News of week 12 at the AEG trial. AMAZING BUSINESS

Here is a summary of July 15-17, 2013 at the AEG trial and the testimony of the Jacksons’ expert witness Arthur Erk who was to estimate Michael Jackson’s earning capacity had Michael been alive.

Arthur Erk is no novice to this business as it was him who was hired by John Branca to assess the value of the Beatles catalog when Michael was planning to buy it. Erk’s estimation was $40mln while the seller estimated it at $49 million.

Arthur Erk said that in this case he reviewed AEG’s contract, emails, budget and other papers including contracts with Karen Faye and Kenny Ortega. Let me note that Ortega’s contract provided for royalties for his part in the tour in case it was taken to various parts of the world and Karen Faye’s contract even stated per diem fees for the countries to which they were taking the show.

Her contract was signed until March 31, 2011 with an option to extend it and this alone meant that Michael’s contract with AEG covered a much longer period than the initial 50 shows until March 2010.

Erk used the average price of tickets from 5 top grossing tours (of other artists as I understand) and estimated it at $108,8. However considering that Michael was the King of Pop the price could have been much higher (and then there would have been no need for Michael to do so many shows to reach the same sum).

Erk’s testimony provides so many figures that I will not even try to go into them and tell you only the one that I managed to grasp – Michael was to earn more than $1 billion after 37 months of doing 260 shows.

At first the number of shows and possible Michael’s earnings presented by Arthur Erk looked stunning to me, then I began to look at them seriously and finally they made me laugh – only not the numbers themselves but the irony of the situation we’ve found ourselves in.

The irony is in the fact that in 2009 it was AEG who was overjoyed by the opportunity to force Michael into a maximal number of shows, and now it is Jacksons’ lawyers who are taking advantage of AEG’s maximal numbers. Instead of disputing the validity and terms of the AEG contract the Plaintiffs decided to take it as it is and are simply turning it against AEG now.

AEG wanted to have a worldwide tour with Michael Jackson and planned at least 186 shows in 27 months? Okay, let it be the basis for the calculation of the number of shows Michael was to do and the money he was to earn following AEG’s own plans.

AEG was forcing Michael into more shows even after December 31, 2011 and set various conditions for him so that he couldn’t get out of the deal? Well, then Arthur Erk will simply add the respective number of shows for the extended period of time and increase their number from 186 into 260.

This way the more shows AEG wanted to have at that time, the higher will be the bill for Michael’s earnings Arthur Erk will present to AEG now. And AEG cannot even remonstrate – in their hunger for money they wanted to eat as much as they could only swallow, so they planned a crazy number of shows and are now reaping what they have sown themselves.

The fact whether Michael could or couldn’t perform this crazy number of concerts is not even the point – what was good enough for AEG then is good enough for the Jacksons’ lawyers now, and if AEG thought that he could perform, it is okay for the Jacksons’ lawyers too. Because the other alternative is even worse for AEG – if they knew that he was frail and could not perform then why did they plan so many shows and make a contract with him at least until December 31, 2011?

The date of December 31, 2011 is stated in the Definitions attachment to the AEG contract and for seeing AEG’s further plans for Michael after that date I suggest looking at two points of this attachment – the Term and the Territory.

The Territory point is simple – it is the whole world. The shows were planned throughout its “major touring territories”:

The Term was a much more intricate business.

First of all this point said that the Expiration date was through December 31, 2011 which means that the contract was to last more than two and a half years after the tour started in July 2009.

But since even two and a half years were not enough for AEG they forced Michael to take more obligations upon himself.  AEG stated that at their sole discretion (without asking the other side) they could extend the contract until they recouped all the advances. This sounds to us more or less okay except that it makes us wonder how was it possible that MJ would be still unable to recoup the advances after 2,5 years of touring?

Brushing aside this confusing thought we go on reading and find that in order to extend the contract and add more shows to the tour the only thing AEG had to do was sending the Artist a simple notice about the extension. The notice was to be sent prior to December 31, 2011.

A couple more sentences down the text and we are also amazed to learn the Artist was supposed to perform all those additional shows regardless of whether AEG recouped all the advances prior to completion of these shows.

So AEG wanted as many shows as possible from Michael Jackson even irrespective whether he owed them money or not…. They simply wanted to bind him with new obligations for the year 2012 and then force him to fulfill them by threatening with sanctions.

