During their collaboration on the song “Say Say Say” in 1983, it is reported that former Beatle Paul McCartney advised the King of Pop, Michael Jackson, to invest some of his significant wealth in music publishing. This piece of financial advice, which may have seemed wise at the time, became a source of regret for McCartney on this day in 1985 when Jackson acquired the publishing rights to most of the Beatles’ catalog for $47 million, outbidding McCartney himself.
To grasp the solid business reasoning behind Jackson’s acquisition of the publishing rights for approximately 251 Beatles compositions, one must first familiarize themselves with basic music-industry economics.
Any time a copyrighted recording is used for commercial purposes—such as being played on the radio or featured in a movie or television ad—the entity utilizing that recording must pay a licensing fee. A segment of that fee is directed to the record label that issued the recording, which then distributes a part of its share to the artist. Additionally, a portion of the licensing fee is allocated to the songwriter of the respective song.
Songwriters, even those who perform, often enter into arrangements with music-publishing companies to handle their songwriting royalties’ collection. Typically, in such an arrangement, a publisher could take 50 percent of a songwriter’s royalties in exchange for managing collections and actively promoting the commercial use of their songs.
John Lennon and Paul McCartney, the Beatles’ main songwriters, engaged in a somewhat more intricate arrangement. They entered into a publishing agreement with a company that they co-owned. This company, called Northern Songs, Ltd., was established in 1964 specifically to generate income from the expanding catalog of Lennon-McCartney compositions. Thus, any sale or commercial use of the song “Yesterday” would earn both Lennon and McCartney a songwriting royalty, which they would split with Northern Songs, and a portion of Northern Songs’ share would subsequently return to them as co-owners of the company.
In 1969, a tumultuous takeover of Northern Songs by the British company Associated TeleVision prompted Lennon and McCartney to terminate their contract for future compositions and divest their shares in the company. Fast forward more than 15 years to 1985, as ATV sought to sell its complete publishing catalog, McCartney envisioned acquiring it himself but was ultimately outmaneuvered by Michael Jackson, who was enjoying the peak of his financial strength at the time.
In the subsequent years, that catalog—which is now estimated to exceed $1 billion—proved invaluable for Jackson, serving as collateral for various massive personal loans that supported his lavish lifestyle during periods of low income and legal troubles. However, in 2008, Jackson relinquished his remaining stake in the catalog to Sony, one of his major creditors.
