WHEN MJ SPOKE HIS MIND AT THE NATIONAL ACTION NETWORK

When Michael Jackson appeared at the National Action Network in Harlem with Al Sharpton’s, he was trying to let people know how the music industry was hopelessly corrupt. He blamed them, described the recording industry as racist, and denounced the injustice against artists, dead and alive.

At that time, it was not just Michael Jackson having problems with record companies. Many USA artists joined forces with the Artist Empowerment Coalition (“AEC”), an activist organization rallying recording artists to end what they believed was unfair business practices. Artists such as Roberta Flack, Faith Evans, Stevie Wonder, Tony Bennett, and many others, invoked throughout the evening the names of those musical greats who – after huge recording successes – woke up one day and were unable to scrape together two nickels.  Blues legends like Billie Holiday and Bessie Smith were denied royalties and died indigent.

Beck and Billy Joel protested against restrictive contracts; the Dixie Chicks were locked in a contract dispute over money with Sony. Courtney Love was fighting with the Universal Music Group. George Michael had to insist on reviewing his contract with Polydor each time he had a new album.

The central conflict had to do with a complex equation of copyright laws, publishing rights, royalty formulas, and expense recoupment, how money was paid out. The paradox for artists was that while they are obligated to pay back most of the costs for recording and promote an album, labels retained control of the master recordings, which is essential to generate ongoing income from minims and greatest hits reprints. Record companies’ response had always been they couldn’t exist without assets like masters.  With the battle between artists and record companies, AEC was taking its case to the legislature of New York State (the center of the music business).

On the other side, they had the help of California Democratic state senator Kevin Murray. A bill was introduced to repeal the music business’s exemption to California’s seven-year contract rule. The little-known labor code allowed record companies to sue for damages if an artist did not complete an agreed-upon specified number of albums regardless of how long that might take. The music industry execs predicted dire consequences for the California economy and foresaw fewer artists’ signings. But Murray was unmoved, calling the seven-year rule “a well-paid form of indentured servitude that gives record companies unfair control of artists.” The debate over the seven-year rule inspired Murray to hold two additional hearings on the recording business accounting practices before the California Senate Selected Committee on the Entertainment Industry. For once, the record companies were on the hot seat.

The demands of Al Sharpton’s National Action Network were pressing, and Jackson’s contribution compelling and straightforward. But it backfired him, and there was no shortage of coverage of the outburst. It took a couple of comments made by some “insiders” to trigger a media war against him. Tabloids brought the trashing of Michael Jackson to another level, plastering mockery headlines picturing him as an eccentric star of bizarre behaviors and made him a joke in the English-speaking parts of the world. Who was behind the Media headlines knew very well the meaning of these actions. For MJ, the problem was more than a black and white issue: it was about big businesses and questionable distribution of wealth.

Michael was more politically savvy than what people gave him credit.  Prince, putting the word ‘slave’ on himself in his struggle with Warner Music, didn’t reach out. He succeeded to some degree, but he didn’t exploit black consciousness. Michael reached out to the black community successfully, as evidenced by the enthusiastic presence during his rallies.

Media fine-tuned propaganda was highly implausible and went hand in hand with the winning backed up formula of the insider that does not want to be mentioned and whose tip becomes the backbone info in the whole article. And the anonymous “donor” spills the “breaking news” semen protected by the first amendment.

Tabloids sold millions of copies launching headlines telling a sordid story of MJ pawning a $2 million diamond watch to borrow money from a bank. Never mind if  Jackson spokesperson Howard Rubenstein dismissed it. The same happened with the story of borrowing cash from Sony against the Beatles songs. The industry insider stating the record label did not seek to buy” ATV Music Publishing but that the word “foreclose” would have been appropriate since Sony technically already owned the songs. Sony’s execs asserting that the Harlem speech was staged cause of MJ’last album had sold only 2 million copies, calling Invincible a flop when worldwide sales figures listed the record from 8 million to 13 million.

Daily News June6, 2002

Daily News June 6, 2002

 

During an exhausting back and forth on the same day, Jackson accused Sony Music of making a false claim such he owed it $200 million, calling it ”outrageous and offensive.” And Sony immediately denied the quote of the anonymous executive saying, “’We have never issued any statement verbally or in writing claiming that Michael Jackson owes us $200 million; as a result, we are baffled by the comments issued today by his press representatives.” 

All of the above, when just seven weeks before the Harlem speech, MJ was with President Clinton at the Democratic National Committee benefit concert, and the Media described him as a role model. How come, once he decided to expose Sony, he became, all of a sudden, “a freak”?

Sony Harakiri for the Invincible album was the juxtaposition that tells there was more going on than what transpired in the news.

Many people think that record companies loan money to artists to record their album. Well, there is a big difference between an “advance” and a “loan.” An “advance” is a pre-payment of royalties, and no interest is applied. It is a misperception that artists are in debt “with record companies or writers concerning their publishing. The advance is NOT a “debt,” and it doesn’t have to be repaid. The advance is only “recoupable,” meaning that it is applied against earned royalties.

The artist funds album using their own royalties. That means paying for recording costs, the recording studios, producers, arrangers, and engineers. And it’s part of the artist’s lawyer’s job to get as much of an advance on royalties as possible. The record company can recoup the investment selling more records to increase the volume of the artist’s royalties. If the artist doesn’t generate enough royalties to pay that back, then the record company has to live with that. They can’t pursue the artist personally for un-recouped royalties. Also, the cost of producing videos is considered advances against the artist’s royalties. Record companies try to recoup 100%, but a good negotiation gives the chances they agree only to recover 50% of video costs.

No record company would do something like what Sony did with the Invincible album that unless there’s so much more at stake. And that’s why Sony’ execs felt comfortable: MJ was not just an artist under-recording contract. He was their business partner, with his ass firmly fixed on an armchair of Sony/ATV board of directors and a bunch of other companies’ agreements and Joint Venture business. In short, he had a say in Sony. For obvious reasons, most of his income flow (not all but many) was credited into Sony accounts and reverted to him deducting the records company commissions and percentage. And it was the card they played. Whatever sum was for MJ accounts as a recording artist could have been used to implement Sony/ATV, recover advances, and any other company emergency because of their joint venture.

When Sony/ATV was set up, technically and in practice, it was Michael Jackson purchasing Sony Publishing, not the contrary. Sony Publishing had limited ownership of the libraries. It was generated by co-publishing or administration deals. Instead, Michael Jackson was the sole 100% owner of the publishing rights – including all of the Beatles’ titles – owned by ATV and was almost the sole owner of his publishing right and copyrights of MIJAC.

Here the excerpt of one of the few articles that got the news correctly:

 

Michael Jackson’s made sure to keep the most valuable stake of the ATV catalog. His 50% ATV Catalog had higher incomes compared with Sony’s other half. There’s an article in the operating agreement, specifying that Sony had to pay to MJ “all losses and various reimbursements while the two companies started making money together.” Did they comply with their obligations? I strongly doubt it, and by listening to MJ words, they didn’t pay the due.

From Court documents, it is clear that already in 2002, MJ wanted to take back from Sony the licensing distribution of his master recording catalog and not to renew his recording contract with them. And he was actively looking for a financial solution to take back from Sony’s at least his stake in ATV. Sony balked. And it was the beginning of a whole series of shading episodes to destabilize his finances, a peculiarity which distinguished Michael Jackson during the last decade of his life.

While seeking for solutions, he stumbled across a bunch of adventurers. These typical leeches gravitated in the undergrowth of political and financial environments. Among others, they include Marc Schaffel, Ronald Konitzer Rabbi “Shmuley” Boteach, and James Meiskin. Jackson met Meiskin, a commercial real estate broker, at the house of Howard Rubinstein while presenting his new charity with Rabbi Shmuley Boteach. At that time, the media described Meiskin as Jackson’s financial advisor.

Meiskin himself spread the news that he had helped set up Jackson’s performance at the Apollo Theatre while trying to line up investors to salvage Jackson’s financial problems. However, the only real connection I found between Meiskin and Jackson is Meiskin’s research for a mansion in South Florida on behalf of Jackson (early 2003). In the lawsuit that Marc Schaffel leveled against Jackson, there’s a statement from Jackson confirming that, in April 2003, he had instructed his accountant Alan Witman to transfer a deposit for a house. However, in October 2003, Meiskin was arrested along with his attorney Samuel Gen on charges of extortion. I would like to dispel an internet myth about the discovery of Jackson’s name linked to Samuel Gen on Epstein’s black book. Gen was never Michael Jackson’s lawyer in any form or occasion.

