Michael Jackson’s untimely death in June shocked the world. It also shocked accountants at more than a few companies. Jackson died less than three weeks before he was to kick off a series of 50 concerts at London’s 20,000-seat O2 stadium on July 13.
The reported $500 million in debt that Jackson died owing was an eye-opener, but a more immediate issue was the $30 million that concert promoter AEG Live had already invested in the production, as well as over $80 million in ticket sales that had to be refunded.
Billboard speculated that premium and VIP ticket packages and resales would have boosted the gross to more than $100 million. Merchandise sales could have brought in another $15 million.
Then there were the 50 nights that the O2, owned by AEG, would go suddenly dark for, at a cost of hundreds of thousands of dollars a day just to maintain basic services. Cash advances to Michael Jackson have not been disclosed, but they are estimated at least $10 million, which, given the King of Pop’s tenuous finances, may or may not be immediately recoupable from what’s left of the singer’s estate.
In terms of sheer dollars, that was just the beginning. This Is It, Jackson’s comeback performance, was to be an elaborate one — a huge live band, dancers, circus acts and animals covering 22 sets onstage, supported by an army of audio, video, multimedia, staging and rigging designers and technicians. Most of these service providers had planned on the income from these shows for the rest of the year and into the next, as Jackson’s performances there were scheduled to run through March, 2010. Some may have already begun counting the cash from a planned road version of the show. Certainly that was the case with AEG, the world’s second-largest concert promoter after Live Nation, which had predicted profits of $115 million from the London shows and a $450 million gross from the touring edition, numbers that are now up in smoke.
“There’s definitely some damage done,” says John Wiseman, CEO of recently formed Chaos Visual Productions in Los Angeles, which had made a multi-million-dollar investment in new 3-D video technology, including a massive 91-by-30-foot LCD screen that Jackson himself was reportedly amazed with. Wiseman says an industry-standard type of cancellation clause with AEG Live will let the company break even for costs other than the 3-D investment, but that the loss of the multi-date concert series will force Chaos to recalculate its recoupment schedule for that equipment. “It’s a very large investment, and it was always going to be used on future projects. But when you have a cornerstone project like [Michael Jackson] suddenly go away, that changes how you manage the debt; it has to be recouped over a longer period of time and more projects.”
But beyond the financial hits that technology services providers may take on the cancellation of Michel Jackson’s comeback concerts, there may be a more widely felt loss. “What’s truly devastating here is that Michael Jackson was the tip of the spear that pushed the bleeding edge of live performance technology further,” says Wiseman, who worked with Jackson on the HIStory and Bad concert tours. “He always moved the bar forward, and he was about to do it again. In terms of video, pyro, lighting…this show would have shifted the paradigm of what a concert is.”
In fact, This Is It could turn out to be a textbook case study in how not to mount a live extravaganza. AEG Live is on the hook for its capital investments into the show to that point, as well as any contractual agreements made with service vendors, thanks in large part to the decision by CEO Randy Phillips to underinsure the production, with coverage reportedly for only the first $23 million in losses. (Perhaps the first monies they need to recoup are from whoever certified Jackson as physically fit to perform.) Previous successes with “concerts in residence,” including the long runs of Celine Dion and Prince in Las Vegas may have contributed to an overconfidence bordering on hubris, considering Jackson’s historical flakiness and seeming indifference to litigation.
But it’s also not like abrupt tour-ending disasters haven’t happened before. Led Zeppelin’s “In Through the Out Door” tour was cut short in September 1980 with the death of drummer John Bonham. That same year, Paul McCartney was caught at Narita with several ounces of marijuana as Wings was beginning the Japanese leg of a world tour; it cost McCartney nine days in jail, $350,000 for promoter’s expenses for the cancelled dates and scrapped a pending 1981 U.S leg of the tour.
McCartney quit touring for nine years after that, which suggests that no one has to actually die to cause massive economic ripples when a tour goes off the rails. And at a time when live touring bears an ever-increasing load to fund the entertainment industry, Michael Jackson’s last act may act as a brake on some of the more spectacular concert deals of the future.
But the bottom line is that those whose technical talents operate the engine rooms of live performance can’t back off. Better cancellation clauses might help — the industry standard is usually two weeks’ worth of revenue — but that’s always at the mercy of the market, and a 10-percent unemployment rate doesn’t offer much leverage.
AEG Live may have several get-out-of-jail cards to fall back on. First, AEG Live was reportedly scrambling to convert This Is It from a Michael Jackson show to a Michael Jackson tribute. With the right mix of supporting artists — including potentially the four remaining Jackson brothers and two sisters — the company could get back some of those ticket sales.
Then, in what may turn out to be a presciently fortunate happenstance, 1,200 hours of rehearsals for the O2 shows, which took place at L.A.’s Staples Center — also owned by AEG — had been recorded in high definition video and multichannel sound, for which Sony Pictures has reportedly already offered AEG $50 million for the rights.
Let’s hope for an equally silver lining for those who toil backstage.
