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Jackson's estate could be a thriller of a profit machine

The singer's valuable share of a music catalog including songs by the Beatles and careful management of his image in the future could expand the vast fortune he leaves behind.

July 06, 2009|Harriet Ryan and Chris Lee

Michael Jackson was one of the most famous people on Earth and also one of the most famously broke. Many who crossed paths with the performer in the final years of his life -- business advisors, lawyers, a Tennessee art dealer and even a Bahraini sheik -- accused him of skipping out on bills. Jackson came within days of losing Neverland Ranch to a foreclosure auction last year, and he died owing more than $400 million to various financial institutions.

But the reality, those familiar with his finances say, can be summed up by the title of a Beatles' song he counted among his possessions: "Baby, You're A Rich Man."

Jackson's assets outweigh his debt by at least $200 million, according to people knowledgeable about his business holdings. Determining a precise figure is difficult, they said, given the complexities of his finances.

Those calculations do not include his posthumous earning power, which seems immense based on the enormous public appetite for his music and memorabilia in recent days. Moreover, his death removed the biggest drain on Jackson's finances: his legendary spending.

For The Record
Los Angeles Times Tuesday, July 07, 2009 Home Edition Main News Part A Page 4 National Desk 3 inches; 114 words Type of Material: Correction
Jackson estate: An article about Michael Jackson's finances in Section A quoted Lance Grode, adjunct professor at USC Law School, as saying that Sony-ATV is "the premium catalog in the world," and said that Grode worked at the law firm that brokered Jackson's acquisition of the catalog when the deal was struck in 1985. Although Grode previously worked at a law firm with Jackson's longtime entertainment attorney John Branca, at the time of Sony-ATV's sale Grode was employed by another company attempting to construct a competing bid to buy the catalog; his comment was in reference specifically to a catalog of 251 Beatles songs that is part of Sony-ATV, not the entire Sony-ATV portfolio.

Who will control his estate's great existing wealth and the massive fortune that licensing his name, recordings and likeness may bring is at the heart of a hearing today in a downtown L.A. courtroom. Lawyers for Jackson's mother, Katherine, 79, filed papers last week asking that she oversee the estate, but 48 hours later, two longtime Jackson associates filed a will the performer signed in 2002 naming them as executors.

At the hearing, which is expected to attract media from around the world, Superior Court Judge Mitchell Beckloff is to take up the issue of who should have authority to handle Jackson's affairs.

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Collecting fees

The need for control is as plain as Jackson's distinctive face on numerous memorial T-shirts and commemorative plates being hawked around the world. Images of the pop icon would appear to be the intellectual property of his estate, but no one is empowered to crack down on unlicensed vendors or collect fees.

The executors, leading entertainment attorney John Branca and veteran music executive John McClain, have urged the judge to clear them immediately to address another pressing matter: resolving issues related to Jackson's canceled comeback concerts.

Whoever the judge names will be running an estate for Jackson's children and perhaps other beneficiaries. Katherine Jackson's attorneys wrote in court documents that the pop star's two sons, ages 12 and 7, and daughter, 11, should inherit all of his assets. The 2002 will transfers his property into the Michael Jackson Family Trust. People familiar with the trust said that under its terms, 40% of Jackson's assets go to his children, another 40% to his mother and the remaining 20% to charities working with children.

Jackson's most valuable asset is his 50% share in the Sony-ATV Music Publishing catalog, which people with knowledge of the partnership value at between $1.5 billion and $2 billion. The partnership itself has about $600 million in debt, one person said. In what is recognized as the shrewdest business move of his career, the singer bought the catalog in 1985 for $47.5 million. Earlier this decade, he borrowed $300 million against the catalog. That puts the value of Jackson's share at between $150 million and $400 million.

The Beatles catalog includes music written by John Lennon and Paul McCartney. Sony-ATV administers nearly all of the Beatles' greatest hits with the exception of the group's songs from the movies "A Hard Day's Night" and "Help!"

It also oversees the publishing of some 750,000 artists -- performers such as Elvis Presley, Destiny's Child, Hank Williams, Joni Mitchell, System of a Down, Eminem, Neil Diamond and Bjork. The catalog has continued to acquire song catalogs into the 21st century, and Sony-ATV is reportedly the fourth-largest music publisher in the world.

"Certain catalogs are considered prizes. There's nothing like them in the world in terms of generating licenses and income," said Lance Grode, adjunct professor at USC Law School who worked at the law firm that brokered Jackson's acquisition of the catalog when the deal was struck in 1985. "The Sony-ATV catalog, it's going to be exploited forever. It's probably the premium catalog in the world."

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