MJ Big Problem For Promoters
It was to be the comeback of the young century: Michael Jackson using the “This is It” tour to retake his throne as King of Pop, lord of the dance and darling of the masses.
What grander stage than London for this late career magic? Jackson’s much hyped revival was to be a marathon, 50-gig tour that gave him a shot at redemption – not to mention repairing his tarnished image, lifting him out of debt and making millions for promoters.
Eager fans spent more than $90 million on tickets despite widespread doubts about the pop icon’s stamina.
Now the star is dead – and one of the city’s biggest arenas has 50 open nights. London, the city that was to be Jackson’s launch pad back to glory, has become a symbol of the wreckage of his life.
The calamity has left Los Angeles-based tour promoters AEG Live, which operates the 02 Arena where Jackson was to have performed, with a colossal problem. In addition to the money taken in by ticket sales, which must be refunded, the company had already paid Jackson millions and spent millions more getting ready for the planned July 13 premiere.
There is no question it’s a disaster, said Chris Cooke, editor of the British music business bulletin CMU Daily. But no one knows the magnitude of the catastrophe.
“The question is how much they were insured, but they’ve been very quiet about that,” he said. “Will the insurance company take the hit, or will they?”
He said AEG Live had been planning a world tour after the London gigs, and possibly an extended residency for Jackson at a Las Vegas hotel in order to capitalize on his revival after more than a decade away from the concert stage.
The goal was to give Jackson a total career makeover that would once again turn him into a money machine. Instead, the pressure to produce – and in effect, to compete with his younger self – may have contributed to his demise.
AEG Live said in a statement Friday that it would advise ticket holders early next week on how to get refunds, adding that fans should hold onto their ticket vouchers and proofs of purchase.
“At this moment our thoughts are with Michael’s children, family and friends. We will announce ticketing information in due course,” read a message on a huge screen outside the 02 Arena.
According to Bermuda-based insurer Validus Holdings Ltd., a group of insurers were covering the concert series through the Lloyd’s insurance market, including its subsidiary Talbot Holdings Ltd. But Validus said it had less than $3 million at risk.
The tour was to have spanned into March 2010, and there was wide skepticism about Jackson’s ability to meet such a demanding schedule – with some London bookmakers even taking bets on how many of the 50 shows the notoriously unreliable Jackson would actually perform.
Industry experts also believed his participation in the spectacle would be limited, with large segments taken up by dancers performing elaborate routines to taped performances of his many hits.
AEG Live, a unit of billionaire Philip Anschutz’s empire, had stood to collect about 5 percent to 10 percent of the gross ticket revenue of $90 million to $100 million, plus as much as $15 million from concession and merchandise sales, Werde said.
Jackson himself would have made the bulk of the money from the ticket sales.
The refund process could be complicated by the fact that tickets were sold to people from a number of countries and because of the sheer volume of tickets sold, Werde said. Some 750,000 tickets, priced between $82 and $124, were sold, though some went for hundreds of dollars on Internet auction sites.
Experts familiar with Jackson’s horrendous financial situation said the singer was counting on the tour to help pull him out of a reported $400 million in debt.
Attorney Jerry Reisman, who represented the Hit Factory in New York when Jackson recorded there, said Jackson desperately needed the tour revenues.
“He had substantial debt to creditors throughout the world, and he hoped to use the tour to repay them and create a cash flow for himself,” Reisman said. “He had a very high standard of living. He lived like a prince, like royalty, traveling by private jets with a huge entourage. His debt was tremendous, exorbitant.”
This financial pressure led Jackson to agree to 50 shows, a demanding schedule even for a younger, more fit performer.
Reisman said the promoters may try to recoup money already paid to Jackson in order to refund money to customers.
Joey Scoleri, a promoter with the North American music division of Live Nation, said Jackson’s death had created complex legal and logistical problems for the promoters.
He said not since Elvis Presley had there been a case of an artist of Jackson’s magnitude dying just before a major tour.
“The only other artist like this was Elvis, and tours weren’t the financial undertaking then as they are today,” he said. Presley died in 1977 before several tour dates.
Scoleri said it was likely the AEG concert division would suffer a financial hit, but it’s the nature of the business to manage risks. He said promoters surely understood Jackson’s health was a factor.
AEG Live spokesman Michael Roth did not immediately comment on the company’s insurance coverage.
Insurance market Lloyd’s of London said its member corporations had underwritten some insurance taken out for the Jackson concerts, but said AEG is likely to be have had multiple policies with several insurers, who would each have taken on a portion of the risk.
Spokesman Bart Nash said he did not know how much Lloyd’s portion of the figure was, or the total cost of the coverage.
“We can confirm that some insurance for Michael Jackson’s concerts has been placed in the Lloyd’s market, but any losses are not likely to be significant,” Nash said.
He said the policy would likely cover the death of an artist, costs of canceling the events, including funds spent on sets already built, promotion and publicity, and, possibly, estimated earnings from the concerts.
“The risk would be quite high,” for artists in poor health, or with a history of canceling concerts, like Jackson, he said.
Chris Rackliffe, underwriter at insurance firm Beazley, said few insurers would have been prepared to take on the risk of an artist with Jackson’s problems.
“His prior history, the fact of his health and the difficulties he has had in his life over the last few years means that, from our point of view, he would have been very high risk,” Rackliffe said.
As for fans looking for refunds, those who bought tickets on the secondary market from the company viagogo will be able to easily have their money refunded, said chief executive Eric Baker.
“No forms, no fuss, just refunded,” he said.
Ticketmaster Entertainment Inc., the primary ticket seller, did not immediately provide information on refunds.
Officials at eBay said any Michael Jackson tickets purchased in the last 45 days through the PayPal system would be covered by the buyer protection plan.