Michael Jackson & Sony Dis-Agreements
When Michael Jackson appeared at the National Action Network in Harlem with Al Sharpton’s on July 6, 2002 , he blamed and described the recording industry as racist. He denounced the injustice against artists, dead and alive.
Tabloids jumped immediately on MJ and there was no shortage of media coverage of the outburst, which spectacularly backfired on him.
Most media accounts dismissed the episode as just one more example of Michael Jackson’s notoriously bizarre and eccentric behavior.
The usual mockery headlines tried to convince readers that what was happening, was not just a black-and-white issue.
In fact, there was more than a black and white issue for him: it was about big businesses and a questionable distribution of wealth.
Wendy Day, founder of the artist advocacy group Rap Coalition said: “Michael Jackson’s problem is like racism: when you’re not the person being oppressed, you tend not to see it”.
With the speech in Harlem MJ was trying to let people know how the music industry was hopelessly corrupt.
Since the beginning of Sony/ATV, the partners agreed to acquire additional music catalogs in order to expand the company. The MJ Trusts borrowed about $270,000,000 to support the purchase of additional catalogs at Sony/ATV, and to support various other working capital needs.
Sony provided the lenders of the Michael Jackson Trusts, a credit enhancement for which Sony received additional payments of about $9,000,000 annually. The purchase of the new catalogs was delayed, while Sony directed the money in other directions. From Court documents, it comes out clear that in 2002 Michael was in negotiations to take back from Sony the licensing of the distribution of his master recording catalog and decided not to renew his recording contract with them.
He also wished to buy out Sony’s 50 percent stake of their joint venture, Sony/ATV. Sony balked. And it was the beginning of a whole series of shading episodes to destabilize his finances, a peculiarity which distinguished Michael Jackson during the last decade of his life.
Michael was more politically savvy than what people gave him credit for. Prince, putting the word ‘slave’ on himself in his struggle with Warner Music, didn’t reach out. He made race an issue to some degree, but he didn’t exploit black consciousness. Michael reached out to the black community successfully, as evidenced by the enthusiastic presence during his rallies.
But it only took a couple of comments made by few “insiders” to trigger a media war against him. Tabloids brought the trashing of Michael Jackson to another level picturing him such eccentric star of bizarre behaviors and made him a joke in the English-speaking parts of the world. Who was behind the Media headlines knew very well the meaning of these actions.
- Media said MJ staged the whole thing cause his last album “Invincible” had sold only 2 million copies and was desperate to recover his career.
FALSE: despite the problems, Invincible went to number one across the world. And Michael received many awards for the achievements. During an interview of October 2001, in response to a comment for another number 1 hit Michael Jackson said, “It’s a great honor…we worked very hard on it. I feel blessed that the fans accepted it the way they did and I am very honored. I really am. I don’t take anything for granted. Every time there is a number 1 album or song I feel excited as if it was the 1st one. So I am very happy about that”.
Worldwide sales figures listed for the album goes anywhere from 8 million to 13 million. It went to Number 1 in eleven countries, including the US. If that’s a flop then I bet a lot of artists wish they had more flops.
USA : 2.500.000 – Canada : 140.000 – Mexique : 75.000 – Argentine : 30.000 Japan : 225.000 – Singapour : 25.000 – South Korea: 80.000 – Australia : 170.000 – New Zeland : 15.000 Europe : 2.220.000 – UK : 400.000 – France : 575.000 – Germany : 325.000 – Spain : 125.000 – Italy : 175.000 – The Netherland : 100.000 – Sweden : 50.000 – Finland : 16.700 – Austria : 25.000 – Switzerland : 60.000 – Portugal :20.000 – Norway : 50.000 – Danemark : 20.000 – Belgium : 75.000 Turkey : 200.000 – Worldwide Estimation : 7.100.000
- Media said MJ went crazy and the Harlem speech was nothing else than a way to get attention.
FALSE: 7 weeks before the Harlem speech, MJ was with President Clinton at the Democratic National Committee benefit concert and the press said he was a role model.
Why is it, when he decided to expose Sony he became, all of a sudden, “a freak”?
Michael Jackson had many reasons to act that way. Infact Court documents show he audited Sony several times.
To Refresh Public’s Memory
At the beginning of the new millennium, it was not just Michael Jackson having problems with record companies. Many artists joined forces with the Artist Empowerment Coalition (“AEC“), a new activist organization rallying recording artists to put an end to what they believed was unfair business practices. In 2003 in New York City there was a benefit concert hosted by AEC.
Artist such as Roberta Flack, Faith Evans, Stevie Wonder, Tony Bennett and Hezekiah Walker invoked throughout the evening the names of those musical greats who – after huge recording successes – woke up one day and were unable to scrape together two nickels. Blues legends like Billie Holiday and Bessie Smith were denied royalties and died indigent.
The main conflict had to do with a complex equation of copyright laws, publishing rights, royalty formulas, and expense recoupment —how money is paid out.
The paradox for artists was that while they’re obligated to pay back most of the costs for recording and promoting an album, labels retained control of the master recordings, which is essential to generating ongoing income from minims and greatest hits reprints. Record companies contend that they couldn’t exist without assets like masters. But the upside-down logic was not lost on Orrin Hatch (R-Utah), a sometime songwriter and a member of the U.S. Senate Judiciary Committee. He observed the practice of the record business: “bank still owns the house after the mortgage is paid?” — a point artists have been making for years —
With the battle between artists and record companies AEC was taking its case to the legislature of New York State (the center of the music business) and on the other side they had the help of California Democratic state senator Kevin Murray; and a bill was introduced to repeal the music business’s exemption to California’s seven-year contract rule.