In any case the first 50 shows in 2009/2010 were only a start:

Could the Artist stop the tour after December 31, 2011? Yes, he could, but not until the additional shows were fully performed.

To stop the tour Michael had the right to send a “buy-out notice” (nice expression) on or after December 31, 2011 while AEG had already set the additional number of shows prior to that date. Thus a one day difference in December 2011 could mean a whole additional year of work for Michael Jackson.

How many more shows was AEG interested in adding to extend the tour “at their sole discretion” ? As many as possible of course, so why are we getting surprised now that the initial 186 shows estimated by Gongaware by the end of 2011 were turned by Arthur Erk into 260? This number is based on AEG’s own projections stated in the budget, emails and contract papers.

Here is the second part of the Term about the notorious “buy-out” notice which sounds to me like the need for Michael to buy himself out of the AEG’ enslavement:

Let me stress it again – the matter whether Michael Jackson was or wasn’t able to perform this dreadful number of shows is not the point. The point is that AEG thought this number of shows possible and they were intent on making Michael perform all of them.

What can AEG answer to that? That their contract which serves as the basis for this estimation is not valid because it was a cut-and-paste job? No, they can’t say that, because it will make things only worse.

Can they say that Michael Jackson didn’t want to do so many shows? Yes, they can, but their own contract says that the additional number was to be set solely at their choice, without asking for Michael’s permission, and this makes it clear that Michael’s consent never really mattered to them.

Can they say that Michael would have never earned that huge amount of money? Yes, they can, but then they will have to admit that they were going to exploit the biggest star on the planet for more than three years and pay him peanuts for the job, putting hundreds and hundreds of millions earned by him into their pocket.

Now I agree with the Jacksons’ lawyers that closing our eyes on the deficiencies of the AEG contract is a much better strategy than disputing it. You simply take this contract at its face value and turn it against them beating them with their own weapon.

As a result of it we find ourselves in a unique situation where the roles of AEG and Michael Jackson have reversed into the exact opposite from what they were in 2009.

At that time it was AEG who told everyone that the tour would be a bonanza for Jackson, and now it is Jackson’s lawyers who are saying that it was a goldmine.

Faced with the need to pay big damages AEG will probably even tell us some truth now and admit that they were to pay Michael peanuts and were going to grab the remaining billion estimated by Erk themselves – these days money matters to them much more than their reputation which is ruined anyway.

In short all of it is amazing. The parties have swapped their roles and everything is upside down.  Even a Hollywood scriptwriter wouldn’t be able to come up with a scenario like that.

When the Heavens laugh they laugh in a unique way.

