‘This Is It’ concerts – $315m the Big Money

So were AEG the ‘good guys’ and helping Michael get out of the financial difficulties imposed on him by corporate bullies, or were they in it for themselves?

Let’s look at the AEG contract itself and see. As a layperson I do not understand all the terms and conditions in the contract, and for that I may have to defer to Leonard Rowe’s explanation in his book. But what I do understand is that the contract was for a maximum of 31 concerts between July 26 and September 30 2009, and the first leg had to be a minimum of 18 shows. A greater number of shows could be agreed, but the initial contract was as above, UNLESS AEG could prove that more shows were needed in order to recoup the advances it paid to Michael.

Leonard Rowe says that normally, production costs are taken from the gross revenue before the balance is split between the artist and promoter.

So for example if the gross revenue was $1 million and the production costs $300,000, the remaining $700,000 would normally be split between the artist and promoter.

In the AEG contract the gross revenue was split 90/10 in Michael’s favour BUT Michael PAID ALL The PRODUCTION COSTS from his 90%. So, using the same figures as above, Michael would get $900,000 minus the $300,000 production costs leaving him $600,000 and AEG would get the other $100,000. This looks OK at first glance, but then Michael also had to pay back other advances as well. So if the productions costs plus advances spiralled upwards, Michael could end up with $0 or even worse, owing AEG money, and AEG would STILL GET their $100,000.

It appears that the AEG contract did not put AEG in any financial risk. All the financial risk seems to be shouldered by Michael, the artist, without whom there would be no revenue in the first place.

Let’s look at the figures, to see if Michael was going to make any money from the concerts:

COSTS for 1 year

Rent of 100 Carolwood Drive for 1 year estimated at $1.2million

Rent of Foxbury Manor in Kent for 1 year – estimated at $1million

Production costs up to $7,500,000

Cancellation insurance premium for 1 year – estimated at $1.3m

Salary for Tohme Tohme at $100,000 per month - $1.2m

Salary for Conrad Murray at $150,000 per month - $1.8m

Producers Fee (5% of Artists Net Tour Income) – estimated at $3,825,000

COST TOTAL approximately $23 million in 1 year

MICHAEL’S INCOME for 50 shows

90% of the revenue for each 5 shows he completes (out of which the costs above are paid) – estimated at $85,000,000

MICHAEL’S INCOME (estimating $113 for each ticket sold) approximately $76.5m in 1 year.

Therefore, subtracting costs,

MICHAEL’S NET INCOME would be an estimated $53.5m in 1 year.

AEG would be making $8.5m.

This is a conservative estimate, but I think it shows that the AEG contract was going to make Michael a very large amount of money. The production costs would be unlikely to ever rise to $53m. Remember, this is just for the 50 shows.

If he had gone on to do a World Tour, the profits would have been even greater:

MICHAEL’S INCOME for 3 year World Tour

90% of the revenue for each 5 shows he completes (out of which the costs above are paid) – estimated at $255,000,000

MICHAEL’S  INCOME approximately $229.5m in 3 years

Therefore, subtracting costs as above for 3 years,

MICHAEL’S NET INCOME would be an estimated $180m in 3 years.

These figures do not include profits from concert merchandise, which were estimated to be $150m. If the 90/10 split also applied to merchandise, that is another $135m for Michael,

MICHAEL’S GRAND TOTAL $315m

AEG Lawsuit – 30 December 2010 AEG Demurrer

Note: in the bulleted list below, my comments are in bold.

The attorneys for AEG Live have filed notice of a demurrer that they will use in court on 2 February 2011. This is in response to the complaint filed by Katherine Jackson on 15 September 2010, which sues AEG, and claims they breached their legal duties to Michael.

·         The demurrer says that Katherine lacks standing to assert any claims on behalf of Michael Jackson, because her complaint gets the law and the facts wrong, and her theories are just that. AEG claim that only Michael’s personal representative can prosecute them, not Katherine. There is a note in the footer which says the estate is in probate, and that John Branca and John McClain are therefore Michael’s personal representatives.

·         The demurrer say that rather than pleading recognised legal duties that Katherine alleges AEG had to Michael, she is trying to create new theories of liability.

·         They state that the performance contract did not create any special duty-of-care, just because AEG arranged for his housing and transport. AEG is not liable for premises liability nor for the actions of a third party within the premises. They say that because Michael had not yet signed the contract with Murray, AEG did not have to supply medical equipment for Murray to use. Various internet articles have stated that there are several monitors that should be used when giving a patient propofol, for example, and Katherine’s lawsuit set out to show that Murray asked for the equipment but that AEG did not provide it. So the demurrer is pointing out that Murray would not receive equipment until Michael signed the contract, and is implying that Murray should not have gone ahead with any treatment that required them. AEG attorneys also say that AEG could not have foreseen that a personal doctor would treat Michael with an anaesthetic that normally is only used in a hospital, and therefore they are not liable under duty of care.