MJ’s name appearing in Epstein’s book might come from the grapevine of those who mention big names to impress people. This infamous book is also obsolete. It contains email addresses from portals that no longer exist, Epstein’s own phone numbers, hotels, restaurants, and contacts of representatives places. It looks like an old business agenda of general contacts met at parties or meetings. A superficial tool. Nothing useful for any criminal discovery. Since countless notable names are included, the mention (but not the contacts) of a worldwide personality like Jackson is not surprising. But was Gen Jackson’s lawyer? In short, no. The only mention of Samuel Gen as Jackson’s lawyer comes from a 2012 article by a freelance blogger, David Musk, who wrote one of the many improbable stories about Michael Jackson. The story is about Musk’s meeting with Denise Rich in Jackson’s hotel suite in New York. The article is mostly focused on the sarcastic and relentless body-shaming of Jackson. Given how the content could have been subjected to a defamation lawsuit, Musk would not have been able to write such claims while Jackson was alive. While I read (with much disgust) the tons of offenses leveled at a human being, I found the following passage:

“We all saw Michael Jackson on August 31st, 2001, when NASDAQ officials presented him with an original 1934 Shirley Temple’s poster, while staffers rolled out a vanilla birthday cake lined with strawberries and sang “Happy Birthday.”

There are two options here: either Musk is giving an offensive and disrespectful fictional narrative or Jackson took the piss (which wouldn’t surprise me).

All of the above seems to debunk the preconception that someone’s name listed into anyone’s contact book has their reputation compromised.

 

Sources: 

https://musictechpolicy.com http://www.techdirt.com   https://music.asu.edu/  

Vibe Mag 2003

 

 

 

 

JACKSON’ JOINT VENTURES, MASTER RECORDING AND “SONY SUCKS”

 

The above excerpt represents the beginning of Jackson’s Invincible album promotion that meant the opening of the poisonous Pandora’s box between Sony Music and Michael Jackson Corp.

  • An amendment in Sony ATV Operating Agreement dated 2000 related to section 7.9, the Put Option. The value has been increased by 45 million dollars, bringing the new loan facility with Bank Of America to 185 million dollars, and it states that if MJ had delivered the new album by June 2001, the loan raises to 200 million dollars.

While analyzing this document, it comes clear that Michael Jackson’s recording artist contract undergone several modifications after 1991. You can read in full here on the blog dedicated page.

The below screenshot is from journalist Zack O’Malley Greenburg book:

Michael Jackson, Inc.

Greensburg implies Michael took his time to release the album because he thought his contract with Sony was on his way to expire. But between MJ and Sony, there was a group of companies all linked together through the Joint & Venture set up in 1991, which included an exclusive distribution agreement of his catalog and Sony/ATV set up in 1995. Moral of the story: around 2000, MJ learned that due to the fine print and various review of contract clauses, the date his licenses were to be reverted to him proved to be many years away, apparently, in July of 2009. In short, he would not get the distribution of his catalog that would allow him to promote his old material how he liked and prevent Sony from getting their cut the profit. Michael said he had never been informed about these added clauses.

And to make the matter worse, Sony began to limit Michael creative control over the production, promotion, and budget; something never happened before, or at least not so blatantly. And Michael could not obtain the advance he required against future sales.

MJ and Branca had a short business separation, about three years, be back working together in 1993. In court documents, I found the amendments list of MJ’s contracts with Sony, and I noticed that after 1994 there is another amendment to his recording agreement in 1995 and another one in 1996. Mr. Branca’s services were back into force at that time. How not pay attention to such crucial matter while examining the documents for the constitution of Sony/ATV? Also, inside the documents related to their employment relationships final closure in 2006, I found the list of all the contents of the MIJAC catalog administered by Branca’s law firm, regularly issuing distribution licenses at Sony request. I could easily dismiss Mr. Branca’s work by stating that he is a distracted lawyer, a lousy lawyer. Still, he’s known as one of the brighter and smart lawyers of the entertainment industry. It feels a sort of intentional careless towards his client.

Coming back to mid-2001, news of MJ recording a new album it spread around the world along with the low blows that Sony lashed against Michael Jackson project behind the scene.

The first example of artist control limitation was Unbreakable that MJ wanted as first release single supported by a spectacular short film. But Sony Music said “NO” and told him that the first single to be released would have to be You Rock My World. Michael never used on being told NO, but his hands were tied. He had to rush the concept for the video clip of “You Rock My World” sort out the production.

I want to bring attention to a specific document dated July 15th, 2001, which is one of the many amendments to the original agreement between Sony Music and Michael Jackson companies.  Keep in mind that everything is heading to the original CBS recording artist and the relevant changes and renewal – and the joint-venture between them dated January 01st, 1991.

  • It resolves an issue related to the Foreign Royalty. The agreement states that upon the release of the studio album (which I assume it would have been Invincible)  and any re-issued version of the catalog controlled by the Jackson Recordings Division (audios, phonograph records) derived from master recordings, the royalties percentage was increased from 23% to 25% with effect from January 01st, 2002. In a few words, there was a rise in royalties rate outside the USA.

MJ knew very well that his sales were good worldwide except the USA. And for a guy targeted by the press as ruined and irreversibly in debt with his record company, it was not such lousy move renegotiate his foreign percentage. It shows he was very much aware of the leverage he had on Sony, and he used it for his benefit.

  • There was a partial audit settlement: Sony Music recognized and accredited $3 million to MJJP’s royalty account. The audit period in controversy was through December 31st, 1999, and there was still pending other claims on Sony Music for the wrong payment of mechanical royalties.

  • MJ returned the equipment listed under the “End User Sales Agreement” dated August 20th, 1995, and Sony had to accredit $300,000 to MJJP’s royalties account.

  • There was another change in the definitions of the MJ Recording Agreement.

As already mentioned, the MJ recording artist agreement is always sealed, which doesn’t surprise me given the sensible and reserved content. I was still able to understand how the changes evolved, thanks to the many excerpts found in the testimonies exhibit. But I want to emphasize that pieces of the puzzle are missing. And mine is logical speculation reinforced by having read court documents and many books talking about the music industry business commenting on some of the definitions of his agreement with Sony.

So, it can be confirmed that – just before the release of Invincible – MJ expressed the desire to end the recording contract with them and no longer produce albums under the Sony label. The return of the equipment is an excellent reason to support this idea.

Michael Jackson’s decision to leave Sony Music, and taking his profits with him, would have been an economic disaster for an already in dire straits company as it was Sony at that time. (who ‘s willing to read Sony financial conditions at that time can read the links about Sony at the bottom of this article). That’s the only rational reason for Sony’s to sabotage the Invincible promotion. They initiated the friction and manipulated the situation and public perception to make MJ look like a problematic artist, so when his contract was fulfilled, no other label would pick him up. If that happened, he would have had three options: renegotiate a deal with Sony, sell his catalog or retire. And they were banking on the middle one. If MJ could not earn enough royalties, he would have had severe trouble with Bank of America, and consequently, it would have further problems finding other sources of loan investments.

Another unusual setback was “You rock my world” leak to two US radio stations. The song was played on August 17th, by both stations every two hours. The day after Jackson’s record label, Epic Records called the program director Frankie Blue and asked him to stop. Blue, never said how he got the single. Rumors say that the entire album was leaked and available on the Sony Russian website over a month before the official worldwide release, but it cannot be verified.

And on August 20th, an amendment to section 7.9 of the Sony ATV Operational agreement postponing the album release date.

Meanwhile, MJ started the album promotion. 

Opening up the NASDAQ stock market.

At the Metropolitan Opera House in New York appeared on stage as part of ‘NSync’s performance of the song “Pop” within the MTV Video Music.

Then the Michael Jackson: 30th Anniversary Celebration memorable shows at Madison Square Garden. On November 13, the show collected an 18 percent share of the TV audience. The show drew a record of 25.7 million USA viewers on CBS, and You Rock My World bang the US Billboard Charts at #10 – without been available commercially jet.

During the same period, MJ recorded the single What More Can I Give to raise money for the victims’ families and survivors of the terrorist attacks in New York. At the time of the attack, MJ stated that he hoped to raise $50 million for those affected and that that the recording would be released as soon as possible. The song failed to gain an official release for reasons that surely are NOT what media, producers, and Sony told at that time. Later different allegations arose as to who was to blame, which will be detailed later on this site.

What transpired publicly was CBS taking action to Jackson’s representatives to force ABC to remove MJ’s performance on the benefit show United We Stand to protect their exclusivity agreement for the upcoming special drawn from the 30th-anniversary concerts to be broadcasted on their channel.