	Monday July 15, DAY 48
1	Hello everyone. Day 48 of Jackson family vs AEG trial has just concluded. Plaintiffs’ expert witness Arthur Erk was back on the stand.
2	Katherine Jackson was in court for the morning session, but not for the afternoon.
3	Side note: Judge Yvette Palazuelos got a hair cut. 🙂
4	Erk explained business management, paying bills, intellectual property.  A master recording is when artist records track in studio, Erk said.
5	Songwriter completes a song, Erk said. A self-published individual will write notes and lyrics, sends to copyright office in Washington D.C.
6	Use license exists whether it is artist on internet who is not signed by a record label or record company, Erk explained.
7	Royalty calculations have not changed, he said, only distribution. Technology advances have changed the industry, Erk testified.
8	Erk: For artist to release song must go to publisher of songwriter or major publishing company to exploit this particular songwriter’s song.
9	The publisher gets 50 cents for every song and artist gets 50 cents, Erk said.
10	He explained the formula radio stations use to calculate and collect over the air royalties
11	In a Print, Folio (printed song material) a songwriter gets 10% of price, Erk testified.
12	In Film, there’s synchronization license to get the right to hear the song in the film. It requires a world wide license.
13	Used to be songwriter gives up right and becomes a member of staff, Erk explained.
14	As Business evolved, biz managers became more savvy, writers wouldn’t give up 100% of copyright, would sell 50% still get co-publishing deal
15	MJ was a tried and tested songwriter and artist from the time he was 5, Erk explained saying he differed from other artists who have died.
16	Panish asked if Erk knows some of MJ’s #1 songs. He responded Beat It, Billie Jan, Man in the Middle, Heal the World, Can’t Stop Loving You.
17	Erk explained that to be a Gold album, it must sell 500,000 copies, Platinum is one million and Diamond is 10 million sales.
18	Erk said he charges normally hour rate of $475. He has worked in a little over 200 hours on this case.
19	The expert has done royalty work for Jackson in mid-80’s. In 1983, he did it for “Thriller,” one of the largest selling albums of all time.
20	“When you have that many sales, there is usually money there, that means they didn’t pay according to the contract,” Erk explained.
21	When MJ’s manager John Branca was pursuing the Beatles catalogue, with 4,000 songs, Erk was hired to determine the value.
22	We call it net publishers share, that is amount publisher is left after paying all co-writers and everyone else, Erk said.
23	Erk: It was our job to go to Robert Holmes a Court, Australian billionaire who owned the catalogue. It was a testing of wills.
24	Erk: We valued catalogue at 40 million. He assessed at 49MM, also didn’t want to give up Penny Lane because he had family member w/ that name
25	The deal got done without that song. Erk said MJ was smart enough to keep his own copyrights.
26	Erk: The average male recording is 75 years. MJ lost 25 years of copyright income.
27	Panish: When someone dies, what happens?
28	The longer you live the longer the copyright goes, Erk said.
29	He assessed areas of touring, the movie was going out on tour, merchandise (t-shits, hats), endorsements (ads, might get signage at arena.)
30	Erk also calculated that MJ would’ve done a thematic show and would’ve earned additional royalties on “grand rights.”
31	Erk described his experience in the business. He’s worked with lots of artists, intellectual property, business management, royalties.
32	He said Bravado is largest merchandising outfit company. Erk examined AEG’s budget, which initially called for 30 “This Is It” shows.
33	Erk reviewed depositions, AEG contract with MJ, picture/development deal that MJ signed w/ AEG, trial testimony, Ortega and Faye’s contract
34	He read emails of AEG’s plans, budgets, handwritten notes of MJ’s; read Ortega’s testimony whether MJ would be successful in film industry.
35	The expert said he saw evidence MJ wanted to do shows in Las Vegas and had intention to record future music.
36	Erk assessed a numerical value for possible losses based on extremely conservative estimates.
37	Panish: When you say conservative analysis, why?
38	Erk: Because I used AEG’s budget numbers that I translated.
39	Erk used several emails from Randy Phillips to show AEG’s plans for future tours. In one, Phillips said MJ sold 750K tickets in 5 hours.
40	AEG prepared budgets. One was at $1.45 exchange rate and another at $1.65, since they used British pounds.
41	Erk said AEG determined what the gross revenue would be for tickets, estimated merchandise sales for shows based on 30 shows originally, not 50
42	O2 arena has 20K seat capacity. They sold 750K tickets for 50 shows. Erk said 1.4% of Great Britain’s population bought tickets for the show
