the company.

Sony/ATV has an approximate valuation of $1.5 billion, and its 39 percent stake — 29 percent for Sony, 10 percent for the Jackson estate — in EMI Music Publishing was valued at $860 million at the time of its $2.2 billion acquisition in July 2012. The current process only impacts Sony/ATV proper, not its stake in EMI, according to sources. The EMI catalog has a separate group ownership, composed of Sony Corporation of America, the Estate of Michael Jackson, Mubadala Development Company PJSC, Jynwel Capital Limited, the Blackstone Group’s GSO Capital Partners LP and David Geffen.

Now for some hypotheticals. If Sony does buy out the Jackson heirs, what’s next? Would it put it up for sale or once it has ended a complicated ownership structure? Or does it embrace and nurture it?

In its most recent fiscal year ended March 31, 2015, Sony/ATV produced revenues of 70.96 billion yen, or about $593 million, up from $559 million on a constant currency basis.

The question of whether to sell Sony/ATV comes at a time when publishing assets, while still prized, no longer generate the lofty valuations of even three or four short years ago. Previously, publishing assets were selling for multiples of 12 to 13 times net of a publisher’s share (also known as gross profit). Now, publishing assets typically trade on 10-12 times NPS, usually nearer to the lower figure.

Selling the company would, at least, spare Sony senior management any headaches around CEO Martin Bandier’s succession — replacing the executive, a deeply rooted industry legend, would not be an easy headhunt. It would also help pay down the parent Corp.’s corporate debt, easing a skittish market’s concerns. But if Sony were to buy the Jackson estate out, it would give them complete control of an asset that might fetch a higher multiple a few years down the line, if streaming proves to be the savior of the music industry that many hope it will become.

If put on the block, the only strategic companies that could even afford to buy, and operate, the giant would be Warner Music Group, BMG, and Universal Music Group — though the latter could face antitrust concerns. When Imagem came up for sale, there was a scarcity of buyers who could afford its $650 million price tag, ending in a busted auction.

One other industry player could afford Sony/ATV — but would the EMI investors buy out the 38 percent stake that Sony/ATV owns, and then double down by buying Sony/ATV itself?

Other possibilities include a private equity firm snapping up the giant. Private firms have been known to value publishing assets due to the relative predictability of their revenue streams. Martin Bandier himself is also said to strongly desire owning Sony/ATV — but could he align the financial backing from private equity to pull off such an acquisition in light of his age (73), and with no obvious successors in sight?

Bandier’s two biggest proteges, Jody Gerson and Jon Platt, are now running, respectively, the Universal Music Publishing Group (with annual revenues of about $1 billion) and Warner/Chappell Music (with annual revenues of about $500 million), the latter having been appointed just this week. There are no executives at Sony/ATV who are thought ready to replace Bandier, although he has been grooming Guy Moot, who serves as Sony/ATV’s president of U.K. and European creative.

When Gerson walked out the door about a year ago, Sony’s upper management were upset that Bandier failed to retain the respected executive.

Bandier attempted to assuage his employees following the Dec. rumors of a sale — which bubbled up through the muck of the Sony hack — writing in a memo to staff: “I have been advised by Sony Corporation that Sony/ATV is not for sale and I can well understand that given we have just had our best year ever both creatively and financially and without a doubt we are the world’s leading and best music publisher with more great things set to come over the next 12 months. Who wouldn’t want to own a company like that, including Sony Corporation?” At that time, however, sources told Billboard that Sony Corp. senior management hadn’t reached a final decision on Sony/ATV.

“Its more likely that Sony buys [out the Jackson estate],” says one knowledgeable source. “They already own a record company, and they seem to like that. Music publishing is a stable business and a good fit with a record label. Logically, you would think Sony is the long-term owner of Sony/ATV at the end of the day.”

As one source put it: “Its very fluid situation at this point.”


Sony to Buy Out Michael Jackson Estate for Music-Publishing Unit

Memorandum of understanding calls for payments of $750 million

Seven years after his death, the King of Pop is ceding much of his publishing empire.

SonyCorp. has reached an agreement with the estate of pop star Michael Jackson under which the electronics and entertainment giant is to obtain ownership of Sony/ATV Music Publishing LLC—the world’s biggest music-publishing company—by purchasing the estate’s 50% stake.

A memorandum of understanding calls for payments of $750 million, including a lump-sum payment of about $733 million by Sony, according to an announcement.

The parties said they expect a definitive agreement by March 31.

Sony/ATV is co-owned by Sony and the estate. Sony and Mr. Jackson—and since his 2009 death, his estate—have jointly owned the company since 1995.