In substance, they made an issue for the participation to a single charity show, because of an they show to be released ten days later.
CBS feared a risk of overexposing that might compromise a special? Hey….they were talking of Michael Jackson, a man who had his image overexposed since he was five, and people never got tired to see it.

One thing that is already certain was ABC had to condense the show. The much advertised Jackson’s solo performance of Man in the Mirror was removed and during the television broadcast, there was no mention of Jackson’s name, and he was never featured in the foreground. No footage of Man in the Mirror performance was released, and limited photos exist. But the full concert was broadcast live on National Radios in the United States.

Originally Michael performed two songs; “What more can I give” and “Man in the mirror.” After listening to the performance, the Radio DJ’s proclaimed themselves fans and apologized for any MJ jokes in the past. You can listen to the audio of “Man in the Mirror”:

 

But there is more; MEDIA demolished the show for the many technical problems. And who got the fault? Michael Jackson, naturally! The concert has been called “The worst benefit concert ever, describing all the “horrors” that happened during the broadcast, and some journalists had the gut to claim that Jackson did not want to be broadcasted because he did not get paid for it.

Finally, on October 29th, (30th, for the USA), Michael Jackson’s “Invincible” had officially been released. The album was available in five different colors covers for a limited time.

MJ went to New York for the Time Square Virgin Mega Event: fans gathered in the streets surrounding the Virgin Megastore. And although critic reviews were not enthusiastic on November 11th, figures revealed that Invincible had sold 4.4 million copies worldwide.

In the wake of September 11, Michael had decided to release the song Cry as the second single worldwide. Again there were issues with creative control, and Sony denied Michael the video clip he wanted. Michael refused to be in the video clip, the song was released in December and was a monumental failure in the charts.

The third single Butterflies, without video clip or single release in the US, was, however a hit, even with the little promotion the album received. The song made it to the no.1 position on the R & B billboard charts, and no—16 on the hot 100. The release date was pushed back several times, as was the video clip, and then both were later abandoned. The news of this pushed the single out of the top 20, never to return.

During 2002, Michael Jackson was nominated in the category Best R&B/Soul Album, Male for Invincible at the 16th Annual Soul Train Music Awards, and was inducted into the Songwriters Hall of Fame. Michael also won three awards at the 33rd Annual NAACP Image Awards, which took place at the Universal Amphitheatre, Universal City, CA. But thanks to frivolous lawsuits like Myung-ho Lee running almost every day to the rags showing supposed loans, debts and unpaid pharmacy invoices or ex-wife Rowe going to a private judge to have her parental rights for the two children, his name was always in the lowlife gossip timelines, instead than be on magazines celebrating his artistic achievements.

On March 29th Michael Jackson made an exceptional live performance at the American Bandstand 50th Anniversary TV special.

Michael’s album, which had managed to debut at no.1, was losing ground fast and tension with Sony Music mounted. They refused to release What More Can I Give, and they set a miserable budget for the video of Unbreakable giving the work to director David Meyers. Michael was not satisfied with the project and decided to finance & produce the video by himself. Sony asked MJ to go on the world Tour to promote himself. But when he was about to start shooting the Unbreakable short film, Sony announced their decision to cease the promotion of Invincible. By the end of March, Sony Music deleted Michael Jackson album as it was not considered a priority only five months after its release.

April 21st, Michael Jackson performed “Dangerous” at the American Bandstand 50th Anniversary TV special in Pasadena, California. The show was aired on May 05th on the ABC network.

On 24th gave a rare performance to launch a campaign Democratic National Committee’s Every Vote Counts. An enthusiastic crowd greeted Jackson at the Apollo Theatre in Harlem, New York. The concert raised almost $3m for the Democratic National Committee.

On May 15, 2002, comes The Mirror with this HEADLINE:

IT’S WAR WORLD EXCLUSIVE: MICHAEL JACKSON BREAKS HIS SILENCE IN HIS FEUD WITH RECORD BOSS

And shortly after the news totally changed and culminated with Michael paraded in New York City and in London on a Double Decker holding up big posters with written “Sony Suck” and “Sony Kill The Music”.

From there, Media had gone crazy writing about everything they got on MJ/Sony subject without an ounce of a clue. They were just reporting the bullshit that “industry insiders” were referring to them. But this one is the Pearl of the 2002: Sony refused to renew Michael Jackson’s contract and spent 25 million promotional campaign; money that went up in smoke by MJ refusal to go on tour.

Even Michael Jackson own Estate appeared comfortable with the old gossip. And considering the inaccuracy of content in that specific document (the pre-trial memorandum on the case with IRS), I believe that this one, together with many others, has as a primary source the tabloid narratives.

Besides the fact that the “Invincible” album contains 16 songs and not 14, I find the comments concerning the sales untrue and tasteless. But what don’t you do to avoid paying taxes, huh?

Mr. Branca himself, contradicted the lame memorandum during his deposition of February 7, 2017

Here Mr. Branca omits the fact that MJ grown suspicious of him because his law firm was also giving service to Sony, and he did not even wait for the full results of an investigation to send him a termination letter on February 2nd, 2002 resulting in his resignation from the MJ/ATV Trust. However, he said the truth concerning Michael Jackson contract recording agreement.

Because of the 1991 Joint Venture that included the exclusive license for the distribution of Michael Jackson master’s recording, and all his intellectual property, Sony found his way to remained inseparable from his business. What was the catch? It might have been the thin print, or they cheated by slipping the expiring dates between one amendment and the other. In any case, only with November 2003 the terms changed, giving MJ the freedom he wanted. Mr. Branca also confirmed it:

Here there’s another interesting word which Sony loved at the Invincible time to defend their decision to put the word end to the album: advance…and how do generally work the “ADVANCES” in an exclusive recording contract with a records label? And how do they worked with the MJ/Sony Venturer?

Stay with me…

 

Sources:

 

MICHAEL JACKSON & SONY DIS – AGREEMENTS

 To better figure out Michael Jackson’s relationship with Sony Music, we have to pass through how artists’ contracts with record labels evolved. 

The record companies ripped off the musician, songwriters, and producers from the ’20s through the ’70s. Artists signed contracts in terms of one year with an option of further four. And recording contracts were possibly intentionally complicated and non-transparent. Artists thought to have a five-year contract with the record company, but it was not the case. The record company didn’t have to pick up the second year. There was a provision ( a very tiny one, the typical one nobody read) stated that during that contract year, the record company had the right to record one album on the artist and at their choice to record a second one. The second album had to be delivered within that one year, and the time would have been extended until completion.

 With the coming of MTV, videos became popular, and record companies decided that an artist, instead of releasing an album per year, could do one every two or three. It was becoming fashionable to make a video on each single and make three or four singles on an album over two years. The album sales continued over two years, and the related videos broadcasted. In the ’90s, despite some lawsuits brought up to record companies and widespread discontent, things did not change: the year plus became period. It meant that the first period would be the time it took to record and release an album plus some months, to let the record companies check the album reception in the marketplace before picking up the option for the second period. And during each period, the artist was required to record one album. So, there was no real difference between the two things. Artists were still bound with very long contracts.

The most flagrant example was Prince that in 1993 stopped going by his name and just went by a symbol. Prince was the first vocal example of what was happening between artists and record companies. He participated on the Today Show and had “slave” written on his face.

He felt that record companies signed artists with extended agreements and were treating them like slaves due to the exclusive rights to their recording services and for much too long time. His public behavior was tentative to raise awareness in the artist’s community and start advocating for more fairness, more transparency!

Credit: Photo by Brian Rasic / Rex Features  PRINCE

His first contract with Warner Brothers Records dated 1977 and didn’t end until he negotiated a settlement in 1995 and still owing two albums to them. Prince then was able to release one single, “The Most Beautiful Girl in the World,” through an independent distributor, Al Bell’s Bellmark Records. That record became very successful. It was what the industry calls a “one-off.” After he ended the contract with Warner Brothers Records, Prince became the one artist who could have one-offs with various major record labels. In short, he could have released albums with different companies each time. Very few artists could do that, but his example gave the possibility of that happening.

That gives some kind of an idea of the length of the contracts and why artists were upset about provisions that required them to stay with one company for such an extended period and possibly their whole career.

It was also one of the reasons why Michael Jackson could not change the record company in the ’90. Though the seven years had elapsed from the first agreement, his contract expired, and California law could have been on his side,  Michael still owed CBS 4 more albums. And CBS could have had sued him for damages and ask an average compensation for loss of profit, taking into account the sale figures of Off the wall, Thriller and Bad.  Too much money even for someone like David Geffen.

