At the beginning of the decade, CDs were great, people were buying, and record companies were signing their biggest stars to ridiculously lucrative deals.  As the first decade of the 21^st Century closed, CD sales fell by about half as digital media pushed out compact discs.  Studios are no longer as free with the big bucks as they once were.  Sony, however, is banking on a big name; they have signed an astonishing $250 million deal with Michael Jackson’s estate, perhaps the biggest in the industry’s history.

According to a New York Times article, studios are wary of signing big names:  EMI, for instance, signed Mariah Carey to a five album, $80 million dollar deal in 2001.  One album later, EMI paid Ms. Carey $28 million to get out of the contract.  Live Nation signed Madonna and Jay-Z to nine figure contracts over 10 years, and they expect minimal returns.  If the big names flop, there isn’t the revenue from “mid-level” artists that has previously cushioned the industry.  The new deal Sony has struck with Jackson’s estate is a gamble, in part because of slumping sales, but also because of the limitations attached to the contract.

The deal with Jackson’s estate, which is certainly welcome on that side because Jackson left behind a legacy and a $300 million dollar debt, gives Sony the right to release 10 projects by 2017. These are likely to be a combination of DVDs, live theater, albums, and maybe a video game.  Sony also bought rights to Jackson’s previous recordings and limited likeness rights.  They do not get a percentage of the publishing or merchandising, however.  So why is this a good idea for Sony?

Of the top four albums of 2009, only one was from a current (and living) artist: Taylor Swift took the second spot, according to Nielsen.  The number one spot was earned posthumously by Michael Jackson, who sold almost twice the albums Ms. Swift did.  Third was the Beatles (half of whom are deceased), and fourth was Jimi Hendrix, who died forty years ago.  Will Page, an economist with PRS for Music, says that “the value placed on a proven catalog of an artist like Michael Jackson goes up, as it can stand above the increasing amount of noise on the market.”  So, as more and more artists are fighting for recognition, it actually increases the profile of the uber names.

Russ H. Crupnik, senior entertainment analyst from market research firm, NPD Group, says, “I think in this particular case, the deal makes quite a lot of sense, both for Sony and the estate. There are incredibly few artists these days who can continue to create revenue streams the way Michael Jackson can.”

Also boosting Sony’s hopes is the fact that Michael Jackson: This Is It has earned more than $260 million worldwide, seventy-five percent of which came from outside the US.  Record sales since his death have totaled about 31 million albums, half of which were purchased outside the US.  Jackson remains a huge name globally, which is positive for both Sony and his estate.

Sony will have access to some 60 unreleased songs by the King of Pop; they will release an album, likely in November.  Also strong possibilities:  a DVD compilation of music videos and a Cirque du Soleil show.  Such a show was created around the Beatles music and was a tremendous success.  Former Epic Records president Charlie Walk says, “Few brands can be continuously reinvented and re-established and reach broad demographic groups.  Michael Jackson can do just that.”

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