The little-known labor code allowed record companies to sue for damages if an artist did not complete an agreed upon specified number of albums regardless of how long that might take. Music industry execs predicted dire consequences for the California economy and foresaw fewer artists signings. But Murray was unmoved, calling the seven-year rule “a well-paid form of indentured servitude that gives record companies unfair control of artists.”
The debate over the seven-year rule inspired Murray to hold two additional hearings on the recording businesses accounting practices before the California Senate Selected Committee on the Entertainment Industry. For once the record companies were on the hot seat.
“UNDERPAYMENT OF ROYALTIES TO RECORDING ARTISTS AND PRODUCERS IS A PERVASIVE, CONSISTENT POLICY. THESE AREN’T ACCOUNTING ERRORS. THEY’RE SYSTEMATIC, OUTRIGHT THIEVERY.”
MJ believed that Sony, taking advantage of the Venture Agreements with his company, methodically diverted revenues from him of the reproduction, the use and exploitation of his musical assets, misguiding such revenues as “profits” instead of “royalties”, by removing the royalties from the pool of revenues upon which MJ royalties were calculated and purposely reducing the royalties and his net receipts.
An example is subparagraph 11.02 of Michael Jackson’s 1985 recording agreement which provides that Sony would credit MJ’s account an amount equal to the portion of the foreign tax credits attributable to MJ’s royalties after a final audit by the IRS.
Once the IRS completed its audit it became evident that Sony did not allocate to Michael Jackson a portion of the available tax credit.
I want to bring to your attention a specific document dated July 15, 2001, being one of the many amendments to the agreement between Sony Music and Michael Jackson companies – all heading to the main CBS recording artist contract dated December 31, 1990 – and the joint-venture between them dated January 1st, 1991.
- Apparently resolved an issue related to the Foreign Royalty. The agreement states that upon the release of the studio album (which I assume it would have been Invincible) and any album released as reissued version controlled by the Jackson Recordings Division (MJ controlled his Masters from “Off the Wall”) and concerning to all other audios, phonograph records derived from master recordings, the royalties percentage was increased from 23% to 25% with effect from January 1st, 2002.
In few words, it was a rise up of royalties percentage of outside the USA.
MJ knew very well that his sales were “the world” except USA. And for a guy targeted by the press as ruined and irreversibly in debt with his record company, it was not such bad move renegotiate his foreign percentage. It show he was very much aware of the leverage he had on Sony and that he was able to use it for his own benefit.
- There was a partial audit settlement: Sony Music recognized and accredited $3 million to MJJP’s royalty account. The audit period in controversy was through December 31st, 1999, and still pending other claims on Sony Music for wrong payment of mechanical royalties.
However, once read the intricate pattern of Sony/ATV operating agreement, I cannot avoid noticing that MJ’s incomes balance was in negative, regardless of adjustments made at the recording artist agreement level.
- MJ returned the equipments listed under the “End User Sales Agreement” dated August 20, 1995, and Sony had to accredite $300,000 to MJJP’s royalties account.
- There was also a change in the definitions of MJ Recording Agreement.
Note: Michael Jackson recording artist agreement is a document always “sealed” in all the legal documents I got into. Which doesn’t surprise me due to the sensible and reserved content. For this reason bear in mind that any comment regarding his recording contract with Sony is an assumption and a speculation.
Having read many books commenting some of the definitions of his agreement with Sony I can assume that – just before the release of Invincible – MJ expressed the desire to end the recording contract with them and no longer produce albums under Sony label. Then in 2002 after the “Mottola war,” it was formalized. You can read in full HERE: 2001 amend JV
News of 2002 claimed Rev. Al Sharpton was aware about MJ negotiations with Sony but didn’t know if the situation had turned “hostile or not.”
Actually, the issue was “hostile“: MJ had to use the conflict of interest due to Mr. Branca representing him and Sony in order to partially close his recording artist contract with Sony and have Mr. Branca out of the picture.
Unfortunately – having a multitude of contract/agreements intersected with each other – neither Sony and Mr. Branca were out of MJ’s life for good. And at that point the hard fight to destabilize MJ financially was officially on “screen”.
Last Sony audit was ordered subsequent to Michael Jackson’s death and performed by Gelfand Rennert. It brought to the attention a miscalculation related the USA digital download royalties for $3,376,000 and foreign digital downloads for $3,341,000 USD.
During a deposition held in connection with Quincy Jones lawsuit, Mr. Branca declared that he didn’t remember if MJ was entitled to proceed of digital download calculated as license fees or as retail sales, and added that nobody ever won that kind of claim with a record label. At the sarcastic question “ was the position that Jackson took in communicating with Sony that they were entitled to the several millions of dollars for digital downloads?” he answered that usually auditors take those positions and every artist would love to prevail on that, but none has and actually is the true.
To make a long story short, on February 24th, 2014 Sony settled the overall claim of $27,400,000 with about $6,000,000 and there was zero allocation for the digital licensing claim. That’s the way music industry audit works.
- What Really Happened to Michael Jackson The King of Pop by Leonard Rowe
- Court Document Quincy Jones lawsuit against Sony, MJJP and Doe 1 (Cohen Dec1. 1 10.) (Cohen Decl. 11 11.)
- Court Documents Prescient Transitional lawsuit against MJ Trusts
- Vibe Magazine, May 2003