The exclusive recording services mean that whoever makes that mechanical reproduction and distributes it – usually the record company – has to get a license for the mechanical reproduction from the publisher of that particular song. Publishers do that by issuing licenses to record companies to be paid the mechanical royalty for sale and distribution of the recording of their songs.

But usually, the transference of ownership clauses sound like this:

A “master license deal” means the label takes 15-25% of all licensing earnings. It secures the master license revenue to the record company while allowing the artist to retain the majority revenue and the control of his master recordings, free to take it away from the record label and get into the distribution agreement with another or even sell it.

But contract negotiation key it always comes down to the artist leverage. If the artist has sold many products, if he is very popular and become an essential asset to the record company, he’s in a position to negotiate better terms. That’s how the record companies dealt with artists.

MJ surrounded himself with a bunch of famous lawyers in double-breasted suits ad had much leverage. Right? Well, apparently, not anymore.

Michael Jackson lawyers negotiated the 1991 renewal recording contract in the new fashion offered by major labels at that time: sign a six-album deal. And usually, a smart attorney could negotiate with record companies a lesser number. Nevertheless, it was the record company that had the right to pick up the option. Record companies wanted the freedom to pick up the options because they claimed to invest much money over the artist in recording, producing, marketing, distributing the record. So they wanted the right to try to get profit from the initial investment.
The contract with Sony contained obligations on MJ’s part to deliver finished CD’s and a certain number of required songs. Sony also had certain rights to repackage Jackson’s back catalog. Their contractual power was forceful but not absolute, and they needed MJ’s agreement for any greatest hits compilation released. So, Sony had to keep Michael Jackson happy.

You can read the loudly-trumpeted contract details delivered by Sony to the press here: https://www.latimes.com/la-me-jacksontimeline-sony-story.html#page=1

Since Motown Records times, MJ’s relationship with the record label had always friendly. Jackson and CBS CEO Walter Yetnikoff had been associated and closed for years. In some way, due to his leverage and the friendship with the executive, he was always able to do pretty much whatever he wanted.

While under the CBS contract, there are several examples of MJ’s behavior: the ET production where he sang the storybook of the movie. It resulted in a lawsuit between Universal and CBS. Or Captain EO, with Yetnikoff, that brokered a half-baked solution of partial promotion with Disney that satisfied nobody. And even with Sony at the beginning was very good. MJ and Sony founder, Akio Morita had a real warm relationship.
    cbs-sued

After the Chandler story, rumors say that Sony wanted to release a Jackson’s greatest hits, while MJJ insisted on a batch of new songs. The “History” album appears to be the compromise of it. After much delays on June 15, 1995, Michael Jackson’s long-awaited new album, HIStory, was released around the world. Five days later, it entered the US Billboard LP Charts at number one, like in many other countries around the world. “Scream” and “You Are Not Alone,” went on to create chart history worldwide. But something was already wrong behind the curtain.

On November 4, 1995, Michael performed for the first time “Hearth Song.” at the European show, Wetten Dass…? in Germany. The song was released throughout the world, except for the USA. Besides the long wait for the singles releases, MJ rose up in no uncertain terms against Sony’s refusal to release Earth Song in the US, holding Sony responsible for bad marketing choices that got the record to fall off US charts. To recover the damage and try to improve the sales, Sony gave to Radio stations promo copies of the song, backed with mixes of “This Time Around.” It was a spectacular failure of Sony USA, and American fans did not forgive them for not allowing the American public to decide whether or not the song was a top ten material. Earth Song video, became MTV America’s most requested video, usually unheard of for a song that hasn’t been released. Not to mention the mess raised by the Jewish community following protests asserting the record was anti-Semitic, which brought Michael Jackson to change the lyrics to the song They Don’t Care About Us and make public excuses.

On March 19, 1996, at a press conference held in Paris, MJ announced plans for his new company, Kingdom Entertainment, jointly owned with Saudi Prince, Al-Walid bin Talal bin Abdul Aziz al-Saoud.

The company was founded aimed to use the film deals that MJ had with Sony/Columbia. Instead, Ghosts was presented in its first version, initially exclusively in the United States between 25 and 31 October 1996, together with copies of the film The Eye of Evil (Stephen King’s Thinner) only in some selected cinemas owned by Sony. Ghosts short film distribution, and many other projects with Columbia Pictures did not go in the right way.

MJ took money out of his pockets, promoting his latest album, “HIStory” and financing the related videos. According to insiders, Sony advanced Jackson at least 2 million dollars for music videos supporting the marketing drive, but he spent at least 9 million dollars more of his own.

“HIStory” is the most crucial album in Michael’s career, after what he had to go through in 1993. And it’s without a doubt the most personal. Michael told his story about the false allegations, the lies, the greedy people, tabloid, and Jackson’s case. The album proved why Michael was the world’s greatest entertainer.

But Michael Jackson’s dispute with Sony Music started long before the “Invincible” production. That had only been the tip of the iceberg.

In 1997, only two years after ‘HIStory,’ Sony released the album Blood on the Dance Floor – HIStory in the mix. Critics called it a hybrid record. Before recording started, Sony, through exec Tommy Mottola invoked its right to ten new songs knowing that Jackson, who was already experimenting with a different attitude from his record company than he had enjoyed in the past, would refuse.

And sure enough, MJ did not agree with Sony’s interpretation of their contract. After negotiations with Jackson’s advisors, the compromise resulted in a CD containing five new songs plus eight remixes of tracks from ‘HIStory.’ However, what seems to be a usual negotiation process was actually part of the campaign to manipulate Jackson in the interests of Sony. Usually, the benefits of the artist and the record label coincide, or they should. In the case of Jackson and Sony, they were now massively divergent.

And the release of Blood on the Dance Floor was a mistake even if it proved the turning point in his professional career.
The new generation was reinventing American pop music through hip-hop and rap. MJ was going with this flow with his usual pioneering approach. In fact, by the end of 1997, Michael Jackson began working on an entirely new set of songs.

It was the end of May 2001, when Michael Jackson finished recording what would become his latest album Invincible: his last studio album with unreleased material.

The exact content of Michael Jackson’s recording contract with Sony Music is unknown; I never found it in any lawsuit exhibit up to now. But I spent a lot of time setting up a timeline based on other documents linked with the recording contract to have gained enough knowledge of rights and obligations on both of the parties convey.

The release of the album coincided with a dispute between him and Sony Music Entertainment. The conflict originated from Jackson’s inability to obtain the masters to his records, even though he believed that he possessed this right in his contract with Sony.
But there’s an explanation for everything, and sure enough, it does not come from what Media divulged.

Stay with me…

Sources:

  • John Kellogg, Music Business Second Legal Aspects
  • Digital Technology and the Allocation of Ownership in the Music Industry. The Centre for Market and Public Organisation 09/228, Department of Economics, University of Bristol.
  • Transaction Costs Determinants of “Unfair” Contractual Arrangements. American, Economic Review, Klein B.
  • https://futureofmusic.org/article/article/major-label-contract-clause-critique
  • Linton Guest: The trial of Michael Jackson 2006

MJ’s ADVISER MYUNG-HO LEE, AND HIS ALLIANCE WITH MAUREEN ORTH

Maureen Orth is the fraudulent journalist that reported false stories on MJ for most of her career. She also implied that Michael Jackson intoxicated a 13-year-old boy, Richard Matsuura, with wine served in soda cans. Matsuura went on TV denouncing the story as completely false. And the father corroborated the son’s statements. The place these reports deserve is a dedicated parodies site of fake news. And it’s still Maureen Orts, the sloppy researcher that together with FX and Netflix is currently being sued for defamation by the Versace family over her portrayal of Versace in a show.

Among the vultures that surrounded Michael Jackson for most of his life, Myung-Ho Lee turned out as one of the central figures regarding financial malpractice against MJ. History tells they met in Seoul in the fall of 1996. But Mr. Lee’s first documented presence in the commercial MJ universe appears on a company called Jackson International LLC which shows him as “President” in 1998. With the resignation of Mr. Tarak Ben Ammar from the co-trustee position in the MJ/ATV trust on January 16, 1998, Mr. Lee’s fill the hole on December 23, 1998, just in time to co-sign a loan of 60 million over an already open line with the other co-trustee Mr. Branca.

On this occasion, Bank of America required MJ to put his 50% of Sony/ATV Music Publishing as collateral. And wanted Sony to agree on the loan as co-guarantor, being the other partner in the company. Sony/ATV officialized the bank request with an amendment in the Operating Agreement.

