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Thursday, March 17, 2016

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


Written by Ben Sisario — Sony has agreed to pay the estate of Michael Jackson $750 million for its share of the Sony/ATV Music Publishing catalog, the two parties announced late on Monday, ending one of the most closely watched contests in the music industry.

Sony/ATV, a joint venture formed by Sony and Jackson in 1995, is one of the jewels of the music industry. The catalog has more than one million copyrights, including about 250 songs by the Beatles.

The catalog is for music publishing rights, which cover the lyrics and music that are embodied in any recording.

The fate of Sony/ATV, which in addition to the Beatles catalog has hits by acts like Taylor Swift and Lady Gaga, has been one of the music world’s most intriguing guessing games since October. At the time, it emerged that Sony had, apparently with no warning, notified the Jackson estate that the company was initiating the buy-sell provision in its joint-venture deal, in which either party could purchase the other’s half.

Despite the difference in size between Sony and the estate, it was never certain which party would be the buyer.

When Jackson died in 2009, he left more than $500 million in debt, which the estate has mostly eliminated through deals for movies, recordings, theatrical shows and merchandise. Sony, on the other hand, has been suffering from a declining consumer electronics business, and in recent years investors have pressured the company to sell assets to raise cash.

Jackson’s control of the Beatles’ material has been one of the great business legends of the industry. Jackson acquired it when he bought the ATV publishing catalog for more than $40 million in 1985, some time after Paul McCartney made an offhand remark to Jackson about the value of music publishing. In 1995, Jackson sold a 50 percent share of ATV to Sony for about $100 million, creating the Sony/ATV joint venture.

For Sony, the deal will bring a measure of simplicity to its complex music-publishing holdings. Although it will no longer have the Jackson estate as a partner on Sony/ATV, it still has a separate deal for the EMI Music Publishing catalog. Sony bought that catalog for $2.2 billion in 2012 with a group of other investors, among them the sovereign wealth fund Mubadala of Abu Dhabi.

By controlling both the Sony/ATV and EMI catalogs, Sony has wielded the biggest catalog in the music-publishing business, with annual sales of just under $600 million, according to Sony filings.

“This agreement further demonstrates Sony’s commitment to the entertainment businesses,” Kazuo Hirai, chief executive of the Sony Corporation, said in a statement, “and our firm belief that these businesses will continue to contribute to our success for years to come.”

John Branca and John McClain, the coexecutors of the Jackson estate, added that the deal “further allows us to continue our efforts of maximizing the value of Michael’s estate for the benefit of his children.”

The payment to the Jackson estate represents the value of its share of Sony/ATV after the debt on the company. According to the announcement, Sony will pay the Jackson estate a lump sum of $733 million, with the rest accounted for in payments previously committed to by Sony.

The parties said they expected a definitive agreement by the end of March, and that the deal was subject to regulatory approval.

The Jackson estate still has significant holdings in music. It was a minority investor in the EMI publishing deal, and still holds its interest in that catalog. It also has complete ownership of Jackson’s songs and recordings, as well as other publishing holdings that Jackson acquired in his lifetime, including songs by Sly Stone and early rock ’n’ roll classics made famous by Ray Charles and Elvis Presley.

And in another benefit for the Jackson side, once the deal is closed, the estate will be debt-free and hold hundreds of millions in cash.

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