The Wall Street Journal reported in October that Sony and the estate were in talks on the future ownership of the venture, after Sony triggered a clause in their partnership agreement that allowed either party to buy out the other. That move came as a surprise to the estate, which had guessed that Sony wanted to sell its share, and lined up two partners to help it finance a buyout, according to a person familiar with the matter. A potential sale had been mentioned in emails among top Sony executives in November of 2014, which were among those posted online by hackers.

But in recent months Sony made it clear that it actually wanted to buy the other half of the music publisher, offering the estate a better deal than it had expected to receive, this person said. According to their deal, Sony had an option to buy half of Mr. Jackson’s share of the joint venture at a steep discount. But Sony didn’t exercise that option to the extent it could have, this person added.

The deal eliminates the estate’s remaining $250 million in debt and allows the estate to diversify its assets beyond the music industry, which is in upheaval as CD and download sales decline, and streaming grows. The sale also gives each of Mr. Jackson’s children more financial flexibility, preventing potential squabbles on what they might do with their shared asset, according the person familiar with the matter.

Sony/ATV’s catalog includes the copyrights to most of the Beatles’ songs, as well as songs by stars including Marvin Gaye, the Rolling Stones and Taylor Swift. Unlike record labels, which own and distribute sound recordings, music publishers own rights to lyrics and melodies and license them out for various uses—including recordings released by record labels.

Mr. Jackson’s estate said the transaction won’t affect its “substantial interests in other music assets,” including all of Mr. Jackson’s master recordings and Mijac Music, the publishing company that owns all of the songs he wrote and certain other songs he acquired. Those include “Great Balls of Fire,” written by Otis Blackwell and Jack Hammer and most famously performed by Jerry Lee Lewis, and “After Midnight” by J.J. Cale and made popular by Eric Clapton.

The estate will also retain its interest in EMI Music Publishing. In 2012, Sony and the estate joined investors including Abu Dhabi’s Mubadala Development Co. and music mogul David Geffen to buy EMI Music Publishing for $2.2 billion.

After a multiyear restructuring led by Chief Executive Kazuo Hirai, Sony has reduced its exposure to troubled consumer-electronics businesses such as television sets.

Write to Hannah Karp at


Sony to Pay Michael Jackson’s Estate $750 Million for Stake in Music Catalog

Even After $750M Sony/ATV Deal, Michael Jackson Misconceptions Abound

Generally speaking, when an entertainer scores hundreds of millions of dollars in a single deal, or pulls in nine figures in a single year, the superlatives rain down in comparable quantity.

When Dr. Dre notched $620 million in 2014, mostly from the sale of Beats to Apple AAPL +0.78% for $3 billion, The Guardian called him a “genius” and Apple chief Tim Cook compared bringing him on to “finding the precise grain of sand on the beach.” Other visionary entertainers like Oprah Winfrey, Stephen Spielberg and Jay Z regularly receive similar honorifics for their business sense.

Yet when Michael Jackson scored $750 million from beyond the grave for the sale of his half of the Sony/ATV catalogue–the Beatles-packed core of which he purchased for $47.5 million in 1985–major outlets seemed to think it was simply a fortuitous coincidence.

A perfect example was a headline in the New York Times: ”Paul McCartney’s Tip To Michael Jackson Pays Off.” Indeed, the former Beatle and Jackson were once close, and discussed the publishing business at length. But to give McCartney full credit for Jackson’s ATV purchase would be like saying Dr. Dre’s Beats inspiration came from the first person who gave him a pair of headphones.

As I explained in my book, Michael Jackson, Inc., the King of Pop’s original ATV deal was the product of many months of careful deliberation, negotiation, and–most importantly–persistence by Jackson in the face of advisers who tried to convince him he was overpaying for the catalogue.

“Turns out that it was a very lucrative investment,” then-CBS Records chief Walter Yetnikoff, one of the naysayers, told me in an interview for the book. “I would have to say that his business acumen is better than mine.”

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

To be sure, Jackson made his share of financial mistakes, and later in life was beset by a crushing debt load in the hundreds of millions. But to let that completely obfuscate the revolutionary moves he did make–in addition to ATV, starting his own shoe line and clothing line a decade before the likes of Jay Z and Diddy, for example–is a disservice to his legacy, and to the truth.

For more insights on the business of entertainment, sign up for my email updates, check out my website, and get Michael Jackson, Inc.

This entry was posted in Michael Jackson - RTs and Incs and tagged , , , , . Bookmark the permalink.

4 Responses to The Music Industry, Sony, MJ Estate and Sony/ATV catalog (2)

  1. Reblogged this on mjjjusticeproject and commented:
    All you need to read regarding MJEstate & Sony’s deal of Sony/ATV Catalog

  2. Hey guys, really enjoyed this after finding it on MJJJustice. You have the whole saga so clear here. Really wonderfully put together. We’re using it as a reference in our next podcast on The Estate. Best wishes,
    The Journal of Michael Jackson Academic Studies.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s