The most important financial question facing Michael Jackson's estate, and the music business, following his death last week likely will be one of the toughest to answer.
They'll want to know how much Jackson's most valuable asset, his 50% stake in Sony/ATV Music Publishing, is worth. And "it will be one hell of a job" to put a price tag on it, even though it's "extraordinarily valuable," says Susan Butler, executive editor of Music Confidential.
The general view is that Sony/ATV, a joint venture formed in 1995, should be worth at least $2.1 billion, the amount Universal Music paid in 2006 for BMG Music Publishing.
But some of the most popular properties in music are in Sony/ATV's catalog of more than 750,000 copyrights — including 251 songs that John Lennon and Paul McCartney wrote for The Beatles.
Jackson saw an unusual opportunity in 1986 to snap up the Beatles songs for $47.5 million, putting a chill into his relationship with Paul McCartney.
"He was a brilliant businessman to get into music publishing when it wasn't sexy," says Primary Wave Music Publishing CEO Larry Mestel.
Music publishing has thrived even as CD sales plummeted: Publishers make money when a song they control is sold; performed (including on the radio); incorporated into an ad, movie, or TV show; or printed on anything from sheet music to T-shirts.
Other writers whose work Sony/ATV owns or administers include Bob Dylan, Neil Diamond, Joni Mitchell, Willie Nelson, Wyclef Jean, Kraftwerk and Diane Warren. Hits run from Jailhouse Rock to Moon River. (Jackson's compositions, including Billie Jean and Beat It, are with Mijac Music Publishing, administered by Warner Music.)
What makes these assets so hard to value is that few beyond Sony/ATV CEO Martin Bandier know the details of its complicated deals.
And Sony won first-refusal rights over Jackson's stake in 2007 when it teamed with Barclays to help the singer after he defaulted on a $300 million loan. Jackson had used his Sony/ATV stake as collateral, raising the possibility that an outsider might pick up his right to select half of the Sony/ATV board and veto major strategic decisions. When someone has first refusal, other bidders "don't stretch," says Boston Consulting Group's John Rose.
That said, Sony is "big enough to make something happen" if it wants to avoid a squabble, says Hudson Square Research analyst Daniel Ernst. "It will take awhile, though, for this to shake out."