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Sunday, 10 July 2016

Michael Jackson and the Beatles Catalogue Copyright


Luckily, Michael Jackson was only Off The Wall. He was never Off His Rocker. And so when he received some sagely advice for free from Paul McCartney, his whole buying spree began. Its climax came when Michael managed to purchase the Beatles' entire catalogue for only $47 million.

Michael Jackson Owned the Beatles' Catalogue Copyright

And it's not just the copyrights for the catalogue (i.e. a document which lists down the constituent elements of a collection), but the catalogue, i.e. the whole series of recordings. 

Michael Jackson's ownership of the Beatles' catalogue has been famously mentioned in the media time and time again. It's clear that it's a profitable catalogue to own, from the royalties that performances, broadcasts, and special editions bring. But how did it happen in the first place?

How the Beatles Lost Control of their Catalogue

As the Celebrity Net Worth website notes, in the early 1980's, Michael Jackson was unaware of the value of musical catalogues. But, in 1982, as he collaborated with with Paul McCartney on a song called "Say, Say, Say", Paul informed him that he had earned $40 million from musical copyrights in the past year alone. All of it was from music that was neither written nor performed by him, but owned by him. 

While working on "Say, Say, Say," Paul invited Michael to stay with him and his wife Linda, at their home in suburban London. One fateful night, after the three finished dinner, Paul took out a thick leather book and laid it out on the dining room table. This particular book listed every song and publishing right Paul had acquired over the previous 10 years. He made it clear to Michael that owning publishing rights was the only way to make REALLY big money in the music industry. Paul further bragged that in the last year alone, he had earned approximately $40 million from his music catalogue:
"Every time someone records one of these songs, I get paid. Every time someone plays these songs on the radio, or in live performances, I get paid."
Paul also clarified that none of those earnings came from Beatles songs, because incredible as it may seem, he did not own them. Ironically, this free advice would come back to bite Paul in the butt two years later, when Michael purchased the entire Beatles catalogue for $47.5 million. Paul felt appropriately backstabbed and his relationship with Michael was damaged forever. 

How The Beatles Catalogue Was Bought by Michael Jackson

The story is told in full in the article, which, to cut things short, was as follows:

  1. Paul McCartney and John Lennon formed a company called Northern Songs with their manager, Brian Epstein. Other shareholders of the company included their musical publisher Dick James and his partner Charles Silver. Dick and Charles owned 50% of the company, and Brian owned 10%. Paul and John held 20% each. 
  2. Paul and John were obliged to churn out 6 songs a year for Northern Songs until 1973.
  3. To avoid a large capital gains tax bill, Northern Songs was listed on the London Stock Exchange. Paul and John each were left with 15% of the company. Dick and Charles jointly held 37.5% of the company. 
  4. In 1967, Brian Epstein died of a drug overdose. Paul and John tried to gain control of Northern Songs, which so angered Dick and Charles that they sold their stake to ATV Music Publishing for $2.5 million.
  5. ATV wanted to buy Paul and John's rights for $14.755 million. However, Paul and John wanted to be released from their contractual obligation to produce six songs per year. They sold their stake in Northern Songs to ATV for $5.738 million and were immediately released from the contract.
  6. In 1981, ATV was sold to an Australian tycoon named Robert Holmes à Court. In the days leading up to the sale, Paul wanted to co-operate with John's widow Yoko Ono to buy the Beatles catalogue for $40 million, but she declined because she thought it was not worth more than $20 million.
  7. Robert the tycoon was not interested in the music business and put it on sale. Paul again declined to buy it, saying that it was too pricey. 
  8. Michael Jackson's lawyer John Branca heard about the sale and helped to Michael to acquire the Beatles catalogue for $47.5 million.

