Tangled Web of Michael Jackson's Huge Debts Will Be Hard to Unravel
State of King of Pop's strained finances becomes more evident than ever but who might benefit remains unclear
With Michael Jackson once again dominating the charts across the world in the days since his death, the earning power of the man who sold an estimated 750m records has never been clearer. But Jackson left a mountain of debt behind him, and how the tangled web of his finances will unravel and who might benefit is far from clear.
There seems to be no doubt that Jackson was facing severe cash problems before he died. His former nanny Grace Rwaramba revealed to the Sunday Times at the weekend that she had to use her own credit card earlier this year to pay for a birthday party for one of his children.
Jackson first ran into big trouble in the 1990s, when the cost of maintaining the Neverland ranch (which he had bought in 1988 for $14.6m, or £8.8m) with its zoo, cinema, fairground and miniature train, placed a severe strain on his finances.
"He had a tremendous burn rate of several million dollars a month running Neverland, shopping and going crazy, flying people all over the world. He kept borrowing against his asset base, and put himself in a deep cash flow situation," his former publicist, Stuart Backerman, told the Vancouver Sun.
He also paid out $25.5m in out-of-court settlements with the families of boys who had accused him of child abuse. Meanwhile, the hits were no longer flowing, with diminishing returns from albums that were appearing four years apart.
"He is the biggest exemplar of the MC Hammer phenomenon, where an artist adjusts his spending to match the peak of his cash flow and then doesn't adjust when the cash flow goes down ‑ and as a result is left in deep trouble," said the veteran DJ Paul Gambaccini. "When you start having an entourage, it's very hard to let them go, you feel you need them around you. You create a little community that exists to support you."
In 1995, to ease the growing pressure on his finances, he agreed to merge his prize asset – the Beatles song catalogue, which he had acquired a decade earlier – with the library of his record company, Sony. Three years later, things had got so bad that he had to take out a $140m loan with Bank of America secured against his 50% stake in the joint venture, Sony/ATV.
Relations between Jackson and Sony soured and in 2002 he mounted a bizarre protest outside its headquarters in an open-top bus, branding chief executive Tommy Mottola "very, very devilish".
Jackson's borrowings continued to swell, while his debt with Bank of America was sold on to the New York company Fortress Investment Group. Some reports have put his debts at the time of his death as high as $500m, and while he hung on to his 50% share of the Beatles rights, it is unclear who will get them now and whether his stake is worth the $1bn that has been mooted.
Sony/ATV takes in $300m-$500m a year from Beatles, Bob Dylan, Eminem and others' songwriting royalties, according to Rolling Stone.
Aside from his extravagance, Jackson's big problem was that he had not put out any new material since 2001. Sony filled the gap with greatest hits compilations and special editions of his classic albums such as Off the Wall.
Last year the company released the anthology King of Pop, following other greatest hits collections Number Ones – currently number one in the album charts – and The Essential Michael Jackson, which also features Jackson Five songs.
Hopes for a new album were raised in 2006 when Jackson appointed Guy Holmes, the man behind Right Said Fred and Crazy Frog, to spearhead efforts to come up with fresh material. The star found a benefactor in Sheikh Abdullah of Bahrain, who was reportedly prepared to bankroll Jackson's costs if he recorded the sheikh's own compositions. But the deal came to nothing.
Musically, Jackson had become directionless, veteran DJ Paul Gambaccini argues. "Everything suggests it's not just his real fans who bought the act, it appears as if he bought the act: he believed that he was the King of Pop, he believed he was still a major star even though in today's marketplace he did not even have a presence. There was no new record for eight years and he seemed clueless about what to do next."
Given that the creative well seemed to have run dry, a return to live performance – which is increasingly lucrative for today's music aristocracy – was Jackson's best hope. Hence his intended comeback in a planned 50-date residency at London's O2 that was to have begun next month and was expected to earn him up to $100m. The fact that such a prolonged run sold out so fast proved Jackson still had extraordinary pulling power.
Since his death on Thursday, sales of his songs and albums have gone into overdrive, propelling the Number Ones compilation to the top of the album charts and many vintage tracks into the top 200 singles.
It has come as a boost to Sony BMG, whose Epic label released all of Jackson's major solo albums, while Universal has profited from the sale of material dating back to the Jackson family's stint with Motown between 1968 and 1976. Another of the four music majors, Warner, administers the publishing rights for the many songs written by Jackson himself, taking a cut from their commercial exploitation on television, in films and in advertising.
Although a posthumous fillip to record sales has been observed ever since the early days of rock'n'roll with the deaths of Buddy Holly and Eddie Cochran, this is the first time that digital sales have allowed many different individual tracks to be purchased at the same time in the immediate aftermath of a pop star's demise.
Retailers happened to be fairly well stocked with hard copies of Jackson's albums because plenty had been pressed in advance of the O2 concerts and all the hype that would have attended them.
