Michael Jackson, Inc. Read online

  Praise for Michael Jackson, Inc.

  “A fascinating, fresh, detailed account of how Michael Jackson changed the game for artists in the entertainment industry, packed with new angles and insights. Greenburg avoids cheap sensationalism in favor of real, research-based reporting. The result is at once a story of Jackson’s remarkable business acumen, as well as a cautionary tale about the price of the ticket. While Jackson’s success came at a great cost, reading this book makes clear how he paved the way for generations of artists to come.”

  — Joseph Vogel, author of Man in the Music: The Creative Life and Work of Michael Jackson

  “Jackson was crazy like a fox, and could be as cold in business as he was hot onstage and in the studio. I’m crazy for this gripping, beautifully reported book.”

  —Michael Gross, author of House of Outrageous Fortune

  “We know the circus that Michael Jackson’s personal life became in the media, yet Zack found the stories of who he became in the business world, which was starkly different and industry influencing. Jackson went hard in the vocal booth and even harder in the boardroom. Artist-entrepreneurs like Jay Z, Diddy, and Lady Gaga owe him the world; we’re indebted to Zack for shedding light on Jackson’s business acumen.”

  —Datwon Thomas, contributing editor at Ozy.com and former executive editor of VIBE

  “The King of Pop is perfectly captured by Zack O’Malley Greenburg, who has a journalist’s eye for detail with Michael Jackson, Inc. The words dance across the page, the mark of a writer with vivid, natural storytelling talent. Bravo, Zack!”

  —Chuck Leavell, keyboardist for the Rolling Stones and author of Growing a Better America

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  For Cousin Andrew, another star gone too soon—and for Danielle, who rocks my world

  CONTENTS

  Introduction

  1 Steeltown Dreaming

  2 Motown University

  3 Epic Changes

  4 Empire Building

  5 Kissing the Monster

  6 The Business of Victory

  7 Buying the Beatles

  8 Dancing with the Stars

  9 Good and Bad

  10 Off to Neverland

  11 New Shoes

  12 Dangerous Ventures

  13 History Lesson

  14 Invincible?

  15 The Prodigal King

  16 This Is It

  17 Postmortem Payday

  18 Immortal

  Acknowledgments

  Books for Food

  Appendix: Michael Jackson’s Career Earnings

  Appendix: Michael Jackson’s ATV Memo

  About the Cover

  About Zack O’Malley Greenburg

  Notes

  Index

  INTRODUCTION

  Once every few months during the mid-1980s, a handful of America’s savviest businessmen gathered to plot financial strategy for a billion-dollar entertainment conglomerate.

  This informal investment committee included David Geffen, who’d launched multiple record labels and would go on to become one of Hollywood’s richest men after founding DreamWorks Studios; John Johnson, who started Ebony magazine and would become the first black man to appear in the Forbes 400 list of wealthiest Americans; John Branca, who has since handled finances for dozens of Rock and Roll Hall of Famers including the Beach Boys and the Rolling Stones; and Michael Jackson, the King of Pop and chairman of the board, inscrutable in his customary sunglasses.

  Shares of the entertainment company in question were never traded on the New York Stock Exchange or the NASDAQ. Though few would even consider it to actually be a company, this multinational’s products have been consumed by billions of people over the past few decades. Had the organization been officially incorporated, it might have been called Michael Jackson, Inc.

  In 1985, this conglomerate made its most substantial acquisition: ATV, the company that housed the prized music publishing catalogue of the Beatles. Included were copyrights to most of the band’s biggest hits, including “Yesterday,” “Come Together,” “Hey Jude,” and hundreds of others.

  At an investment committee meeting months before the deal was consummated, however, the acquisition was looking unlikely. Michael Jackson, Inc. was deep into negotiations with Australian billionaire Robert Holmes à Court, whose asking price for ATV had soared past $40 million—prompting disagreement among Jackson’s inner circle over how to proceed.

