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Jackson’s finances continue to dwindle

Pop star has maintained his opulent lifestyle throughout trial
/ Source: The Associated Press

In the decade that Michael Jackson has battled allegations of child molestation, his income has suffered along with his record sales.

Still, the former King of Pop maintained an opulent lifestyle, prompting claims during his trial that he was spending like a billionaire on a millionaire's budget.

Many financial details regarding Jackson remained sketchy during the proceedings. But forensic accountant John Duross O'Bryan testified that Jackson had an "ongoing cash crisis" and was spending $20 million to $30 million more a year than he earned.

A balance sheet dated June 30, 2002, indicated the entertainer had assets of $130 million and liabilities of $415 million, O'Bryan said.

The testimony included references to memos by Jackson financial managers warning that to balance the books and clear huge loans held by Bank of America, he might have to sell his share of up to 50 percent of Sony/ATV Music Publishing. Analysts estimate the company could be worth about $1 billion.

Sony/ATV owns and administers copyrights to thousands of songs, including the words and music to 251 Beatles tunes. The catalog provides a steady stream of income for Jackson and has been used as collateral to secure the $200 million in loans from Bank of America.

Advisers urging Jackson to deal with his debtThe prospect of selling his stake in the catalog has split Jackson's advisers. In recent months, some urged him to rid himself of debt by selling part or even all of his music publishing holdings, said the Rev. Jesse Jackson, who has advised the entertainer on personal matters.

Michael Jackson also sought financial advice from longtime friend and Los Angeles billionaire Ron Burkle, who suggested he hold on to the catalog, according to a source close to the situation who spoke on the condition of anonymity.

Burkle was in New York and couldn't be immediately reached for comment, his spokesman said.

In April, the pop star faced the possibility of losing the catalog to foreclosure when he was a day late making a full $3 million payment to Bank of America, said the Rev. Jackson, who met with the president of the bank on behalf of the singer.

The move, combined with efforts by Burkle, "worked out well and Michael no longer has a cash flow problem," the Rev. Jackson said. "It was really unnecessary for any kind of a foreclosure. But if the foreclosure had taken place, it would have had an impact on Michael's catalog. His whole financial empire would come crumbling down."

Michael Jackson and his representatives insist that assets such as the Sony/ATV catalog and his Neverland estate ensure his bottom line is in order. In a March interview by the Rev. Jackson broadcast over the Internet, the entertainer denied rumors that he is near bankruptcy.

"That's not true at all. It's just one of their many schemes to embarrass me," he said.

Raymone K. Bain, a spokeswoman for the pop star, denied reports that Jackson might sell his music holdings.

"Michael is not selling his catalog," Bain said, adding that Sony had not made any overtures to buy him out.

Jackson built his fortune in the 1980s as one of the most popular entertainers in the world. His 1982 album "Thriller" sold 26 million copies and included huge hits such as "Billie Jean" and "Beat It."

His 1987 release "Bad" sold 22 million copies. In 1991 he signed a landmark $65 million recording deal with Sony.

Music holdings remain his trump cardOne of his shrewdest deals was his 1985 acquisition of ATV Music for $47.5 million. When he ran into financial problems a decade later, he agreed to a $95 million deal to merge ATV with Sony's library of songs.

As his financial problems continued, Jackson began to borrow large sums of money, according to a 2002 lawsuit by Union Finance & Investment Corp. that sought $12 million in unpaid fees and expenses.

Jackson had hired Union Finance in 1998 to help straighten out his finances. The firm soon discovered Jackson was "a ticking financial time bomb waiting to explode at any moment," according to the suit, which was later settled.

By 2001, Jackson had borrowed $200 million from Bank of America. Last month, the loans were acquired by Fortress Investment Group, a New York firm that specializes in troubled loans.

Bain said the move will give the pop star "greater financial strength and flexibility." Details of the deal were not disclosed.

Jackson owns homes in Las Vegas and the Encino area of Los Angeles along with his 2,600-acre Neverland ranch in Santa Barbara County. With an amusement park and zoo, the estate has an estimated value of as much as $100 million.

If the pop icon is acquitted, it's hard to say how much he might expect to make from new albums or tours. His box set, "The Ultimate Collection," sold just 57,000 copies last year. The "Number Ones" compilation album released in 2003 sold 903,000 copies, according to Nielsen SoundScan.

At this point, the terms of his recording deal with Sony are unclear. A spokesman for Sony BMG Music Entertainment said the company does not comment on the contract terms of its artists.

Gary Bongiovanni, editor in chief of Pollstar, a publication that tracks the concert business, said the trial may hurt Jackson's image but not permanently.

"They'll be promoters who will be lined up to work with him if he's acquitted," Bongiovanni said.