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Sony buys Michael Jackson estate out of Sony/ATV

By | Published on Tuesday 15 March 2016


Sony Corp has agreed to buy the Michael Jackson estate out of their Sony/ATV joint venture, which will give the entertainment and electronics conglom complete ownership of its main music publishing business.

According to Sony, a memorandum of understanding has been signed that commits the firm to pay the estate $750 million for Jackson’s 50% share in the publishing business, which famously controls much of the Beatles songs catalogue as well as mountain of other famous works. Sony/ATV is, of course, the biggest music publisher in the world, partly because of its role as administrator of the EMI Music Publishing catalogue.

Sony and Jackson were long-term business partners in the music publishing domain. Jackson bought ATV Publishing – what had begun as the music rights spin-off of UK TV company ATV – in 1985. He then went into business with Sony, with whom he was signed for recordings, in 1995, with the two firms merging their respective music publishing businesses to create Sony/ATV.

In the latter years of Jackson’s life, as the star struggled to service mounting debts, there were frequent rumours that he would sell his valuable stake in the Sony/ATV business to pay off loans and mortgages. But in the end that didn’t happen, and since the star’s passing his estate seemingly remained committed to the publishing company.

Until last year, when it emerged that a ‘buy-sell provision’ in the two parties’ joint venture agreement had been activated, resulting in both partners discussing the option of buying the other side out of the Sony/ATV company.

Although it always seemed more likely that Sony would buy the Jackson estate out of the business, rather than the other way around, rumours that the top guard in Sony’s entertainment division were hesitant about the future of music publishing led to speculation Sony might sell its half, making Sony/ATV a truly major independent player in the music rights industry.

Had that happened, it could have had a big impact on the music rights sector. One of the key debates ongoing in the music rights community is the way streaming income is split between the separate recording and song copyrights.

As it currently stands labels receive a much bigger cut of streaming income than publishers (four to five times more), the splits having been initially based on the CD model. But many in music publishing now question whether that was the right model, arguing that the costs incurred and risks taken by record companies are less in digital than with physical.

Meanwhile many songwriters and publishers say that they need to earn more from streaming, otherwise non-performing songwriters will struggle to live off their music. That might mean demanding that the already loss-making streaming companies reduce their cut of the action. Or it might mean somehow repositioning the label/publisher split, so that those repping recording rights take less from the digital pie so that those repping song rights can take more.

Quite how that repositioning could ever be achieved is unclear, given that the streaming services have separate relationships with labels and publishers, so the two sets of music rights owners never meet when digital deals are being done. Except, of course, many music rights companies own both labels and publishers, and the three biggest record companies are also the three biggest music publishers.

So, if they wanted to, Sony, Universal and Warner could re-slice the digital pie to the advantage of songwriters tomorrow. Why would they though, given that contractual conventions mean that labels usually get to keep the majority of income generated by exploiting sound recordings, but songwriters get the majority of the money generated by exploiting songs?

All of which means that, for the majors, the status quo is the desirable option. However, had the world’s biggest music publisher had no affiliation with a record company, that could have dramatically shifted the digital pie debate.

But that is not to be. Indeed, as a result of the new deal, Sony/ATV may become a closer ally to the Sony Music record company, because Sony Corp not owning the former outright has previously forced the two music companies to operate more autonomously, while the other majors have at times sought efficiencies by bringing their label and publishing businesses closer together (albeit, generally, only to a limited extent).

Under the deal agreed by Sony and the Jackson estate, the latter will retain its 10% stake in EMI Music Publishing, which was acquired by a Sony-led consortium in 2012. There are other shareholders with an interest in the EMI catalogues too, though Sony/ATV administrates that repertoire, and day-to-day acts as if it were the owner, something it will continue to do. The Jackson estate will also retain ownership of Mijac Music, which mainly controls the popstar’s own song copyrights.

The deal should be finalised by the end of the month, but could take much of the rest of the year to complete, with the arrangement subject to certain closing conditions and regulatory approval. But once the estate has the loot off Sony Corp, it’s expected executors John Branca and John McClain will use some of the money to pay off the late singer’s remaining debts, leaving the estate in credit, before transferring the rest to the trust fund that provides for Jackson’s three children.

Confirming the deal last night, Branca and McClain said: “This transaction further allows us to continue our efforts of maximising the value of Michael’s estate for the benefit of his children. It also further validates Michael’s foresight and genius in investing in music publishing. His ATV catalogue, purchased in 1985 for a net acquisition cost of $41.5 million, was the cornerstone of the joint venture and, as evidenced by the value of this transaction, is considered one of the smartest investments in music history”.

Meanwhile Sony Entertainment CEO Michael Lynton added: “This acquisition will enable Sony to more quickly adapt to changes in the music publishing business, while at the same time continuing to be an unparalleled leader in the industry and a treasured home for artists and writers. All of us at Sony look forward to continuing to work with the estate to further Michael Jackson’s legacy in many different ways”.