  CBS Records chief Walter Yetnikoff, a confidant who wasn’t on the committee, found the price to be exorbitant, and he had plenty of company.1 Even Geffen seemed to think the bidding had gotten too high. Johnson thought differently. “This is something you believe in and want to get,” he told the singer. “Don’t blow it over price.”2

  Not wanting to upset anyone, Jackson remained silent—as he often did in meetings—but he’d already made his decision. He scrawled a note on the back of a financial statement and passed it to Branca beneath the table.

  “John please let’s not bargain,” it read. “I don’t want to lose the deal . . . IT’S MY CATALOGUE.”3

  A few months later, Jackson purchased ATV for $47.5 million. Today, that investment alone is worth about $1 billion.

  * * *

  As evidenced by the size of the empire he left behind when he died suddenly in 2009, Michael Jackson was effectively a corporation in and of himself. He was not only the founder and creative force behind this empire, but also its most important product. By the middle of the 1980s, he chaired an organization that included Branca (Jackson’s chief executive officer, if you will), manager Frank Dileo (his chief marketing officer), and a handful of others.

  Jackson and his team made many game-changing moves beyond acquiring ATV. Among them: creating and promoting Thriller, the bestselling album of all time (roughly 100 million units sold), landing unprecedented endorsement deals with Pepsi ($5.2 million in 1983, $10 million in 1987, $15 million in 1990), and launching record-setting excursions like the Bad Tour ($125 million in gross ticket sales). The latter drew 4.4 million people, who each paid about $28 per ticket. With a modern price of $130, it would have grossed nearly $600 million, making it the second most lucrative tour of all time. At $200 per ticket, it would have been number one.

  “I got to witness the divinity in him every night,” says Sheryl Crow, who served as one of Jackson’s backup singers on the Bad Tour. “[He had] that thing that is not quantifiable—that thing that you watch, and you cannot figure out why it is that you feel the molecules in the room change, but you are aware of it.”4

  Perhaps most significantly, Jackson fundamentally changed the formula for monetizing fame forever. In addition to making the most successful music video of all time, starring in movies and penning a bestselling autobiography, he launched an eponymous clothing line, teamed up with Sega to place himself in a video game, and scored a deal for his own LA Gear sneaker, unbelievably earning a bigger initial guarantee than Michael Jordan did with Nike. All in all, he earned $1.1 billion in his career—$1.9 billion, adjusted for inflation (see appendix for a year-by-year breakdown).

  “He had good instincts . . . more, more, more; better, better, better,” says Sandy Gallin, who served as Jackson’s manager for the first half of the 1990s. “He would, in his mind, negotiate the same way. No matter what anybody would offer, he wanted more.”5

  Jackson helped flip the paradigm of entertai
ner as contractor on its head, offering a new path: entertainer as owner. On top of the ATV deal, he secured the rights to his own master recordings and compositions, and launched his music imprint as a joint venture under the Sony umbrella. Not all of his gambits turned out as well as Jackson might have hoped; some failed altogether (for example, an attempt to buy a bankrupt Marvel Comics a decade before Disney purchased it for $4 billion), but most still earned him double-digit millions—and paved the way for the modern celebrity mogul.

  “Michael Jackson was so much bigger than Jay Z or 50 Cent or anybody else who did it, in comparison,” says 50 Cent, who completed the shoes-clothes-label trifecta years later. Jackson, he adds, is “why music is the way it is now . . . you’ve seen a shift in an area [previously] reserved for professional athletes.”6

  For that reason and others, plenty of megastars still look up to the King of Pop as a trailblazer on and off the stage despite the moves that didn’t work out. “He was extremely smart,” explains fellow actor-musician-entrepreneur Ludacris. “From my perspective, because I’m business-oriented and savvy, I noticed and even read up on everything that he did.”7 Adds superproducer Pharrell Williams: “He was so far advanced in the way he thought about things.”8

  * * *

  The tale of Michael Jackson, Inc. begins with its namesake’s early days as part of the Jackson 5, touring the “chitlin circuit.” At gigs, Jackson met famous musicians like Smokey Robinson, Gladys Knight, and Jackie Wilson. Even at age seven, he’d ask question after question not only about their performances, but about how the music industry worked.

