How Michael Jackson's Estate Earns $145 Million a Year (From the Magazine)

Michael Jackson and Quincy Jones at the Grammy Awards in 1984

This article first appeared in Billboard Magazine -- subscribe here and buy this issue here.

In June 2010, a year after Michael Jackson’s death, Billboard looked at the estate’s music-based revenue streams and estimated that some $1 billion of gross revenue flowed into it. Through interviews with industry experts and our own number-crunching, Billboard examined the revenue that Jackson generated in 2012, as well as that to date in 2013, and also estimated the earnings that revenue generated for the estate. The results don’t match those of 2010, when Jackson’s loss was still fresh, but they remain impressive: 2012 music-based revenue of $544.6 million, with the estate’s earnings at $121 million. Estate sources suggest the full earnings total is closer to $160 million, which would leave $39 million in merchandising, film and TV licensing, DVD sales and other licensing deals.

Michael Jackson's Estate Valued at $2,105

MUSIC SALES AND STREAMING

2012 revenue: $51 million
Jackson estate share: $22.4 million

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In 2012, Jackson sold almost 819,000 album units in the United States and 2.8 million tracks, according to Nielsen SoundScan. The estate has said that his U.S. album sales are 30% of global album sales, and Billboard estimates the artist’s U.S. track sales at 48% of global sales, which extrapolates to total global album sales of 2.7 million units and 5.8 million track sales for a total revenue of about $39.2 million. Meanwhile, the Jackson 5’s total U.S. sales were 155,000 album units and 422,000 tracks. Using the same calculation, that would be 518,000 global albums and 880,000 tracks for a total of $7.2 million. In 2012, streaming was 12% of sales, which means the Jackson catalog generated another $5.5 million in streaming revenue, bringing total music revenue to $52 million. If Jackson gets a superstar 50% royalty rate (and one-fifth of the Jackson 5’s 20% royalty), then his estate’s share of that would be $22.7 million.

To date in 2013, Jackson’s 482,000 U.S. album sales (as of Oct. 27) and 1.9 million in track sales extrapolates to a global 1.6 million album units and nearly 4 million track sales, generating $23.7 million. The Jackson 5’s U.S. sales of 48,000 album units and 248,000 tracks extrapolate to 161,000 global albums and 516,000 track sales, or $2.5 million. Billboard estimates streaming in 2013 at about 15% of sales, or another $4 million, for a total of $30 million, with the estate earning $14 million.

TOURING/LICENSING

2012 revenue: $150.6 million
Jackson estate share: $30 million

“Michael Jackson: The Immortal World Tour” pulled in $150.6 million in 2012. Estimating the costs of staging that production at $90 million, that would leave $60 million to be split between Cirque du Soleil and the Jackson estate, or $30 million earnings for the latter.

So far this year, that show has pulled in $124.3 million. A new live-performance revenue stream has been added: “Michael Jackson One,” the residency at the Mandalay Bay in Las Vegas. Billboard estimates that “One” is generating approximately $2.5 million per week in box office, or $45 million since its opening on May 23. That puts total touring/licensing revenue at about $170 million. If the cost is about $100 million, that would leave $70 million to be split evenly, with the Jackson estate earning $35 million.

RECORDING CONTRACT

2012 revenue: $31 million
Jackson estate share: $31 million

In 2010, Sony Music Entertainment reached a deal with Jackson’s estate to release 10 albums of the singer’s music through 2017, with the estate guaranteed between $200 million and $250 million for the deal. That works out to $31 million per year, with the last release being the 25th-anniversary edition of Bad in September 2012.

MUSIC PUBLISHING

2012 revenue: $312 million
Jackson estate share: $38 million
When a Sony Corp. of America-led consortium of investors bought EMI Music Publishing, Sony’s share amounted to 38%, of which Jackson owns one-quarter, or 9.5%. Since it paid $2.2 billion for the company and divested song catalogs worth about $90 million, that means the Jackson estate’s share is worth $206.8 million. In its most recent public numbers for the year ended May 31, 2012, EMI Music Publishing generated $211 million in earnings before interest, taxes, depreciation and amortization, but with costs associated with the acquisition and closing of the deal, and then layoffs, there probably wasn’t any payout to shareholders in 2012. This year, Jackson’s payout, after debt service, could be worth about $9 million.

The Jackson estate also owns half of Sony/ATV, which has been valued at about $1.6 billion, which means ­Jackson’s portion is worth about $800 million. According to recently released financial data, at midyear fiscal 2013, Sony/ATV had revenue of $315 million. If it earns the equivalent revenue in the other half of the year, Sony/ATV’s annual revenue should be about $630 million, and through the first 10 months that would equal $525 million. If the ­company’s EBITDA hits the same 30% of revenue that EMI achieved, that should give the company $157.5 million to date in 2013. Sony Corp. put up about $300 million in equity toward the purchase price, probably put on the Sony/ATV books as a loan, which at 5% probably has about $15 million in annual debt service and $12.5 million through the end of October. That leaves earnings of $145 million. All of which means that if that’s split among shareholders before taxes, Jackson’s share would come to $72.5 million. As it is, the Jackson estate is guaranteed an annual payment of at least $23 million.

Billboard values Jackson’s Mijac Music catalog at about $150 million. Assuming the standard 10 times multiple on publishing, that yields about $15 million a year in royalties. Overall, Billboard estimates the valuation of Jackson’s publishing assets at $1.2 billion.

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