The U.S. Tax Court released an opinion concerning the dispute between the U.S. Government and Michael Jackson’s Estate concerning the valuation of his image and likeness. Notably, the court stated that the estate valued his image and likeness at $3,078,000, and the government valued it at $161,307,045. That’s quite a spread and you can imagine that the tax bill looks very different based on the valuation. The court ultimately valued Jackson’s name and likeness at $4,153,912. The decision is over 250 pages and chronicles Michael Jackson’s rise to fame as well as the problems. Importantly, the decision raises how even when Michael Jackson was enjoying commercial success as an artist that licenses of his name and likeness did not do well at all. The decision states:
Jackson’s personal fame meant that he received numerous
requests for merchandising licenses for his “image and likeness.” To handle
these requests, Triumph International, Inc.--an S corporation with Jackson as
its sole shareholder --was incorporated in March 1984. In July 1984 Triumph
entered into a five-year licensing agreement with Sullivan’s company,
Entertainment Properties, for the use of Jackson’s image and likeness on a
variety of products, including a line of clothing and fragrances. Under the
agreement, Jackson was to receive $18 million upfront, with a potential total
of $28 million. Jackson, however, was the only winner in this deal. He got the
$18 million, but the merchandise didn’t sell, and the deal ultimately proved
disastrous for the Sullivan family.
Based on Michael Jackson’s success at that time, one wonders
if there were management issues concerning the exploitation of his image and
likeness. After Jackson was sued for
child sexual assault, the court notes that his next tour, while successful, did
not have dates in the United States and was not sponsored. The court states:
The tour did have one merchandising agreement. Triumph
granted Sony Signatures “the sole and exclusive right and license to utilize
the Licensed Marks in connection with the manufacture and [distribution]” of
merchandise, with “Licensed Marks” defined as “name(s), symbols, logos,
trademarks, designs, likenesses and/or images of [Jackson].” Sony Signatures
paid a $6 million advance, and Jackson also got nominal amounts from a few
other licensees. Sales of tour merchandise were, however, significantly less
than the advance, and Jackson had to repay Sony Signatures nearly $4 million.
The court concludes that:
We have to look for the value of each of Jackson’s assets as
if “in the decedent’s hands at the time of its transfer by death.” Estate of
Simplot, 249 F.3d at 1194-95. The value we put them as of the day he died is,
we acknowledge, much less than their value much later under the Estate’s
management. Branca, a friend of Jackson’s for many years, but a practical man
forever, credibly testified that as popular singers age their prominence
declines. Jackson, at the time of his death, was not behaving as if this were
true; even a rational and undistressed hypothetical seller would have been
hardpressed to avoid fire-sale prices. But Branca is right. Older stars’ “fans
are less apt to buy tchotchkes.” Older stars do get less play on the radio. And
according to all the expert witnesses, the same is true about even Jackson.
They predicted that, like most popstars, Jackson would have a foreseeable surge
in sales of his songs when he died, but a surge that would fade with time. They
are right. Popular culture always moves on. There will come a time when Captain
EO joins Monte Brewster and Terry Forbes as names that without googling sort of
sound familiar, but only to people of a certain age or to students of
entertainment history. And just as the grave will swallow Jackson’s fame, time
will erode the Estate’s income. It resurrected and then sold what became its
most valuable asset to Sony before trial. The value of what it has left, no
matter how well managed, will now dwindle as Jackson’s copyrights expire and his
image and likeness shuffle first into irrelevance and then into the public
domain.
I am not sure “radio” time is that important anymore—like on an FM station, but see the licensing information mentioned above. The full opinion has a lot of information on valuation and is available,
here.