43	Panish: How do you assess ticket prices?
44	Erk: We took the top 5 grossing tours and took average ticket price.
45	Erk showed chart with projections of seats they figured would be sold for MJ touring in Great Britain, Central Europe, Asia, Australia and US.
46	He estimated the actual seat projection to be 12.9 million, out of 5.9 billion people, would generate MJ revenue of $452,155,095.
47	Erk said he didn’t consider MJ’s past tour attendance since MJ said This Is It, it was going to be his final tour; he adjusted the projection
48	Erk said MJ’s albums did “quite fantastically” worldwide, sales doubled and tripled around the world.
49	Erk explained that Tier 1 is what is reasonably assured MJ would’ve done, no speculation, very conservative estimate.
50	Tier 1 are top artists: U2, Madonna, Bruce Springsteen, Bon Jovi, Erk said. “MJ is in a class of his own, King of Pop, no one came close.”
51	Billboard is the music industry magazine, which has a top Box Office for concerts.
52	In the top 25 grossing acts in 2009, Paul McCartney had 10 shows but was 3rd grossing, since he had very expensive tickets and big venues.
53	Only two artists were sold out for all the shows in 2009: U2 and Madonna. Billy Joel and Elton John almost sold out, Erk said.
54	Erk calculated MJ’s ticket price average of $108.18. “He’s the top of the pyramid,” the expert opined.
55	Panish asked if the price could’ve been higher. Erk said AEG did not expect this wild demand.
56	Erk: The demand here was so wild, they could probably sell the tickets for a much higher price and still sold out shows.
57	Total Projected Economic Damages: $1,511,182,374 billion for MJ’s loss of economic earning capacity based on $200 ticket minus MJ’s expenses
58	Total projected income based on $108.18 ticket price: $1,261,745,023
59	Outside the presence of jury, Judge Palazuelos told audience that someone took picture of courtroom and/or jury through the courtroom window
60	She admonished everyone again that no pictures are allowed in the courtroom/courthouse. The windows are now covered, Sheriffs investigating.
61	Judge told jurors they might have to have new procedures to protect them, but judge doesn’t want to discuss that just yet.
62	Erk analyzed five categories: Tour, Merchandise, Endorsements, Vegas shows and Vegas royalties.
63	The assessment was based on the price of ticket sales. The estimate of MJ’s gain was between $1.127 million and $1.511 million.
64	Erk said he’s been in the business for more than 34 years. He said artists always go back to do what they are good at.
65	Erk then calculated Tier 2 category, which is for future earnings for business MJ would most likely do.
66	He said he had MJ on a much reduced tour, period of hiatus, another reduced tour, and decline from there up until he was 65 years old.
67	My belief and perception of AEG executives as well, there’s no other artist like Michael Jackson, Erk opined.
68	Erk projected MJ do 260 shows, average of 2 per week. He said MJ was much bigger than any other artist.
69	Beyonce had a Pepsi endorsement deal of $50 million in 2012. Her most recent tour gross revenue was $119,500,000.
70	MJ’s TII Gross (2009 and 2010) — $638.976.138  Erk did a calculation based on Beyonce’s Pepsi deal and came up with $267,354,032.
71	He added $50 million clothing endorsement and came up with $317,354,032.
72	Erk said he could not compare Beyonce with MJ. “He was the King of Pop,” Erk explained. “There was no other like him.”
73	Projected Income to MJ – Vegas: $269 million. That was for Vegas show after MJ died, where MJ did not have to perform.
74	Royalties, for use of music, would pay 5% of box office: $102 million total.
75	Erk said the calculation in Tier 1 was based on things MJ was reasonably assured of doing. “I tried to err on the low side.”
76	Future Loss: For 37 months $1.127 billion – $1.511 billion; For 48 months $1.462 billion – $1.96 billion.
77	Professional fees: entertainment attorney, business manager and personal manager. Erk calculated MJ would have 20% expense in fees.
78	Future Loss Minus Professional Fees: 10% fee — Range from $1.014 billion to $1.764 billion; 20% fee — range $901,600,000 to $1.568 billion
79	I think their opinion is that there would be no loss of future income, Erk said about AEG economist and accountant expert. Erk disagrees.
80	Panish asked if Erk is familiar with artists saying this is it and returning to tour. “Not to me personally, but I’ve seen in the public eye.”
81	Erk did not calculate how much money MJ could earn making movies. He said he thought it was best left for the jury to decide.
82	Tier 2 is future touring. $373,985, 179 — total projected economic damages for Tier 2, including merchandising.
83	Erk calculated 4 more tours through 2024. Projected Income to MJ — Merchandise $79,407,278.
84	Panish then announced he concluded his direct examination. AEG’s attorney Sabrina Strong did the cross examination.
