March 20, 2010 / 12:43 AM / 7 years ago

Music biz insiders say Sony-Jackson deal makes sense

LOS ANGELES (Billboard) - The magnitude of Sony Music Entertainment's landmark recording contract with the estate of Michael Jackson raises an inevitable question: Is it a smart deal for the label?

Given Jackson's superstar status, his influential creative legacy and the market's seemingly insatiable appetite for all things MJ, the consensus of executives who handle works of other deceased music stars is an overwhelming "yes."

Under the contract, which guarantees the estate between $200 million and $250 million, Sony will issue 10 releases of Jackson's music through 2017, with the double-CD "This Is It" soundtrack counting as the first of these. Already in the pipeline is the planned November release of a collection of previously unreleased tracks and a 2011 reissue of Jackson's seminal 1979 Epic album, "Off the Wall."

The Jackson/Sony deal eclipses such recent headline-making unions as Live Nation Entertainment's pacts with Madonna and Jay-Z, pegged at $120 million and $150 million, respectively. And it places Jackson among a select group of artists who posthumously remain major wage earners: Elvis Presley, Ray Charles, Frank Sinatra and Jimi Hendrix, whose new album of unreleased material, "Valleys of Neptune," debuted at No. 4 on the Billboard 200.

Since Jackson's June 25 death, his catalog has generated sales of 8.7 million albums in the United States, according to Nielsen SoundScan, and a reported total of 31 million worldwide. To date, the "This Is It" double CD has sold 1.5 million units domestically, according to SoundScan, and more than 5 million worldwide, according to Sony.

LONG-TERM GOALS

Sony has been in talks with the estate since late last summer, when they came together to discuss the "This Is It" movie and soundtrack, according to Columbia/Epic Label Group chairman Rob Stringer. The new contract renews Jackson's 30-year association with the company, which dates back to 1979.

"My first premise for wanting to do something long-term," Stringer says, "was there was music that was out there post the term of our contract, and I wanted that wrapped up as part of our forward-going structure with the estate. For instance, it would have been a very strange process if we had to deal with the estate and then another record label signed the material post the term after 'Invincible.' It was a much-needed process for both sides to have everything in place. Both the 'This Is It' movie soundtrack and DVD exceeded our expectations. We knew we had something incredibly buoyant in terms of the legacy of a fantastic artist."

John Branca, who with John McClain serves as special administrator for the Jackson estate, says the contract is in keeping with future projects and other ideas he and Jackson had discussed before his death. "What John (McClain) and I have been trying to do is execute a game plan Michael would have been comfortable with," Branca says. "We have turned a lot of things down; we have been very selective. And yet we're also very aggressive about wanting to do these kinds of deals that Michael would have been proud of."

Tony Gumina, president of the Ray Charles Marketing Group, calls the Jackson/Sony agreement a great deal for the major. "The $250 million figure sounds incredible, but so did the $60 million that Columbia Pictures guaranteed for the footage used in the 'This Is It' film," Gumina says. "It has since grossed more than $200 million in worldwide box office and DVD sales."

Bob Sillerman, chairman/CEO of CKX, which oversees Presley's estate, doesn't view the contract as much of a gamble because of Jackson's unique appeal. "If their experience with the Jackson catalog is anything like our experience with the Elvis catalog -- where ... there has been a treasure trove of unreleased material and the ability to repackage material -- then the label and the estate have done something unique and will be immensely successful."

MOVING QUICKLY

A senior executive at another major label agrees that the deal is a wise investment, while observing that the speed at which it was completed suggests "just how much debt pressure there must be on the heirs." The executive adds that "the important thing now is for Sony to handle the assets and fans with care and respect and not overlook the demand at the moment."

The contract is also a testament to Jackson's worldwide appeal, Gumina says.

"When you're dealing with icons like Michael Jackson and Ray Charles," he says, "their appeal in the international markets is remarkable, so you're not just selling product in North America. If there are some great Michael Jackson recordings in the Sony vaults, this should be the best catalog investment they have ever made."

The key to maximizing this kind of material is respecting the artist's legacy and recognizing that less is more. "There is no urgency to rush these out," Sillerman says. "Being respectful of the integrity of the original creation and the original audience is something that the estate and the label know as well as anything."

Sustaining interest in any legacy act in the long term remains a challenge. But not every legacy act carries Jackson's cachet. "This deal shows you the power of the Michael Jackson brand," says Larry Mestel, CEO of Primary Wave Music Publishing, which owns a stake in Kurt Cobain's song catalog. "There are only a handful of artists who have that type of power. That's why Sony was very smart to make that deal."

Sillerman adds, "There are other world-class acts that I don't think have the reach and impact that Michael and Elvis have. I would put the Beatles up there and also the Rolling Stones."

Branca says there will always be interest in Jackson. "Look what happened with Elvis," he says. "To this day, there's interest in Elvis. And I think there will be enduring interest in Michael. It's our job to continue to expose Michael to new generations."

Additional reporting by Louis Hau, Craig Marks and Ray Waddell

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