  Along the way, Jackson developed a sense of perfectionism, something his violent father pounded into his son with his fists after miscues in rehearsal. At age nine, Jackson gained a comparatively kinder, gentler mentor in Berry Gordy—who founded his own entertainment conglomerate, Motown Records, and signed the Jackson 5 to the label in 1968. Under Gordy’s tutelage, Jackson eagerly absorbed lessons on how to write, record, market, and profit from a song.

  “I was a person that had a lot of rules and sayings,” says Gordy. “Stuff like . . . ‘You have to capture your audience in the first twenty seconds; if you don’t, then you can’t release it’ [and] ‘It’s not in how much you promote it, it’s not about that, it’s what’s in the groove.’ ”9

  Jackson’s early experience paved the way for the monster deals he made as an adult with the help of advisors like his longtime attorney Branca, whom he handpicked at age twenty-one. The lawyer set a new industry high with Jackson’s royalty rate ahead of Thriller, which still stands as the bestselling album in history. On top of ATV, Branca was able to help Jackson land the catalogues of Bread, Sly and the Family Stone, and a handful of songs made famous by Elvis Presley.

  “Michael Jackson had the mindset of being a businessman the whole time by acquiring businesses,” says Kevin Liles, former president of Def Jam Records. “[It was like] the Michael Jackson private equity firm.”10 Even his Neverland Ranch, purchased for $17.5 million in 1988, has soared in value—some real estate veterans say it could fetch as much as $75 million11 to $100 million on the open market.12

  With some help from his team, Jackson also revolutionized the modern music video after overcoming fierce resistance from MTV, which had largely avoided airing music by black artists before caving on Jackson’s “Billie Jean.” His subsequent “short films,” as he liked to call them—namely, “Beat It” and “Thriller”—shattered the notion of what a video could be, both artistically and commercially. Today, there’s only one music video in the Library of Congress’s exclusive National Film Registry: “Thriller.”13

  “That was the beginning, in my estimation, of music videos becoming the chief promotional tool to sell music,” says Fred “Fab 5 Freddy” Brathwaite, longtime host of the show Yo! MTV Raps. “Radio play was important, but seeing the artist—and the artist being able to give you a good performance—solidified and became indelible along with the sounds.”14

  Jackson also aimed to instill a sense of marketing in everyone on his team. In 1986, he gave them copies of Humbug, a biography of circus impresario P. T. Barnum; he wanted his life to be the greatest show on earth. At his insistence, lieutenants planted fantastical stories about him in mainstream publications and the tabloids.

  But Barnum was a complicated role model. Though the aforementioned book describes him as perhaps the greatest showman in American history, it also reveals him to be “a hardheaded businessman [who] followed no battle plan to victory,” someone who thought all publicity was good, and was at the same time “self-conscious, and anxious for a claim on national gratitude.”15 At times, the same could be said about the King of Pop.

  When Jackson stopped supplying fresh story fodder in the late 1980s, the press started doing it for him. Outrageous headlines followed him throughout his life (“Michael Jackson: Prince Using ESP to Drive My Chimp Crazy”) and after his death (“MJ Is Alive—And Running for President”). After he was accused of child molestation in 1993, his image took a hit that would last the rest of his life. His ever-changing physical appearance, altered both by voluntary cosmetic surgery and by the onset of vitiligo, didn’t enhance his reputation.

