Sony’s $600m Michael Jackson deal isn’t completed yet – but it just took a big step forward in court

A California appeals court has tentatively given the go-ahead to Sony’s reported acquisition of a 50% stake in Michael Jackson’s music catalog, rejecting an effort by Jackson’s mother to stop the deal, according to multiple news reports.

Katherine Jackson had gone to court to stop part of her son’s legendary music catalog from being sold to Sony – a deal that was initially revealed by Billboard earlier this year.

However, in a preliminary ruling issued on Wednesday (July 17), the appellate court rejected Katherine Jackson’s argument that the sale went against the wishes stated in Michael Jackson’s will, and that, given she had not made this argument before a probate court last year, she can’t make the argument now in front of an appeals court.

According to Rolling Stone, the preliminary ruling is expected to be adopted formally within the next 90 days.

“The court is tentatively inclined to affirm the probate court’s order granting the executors’ request to proceed with the proposed transaction,” the appeals court wrote in a ruling obtained by Billboard.

“We tentatively conclude that Katherine’s challenge fails on the merits because the probate court’s order does not violate the terms of Michael’s will.”

Katherine Jackson’s lawyers had argued that Michael’s will required executors to “sell off as little of the estate as possible after paying legitimate estate debts,” but the will’s language “does not suggest this limitation,” the appellate court stated, as quoted by Rolling Stone.

That means that Sony’s deal for half of Jackson’s estate has cleared one major hurdle.

According to Billboard, the executors of the estate – attorney John Branca and A&R executive John McClain – came to an agreement with Sony Music Group to have the music giant acquire a 50% stake in Michael Jackson’s publishing and recorded music catalog for USD $600 million, though some sources indicated to Billboard that it could be as high as $750 million.

That values Jackson’s catalog at between $1.2 billion and $1.5 billion, meaning the catalog is at least equal in value, or potentially more valuable, than the GBP £1 billion (USD $1.27 billion) deal for the catalog of legendary rock band Queen, which was is being acquired by the same Sony Music Group – now evidently a major player in the blockbuster mega-deal landscape in the music industry.

However, it’s difficult to make apples-to-apples comparisons of these two deals, because the Queen deal includes not only publishing and recorded music rights, but also rights to incomes from theatrical performances of Queen’s music and royalties from the biopic Bohemian Rhapsody.

The Sony deal with Jackson doesn’t include similar incomes, but it does include the publishing rights owned by Jackson’s company Mijac, which, according to Billboard, holds stakes in the catalogs of Sly & the Family Stone, Jerry Lee Lewis, Curtis Mayfield, Ray Charles, Percy Sledge and others.

Despite the fact that Michael Jackson died at the age of 50 more than 15 years ago, his estate remains in probate. Over the years, the estate has dealt with challenges including a tax claim from the IRS of more than $700 million, per Rolling Stone, as well as challenges from creditors, relatives and other legal and financial issues.

While the tax issues have largely been resolved, there still remains a disagreement over the valuation of a single unnamed asset, which is holding up a resolution with the tax authorities; in the meantime, the IRS continues to hold a lien on the estate, Rolling Stone reported.

Last year, a probate court in California gave the Jackson estate’s executors the green light to negotiate the deal with Sony, despite objections from Katherine Jackson and Bigi (aka Blanket) Jackson, one of Michael Jackson’s three adult children.

“We tentatively conclude that Katherine’s challenge fails on the merits because the probate court’s order does not violate the terms of Michael’s will.”

California appellate court, as quoted in news reports

Katherine Jackson appealed the ruling, which triggered another legal case, that one brought by Bigi Jackson against Katherine. Bigi had reportedly resigned himself to the Sony deal going through, and now objected to Katherine Jackson using money from Michael Jackson’s estate to find her legal challenge to the Sony deal.

Katherine Jackson is a beneficiary of the estate, and not an heir. A source told People that she had received more than $55 million from the Michael Jackson estate since the artist’s death in 2009.

In the appeals court case, executors Branca and McClain argued that the Sony deal “is to the estate’s advantage and in the best interest of the beneficiaries,” meaning Michael Jackson’s three children, Bigi, Paris and Prince, along with certain unnamed charities.

The executors said they entered into talks with Sony in order to take advantage of a music asset market that was “by far the hottest it had ever been.”

They also argued that they had proven to be highly effective managers of the years. The estate had been saddled with $500 million in debt at the time of Jackson’s death, but by “exercising the powers granted in Michael’s will as confirmed by the probate court, they entered into business transactions involving the estate’s assets that skyrocketed the estate’s value to over $2 billion,” according to a briefing the executors’ attorney filed with the appellate court earlier this year.

Some of that financial turnaround has to do with Sony itself. The company has long had a relationship with Michael Jackson and, later, his estate.

In 1991, Sony bought half of ATV Music, which owned a catalog of music, including songs from The Beatles, that Michael Jackson had acquired in the 1980s.

That acquisition by Sony resulted in the creation of Sony/ATV, which Sony bought fully in 2016 for $750 million. (Fun fact: In 1991, it had bought the first half of ATV Music for $100 million.)

Two years after the deal to take full control of Sony/ATV, Sony Music reportedly paid $250 million for the rights to distribute Michael Jackson’s recorded music for seven years. Thus, in the space of just a few years, Sony paid the Jackson estate some $1 billion.Music Business Worldwide