85	Erk said he spends half of his time doing business management and other half of royalty compliance.
86	Largely, Erk said he made estimations based on touring, but he is not a tour manager.
87	Erk testified he prepared tour budget before. But in his deposition, Erk said tour budget was not part of his responsibilities.
88	Strong said Erk estimated MJ would do 260 shows for TII tour, plus 4 more tours after that. She asked if that wasn’t too much. He said no.
89	Strong questioned Erk’s expertise in tours, endorsements, merchandising, Las Vegas shows.
90	Erk: I relied of what should’ve been an expert, AEG’s numbers.
91	Erk never met Michael Jackson. Strong asked if Erk had personal conversation with MJ about his future plans. He said no.
92	Erk’s firm has spent 650-700 hours for total efforts of all the employees in the company, including his 200 hours, in this case.
93	Strong: Had MJ not died in 2009, you estimate he would’ve gone on tour 3 more years, 4 more tours after that until age 66, correct?
94	Erk: 4 more tours, until age 66, was my professional opinion.
95	The show was called This-Is-It, he was going to blow it out, Erk said, adding MJ planned on earning as much money as he could.
96	Strong: At the time MJ passed away, TII was expected to be 50 shows, correct?
97	Erk: First leg, yes
98	Erk said TII sold 750K tickets in 5 hours, 525K people waiting to buy tickets. “Never done before, never done again,” Erk testified.
99	Erk said he had triple fusion surgery just before giving deposition.
100	Had he lived, I believe he would’ve performed the shows, Erk testified.  “I believe had he lived he would’ve taken the stage.”
101	For his projections, Erk assumed MJ was in good health.
102	Strong: Did not consider MJ was taking Demerol in a regular basis?
103	Erk: No, I did not
104	Erk said he didn’t consider MJ’s use of Propofol, drug abuse. “I’m not aware he was a drug abuser” Erk said; didn’t review medical record.
105	Erk said he would not have changed his opinion if he knew MJ was using Propofol.
106	Strong asked Erk if he knew MJ was ordered to pay $5 million in breach of contract for backing out of the Millennium Concerts.
107	Marcel Avram was the promoter. “And he also spent some time in jail,” Erk said. Strong showed a judgment Avram v MJ for breach of contract.
108	Did Mr. Jackson break the Jan. 14, 1999 contract by failing to perform the Millennium Concerts? Jury answered “Yes.”
109	There was $5.3 million in judgment for breaching contract. Erk said he didn’t even know about this judgment, didn’t use it in his opinion.
110	Strong laid out several lawsuits MJ had for failing to perform. Erk said he had not reviewed any of the prior lawsuits.
111	Strong: Did you take into account any of his prior failed projects?
112	Erk: No. He needed to work
113	Erk said he didn’t consider the fact MJ didn’t tour/perform in 12 years or Prince’s testimony that his father didn’t want to tour anymore.
114	Strong played KJ’s deposition. She said she was a bit surprised with MJ going on tour since MJ didn’t want to do Moonwalk on stage at 50.
115	Strong asked if Erk’s opinion was based on pure speculation. Erk said it was not speculative, he had reasonable assurance MJ would perform.
116	Strong: Mr Erk, are you aware Mr. Jackson generally spent more than $570K a month to live between Jan 2000-June 2009?
117	Erk: I don’t know that
118	Erk relied on a memo to come up with MJ’s monthly consumption. It has handwritten notes amounting to $570k.
119	Strong said there’s testimony MJ was a heavy traveler, used charter planes and stayed at the finest hotels, would take over entire wings.
120	Strong also said MJ spent $435,000 on air fare and hotels in two months period in early 2000s.
121	Judge adjourned session until 9:30 am tomorrow. Erk is back on the stand, only morning session scheduled for tomorrow.
122	After jury left, Panish said he wanted to put on the record that AEG didn’t know if the $5.3 million judgement was ever reversed on appeal.
123	Panish asked if he should present all the lawsuits AEG has been a defendant, like the boy who fell and died at Staples Center.
124	I certainly hope it is final judgment, judge said, adding she doesn’t want to have to undo anything. More on that tomorrow.
125	Attorneys discussed future calendar, it looks like jurors are having problems and need time off.
126	Apparently in August and September, there will be a lot of days off. There are 3 weeks with only 2 day of session scheduled.
127	Judge said mid-September has school starting, “it is just the nature of the beast.”
128	Panish said he will try to finish this week. Witnesses to come: Erk, an economist, Dr. Brown, Katherine Jackson and maybe Tom Barrack.
129	Judge told defendants’ attorneys to be prepared to start their case in chief on Monday.
130	To see Katherine Jackson’s deposition, watch @ABC7 and go to http://www.abc7.com . We hope to see you tomorrow! Good night everyone!