  Even so, Jackson had his share of triumphs during the final decade and a half of his life. On the business end, he and his team convinced Sony to pay $115 million for the privilege of merging its publishing arm with his catalogue, creating Sony/ATV, a joint venture now worth about $2 billion. He played to millions of fans abroad in support of his double album HIStory. On the personal side, he started a family of his own and set a Guinness World Record for the most charities supported by a pop star.16

  But he didn’t launch a full-scale tour in the United States or earn another endorsement deal after 1993, and his legal troubles sank a budding film career on both sides of the camera. Jackson became deeply distrustful of many of his closest advisors, sometimes with good reason, sometimes not. As a consequence, he disbanded his original business team and replaced it with a carousel of sycophants.

  Without a consistent group of advisors to help refine and execute ideas—and to tether his creative genius to reality—the financial prospects of Michael Jackson, Inc. dimmed considerably. After Jackson’s annual income stream reached twin peaks of $125 million in 1988 and $118 million in 1995, it declined to $18 million by 1998 and hovered in that vicinity for the rest of his life. But his expenditures remained high as ever. “He did have a business head,” says Walter Yetnikoff, Jackson’s longtime boss at CBS Records. “His problem was that he overspent.”17

  The perfectionistic impulses that had helped him create Thriller drove Jackson to spend increasingly outrageous quantities of time and money trying to top it. For Invincible, released in 2001, he ran up recording costs of $30 million to $40 million in an era where $1 million was considered a fairly large budget. He never released another studio album. By 2009, though he was still rich on paper thanks to his Sony/ATV stake and personal publishing holdings, he was running out of cash and nearing the point where he’d have to sell those assets to pay back his loans.

  “All people who become legends overnight, especially when they’re very young, people do not tell them no,” says film director Joel Schumacher, who first worked with Michael Jackson on the 1978 film The Wiz. “So they actually learn to become a person that cannot take no. And they make sure there’s no one around them that says no. And many times the entourage can [lead] you to your demise.”18

  Jackson died on June 25, 2009, of a drug overdose administered by a member of that retinue—his personal doctor, Conrad Murray, who was later convicted of involuntary manslaughter and sentenced to four years in prison. But when the news of Jackson’s death broke, something fascinating happened. The public’s tattered memories of his later years seemed to fade as Thriller returned to heavy rotation on radio stations around the world.

  Indeed, the music video medium that Jackson had reinvented was suddenly securing his legacy. By the morning after his d
eath, a new generation of fans had watched a young, handsome Jackson resolve conflict through dance in the short film for “Beat It” on YouTube. In twenty-four hours, the singer’s music racked up 3 million spins on MySpace alone.19 Jackson sold a record 8 million albums in the US that year—nearly twice as many as the runner-up, Taylor Swift.20

  Within just a few months, a resurrected Michael Jackson, Inc.—led by coexecutors John Branca and music industry veteran John McClain—was flourishing once again. Deals included a $60 million advance for This Is It (a film based on the concert series for which Jackson was rehearsing when he died), a record deal with Sony worth $250 million (the largest in history), and an agreement with Cirque du Soleil to produce a roving spectacle based on Jackson’s music. The show would make him the top touring act in North America—and help wipe away his personal debts—just three years after he passed away. All in all, Jackson’s estate has earned over $700 million in the five years since his death, more than any musician dead or alive during that period.

  * * *

  Covering this ongoing story for Forbes made me aware of the magnitude of Michael Jackson’s postmortem business—and of the fascinating story behind the assets he accumulated and cultivated during his life. The realization that his most important moves were not simply executed by savvy handlers, but in many cases driven by Jackson’s own intelligence and intuition, gave me the idea for Michael Jackson, Inc.

  My first book, Empire State of Mind, was a business-focused biography of Jay Z, someone widely lauded for his skills as a mogul. I saw that I could approach Jackson’s career from a similar angle. But I also identified with Jackson in a way that few others likely do: I was, briefly, a child actor. And though my experience constituted perhaps a single note when compared to the double album of childhood pain and pressure that Jackson experienced, I did get a taste of the delicious, terrible, reality-bending world of show business.