It consisted of Sony’s obligation to pay off the loan Capital to the bank only in case of MJ defaulted to reimburse. It recites that from December 1, 2005, and on or before February 28, 2006, MJ could require the Sony Music Publishing Members to purchase his company interests for a purchase price of $140,000,000 (the “Put Price”). If MJ did not exercise the Put Option on or before March 1, 2006, Sony Music Publishing could require to MJ, from March 1th, 2006 to May 31, 2006, to purchase their SMP Interest in the Company (Sony/ATV) for a purchase price equal to the Put Price.

On April 5, 1999, MJ announced an investment of rumored 30 million dollars in Tickets.com Inc. partnered with other companies through his Jackson International LLC. He owned 20% of Ticket.com for a short period. Right after this investment, Ticket.com’s losses started to grow. MJ likely lost or sold his shares. In brief: he lost money.

On September 29, 1999, a new credit line facility of 30 million was put in place using as collateral the trust MJPT, which included among others his catalog MIJAC. As usual, the security agreement was signed by Lee and Branca, and additionally, there was a continuing, unconditional guarantee provided by MJ.

On July 1, 2000, it was reported that MJ invested in HollywoodTicket.com through Jackson International LLC company. The service was designed to give space to young movie artists and give the fans a chance to get closer to their idols.

The website got blank in early 2001, and managers of the project sued MJ for alleged unpaid bills. Both the site and the company behind had been shut down in January 2003.

In December 2000, a third increase of 45 million dollars guaranteed by the MJ/ATV trust at the rate of 7.14 % per annum. Signature by Lee/Branca.

MJ fired Lee in August 2001 to rehire him almost immediately. It’s unclear when they separate their ways for good, but it occurred sometime between fall 2001 and the filing of Lee’s lawsuit in April 2002.

Lee sued MJ alleging had signed a document to pay him 12 million of arrears. Court documents immediately available to the press caused the diffusion of some specific facts of Jackson’s private life.

In December 2002, MJ lawyers presented a complaint against Lee’s claim. In March of the same year, the judge ruled in favor of Jackson, who could go ahead to countersue Lee for breach of contracts and fraud. In an affidavit, Jackson denied that he signed the deal, saying he was “not even in Los Angeles” that day. Jackson alleged that someone forged his name on the agreement Lee introduced to the Court. He added to have paid Lee for his services 3.5 million, but he wanted more. MJ alleged that Mr. Lee stole millions from him. Jackson lawyers asked the judge to toss away the suit.

The 140 million dollar loan hoax had ignited the imagination of journalists to the point of messing up a growing proliferation of millions while divulging a story much closer to the multiplying of loaves and fishes described in the Gospel than fair and informative reports. Except the situation was unpleasant anyway, I guess MJ would have had much fun reading it.

https://www.foxnews.com/story/hard-numbers-show-jacko-in-constant-financial-peril

https://nypost.com/2002/07/27/king-of-debt-suit-jacko-owes-200m/

Here the mess transpired in the press:  

  • Lee alleged claimed having arranged a 140 million dollars loan for Jackson in 1998 using as collateral “the complete catalog of Beatles’ songs.”

In reality, MJ already had the Beatles catalog since 1985. And the loan was far from being a new one. And it was not organized by Myung-Ho Lee but by “the only and the one” John Branca. Michael Jackson was a well-known client of the bank, having an escrow account where EMI credited the catalogs royalties. A credit facility with NationsBank, then absorbed by Bank of America, was already in place since 1993 and guaranteed by some of Michael’s assets. The 140 million of December 23, 1998, so much trumpeted by Media was nothing than a restated and consolidated Loan Agreement with the 90 million loan facility already in place. In short, there was an additional 60 million disbursement. The expiring date of the loan remained December 20, 2005.

It is common practice to open, close and expands credit facilities when you have commercial activities. When MJ expanded his operations and purchased the Northern song’s publishing in 1985, he sold a small catalog of about 6 million and borrowed something like 40 million dollars from Chemical Bank.

His companies always worked with banks, credit lines, loans, direct or indirect. Michael Jackson was a brand, a creator of services in the entertainment world, a music industry producer, a marketing genius. He was an International Corporation. I’m not going to list the number of companies he headed, directly and indirectly, the web has all these lists. What I care to point out is that when it came to business, MJ was not the sensitive, fragile, and the childlike guy showed in public.

Thanks to Chandler extortion, Michael’s life changed sharply. Countless of frivolous litigations arrived on his desk (from alleged false molestations claims to crazy women allegedly pregnant or with an already done child by him). I think many of us underestimate how desperate people can be. The entertainment industry is rife with beggars and hangers-on who leech themselves to a celebrity looking for power, fame, money, and opportunities. MJ tried to contain the whole lousy publicity, paying settlements and tremendous fees to lawyers. He was billed tens of thousands every month by the PR consultants and advisors.

MJJ Productions and Kingdom Entertainment, produced the short film GHOSTS coming from an old project of 1993 the “Addams Family Values.” Michael Jackson recorded a horror-themed song for Addams Family Values and filmed a music video to promote it, he invested a large amount of money in the project, which was then shelved in the wake of the Chandler child molestation allegations.

GHOSTS  “entire project cost Michael a reported 15 million straight out of his pockets, but he wouldn’t see much of a financial return. Television stations were offered the film as part of an hour-long special but were put off by the high price”.

  • Lee alleged that in the middle of 1999 procured for Michael a $30 million line of credit.

In reality, in February 1999, the promissory note of 140 million been reinstated per the same amount. It means that interests and fees been paid regularly, and the reinstatement was due to amend company documents. The applicable interest rate of the loan was 6.16 % per annum, provided that any overdue amount on principal, interest, and fee was payable on demand, at a rate equal of 2% per annum. Signature: Lee/Branca. And on September 29, 1999, Bank of America opened a new credit line facility of 30 million that was put in place using as collateral the trust containing MIJAC. As usual, the security agreement signed by Lee and Branca, and there is a continuing and unconditional guarantee signed by MJ.

  • In October 2000, Lee alleged to be able to raise the original loan by 60 million — with the provision that Jackson uses 30 million dollars of the increase to pay off the credit line, which was now due.

In reality, in December 2000, there a third loan over the MJ/ATV Trust of 45 million at 7.14 % per annum, provided any overdue amount on principal, interest, fee, payable on demand, at a rate equal of 2% per annum. Signature: Lee/Branca.

Once Myung-Ho Leech (sorry Lee) was fired for fraud and incompetence MJ liquidity shortage is evident.

On September 30, 2002, there’s reinstatement of both loans with the relevant security agreement. (which mean that all matured interests and fees were paid, and the principal amount reinstated) and a loan increase of 11.5 million under the MJ/ATV facility. What ‘s weird about this third loan? That the only purpose was to fund the cash collateral account as per the loan contract, pay the amendment fees, and the remainder to finance MJ’s professional and personal expenses.

Most of MJ royalties and incomes derived by his compositions and the licensing of the publishing catalogs were linked as a collateral of the various investments he went through his career. Michael Jackson earning estimation was around 20 to 35 million annually. Despite records sales reduction and losses in doubtful and insecure transactions, he could still manage the coverage of the bank interests and fees and deal with his life. The 11.5 million borrowed look as a Sony/ATV advance guaranteed distribution not received from Sony due to one of the many priorities at the company benefits. MJ was entangled with them in excess, and they had control over most of his assets and money.

The roughly 115 million dollars Sony had to pay to reach the parity on Sony/ATV shares seem to have been settled in several installments over the years. Most of the money remained in the company books to capitalize on the company and to serve operational costs. That’s was the situation Michael Jackson was at that point.

Meanwhile, South Korean Myung-Ho Lee had become Maureen Orth “adviser,” a woman representing the definition of trash journalism, as her sole competitor is Diane Dimond. Lee told Orth an incredible number of stories. Among many, one was about Jackson cleansing himself with sheep’s blood. Another, that Jackson sent Lee in Switzerland, to wire 150,000 dollars to an African witch doctor named Baba to perform a “voodoo ritual” intended to curse twenty-five people of a Jackson’s alleged “enemies list.” Orth spared no details such as Baba’s curses had been sealed with the blood of forty-two ritually sacrificed cows.

In April 2003, Orth targeted MJ writing the article on Vanity Fair magazine. Being a magazine of international resonance, and the article content highly ridiculous, news had a full day of laughing. (at that time).

What is more incredible is that her shit binge was once again rehashed the moment Leaving Neverland mockumentary appeared.

Despite Jackson nearly had Lee’s lawsuit thrown out, the Korean attorneys successfully scheduled a deposition of Michael Jackson in June 2003, where the singer’s finances would have been fully explored. It was an obvious tactic to scare the Jackson camp into settling before the expensive trial started. And it worked: the day before he was to be questioned, he ended out of court Lee lawsuit. A predictable Hollywood story.

