Negotiations in the Music Industry, The John Branca’s Story
When the King of Pop went after The Fab Four’s back catalog, records were bound to be broken. Sib Law takes us inside the negotiation that shook the music industry.
This article was written in collaboration the The Gap Partnership an international negotiation consultancy firm.
In 2016, Sony announced that it would pay $750 million for the Michael Jackson estate’s stake in Sony/ATV. This is the company that controls large parts of the Beatles catalog. But even with such a price tag, how the singer came to control one of the most iconic collections in the history of music is a much more interesting story. Furthermore, it illuminates one of the basic truths about negotiation: when something has a low cost to one party and a high value to the other, it can make all the difference in sealing the deal.
A month after the deal was complete, in 1985, the L.A. Times ran an exposé on how Jackson made the acquisition. In the article, staff writer Robert Hilburn describes a decade-long journey taken by a number of Beatles songs during the 1960s. That journey began inside a tax-shelter-holding-company set up by John Lennon and Paul McCartney. However, the songs had many stops before they became part of ATV Music Ltd., owned by Robert Holmes a Court. In a 2010 four-part retrospective on Michael Jackson, The Wrap – a Hollywood industry publication – added more details to the story. In the article by Johnnie L. Roberts, he describes super-lawyer John Branca’s guile and chutzpah as the main reason behind the successful acquisition. The first offer from the Jackson camp came in at $46 million. Both The Wrap and the L.A. Times refer to a story in Fortune Magazine, where Holmes a Court compares his own negotiation style to that of the Viet Cong. As seems typical of large deals these days, negotiations were on and off. In fact, things got so bad that in May 1985 the Jackson team broke off negotiations for a month. Another offer emerged during the period that Jackson was out of the running. This one came from the team of Martin Bandier (currently the CEO of Sony/ATV ) and Charles Koppelman (a long-time entertainment executive and investor).
Their number was $50 million. Branca discovered that the opposing offer was financially backed by MCA Music, which was headed by Irving Azoff. Branca and Azoff were old acquaintances, having worked together prior to these negotiations.
Both parties were on the same plane to London to meet with Holmes at a Court. Both parties believed they were traveling to seal the deal to secure the Beatles’ songs. Roberts describes an interaction between the two parties where Bandier and Koppelman asked Branca “What brings you to London?”, to which he responded, “Just business.” What they did not know was that Branca had convinced Azoff to pull the MCA Music backing and that he had sweetened Jackson’s offer.
Jackson’s successful proposal was $47.5 million, which according to the 1985 L.A. Times article, was the most ever paid by an individual for a music catalog. Even so, this was still $2.5 million less than an offer Holmes a Court had in-hand; the same man who compared his own negotiation style to the Viet Cong.
Working to ensure his offer would be accepted, Branca threw in a number of intangibles. In addition to the money changing hands, Branca included a Michael Jackson benefit concert for Holmes a Court’s favorite charity. But, what may have finally sealed the deal was a lifetime of income from the Beatles classic, “Penny Lane”, for Holmes a Court’s daughter Catherine. The measurable personal costs of either of these negotiating variables would have been very low for Jackson while clearly representing a high value for Holmes a Court.
Many negotiation competencies were at play as Branca maneuvered to acquire the catalog that contained the Beatles songs in 1985. But, the use of low-cost/high-value intangibles made it possible to sweeten the deal to the other party without having to match the price offered by the competition.
This article has been published in accordance with Socialnomics’ disclosure policy.
