Michael Jackson, Northern Songs and Itunes

Someone asked me last night if the Michael Jackson Estate would profit from the Beatles deal with iTunes.  Apparently there have been rumors that Jackson's Estate would not profit.  Let's do a little history lesson, so everyone is up to speed.

First, we need to understand that the Michael Jackson estate owns the publishing rights to the majority of Beatles songs.  "The chief benefit to owning the publishing rights of songs is that the standard publishing agreements call for royalties to be split 50-50 between the publisher and the songwriter(s), so owning the publishing rights to popular songs can be a lucrative form of income."  In this case, the songwriters (for the most part) are Paul McCartney and John Lennon, and the owner of the publishing rights are the Jackson estate and Sony. 

Northern Songs

In 1963, the Beatles assigned their publishing rights to a company called Northern Songs.  They did so because they were earning so much money in songwriter rights, that their publishing rights were being eaten by taxes.  Northern Songs passed hands a few times until Michael Jackson bought them in 1985 for a reported $47.5 million.  In 1995, Jackson merged the Northern Songs with Sony's ATV catalog, to form Sony/ATV publishing.  A more detailed explanation of the entire history of the Northern Songs, along with publishing rights is available from the link above.  So we now know that the publishing rights in a standard deal gives Sony and the Jackson Estate a 50% profit for the majority of Beatles songs, albums and box sets that are sold on iTunes.  Sony receives 25% and the Jackson estate receives 25%.

Beatles/Itunes Deal

iTunes began selling Beatles songs on November 16, 2010.  In the first week alone, iTunes sold an unprecedented 2 million single songs and 450,000 albums by the Beatles.  In January, 2011, the Apple Insider announced that in two months, iTunes had sold 5 million single songs and 1 million albums. 

A New York Times article states that "terms of the deal were not disclosed, but in standard agreements with Apple a label collects approximately 70 percent of the sale price, and pays royalties out of that share.  One beneficiary of Beatles would be the Michael Jackson estate, which owns half of the Sony/ATV catalog, the publisher of most Beatles songs; the publisher would most likely collect about 9 cents on each song." 

So if we took a look at just the first two months of Beatles individual song sales (excluding albums), the total is 5 million.  If we multiply that by $.09, the total is $500,000.  One half goes to Sony ($225K) and the other half goes to the MJ Estate, another $225K.  This is just in two months and does not include albums or boxset publishing royalties. 

Most importantly, is this Rolling Stone article entitled, "Beatles Deal Most Lucrative in iTunes History".  In this particular deal, iTunes pays the Beatles and Sony ATV Publishing (MJ estate included) directly, and eliminates a middle man.  This is the opposite of a standard deal with Apple.  "If this is the case, the deal functionally acts as a licensing agreement as opposed to a standard digital retail sale, which would split royalties between the Beatles and Sony/ATV Music, significantly more lucrative than the traditional 20-25% “superstar” rate.

Of course, we are not working with absolutes here regarding profit revenue for the Jackson estate.  But it is safe to say that the Jackson estate IS making a hefty profit from the Beatles/iTunes deal.