Knowing how MJ used to keep his private life out of tabloid headlines, what Myung-Ho Lee delivered to the press, it was nothing also that pure poisoned retaliation aiming to extort some extra money to him.

Had he a spending habit? Who wouldn’t have got it, when earning for millions of dollars since he was a child? Then note that “burn” 90 million dollars in 4 years means 22.5 million per year. And Michael Jackson was a Corp, giving jobs to hundreds of people. There’s nothing sensational in the amount when you read the way money was employed.

The group of floaty vultures around him are guilties. Most of these former advisors are sitting on their ass, counting the millions of dollars they made and still make on his dead body. Whatever it turns on Michael Jackson’s financial issues, his former advisors, are far more than outrageous individuals.

Sources:

Avram vs Jackson Case no. 1007622 November 4, 2002 pacermonitor.com/case/16787632/Prescient Acquisition Group, Inc v MJ Publishing Trust et al 2006-2008Joe Jackson objection documents case no. bp 117321 November 10,2009

THE INAPPROPRIATE EXPLOITATION OF MJ’S CATALOG IN THE NINETIES

When MJ and his brothers left Motown Records, they signed with CBS Records in 1975.

After the Off The Wall album Attorney John Branca negotiated for Michael Jackson a separated contract and new agreement with BMI, a company that collects artists’ royalties from songs public performance. Meanwhile, Thriller became the biggest selling album of music history. And with such success, MJ invested in Northern Songs Catalog (ATV was one of them). But as record Labels began to consolidate, this precious investment became a severe problem. And this is how it manifested itself.

MJ record contract was negotiated several times, and one of the benefits he had was to obtain the ownership of his all masters recording. CBS reverted the master’s recording, and by setting up a joint-venture with MJ had the exclusivity to license them.

MJ, at the peak of his career, became increasingly influenced by David Geffen, which was the principal reason for John Branca’s replacement in 1990 with three specialist attorneys of Geffen camp. Reports of that time tell that MJ was unhappy with his CBS contract, which John Branca been trying to renegotiate. You can read some stories here: http://articles.latimes.com/1990-11-15/business/fi-6098_1_cbs-records.

In March 1991, news announced that MJ renewed the contract with Sony and inside sources revealed he was guaranteed an advance payment of 5 million per record plus a 25% royalties from each album based on retail sales. The contract bridged recordings, movies, and video software. http://articles.latimes.com/1991-03-21/news/mn-654_1_michael-jackson.
Then MJ got 18 Million dollar advance for the album Dangerous. Great deal, right? Well…NO. That’s when the games started. 

Here a short recap of the events where you will find few names resorting pretty often in the music world and MJ professional life: 

  • 1985 – MJ bought  Northen Song Catalogs
  • 1986 – CBS publishing interests are purchased by a company, SBK. The acronym of this company means Stephen Swid, Martin Bandier , Charles Koppelman.
  • 1987 – Sony bought CBS Records with a host of subsidiaries, including Epic Records, which was MJ’s label.
  • 1988 – CBS was renamed Sony Music Entertainment

As  Lynton Guest penned in his book, “Michael Jackson became entangled with the Sony Corporation almost by accident.”

From there, MJ was submerged by any kind of controversy. His mental state was questioned, and he was embroiled in legal issues.  Gossip’s headlines regarding his expensive lifestyle and the various lawsuits he was subjected to, speculating he had cash flow problems, and when his ATV Music Publishing Company merged with Sony Music Publishing did not help his cause.

David Bowie, as well, was looking for solutions to the financial issues that caught up with him by the turn of the century. His expensive lifestyle in New York had led him to migrate to Berlin for a while, but financial freedom became a priority. In 1997 David Bowie found himself in need to immediately get a large amount of cash to be able to buy from his ex-manager Tony De Fries 50% of copyright on his albums from 1972 to 1976.

His business manager William Zysblat investigated other financing options. Zysblat discussed an asset-backed bond issuance with David Pullman, the managing director of New York’s Fahnestock & Company’s structured asset sales group, and attorney Richard Rudder, head of the securitization practice at New York’s Willkie, Farr & Gallagher. The three managers determined that an asset-backed bond issuance would be more beneficial to Bowie’s interests than a traditional distribution agreement because it would afford him more significant financial gains. As a result of this deal, Bowie received $55 million.

It’s interesting to note that Michael Jackson struck a more dominant deal merging half ATV for 115 million and getting a place on the board of the company. And considering he purchased 100% of ATV for 47 million just ten years before the financial result was terrific. Still, the difference between Bowie and Michael Jackson headlines are pretty stunning:

The Bowie bonds were issued at a fixed rate of 7 .9 percent and had an average life of ten years, reaching maturity at fifteen years. The bonds were sold privately to Prudential Insurance Company.  Selling the bonds privately eliminated many cumbersome reporting requirements. Upon the maturity date of the bonds, the copyrights reverted to Bowie.

The possession of the copyrights of the musical compositions was the key to structuring the Bowie bonds deal because the royalty income generated by the copyrights and received from music publishing licenses and record sales were the assets that support the bonds. Bowie gained tax advantages and a higher present value of the royalty payments by receiving the cash before the periodic royalty payments. Furthermore, the acquisition of the lumpsum enabled him to diversify his income, and he could make investments that would generate revenue beyond the music industry. EMI’ s fifteen years licensing deal for Bowie’s back catalog was used as credit enhancement. After fifteen years, the ownership of the master tapes reverted to Bowie. 

Pullman, who organized the deal, viewed such asset-backed transactions as an alternative to traditional bank loans because they generated more capital and may either had a fixed or a floating interest rate. Additionally, banks usually require personal guarantees to loan money based on the liquid assets of a borrower.

Michael Jackson already retained the masters and copyrights ownership of his back catalog of music and, also, owned the publishing right of all his catalog. Therefore MJ theoretically had a situation much more viable than Bowie, having only an agreement with Sony for the distribution rights and the exploitation of his intellectual property.

After the Bowie bonds came into the spotlight, rumors of a possible bonds deal on MJ intellectual property emerged in the Newsweek of November 1998. The magazine claimed that Jackson was about to sign a bond deal.

 Two years later, in May 2001, there was an article on the Mail on Sunday describing a deal that could raise  500 million dollars by issuing bonds backed by the copyrights of his songs and those of the Beatles in what was described as the Holy Grail of showbiz bond deals. The story was later denied.

However, every time good news came out, there was 10’000 bad news against him. For example: on January 6,  2002,  The Sunday Times, published an article asserting Michael Jackson turned to his record company for a loan, borrowing 200 million dollars using the Beatles’ catalog as collateral, to fund his Neverland Ranch in California and make the album Invincible, released in September 2001.  It was even suggested that he might face bankruptcy. The bullshit was so big that Sony had to publicly deny.

In reality, the effects of a possible bankruptcy were considered unappealing and reduced the attractiveness of a bond deal to potential investors sharply. That’s what does it mean the use of BAD PRESS. David Pullman also pointed out that such transactions take many months to arrange and that Jackson’s need was probably more immediate.

So, while The Bowie Bonds earned a triple-A bond rating from Moody’s, on September 29, 1999, Michael Jackson Publishing Trust opened a credit line initially of 30 million with the usual Bank of America: a traditional financial instrument loaded with massive interest and management costs. Surely it happened because he was entangled with too many intricate agreements with Sony and the bank. And his business management did not care to look for valid alternatives.

But who had an interest in setting up this multiple news? Not MJ for sure. So, was it a case of intense verbal diarrhea coming from some executives mouths in charge to disclose messed up stories against him?  The timeline was suspicious because reports used to come out just after or just before some update in the documents of the financial transactions. And it was clear since 1995 that his 50% of Sony/ATV was pledged totally to BOA.

The Sony/ATV loan went under consolidation and reinstated many times. Sony was co-guarantor – being the other company shareholder but never loaned directly any amount under the BOA facility. So the options are only two: messed up revelations were distributed on purpose or media is populated by a bunch of people not able and deliver decent job. Saying that info was not verified is a euphemism. 
Eager to airing MJ dirty laundry, they filled pages and pages of their rags passing off as a jumbo loan nothing but an inter-creditor agreement related advances that generally record companies give to artists. It was a few million advance against the royalties over the merchandising. Usually, there is an advance over a royalty rate of X percent, if enough merchandising would be sold, it recoups the advance to pay themselves the advance, and then begin to get royalties. It this case, Sony Signatures claimed not to have recovered the advance, so they put themselves in a queue as a junior creditor with BOA.  The next blogs show it might be all these kinds of invoices that generated a debt toward Sony.