	Tuesday July 16 DAY 49
131	Day 49 of trial has just concluded. Here’s Jacksons’ attorney Brian Panish speaking with our reporter. pic.twitter.com/K7OcHkFyZe
132	Here’s AEG’s attorney Marvin Putnam. Watch complete coverage on @ABC7 and http://www.abc7.com  pic.twitter.com/ebGPSW4cZU
133	Plaintiffs’ expert witness, Arthur Erk, back on the stand. Sabrina Strong, attorney for AEG, resumed cross examination.
134	Katherine Jackson arrived late. She is wearing a graphic print jacket, bold black leafs on white background.
135	Strong: AEG Live never projected MJ would’ve earned anything close to the $900 million you estimated, correct?
136	Erk: That’s correct
137	AEG Live never projected MJ would do 260 shows, Strong asked. Erk agreed.
138	Strong talked back about consumption, which is the amount of MJ’s expenses. She said MJ was $400 million in debt when he died.
139	Strong asked if Katherine Jackson’s Hayvenhurst home was about to go in foreclosure. Erk said yes.
140	The reason he was going on tour was to get himself straight, earn money to take care of his family, Erk said.
141	Historically, MJ spent more money than he earned, Strong said. Erk said that based on the accountant’s testimony, yes.
142	Strong said Siegel noted MJ had substantial income coming in and higher expenses going out.
143	Barry Siegel is one of MJ’s former accountant.
144	Strong asked if Erk knows why Siegel quit his job with MJ. Jacksons’ attorney objected to the form of question.
145	Strong then said assuming Siegel quit because MJ couldn’t control his spending, if that would’ve affect his consumption numbers. Erk said no
146	Strong: And that doesn’t account for million dollars shopping spree?
147	Erk: I don’t call it consumption, I call it fun money
148	Strong asked if MJ spent $20 to $30 million a year more than he was earning. Erk said yes.
149	Strong said $1 billion Erk estimated didn’t include repayment of MJ’s debts. (Implication is you can’t get damages for money to repay debts)
150	Erk said his job was not to consider whether MJ was going to repay his debts. He was hired to estimate MJ’s earning capacity had he lived.
151	Strong asked if Erk knows how much money MJ earned in 2001, 2002, 2003. He said no and that it had no relevance to his assessment.
152	Erk said he reviewed documents attached to depositions explaining MJ’s yearly earnings and consumption.
153	Erk said the estimate of cost of his firm’s work in this case is $300,000. He didn’t review thousands of pages, eliminated all unnecessary.
154	Erk explained he’s been doing this for 34 years and it would’ve taken an untold amount of man hours to go through all the documents.
155	Erk: In my and my partner’s experience, we are very good in judgments. We boiled down what we thought was important for the calculations
156	Strong said Erk’s opinion assumes that MJ would do something he had never done before.
157	Strong: The artist usually had the final decision?
158	Erk: Yes, they have final say but consult with the professionals that surround them
159	Strong showed Erk’s overview of the 260 shows the expert projected MJ would do had he lived, within 37 months.
160	Strong questioned Erk about his 260 tours estimates. She reiterated there’s no AEG document saying MJ would ever do 260 shows.
161	Erk said there was testimony that MJ could’ve done a 48-month tour, which would increase revenue in approximately 30%.
162	The increase would be based on higher ticket sales and merchandising. He didn’t include endorsement, which could be higher too.
163	Erk said he didn’t calculate how many more shows would be required to fulfill a 48 month tour.
164	Using the simple 30% increase calculation, there would be an additional 78 shows, totaling 338 shows in 48 months.
165	Question to followers: Do you think MJ wanted and/or could have done either 260 shows in 37 months or 338 shows in 48 months?
166	The expert said Randy Phillips, a top AEG Live executive, said in an email they would probably do a four year tour.
