Forbes: Michael Jackson a business genius

In 2010, Michael Jackson had income of $275 million. This figure is more than the combined earnings of Beyoncé, Lady Gaga, Madonna, and Jay-Z. Although a large part of this income comes from the public’s luck and attention toward his works and memorabilia, a significant portion is also the result of his own underestimated business genius.

He spent lavishly the huge profits from selling 750 million copies of his albums. Saving money wasn’t the King of Pop’s favorite thing to do. But finding unusual ways to invest and make even more money—those were among his many talents.

(*) This figure is based on official statistics for the sales of his solo albums up to 2006. Unofficial figures put it close to 1 billion.)

His best business decision had nothing to do with his own career. In 1985, he paid $47.5 million to buy the publishing rights to a music catalog, which included songs by The Beatles. Ten years later, Sony paid Michael $90 million to share in that catalog at a 50% stake. This joint investment created Sony/ATV.

Today, the Michael Jackson Foundation and Sony are partners in this catalog, which contains more than half a million songs by people such as Bob Dylan, Elvis Presley, Eminem, and others.

Experts estimate the value of this catalog at nearly $1.5 billion. The catalog generates annual revenue of $50 to $100 million, and it has increased in value by three thousand percent compared to the price Sony paid in 1985.

Ryan Skinman, the CEO of the largest music-purchasing company, Platinum, says:

“This is the biggest catalog in the world. When there are so many number-one songs in this catalog, you can’t put a price on it.”

One of Michael Jackson’s smartest habits was his use of sharp advisors. Probably the best example is his superstar lawyer, John Branca, who has negotiated many profitable deals for Michael so far and has performed brilliantly for his foundation.

It was Branca who secured the highest royalty figure the industry has ever seen for Michael’s albums. Under this agreement, $2 from every album single sold went into Michael’s pocket. That’s how Michael benefited from many untold profits from the best-selling album in history (“Thriller”).

Michael also had other smart advisors, including David Geffen and Ron Burkle. Burkle told him not to lose his catalog for any price.

Buying a $20 million ranch in 1987—later named Neverland—was another of Michael’s smart investments. Today, the ranch is worth about $90 million. The only bad part of the story was the $35 million cost to create an amusement park, a zoo, a train track, and similar things on the ranch.*

(*) Michael accepted poor, sick, or orphaned children for free at Neverland. Several times a year, the gates of this ranch were opened to the general public so they could come and enjoy all the services of the place for free.)

But how much of Michael Jackson’s commercial success came from his own business intelligence, and how much was due to his sharp advisors?

Donald David, a lawyer in the entertainment industry, believes:

“I think this success is the sum of both of these factors, but mainly it was his own genius. I once sat with him for an hour and talked with him. I have to say he knew the ups and downs of the music industry and business. He had a good instinct. He really had a good instinct for this work.”

David says Michael’s strange behavior didn’t give people a sign of his sharp mind.

“He wasn’t the man people thought he was. He was playing a role and speaking with that high, feminine voice. But beyond that, Michael was a very intelligent and very perceptive person. He was one of the smartest artists I’ve ever seen.”

The final word is this: if he had controlled his expenses, he would have become a billionaire before his death—based only on the Sony/ATV catalog. Unfortunately, he left this world with half a billion dollars in debt, although after his death his wealth rose to more than $1 billion.

Source: eMJey / forbes.com