In May 2003, there was more speculation about Jackson’s finances in the media, and again it was suggested that he might face bankruptcy. And actually, something was up for him.

Goldman Sash‘s made an offer through Jackson’s adviser of that time, Charles Koppelman, to purchase MJ catalogs just around April 2003. All of them. They asked the consultancy of John Branca. The proposal was that MJ had to put all his interests of Sony-ATV and MIJAC to a newly created vehicle such as “Music LLC” in partnership with Goldman Sachs Capital Partners. Goldman would have provided 135 million in cash, which MJ could have used to repay part of his Sony/ATV liabilities to Bank Of America and 35 million to pay off the whole MJIAC credit line. They proposed to secure the difference of Sony/ATV loan with MIJAC to reduce the 200 million balance but still with 132 million balance to be paid to them. MJ would receive 3.5 million per year for five years apart for the first year, where he would have received 12 million due to 9 million proceeds from Goldman.  And an initial 50% common equity stake in Music LLC in partnership with GSCP for future wealth creation opportunity.

There’s no surprise why Michael Jackson flat out the offer, right?  At that time, Mr. Branca was not working for MJ being dismissed previously in February 2003. But knowing his former client very well, sent a letter to the Goldman people advising that they might receive a refusal.

MICHAEL JACKSON PUBLISHING TRUST LOAN

The credit line with Bank of America initially bore an annual interest rate equal to one month LIBOR + 3.00% at the beginning.

The security collateral of MJPT Loan was:

  • All his musical compositions, MJIAC Music, Miran Publishing Inc, Miran Publishing Corp, and Mystical Light music, including all music, musical compositions, lyric versions,  arrangements of music and translations including air vocal lyric versions or adaptation of lyrics, and all properties and things of value pertaining and all replacements and substitutions, and products end proceeds, acquired or produced.
  • All copyrights, rights in copyrights, interests in copyrights and renewals, extensions, application and registration of copyrights, domestic and foreign, and the right ( but not the obligation) to make publication thereof for copyright purposes, to register claims under copyrights throughout the universe and perpetuity, end the right (but not the obligation) to register, renew and extend each copyright, and the right (but not the obligation) to site for past, present and future infringement of copyright. Most of these rights were included and governed by Warner with the Stewart Agreement dated June 30, 1983,  between Michael Jackson and Warner/Chappel Music. Inc. and  The Warner Agreement dated as of June 12, 1990.
  • A personal guarantee

As usual, the bank did not fall short on anything regarding the guarantees department—Overcollateralized to excess.

On September 29, 1999, Bank of America made an initial loan to MJPT of 30 million dollars.
Through some subsequent agreements, the principal amount of the loan was increased, and the due date extended.  Ultimately, under an agreement dated March 25, 2004, BOA wound up lending an aggregate principal amount of $72,500,000.

The Third Amended and Restated Loan Agreement between BOA and MJPT, dated March 25, 2004, bore interest at an annual rate equal to one month LIBOR + 3.00%.

  • Upon an Event of Default, the MJPT Loan bored default interest rate of Prime + 4.00% per annum. 
  • The MJPT Loan was due and payable in full, together with all accrued and unpaid interest thereon, on December 20, 2005.
  • MJPT Trust Agreement provided that MJPT’s principal assets consisted of music publishing catalog MIJAC formed by Michael Jackson in 1976, Miran Publishing Inc, Miran Publishing Corp, established in 1978 with his brother Randy, Mystical Light music, and the right to receive payments under the administration agreements between MJPT and third parties.
  • BOA’s remedies upon an Event of Default included its right to resort to all of the collateral and to exercise the rights of a secured party according to applicable law. Further,  MJPT  would be obligated to pay to BOA a default fee of $1O million, and BOA could, at its discretion, publicly or privately sell the MIJAC Catalog and the Administrative Agreements upon such terms as BOA deemed commercially reasonable.

On February 24, 2004, the New York Daily News reported that Michael Jackson, beset with legal problems, was again considering securitizing his song catalog. But still, the rumor was false. What happened in that period was one of the usual extensions, which increased the principal amount from 70 million up to 72. But Bank of America’s conditions became more and more impossible, as well as the shortages into the accounts and withdrawals of too high bank costs.

Michael Jackson was not a newbie, neither a naive nor ignorant. He knew the business very well as growing up in the music industry and saw the music industry growing up with him. Sadly be aware of what surrounded him was not enough.

Sources:

MJ AND THE NEW ECONOMY

The Michael Jackson projected into the New Millennium was no longer the man who shared the podium with the then President of the United States, Ronald Reagan. Aside from the new artistic maturity and quality of content production, ten years later, he was “poorer.” (poor in the broad sense, considering his privileged status).

 

The New Economy, the dot.com, the iPod, the cell phones, and the Palm Pilot was the 1990s American illusion led by private-sector spending and independent-sector employment. In the attempt to exploit the services arising from investment and speculation, Michael Jackson’s revenue streams became financialized from 1995 onwards. It was a fashionable exercise for many other wealthy Americans. It was a way to stay relevant through the transition from the American Economy of Industrialization to the financial Bubble Economy that around 2000 lead the world into the “Great Recession.”

 

Finance is often confused with the boring accounting entries; instead, studying the market and monetary flows can be creative. And in mid ’90, “finance” got creative. Maybe too much… In the wake of the New Economy, financial institutions began marketing mortgage-backed securities and sophisticated derivative products at unprecedented levels. In just a few years, they doubled the amount of money and debt in the economy. Lending large sums, especially into the property market, pushed up the price of houses along with the level of personal debts.

 

One form of financial creativity apparently suitable to Michael Jackson came straight from Wall Street: the David Bowie Bonds is the best example of securitization of intellectual property of that time. Michael Jackson did not jump on that wagon, even if it was reported he had thought about many times. Unfortunately, he was already entangled in something more conservative and maybe not planned at best for his personal and corporate needs.

 

In November 1995, after the merger of ATV catalogs with Sony Publishing catalogs, Sony Venture Capital Corporation – an investment arm of Sony Corporation – issued to Bank of America a bank guarantee in favor of Michael Jackson to facilitate corporate loans and serve fresh working capital. The guarantee amount was about abt 148 million dollars. To reach 50% membership in the newborn Sony/ATV, there was a discrepancy of 115 million in favor of Mr. Jackson’s that Sony had to recognize to reach the desired parity. That shows how valuable the about Michael Jackson’s 4000 songs were, compared to Sony Publishing. Mr. Branca confirmed so. In a deposition of February 2017 during the trial with IRS, Mr. Branca summed up Sony/ATV general rules and provisions.

Exhibit B of the Sony/ATV Operating agreement gives us a better understanding of the joint-venture MJ got into with his record label. It describes the total ownership percentage by catalogs and countries. Sony Music Entertainment operated the company to 10% higher than any other publishing company, and 50% of these hefty expenses were for Michael Jackson’s account. Shareholders could not buy each other for ten years, and it was going to expire in December 2005.

 

Sony made substantial cash injections inside the company (Sony/ATV), not personally to Michael Jackson or his companies. And by the minute the company became operative, Sony Music Entertainment (SME) started charging the company (Sony ATV) with administrative expenses and other extraordinary cotillons. Sony itself expanded its credit lines borrowing heavily from banks – since Kyoto trees have no money under the petals. The major exercises were purchasing new catalogs for the company project expansion, debiting massive operating costs to the company, generated huge company liabilities, which resulted in a lower market value of the entire catalog and excellent move for tax benefits. Michael Jackson, being a partner at 50%, had to handle half of all of it. The term “merge” means to combine or join together, not to sell, and that’s what happened between ATV catalogs & Sony publishing.

 

There were rumors that later in 1997, MJ yielded another 2% of his foreign catalogs to Sony, and therefore, the Joint-Venture situation would be reversed. There are NO documents either amendments in the “operating agreement” that confirm the transaction. All the loans describe a 50% membership by both parties. It should be clear by now that when someone searches pieces of information on Michael Jackson, we mostly find hacked and manipulated news. In synthesis, bull shit spread around by whom had interested to put down MJ reputation. An evil quirk that Sony must’ve developed within the company’s compliances.