167	Strong asked Erk if MJ’s record high of number of shows was 123 shows for “Bad” tour in 1987 when MJ was 29 years old. He said yes.
168	Dangerous tour: began in 1992, MJ was about 33 years old, had 73 shows. Strong said Gongaware testified it was about 70 tours.
169	HIStory tour, 1996, MJ was 38 years old — 82 shows. Total of 275 shows if added all together.
170	Strong: Now you have him in one tour, 12 years later, at age of 50, doing 260 shows?
171	Erk: Yes
172	Strong said Erk calculated MJ would gross in “This Is It” more than 10 times he ever grossed before in a tour.
173	MJ’s highest gross tour is “HIStory” — $165 million for 82 shows. It ranks number 26 on the highest grossing tours of the all time.
174	Even though HIStory was the highest grossing tour for MJ, he didn’t take home any money, according to Paul Gongaware’s testimony.
175	Strong: You estimated gross of $1.5 billion for 260 shows and the highest you know MJ ever did was $165K?
176	Erk: Yes
177	Strong: And is that conservative?
178	Erk: Yes
179	Bad — $125 million gross. “I can tell you that show was fantastic!,” Erk opined on Bad tour.
180	Strong asked if Erk’s projection is inconsistent with MJ’s tour history. Erk said the show was called This Is It, his final extravaganza.
181	I packed a lot of shows in to go out with a bang, Erk said.
182	Regarding the ticket numbers, Strong said that for the 260 tours, Erk’s assumption was that it would sell approximately 13 million tickets.
183	Strong: Just like with the number of shows, MJ never sold anywhere near 13 million tickets, correct?
184	Erk: Yes
185	Number of tickets sold in “Bad” was close to 4.5 million. “HIStory” tour sold about the same number of tickets, 4.5 million.
186	Erk said he doesn’t think the child molestation trial would have any impact on whether people would attend his show.
187	Strong asked if MJ never agreed to do more than 50 shows. Erk said he doesn’t know if he agrees with that.
188	Erk said he spoke with Prince on Saturday and he said MJ told him they were going to Asia.
189	Strong asked if people had issue with MJ dangling a baby over the balcony of hotel. He said for a short time yes, but not to affect attendance
190	Strong: You estimated Mj would’ve sold 100% tickets for all the show?
191	Erk: Based on the huge, excessive demand, yes
192	Erk said MJ needed to work, needed the money, so had incentive to perform all shows.
193	MJ was on a category of his own, Erk said, he was the King of Pop, could not be compared to any other artist.
194	Strong: You had MJ selling out Rose Bowl three times?
195	Erk: Yes
196	MJ never performed at the Rose Bowl, Strong said. Panish objected saying MJ performed at Superbowl half time there and it was sold out.
197	Strong asked if Erk used the same price for tickets in all shows, in different countries. He said yes, just adjusted inflation.
198	There are a lot of wealthy people in India, Erk said.
199	Strong asked if Erk knew the stadium in Salt Lake City was for sports events only and that MJ would not be able to perform one show there.
200	Erk said if there was no negotiation, yes, he would not be able to perform there.
201	Judge adjourned session until 9:45 am PT tomorrow. Erk to resume on the stand. Strong estimates another half day of cross, judge gave 2 hrs
202	Jacksons’ attorney still wants to finish his case by the end of the week. There’s no afternoon session today.
203	Katherine Jackson will probably be plaintiffs’ last witness. It’s still unclear when the matriarch will take the stand.
204	After session ended, attorneys for both sides had a heated exchange of words in the hallway when they were talking to media and fans.
205	Both attorneys were shouting to each other, court clerk asked them to knock it off, called sheriffs.
206	After that, both attorneys gave us interviews about their views of the case. Watch complete coverage @ABC7 and http://www.abc7.com
207	We hope to see you tomorrow for complete coverage of the trial. Have a nice one, everybody. Court begins at 9:45 am PT tomorrow.

