Michael Jackson pact shows value of legacy artists

The numbers are eye-popping, but the megabucks deal between the estate of Michael Jackson and Sony Music Entertainment comes as no surprise in a music sales climate in which legacy recordings often trump new product.

The seven-year pact unveiled Tuesday is believed to be the largest in history for rights to an entertainer’s output. Exact terms of the Jackson estate’s renewed contract with Sony Music were not disclosed, but a source familiar with the deal said it was valued at $200 million, and could reach $250 million if certain performance provisos are met over the seven-year term.

It also reportedly encompasses licensing rights, extending the value of the arrangement well beyond profits from record sales into the lucrative realm of ancillary marketing.

A new, as yet untitled collection of previously unreleased music by Jackson, who died in June at age 50, will be issued in November, just in time for the holiday shopping season. A person close to the pact told Daily Variety that there are 60 unreleased recorded songs by Jackson.

What form this material will take has yet to be determined, but according to the source, it could likely be a combination of two new LPs, as well as previously unreleased bonus material that could accompany reissues, such as a deluxe version of Jackson’s 1979 Epic Records debut “Off the Wall” that’s also in the works for a 2010 release via Sony’s Legacy catalog division. That version will include a considerable amount of new content.

The blockbuster Jackson agreement dwarfs Jay-Z’s $150 million deal with Live Nation, and Bruce Springsteen’s 2005 contract renewal with Sony, worth a reported $110 million.

Apparently Jackson did a lot of recording on his own, such as “Billie Jean,” which was initially done in a home recording studio, and so a “Beatles Anthology”-styled compilation is not out of the question. The pact comes on the heels of a year that saw Jackson outsell all other artists in 2009, with nearly 8.3 million albums sold domestically, according to Nielsen Soundscan — almost double the LPs that country crossover queen Taylor Swift moved (4.6 million) and despite a nearly 13% drop for the biz overall in album sales. Tellingly, the Beatles placed third, with 3.3 million albums sold after their entire studio catalog was remastered, and despite the fact that their last LP, “Let It Be,” was released 40 years ago.

More than 31 million Jackson albums are reported to have been sold worldwide since the singer’s death last summer.

While sales of Jackson’s catalog have inevitably slackened since the initial burst, Sony is betting that his bestselling material, untapped vault recordings and licensing revenues will ultimately amortize its massive investment up the road.

“We have a lot of great stuff from around every period (of Jackson’s career),” Rob Stringer, chairman of the Columbia Epic label group, told the Los Angeles Times. “We’re going to plow through everything now to understand what we’ve got.”

Moreover, Sony Music’s announcement refers to “never-before-released Jackson recordings,” which were decidedly absent from the posthumous two-CD “Michael Jackson’s This Is It” set, which is retroactively covered in the new arrangement. “This Is It” has sold 5 million copies worldwide. Worldwide B.O. take for the accompanying film — the highest grossing concert film to date — has topped $250 million.

An LP by Jimi Hendrix, “Valleys of Neptune” (also on Sony Legacy) that was released last week, featuring 60 minutes of never-before-heard studio recordings by Hendrix, and an announced reissue of the Rolling Stones’ classic 1972 double LP “Exile on Main Street” (Universal Music Group) that touts 10 never-heard bonus tracks from the period, point to the seemingly bottomless treasure trove of unmined material from iconic artists.

And at a time when labels are increasingly hard-pressed to nurture up-and-coming artists, and albums are often passed over by consumers who prefer to cherry-pick singles via iTunes, Amazon and budget sites like Lala, legacy recordings and previously unreleased material — with a built-in awareness factor and relateively minimal production and marketing costs — represent a veritable goldmine of longform possibilities.

According to Janie Hendrix, who oversees the Hendrix estate after years of legal wrangling, more than 10 more years of audio and video product from the guitar legend could be in store, with a Rockband game currently under development. “Honestly, there were more than 400 hours of tapes when he died,” Hendrix told Daily Variety.

Don Was, one of the producers of the newly unearthed “Exile” tracks, told Daily Variety that he sifted through more than 200 hours of tape for the impending May 17 release. “The things that have slipped out on bootleg is just a fraction of what’s available,” he said. “(The Stones) could do this with every album they’ve ever made if they wanted to.”

Jackson began recording for Epic in 1979 after making the leap from Motown Records, where he cut his first hits as lead singer of family group the Jackson 5. His Epic catalog comprises albums “Off the Wall,” “Thriller” (the bestselling album of all time, with sales estimates as high as 110 million worldwide), “Bad,” “Dangerous,” “HIStory” and “Invincible.”

The closest analog to the renewed Jackson deal may be the Elvis Presley estate’s ongoing association with Sony. Presley, who recorded for RCA Records (now part of Sony Music) from 1956 until his death in 1977, has experienced a lengthy commercial afterlife, selling millions of albums that include unearthed unreleased material and repackages of his hits.

Sony Legacy is mining Presley’s recordings anew as part of a campaign commemorating the 75th anniversary of his birth. A wave of reissues commenced in January with the release of a comprehensive four-CD box, “Elvis 75.”

Jackson’s debt-wracked estate receives a major financial shot in the arm from the new contract: The performer reportedly owed some $400 million at the time of his death.

Estate’s other main revenue source is its 50% share in music publisher Sony/ATV music, Sony’s publishing arm, which holds copyrights for songs written or recorded by the Beatles, Presley and other top names.

(The Associated Press contributed to this report.)

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