 

Michael Jackson’s financial “pressure” as Mr. Branca called it, were lawsuits against him piled up in between ’92 and ’94. L.A. Gear filed a 10 million suit against Michael Jackson and his companies, accusing him of fraud and breach of contract in a deal for a failed line of sneakers. MJ countersued them 44 million, and a settlement was in need. Promoter Marcel Avram sued him for $20 million for canceling his Dangerous world tour. A Chilean promotions company sued for $5 million for canceling two concerts of the Dangerous Tour, one in Chile and another in Peru. Smith-Hemion Productions sued the Jackson family for the musical benefit show Jackson Family Honors. All lawsuits settled around 1994. Not to mention the huge amounts disbursed to lawyers and investigators derived by Evan Chandler’s blackmail and extortion.  It was enough to burn almost his entire business and career, and the weight of the whole period crashed his soul and his confidence.

 

The infamous 115 million 

 

Zia Modabber – an attorney that despite being fired in 2002 by Michael Jackson for negligence still works for MJ Estate, involuntarily confirmed that between 1995 and 1998 not even a shadow of the 115 million got into Michael Jackson coffers, if not for the incomes of the History Tour and the related album. If he had received 115 million, he would have cleared out the pending matters and started with a clean slate. Instead, he borrowed almost immediately the first 90 million from the Sony guarantee. In synthesis, he merged his ATV catalogs against a guaranteed loan. Of course, Sony /ATV value raised sharply in few years – as well the corporate company debts, but it looks as Michael Jackson’s entourage didn’t plan the transaction with an eye toward his corporate needs and standard of life.

 

However, looking to the amounts and dates of Bank of America documents, these loans likely corresponded to a financial project built around a table, with all participants interested to exploit the publishing catalogs the same fashion of commodities and derivatives. Many people think it was a long-range of “operations” finalized to strip away Mr. Jackson assets. I tend to believe it was something in the middle since Mr. Jackson was a smart and seasoned businessman. Sometimes a business start with the best intentions, then time and other issues change prospects and priorities. Anyway, these loans were not opened to cover the holes of a pathological big spender as media, books, and biographers keep claiming.

 

The Loan Guaranteed BY 50% of Sony/ATV.

 

Between 1995 and 1998, there were four restated and consolidated loan amendments due to amount increase and document revision. The structure of Michael Jackson’s business undergone various modifications and some new trusts were created. The loan of 140 million consolidated in 1998 bore a Prime Rate of interest at 6.16% per annum. The loan term had a due date of December 2005.

 

Note: a long-term loan provides working capital to a business it can use to purchase assets, which can then create additional income for the business. A company takes on long-term debt to obtain immediate capital. A long-term loan provides higher loan amounts, a lower interest rate, involves collateral submission, repayment in installments, and tax benefits.

 

Before you think Michael Jackson touched the entire amount, a bitter interlude needs to be open, which is not the bank interest rate but the commissions Michael Jackson “vultures” team used to take. This time was Mr. Branca and Myung Ho Lee, being both the trustees of the MJ fund. The only published and sure information is related to Mr. Branca percentage and contractual agreement. All the rest remain a rumor. The documents tell that Mr. Branca, as per agency agreement with Michael Jackson, among other things, used to pocket 5% of the principal amount of the loan. Besides it, he was entitled to take directly from Sony/ATV as follows:

 

  • 5% of all MJ “guaranteed advance.”
  • 5% of all MJ “excess of cash flow.”
  • 5% of the “Put Price” amount if the clause would ever be exercised.

 

However, to facilitate the 1998 loan documentation, “generously” waived the direct payments from Sony until September 2005, to reclaim the whole “package” – principal capital and accrued interests – at expiring date by issuing a UCC lien for 50 million of dollars on Michael Jackson publishing assets. Business is business: especially in the United States, no doubt on this, but here there is a deep consideration to make: these two were friends once.

 

Why Mr. Branca needed to reiterate his very existence in Michael Jackson’s life at the very time when MJ was already up to his neck in it? It was not about money. Mr. Branca accepted 13.5 million – not the original amount requested – and without making additional troubles. So what it was: revenge? Power affirmation? (you fired me, but I exist). Or was he part of the already in motion mechanism to open the bankruptcy procedure and compel MJ to sell off to Sony? The contract enforcement was a means. The motivations might be others. Who thinks Mr. Branca made this action for greed is a naïve, narrow mind. These people do not need the money and do not sue for money, even if, apparently, it shows as the motivation. Power, revenge, and favoritisms are much more likely.

 

  • In February 1999, there was another change in the Michael Jackson Trust structures. The company MJ LLC merged into the newly constituted MJ-ATV Publishing Trust.
  • In December 2000, there was an additional amount added to this loan in the principal amount of 45 million. The loan bore Prime Rate of interest at 7.14% per annum.
  • On September 30, 2002, the third loan of the principal amount of 11’650 million. The loan bore prime rate of interest at one month LIBOR + 2.00% per annum. With it, there was the second amendment reinstated and consolidate loans and agreements for a whole 200 million.
  • The fourth loan by September 2005 was already planned in the loan agreement. (but events changed sharply, and MJ credit facilities were already in Fortress hands).

Why going from a fixed rate on a fluctuating one? Because in 2002, the LIBOR rate was lower than the US prime rate, and although floating, there was good chances of speculation. With a hedging contract, the risks of an increase in rates should limit the damage.

In short: Libor + spread rate, the hedge contract costs, the amendments cost, and bank services: everything for MJ accounts. Absolutely normal, just financial practices. Banks always cover themselves. But Michael Jackson’s Bank of America loan was really overcollateralized. Here the details:

Collaterals pledged

 

  • MJ-ATV Trust pledged to Bank Of America all MJ ATV’s rights, titles, and interest in Sony/ATV. That meant all the economic interest in Sony/ATV, all distributions, all deposit accounts, including the interest-bearing the cash collateral account. All security accounts and investment accounts, all notes, certificates of deposit, deposits, accounts, checks.
  •  Account Collateral: all interests, dividends, cash, instruments, and other property from time to time received and receivable.
  • All the rights to the Hedge Contract Agreement.
  • The right to exercise the “put option” outlined in Section 7. 9 of the Operating Agreement of Sony/ATV.
  • Neverland Ranch was also added.

 

Debtor’s Covenants

 

  • Until full payment of all obligations under the loan, MJ-ATV Trust could not, without the prior written consent of Bank Of America sell, lease, assign, trade, dispose or transfer any portion of its assets.
  • MJ/ATV Trust had to agree, that payments of Sony ATV Operating were transferred directly to the Cash Collateral Account. All revenues received by the MJ ATV in connection with the Operating Agreement had to be received in trustier the benefit of the Bank, be segregated from other funds, and be forthwith paid over to the Bank in the same loan as received.  
  • MJ ATV had obligations to maintaining the cash collateral and investment accounts. Had to perform and observe any term provision of Sony ATV Operating Agreement to be performed relating to the collateral company. Had to deliver to the bank all the financial statements relating to Sony ATV, inform if he received any “guaranteed advance” or “Excess guaranteed advances,” specifying the amount.
  • If an event of default occurred where MJ-ATV failed to pay in full when due principal or interest due, Bank Of America had the right to resort to any or all of the Collateral and to exercise any the rights of the secured party. At its discretion, the bank could sell MJ/ATV’s interest in Sony/ATV within commercially reasonable terms.
  • If the MJ ATV would have failed to pay the outstanding principal amount and the interests of the Loan at the maturity date, the Bank had the right, at any time from and after December 21, 2005, and within to February 21, 2006 (the “exercise Period’), to exercise the Put Option under Section 7.9 of the Sony ATV Operating Agreement, causing MJ ATV to sell to the Sony Music Publishing his Membership Interest. The Bank would have received the entire Put Price.

 

Apart from the old Infos, I read in countless “investigations,”, articles and books trying to give reasons to it – in real -, Sony played long with MJ.

 

The bank had Sony involved to pay the principal loan amount, only in case MJ would have defaulted. But it is crystal clear that the whole loan focused on the expansion project and the grown on the value of Sony/ATV, which is classic financial speculation. The documents tell that MJ never touched the “guaranteed distributions” in 10 years due to the bank agreement. That’s why Mr. Branca talks about “a forced savings. “

But money was not there, or the transfers were not sufficient, since too often there was never enough to cover the interests. And this is not an opinion. There are at least four key testimonies, one of the MAN himself, who testified that money was missing.

The profits of the exploitation of Sony/ATV would have been a successful outcome for Michael Jackson only if the distributions had been equally allocated among the shareholders. It wasn’t like that at all.

You will read it in the upcoming blogs that will show you in detail the documents I mentioned here.

Sources:

Transcript MJ Estate v/s IRS John Branca/Zia Modabber: teammichaeljackson.com Unfinished Business-Judith Hamera Sony/ATV Operating Agreement BOA Security Agreement 98/2002 The Road to America’s Economic Meltdown-Raymond Beresford Hamilton Money creation in the modern economy – Bank of England