·          AEG attorneys say that AEG and Michael did not have a ‘special relationship’ because Michael was not a dependant of theirs. Katherine’s lawsuit claims that AEG exerted ‘an extraordinary degree of control over Michael’ but AEG attorneys say they do not provide facts to back this up. They only back up that he was financially dependant on the money he was going to receive in advances. Now this is where it may get interesting, because AEG attorneys do not deny that Michael was financially dependant on the money he was due. If Katherine’s attorneys are canny they will home in on this, because I do feel they have a case to show that the contract could have made Michael financially dependant on AEG for 2 and a half years. Leonard Rowe says in his book that parts of the contract were not standard practice, and I think that the contract may have been worded in a way to KEEP Michael financially dependant on AEG for two and a half years or more. Leonard describes the AEG contract as grounds for malpractice and a breach of fiduciary duties. The demurrer goes on to say that despite the lawsuit alleging that Michael was threatened with cancellation unless he accepted Dr Murray’s services, which they claim indicated a ‘special relationship’, Michael was only under pressure financially. Here AEG attorneys are actually agreeing that Michael was under pressure financially and furthermore under pressure financially to accept Murray’s medical care. So he was dependant financially on AEG, and under pressure financially to accept Murray. So maybe it could be proven that he agreed to both under duress? AEG attorneys then say that Michael could have refused Murray and cancelled his contract with AEG. But they have just agreed that he was under pressure financially. His contract states that if Michael cancels, he has to pay back all advances plus all production costs incurred. That means the rent on the house, any cash advanced, transport costs, cancellation premiums, Tohme’s salary, rehearsal costs etc etc. How many millions was that? I estimate well in excess of $6m and may be as much as $36m. The cancellation insurance (paid by Michael, and benefitting AEG) would probably cover these costs, but what recompense would Michael get? Probably nothing, and his reputation and career would probably be extinct too.

·         It says that the complaint seeks to hold AEG liable for fraud without alleging any actual misrepresentations. Here Katherine was trying to show that AEG made false representations to Michael, when they went to his house on 18 June 2009, in that they said they were looking after his well-being and best interests, but actually were threatening him to accept only Murrays’ medical care. AEG attorneys say that the allegation does not specify what was said, by whom, and who had the authority to make the statements. As if anybody needs authority to make a threat! A threat is a threat. So they knew he was under financial pressure, and they threatened him with more. Great. The problem is, without witnesses, it is quite difficult to prove that any threat took place. Randy Phillips was there, with Murray and Michael. Who of these will testify a threat took place?

·         Katherine’s complaint holds AEG liable under respondeat superior , but the AEG attorneys says she does so without recognising that there was no special employer-employee relationship. (respondeat superior : Latin, Let the master answer.] A common-law doctrine that makes an employer liable for the actions of an employee when the actions take place within the scope of employment.AEG attorneys say that because Dr Murray was employed by Michael and not AEG, that there are no grounds for a employer-employee relationship regarding Murray. They also say that Katherine should have claimed for wrongful death due to medical negligence within one year, and she has failed to do so, so her claim should be dismissed.

·         AEG attorneys  say that Michael, not AEG, controlled his medical care and hired Dr Murray. They refer to the contract between Michael and Murray, which Murray had signed but which had not yet got Michael’s signature. They point out that the contract was between Michael and Murray, not AEG and Murray, and as it was not signed by all parties, was not yet in force. But as we saw above, Michael was later put under pressure by AEG financially to accept Murray’s medical care. We have been told in the past that Michael was told by AEG not to visit his dermatologist anymore, and only accept Murrays care, or AEG would pull the plug on everything. If Michael did not accept Murray or cancelled with AEG, they would want all their money back.

·         AEG attorneys say Katherine has not shown that AEG were told that Murray was unfit to be Michael’s doctor, nor has she shown that they knew Murray was giving Michael anaesthesia.

·         The demurrer says that the claim for Prince Jacksons’ emotional distress at seeing his father lying injured, should be dismissed because Prince did not witness the actual injury taking place. Maybe not, but he would have seen his father with an IV in his leg, and maybe various syringes and vials were being used as Murray was trying to resuscitate Michael. He would have known that something was wrong. It wasn’t as if Michael was just lying there under the bedcovers with his eyes closed. The scene must have been chaotic and a total shock.

Generally, this demurrer is nothing less than I would have expected. I don’t think they are not going to admit any wrongdoing or liability, and are only going to respond if accused of something directly. I have seen this tactic used before myself, although outside the courtroom:

I will only answer direct questions. If you don’t ask the right question I am not giving any extra information.

I will try and divert your attention onto less relevant issues, in the hope you will forget to ask me about the important issues.

Ding.Ding. Round 2.

UPDATE: A judge ruled in L.A. on 2nd February that the lawsuit can proceed. Judge Yvette Palazuelos stressed that Katherine's case would need to provide evidence of “fraud, negligent infliction of emotional distress and civil conspiracy”, adding that proof of the latter was currently lacking. Palazuelos said that any agreement that Dr Murray would ensure Michael made it to rehearsals was not, in itself, an illegal act, and that evidence would be needed that the implications of such an agreement were more sinister.
Kenny Ortega, who had worked with Michael before, and who was director of 'This Is It', was originally named as a defendant. But Katherine Jackson's attorneys recetly dropped him from the suit, citing new information.
The next hearing in Katherine Jackson's civil case is scheduled for March 22.
UPDATE: On March 21 2011 AEG filed their answer to the Lawsuit, denying every allegation.
UPDATE: 2 June 2011 the trial date has been set as 10 September 2012.