Michael Jackson: Money, Myths, and the Mainstream Media
Media accounts of Michael Jackson being “deep in debt”, without providing further explanation, gave the impression that the King of Pop’s financial situation was something the general public could easily relate to or understand.
But far from that. Jackson’s so-called “massive debt” was something almost none of us will be lucky enough to experience. I daresay most of the general public has never heard of Jackson’s debt category, better known to some as “acquisition debt.”
Acquisition debt involves multi-million dollar purchases of companies in which a significant percentage of the purchase price is financed through “leverage” loans. The assets of the acquired company are used as collateral for the borrowed capital.
When Northern Songs, a music catalog with thousands of songs, including the Beatles’ back catalogue, was released, Jackson was immediately interested in the catalogue. He was warned that he would face strong competition. “I don’t care. I want those songs,” Jackson told his entertainment attorney John G Branca. Get me those songs, Branca.
Jackson eventually beat out the rest of the competition, including Paul McCartney, in negotiations for the Northern Songs catalogue, which lasted 10 months. He even bought the catalog for $47.5 million.
Jackson used equity in his own catalogue, MIJAC, along with assets acquired from Northern Songs for loan qualification, with the newly acquired assets structured so that capital flows toward debt service.
In 1995, Jackson merged his Northern Songs catalog with Sony’s publishing division, creating Sony/ATV Music Publishing. This deal gave Jackson half ownership of Northern Songs, as well as half ownership of Sony/ATV. It also included distribution rights to thousands more songs. With the merger, Sony/ATV became the third largest music publishing company in the world. Both Jackson and the people at Sony were equal partners and promised to become the biggest catalog in the world.
In late 2001, Jackson and Sony acquired Tony Martin’s Baby Mae Music catalog of 600 songs.
In July 2002, they bought country music publisher Acuff-Rose for $157 million. The company included publishing rights to 55,000 songs.
And in November 2007, Jackson and Sony purchased Famous Music LLC from Viacom. This deal gave the King of Pop the rights to songs by Eminem (a C-rated artist who once made fun of him), Shakira, and Beck, among others. The company included the assumption of a debt of 30 million dollars. They bought the business for $370 million.
Bottom line. if jackson were indebtedit makes more sense to believe that his “$500,000,000” indebtedness resulted from the acquisition of multi-million dollar companies and not, as the media myth-makers would say, “lavish spending.”