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Michael Jackson Agrees to Huge Contract With Sony
In a thriller of a deal, pop icon Michael Jackson has signed a long-term contract with Sony Corp. that guarantees him an unprecedented share of the profits from his next six albums, his own record label, a role in developing video software products and a shot at movie stardom.
The contract, the biggest ever awarded an entertainer, is expected to return hundreds of millions of dollars to Jackson. It also cements Sony's relationship with its biggest star, who reportedly had threatened to move to another label in a contract dispute last year.
"We're married to him now," Sony Software President Michael P. Schulhof said Wednesday.
Sony, which inherited Jackson when it bought CBS Records for $2 billion in 1988, declined to discuss specific terms of the deal. But sources close to the talks said the agreement makes Jackson a significant partner in all business ventures with the Japanese electronics giant.
Jackson, 32, reportedly could receive more than $120 million per album if sales match the 40-million-plus level of his smash mid-'80s album "Thriller." Two sources close to the talks said the reclusive singer is guaranteed an advance payment of $5 million per record plus a 25% royalty from each album based on retail sales.
"If he continues to sell records like he has in the past, he will earn more money than any other person in the history of the record business," said one person familiar with the deal.
Sony said it expects to realize $1 billion in revenue from the partnership. But some financial analysts called the Jackson deal extravagant. "They (had) better hope he stays popular," said one analyst who asked not to be named. Another accused Sony of "grandstanding."
Industry analyst Harold Vogel of Merrill Lynch & Co. said the Jackson deal could change the record business. "It's off the scale, basically," Vogel said.
Entertainment attorney Jay Cooper said the deal could result in everything from higher overall payments to top performers to higher album prices. "What do you think is going to happen the minute Bruce Springsteen's contract comes up for renegotiation?" Cooper said.
The issue of Jackson's productivity was also raised by critics. The singer released only three solo albums since "Off the Wall" in 1979. If that trend continues, he will be approaching 60 when his final record under the Sony deal hits the stores. One source predicted that Jackson will step up the pace now. He also reportedly will augment his new material with a "greatest hits" collection. But Schulhof said he was not concerned.
"A great entertainer stays ahead of the public tastes and helps shape them," Schulhof said. "I am confident that, no matter what his age . . . he will stay ahead of the public."
Sony's reputation for unbridled spending stems from its $3.4-billion purchase of Columbia Pictures Entertainment two years ago. The company, which paid out unprecedented sums of money for upper management and movie deals, has been blamed for driving up costs in Hollywood.
Jackson's much-rumored deal is the result of months of difficult negotiations between Sony executives and Jackson's phalanx of managers and lawyers. People close to the talks said Jackson insisted on striking a bargain that bridged records, movies and video software.
Before the announcement of her brother's Sony contract, Janet Jackson's estimated $32-million deal last week was the largest in history. A & M Records President Al Cafaro, whose company lost the fierce bidding battle over Janet Jackson to Virgin Records, said record companies may be vesting too much importance in individual performers.
"These kinds of deals are great for the artists involved--a real bonanza," Cafaro said. "But a label runs the risk that these huge agreements will distract them from the real business of record companies, which is developing new and exciting talent and artistry. The future continues to be about that unknown artist waiting to wow the world."
Sony, however, already has a certified wower in Jackson. The former child star's "Thriller," released in 1982, is the biggest-selling album of all time. "Bad," the 1987 follow-up, claimed sales of 25 million.
Jackson, often the butt of jokes because of his reported facial reconstructions and his penchant for spangled wardrobes, is nobody's fool when it comes to business deals. He made a combined $70 million from separate endorsement contracts with Pepsico and L.A. Gear. Jackson also owns the publishing rights to the Beatles songs.
The Sony deal guarantees him a presence in practically every other facet of entertainment. It is the first significant example of the cross-pollination that was supposed to result from a spate of recent media company mergers--including Sony's deals for CBS and Columbia Pictures, Matsushita Electric Industrial Co.'s $6.6-billion purchase of MCA Inc. and the mega-merger that created Time Warner Inc.
Jackson's next record, for which he reportedly received an $18-million advance, is due this summer. In addition, Jackson will be paid a onetime $4-million fee, informed sources said, plus $1 million a year to run Nation Records, the record label created under the deal. Sources said Sony also agreed to put up $2.2 million a year in administration costs.
The agreement gives Jackson full authority to sign acts to the label. Sony executives predicted that "new and established artists" would become part of Nation Records. "Michael Jackson is not exactly a bad magnet for attracting these people," said Sony Music President Tommy Mottola.
Jackson is not the first star to get his own record label. Frank Sinatra started Reprise before selling it to Warner Bros. The Beatles had Apple Records, and more recently labels have been established by such performers as Elton John, the Rolling Stones, Jefferson Airplane, the Grateful Dead and M.C. Hammer. More often than not, the results have been disappointing.
Unlike those acts, Jackson will remain on Sony's Epic Records label. He will also remain a ubiquitous music video presence, since the Sony deal stipulates that such acclaimed directors as Sir Richard Attenborough, David Lynch and Tim Burton will make long-form videos based on songs from Jackson's next album. Jackson will also own 70% of the video rights.
The deal further assures that Jackson will star in his first feature since the 1978 flop "The Wiz." People close to the talks said he will be paid at least $5 million to appear in a musical action adventure based on his own idea.
The movie deal is largely the result of Jackson's friendship with Columbia Pictures Co-Chairman Jon Peters and his partner, Peter Guber. Company officials said further films may follow if the first, set for a 1992 release, is a success. Jackson is also supposed to be given offices on Columbia's Culver City lot.
"The intention is that we will all live happily ever after," said Columbia Executive Vice President Sid Ganis.