How long the sales bounce will be sustained is open to question, given the dearth of new material that might have raised interest in Jackson's oeuvre. By contrast, when John Lennon was killed in December 1980, he had just released the album Double Fantasy.
There seems to be no doubt that Jackson was facing severe cash problems before he died. His former nanny Grace Rwaramba revealed to the Sunday Times at the weekend that she had to use her own credit card earlier this year to pay for a birthday party for one of his children.
Jackson first ran into big trouble in the 1990s, when the cost of maintaining the Neverland ranch (which he had bought in 1988 for $14.6m, or £8.8m) with its zoo, cinema, fairground and miniature train, placed a severe strain on his finances.
"He had a tremendous burn rate of several million dollars a month running Neverland, shopping and going crazy, flying people all over the world. He kept borrowing against his asset base, and put himself in a deep cash flow situation," his former publicist, Stuart Backerman, told the Vancouver Sun.
He also paid out $25.5m in out-of-court settlements with the families of boys who had accused him of child abuse. Meanwhile, the hits were no longer flowing, with diminishing returns from albums that were appearing four years apart.
"He is the biggest exemplar of the MC Hammer phenomenon, where an artist adjusts his spending to match the peak of his cash flow and then doesn't adjust when the cash flow goes down ‑ and as a result is left in deep trouble," said the veteran DJ Paul Gambaccini. "When you start having an entourage, it's very hard to let them go, you feel you need them around you. You create a little community that exists to support you."
In 1995, to ease the growing pressure on his finances, he agreed to merge his prize asset – the Beatles song catalogue, which he had acquired a decade earlier – with the library of his record company, Sony. Three years later, things had got so bad that he had to take out a $140m loan with Bank of America secured against his 50% stake in the joint venture, Sony/ATV.
Relations between Jackson and Sony soured and in 2002 he mounted a bizarre protest outside its headquarters in an open-top bus, branding chief executive Tommy Mottola "very, very devilish".
Jackson's borrowings continued to swell, while his debt with Bank of America was sold on to the New York company Fortress Investment Group. Some reports have put his debts at the time of his death as high as $500m, and while he hung on to his 50% share of the Beatles rights, it is unclear who will get them now and whether his stake is worth the $1bn that has been mooted.
Sony/ATV takes in $300m-$500m a year from Beatles, Bob Dylan, Eminem and others' songwriting royalties, according to Rolling Stone.
Aside from his extravagance, Jackson's big problem was that he had not put out any new material since 2001. Sony filled the gap with greatest hits compilations and special editions of his classic albums such as Off the Wall.
Last year the company released the anthology King of Pop, following other greatest hits collections Number Ones – currently number one in the album charts – and The Essential Michael Jackson, which also features Jackson Five songs.
Hopes for a new album were raised in 2006 when Jackson appointed Guy Holmes, the man behind Right Said Fred and Crazy Frog, to spearhead efforts to come up with fresh material. The star found a benefactor in Sheikh Abdullah of Bahrain, who was reportedly prepared to bankroll Jackson's costs if he recorded the sheikh's own compositions. But the deal came to nothing.
Musically, Jackson had become directionless, veteran DJ Paul Gambaccini argues. "Everything suggests it's not just his real fans who bought the act, it appears as if he bought the act: he believed that he was the King of Pop, he believed he was still a major star even though in today's marketplace he did not even have a presence. There was no new record for eight years and he seemed clueless about what to do next."
Given that the creative well seemed to have run dry, a return to live performance – which is increasingly lucrative for today's music aristocracy – was Jackson's best hope. Hence his intended comeback in a planned 50-date residency at London's O2 that was to have begun next month and was expected to earn him up to $100m. The fact that such a prolonged run sold out so fast proved Jackson still had extraordinary pulling power.
Since his death on Thursday, sales of his songs and albums have gone into overdrive, propelling the Number Ones compilation to the top of the album charts and many vintage tracks into the top 200 singles.
It has come as a boost to Sony BMG, whose Epic label released all of Jackson's major solo albums, while Universal has profited from the sale of material dating back to the Jackson family's stint with Motown between 1968 and 1976. Another of the four music majors, Warner, administers the publishing rights for the many songs written by Jackson himself, taking a cut from their commercial exploitation on television, in films and in advertising.
Although a posthumous fillip to record sales has been observed ever since the early days of rock'n'roll with the deaths of Buddy Holly and Eddie Cochran, this is the first time that digital sales have allowed many different individual tracks to be purchased at the same time in the immediate aftermath of a pop star's demise.
Retailers happened to be fairly well stocked with hard copies of Jackson's albums because plenty had been pressed in advance of the O2 concerts and all the hype that would have attended them.
How long the sales bounce will be sustained is open to question, given the dearth of new material that might have raised interest in Jackson's oeuvre. By contrast, when John Lennon was killed in December 1980, he had just released the album Double Fantasy.
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