Catalogue Ownership and Merger with Sony

In a follow up article, Celebrity Net Worth noted:
  1. Michael Jackson, after receiving the sagely advice from Paul McCartney on making money from owning publishing rights, had, between 1982 to 1984 been on a buying spree. By 1984, he owned the publishing rights for the entire catalogue for Sly and the Family Stone. He also owned "Great Balls of Fire," "Shake Rattle Rattle and Roll," "When a Man Loves a Woman" and "Runaround Sue" (inter alia).
  2. Michael and his lawyer, Braca, offered $47.5 million so that other bidders would back off. It was higher than the last price of $40 million. 
  3. Due diligence of the 4,000 plus Beatles songs took one year, involved more than a hundred lawyers, and cost more than $1 million. 8 contracts were generated. Finally, the deal was sealed.
  4. In 1995, Sony approached Michael with an offer to form a new company, merging ATV and Sony's catalogue company. Each party would own 50% in the new company. On top of that, Michael would receive $95 million. Michael agreed.
  5. By 2005, the Sony/ATV catalogue had grown to 200,000 songs. It earned $500 million of clean income each year from licensing and royalties.
  6. Despite the income, by Michael's death in 2009, he was in debt for more than $500 million. 
  7. Michael Jackson's song catalogue, thankfully, were held by his own catalogue company, called Mijac Music. 

Paul McCartney and the Reversion of Rights

Paul McCartney never forgave Michael what he perceived to be a betrayal of their friendship. But it wasn't really fair to blame Michael, when Paul had had two bites at the cherry, and could have purchased it outright (even without John Lennon's widow). Paul had the chance, and he blew it.

But thankfully, US Copyright Law has some small mercies. From Billboard.com:
The U.S. Copyright Act of 1976 gave songwriters the ability to recapture the publishers’ share of their songs, and in the case of titles written before 1978, writers can recapture songs after two consecutive 28-year terms, or 56 years. (That legislation allows for writers of songs issued in or after 1978 to recapture their publishing after 35 years.)

The Lennon-McCartney catalog begins hitting the 56-year mark in 2018.

In order to reclaim publishing ownership of a song, a songwriter must file with the U.S. Copyright Office, terminating the publishing anywhere from 2 to 10 years before the 56 years elapse, in order to obtain ownership of that song’s publishing in a timely manner. (If the writer doesn’t put in a notice within that window, they have another five-year period to reclaim the copyrights but each day’s delay adds another day that the publisher owns the copyright.)

On 15th December 2015, Paul McCartney began the process of reclaiming his copyrights by filing for termination of publishing rights.

What Are Publishing Rights?

Publishing rights are, more or less, the right to “exploit” a song — to, for example, license it to a film, TV show or video game. .... As the world found out in 2012 when “Mad Men” paid $250,000 to use “Tomorrow Never Knows” at the end of one episode, Beatles songs are not “exploited” cheaply. 

Some Lessons For You

Lesson #1: If you know a big secret, try not to tell others. 

Paul should never have told Michael about the hunt for publishing rights. From the National Post again:
“I gave him a lot of free advice,” he would later say. “And you know what? A fish gets caught by opening his mouth.”

Lesson #2: Never look down on others.

Paul laughed when Michael told him that he wanted to own the Beatles' catalogue. From the National Post:
When Michael told Paul, “Maybe someday I’ll buy your songs,” Paul laughed.

“Great,” He said. “Good joke.”

Lesson #3: Don't delay what's important.

Paul had the chance to buy the whole Beatles' catalogue for $40 million. He was worth millions of dollars then. He declined.

Lesson #4: Don't be shy if it's important.

Paul declined to buy the Beatles' catalogue because, in part, he thought that he would look greedy. And so he let the Australian tycoon sell it off to some other buyer. Does he look greedy now, trying to get the Beatles' catalogue reverted to himself?


Lesson #5: Never underestimate the value of intellectual property.

As Paul McCartney, and perhaps Yoko Ono, are learning, the Beatles' catalogue is now worth so much more. From a $47 million investment, Michael Jackson managed to merge ATV with Sony. And that merger led to $500 in clean profits every year. If that's not impressive, I don't know what is.

References

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