Latest courtroom victory illustrates how far the posthumous Jackson machine has come in barely a decade. Now that human loyalties and human frailties have been removed from the equation, the estate has only one thing keeping it from corporate immortality: the heirs.
Michael Jackson keeps on going. And the more time that passes since his 2009 death, the weaker the links to the estate’s mortal origins get.
Just this week, the estate finally cut its last ties to Jackson’s publicist and former management team after a multi-year courtroom fight.
The losers claimed they befriended the star at an especially low point in his life and that in return he told them they could share 15% of his business.
Since the estate wanted to keep the whole thing, whatever Michael really wanted takes a back seat to the absence of paperwork turning his thoughts into legal reality.
Now that a judge has agreed to dismiss the dispute, the estate can continue consolidating its hold over every aspect of the Michael Jackson brand -- and any human relationship the star once had with his “partners” is as dead as he is.
It’s just business
The executors have been extremely busy over the last near-decade stitching up the often ragged edges a larger-than-life human being left behind.
Human talent had its limits. What the estate has built in its place looks more like a robust media start-up -- more institutional -- than anything an individual person would generate on his or her own.
Think of the gap between Warren Buffett and Berkshire Hathaway or any superstar hedge fund manager and the fund itself. When Jackson was alive, he was as erratic as any of us, making friends and enemies along with money.
The estate, on the other hand, is all about zeroing out existing relationships in pursuit of higher absolute returns on the assets. The only human constraints left here are the ones Jackson mandated in the will and other binding documents.
There doesn’t seem to have been a lot of that here. Michael and his lawyer at the time -- who’s now running the estate -- focused on how to structure the way the assets transfer to the kids.
Michael’s mom gets 40% of the income while she’s alive. The kids each get a third of what’s left in three installments apiece starting when each turns 30.
Beyond that, as far as we know, truly anything goes. The only mandate is to maximize the ultimate amount that the executors will one day hand over.
No assets are sacred. That’s how the estate could justify liquidating the Beatles song catalog Michael cherished, even though it was paying at least $10 million a year.
And it’s why the estate decided to sell the global distribution rights to Michael’s own publishing in a deal that expires this year: it’s not about the music.
It’s all business. Michael might have paid off his friends if he was alive, similar to how he kept paying his deeply estranged father a $700,000-a-year allowance.
Corporations don’t have friends or fathers. They don’t get sentimental about old songs. If they get a good offer, they sell. That’s where the Jackson estate is now.
Endless earning potential
Money is what fuels the machine. When Michael was alive, he was professionally close to untouchable and burning cash at a staggering rate.
He made bad decisions and wasn’t able to attract the really top-tier management talent it would have taken to turn his cash flow around.
For all practical purposes, he was getting by on goodwill. That’s how he lured his old lawyer back at the end to run the estate.
Since then, it’s turned into a big enough business to chase bigger deals, generate bigger management fees and even attract a few dormant “interests” that didn’t speak up until they saw the cash flowing.
Underperforming assets have been liquidated to pay the debts. The assets that are actually working were put to work: old video footage reworked into smash tribute movies, the music vaults picked over for posthumous albums.
I think what we’ve seen so far is really only the first phase, which amounts to stabilizing an enterprise that was bleeding money.
The debts are gone. And once the estate settles its initial dispute with the IRS, the balance sheet will be clear.
From here, the focus shifts from survival to strategy. The initial posthumous album deal liberated a healthy pool of cash when the estate needed it, but with a rumored 1,000 unreleased songs or more left in the vaults, there’s plenty of earning power left to hoard.
Michael himself can keep working in the meantime, with modern computer animation supporting a new generation of endorsements and “appearances” for the right fee.
Arguably the hologram can work harder, appear everywhere, maybe ultimately complete that long-delayed final tour.
As long as the programmers are good enough -- and with the amount of money we’re talking about, I don’t think that will be a problem -- Michael Jackson is on the verge of an incredible comeback.
He might have personally considered the notion of a digital resurrection blasphemous. Like a lot of things, it doesn’t matter any more.
What matters is that if the IRS is demanding tax on image and publicity rights worth up to $140 million, the estate has a duty to the heirs to try to squeeze at least that much money out of those rights.
After all, there’s still a full decade to go before the kids get the first taste of their real inheritance. Here and now, it’s all about making sure they’re extremely comfortable while the managers keep the assets working.
Michael’s song copyrights aren’t set to expire for another 62 years, by which point intellectual property law may have pushed public domain back even farther.
California publicity rights also run for 70 years after death, so if kids are still buying Michael merchandise in the late 2070s, his grandkids and great-grandkids can spend the royalties.
With the right management, the roughly $1 billion in net cash the estate is worth right now will only be the ultimate financial impact Michael leaves behind.
Meanwhile, of course, the cash can work wherever the executors decide represents the best investment and the best shot at paying the family’s overhead.
A decade is a long time for both technology and the markets. When the kids finally inherit, they could each start adult life as something close to a billionaire.
What they’ll do with all that cash is another story. A lot of dynastic estate plans lavish a lot of care on training the heirs to perpetuate the family’s ethos.
I’m not sure that’s happening here. Michael’s mom is raising the kids as best she can, and maybe that’s enough.
Institutional clients are immortal
And if this is only the first of a new species of estate arrangements, future celebrities and other extremely wealthy people are going to keep improving on the early sketches we’re seeing here.
Billionaires may not live forever, but with the right technological “assistance” and legal structures, they can still exert a lot of posthumous influence in the directions they choose.
When we see Michael Jackson take the stage for a paying crowd, we may be on the verge of a new relationship to death -- the dead hand in a sequined glove. Advisors, take note.
Your clients may be active relationships for your firm long after you and they are gone. They’ll be institutional relationships, estate accounts. Your professional heirs will take care of it.
What’s nice about institutions is that they’re relatively rational. They pay for professional advice and they follow it. Just look at how well Michael Jackson is doing now.