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Michael Jackson’s estate reaps US$750 million in Sony venture exit

VARIOUS, VARIOUS - JUNE 25: Michael Jackson performs at the 12th Annual MTV Video Music Awards at Radio City Music Hall in New York City on September 7, 1995. (Photo by Kevin Mazur/WireImage)

The late Michael Jackson performing at the 12th Annual MTV Video Music Awards at Radio City Music Hall in New York City on September 7, 1995. (Photo by Kevin Mazur/WireImage)

Sony Corporation, betting on the growth of music streaming, agreed to pay about US$750 million to buy out late pop star Michael Jackson’s stake in a jointly owned catalog of songs by artists from the Beatles to Taylor Swift.

The deal gives Sony control over the rights to almost 4 million songs amid the shift by listeners from individual album purchases to subscription services offered by Apple Inc., YouTube and Spotify Ltd. Sony has said the growth of streaming services will help bolster revenues in the music business to as much as $5.2 billion in fiscal 2017.

“The value of music assets is increasing with the growth of streaming,” said Damian Thong, an analyst at Macquarie Group Ltd. in Tokyo. “Sony is actually paying less than the stake is worth.”

The terms of the deal call for Sony to make a lump sum payment to the Jackson estate of $733 million for a 50 percent stake in Sony/ATV Music Publishing, as well as future distributions, according to a statement. The estate of Jackson, who died in 2009 at age 50, still owns the rights to his master recordings and a stake in EMI Music Publishing.

Talks on a deal began in September, when Sony exercised its right under their joint venture to buy out Jackson’s estate.

Sony expects paid subscribers to account for 60 percent of the market next year, outpacing downloads with 22 percent and digital radio with 5 percent. Its shares closed 0.2 percent lower at 2,794 yen in Tokyo, while the Nikkei 225 Stock Average declined 0,7 percent. The stock is down 6.9 percent this year.

Leaked Documents

Documents leaked by hackers who broke into Sony Entertainment’s computers in 2014 revealed that executives at the company were weighing the future of the joint venture.

“The entertainment businesses have long been a core part of Sony and are a key driver of our future growth,” said Kazuo Hirai, Sony’s chief executive officer, in the statement. “This agreement further demonstrates Sony’s commitment to the entertainment businesses and our firm belief that these businesses will continue to contribute to our success for years to come.”

Jackson purchased the ATV catalog, which was the foundation for the eventual joint venture with Sony, for $41.5 million in 1985. The deal announced Monday “further validates Michael’s foresight and genius in investing in music publishing,” said John Branca and John McClain, co-executors of the estate, in the statement. “This transaction further allows us to continue our efforts of maximizing the value of Michael’s estate for the benefit of his children.”

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