Wednesday July 17, 2013. DAY 50

On this day AEG’s lawyer Sabina Strong finally did what was inevitable in this case – she told us the real sum AEG was planning to pay to Michael as a result of performing 50 shows.

This sum was $22 million.

• “Net Income, amount of money AEG Live projected MJ would take home had he performed all 50 shows at the O2 arena: little over $22 million”

Do you remember that AEG claimed that they were dividing their profit in the ratio of 90/10 –  90% as Michael’s share and 10% as AEG’s share?

And now we get first-hand information from AEG themselves that out of the $95 mln. for the tickets sold Michael was to get only $22 mln. which is less that one fourth of the whole sum collected for the tickets.

However even the balance of $73 mln. was not the final sum due to AEG. The real revenue was much bigger as it included merchandising and money from the 3D film which amounted to $37mln according to their preliminary estimations made in May 2009:

If we add up $73 mln and $37mln AEG’s share will come to $110mln, while Michael’s share will still remain at $22mln (in case AEG did not add some per cent to Michael for the merchandise).

So the real ratio in AEG’s business with Michael Jackson was planned to be roughly 20/80. In other words 80% of the money made for them by Michael was to be taken by AEG. 

In short it was going to be a big fraud.

Now we know how they make their billions, don’t we?

	Wednesday July 17, DAY 50
208	Hello form the courthouse in downtown LA. Day 50 of Jackson family vs AEG trial is currently underway.
209	Jackson’s expert witness, CPA Arthur Erk, is back on the stand for cross examination. Sabrina Strong, for AEG, doing the questioning.
210	Outside the presence of the jurors, judge told everyone to follow the rules of the court and that things are getting out of hand.
211	This comment was made in light of the heated exchange between the attorneys in the hallway yesterday while talking to the media and fans.
212	Judge called attorneys for both sides into her chambers for a sidebar.
213	Earlier today, the court sent email to all media members that interviews are to be conducted only in approved areas or outside the building.
214	Yesterday, after session concluded, attorneys for both sides were in the hallway speaking to the media and got angry at each other.
215	Jacksons‘ attorney Brian Panish and AEG’s attorney Marvin Putnam shouted words to each other. Sheriffs were summoned to calm them down.
216	When jurors took their seats, Judge Yvette Palazuelos told them they have a better estimate for end of trial to be in mid-September.
217	Judge said attorneys are trying their best to expedite things, but with some days off and lots of witnesses estimate is stretched further.
218	Back to testimony. Strong asked Erk about sponsorship/endorsement. He estimated MJ would get $317 million in the “This Is It” tour.
219	Erk estimated clothing endorsement to be $50 million and $217 million based on a calculation of a Pepsi deal Beyonce had in 2012.
220	Erk said MJ’s clothing would become a fashion statement and that people would want to wear it. Thus the demand.
221	Strong questioned whether Erk really thought MJ, at 50 years old, would be a fashion icon for young audience. He said yes.
222	She then asked if the $50 million figure was speculation. Erk said no that he had reasonable belief shows would happen, clothes would sell.
223	Speculative is hope, Erk opined.
224	Erk came up with $50 million for clothing endorsement based on earlier deal of $28 million plus inflation/financial adjustments to year 2009
225	Erk said he relied on news reports regarding Beyonce’s Pepsi deal. He didn’t actually see the deal himself.
226	Beyonce’s most recent gross was close to $120 million. The Pepsi deal was, reportedly, $50 million, which is almost 42% of the tour revenue.
227	Strong: Do you know if anyone ever used your methodology to estimate endorsement deal?
228	Erk: No
229	Strong inquired Erk whether he knows any other artist who has endorsement being 40% of gross revenue.
230	Erk said that most endorsement deals are private, Beyonce’s was the only one that was made public through the media.
231	Strong questioned whether Erk always trusted the media reports to be true. He said no, but no one disputed Beyonce’s endorsement number.
232	Strong asked if Erk knows for a fact that Beyonce’s endorsement deal being 42% of gross revenue is true.
233	If the reported figures are correct, the 42% is correct, Erk said.
234	I answered before I didn’t see the contract, my firm doesn’t have Beyonce, I couldn ‘t confirm the deal.
235	Strong asked if Erk thought MJ’s image was rehabilitated in June of 2009.
236	What I do know as fact is that the demand was there, Erk said. “The demand was there, I think that is unquestionable.”
237	Strong: Was his image rehabilitated by June 2009?
238	Erk: It wasn’t consideration on my part since it sold so many tickets in a short time
239	I think AEG was more concerned with people in the US than worldwide, Erk said.
240	Strong: So my question was, do you think MJ’s image was rehabilitated to get an endorsement deal?
241	Erk: If you need a yes or no answer, the answer is yes
242	Erk: By evidence of selling so many tickers, I have no other way to come to that conclusion, but based on the facts of tickets sold, yes
243	Strong: You are not aware of any endorsement or sponsorship deal for TII tour being in place when MJ died?
244	Erk: No
245	Strong asked if MJ’s molestation accusations and trial affected his estimation in the endorsement deals.
246	The outstanding, unprecedented demand for tickets took care of that, Erk said.
247	Going back to Beyonce, Strong asked if Beyonce ever had negative publicity. “As far as I know, no,” Erk responded.
248	Strong asked Erk if he relied on AEG’s own budget to come up with his estimations. He said yes.
249	AEG’s projection of what MJ would take home was a little over $20 million, according to the budget Strong showed.
250	Net Income, amount of money AEG Live projected MJ would take home had he performed all 50 shows at the O2 arena: little over $22 million
251	Alternative budget had projection of a little over $30 million, Strong showed.
252	Strong said the range AEG Live was projecting MJ would take home for performing all 50 concerts at O2 arena was between $22 and $30 million.
253	AEG projected 750,000 tickets sold and didn’t estimate revenue of merchandising.
254	AEG did not project a single dollar in endorsement in this budget or any other budget that Erk saw.
255	Strong showed a side-by-side demonstrative of AEG’s and Erk’s projection.
256	Erk’s projection: Approximately 13 million tickets sold, 260 shows, merchandising and endorsement estimate.
257	Net revenue to MJ, 260 tour $460 million
258	Merchandising $121 million
259	Endorsements $317 million
260	Net number of $890.5 million
261	Erk said he relied on email exchanges from September 2008 that included records, movies and others, such as worldwide tour.
262	It shows they clearly intended to take him around the world, Erk said about the email on the plan, mentions a net to MJ of $132 million.
263	Erk said AEG had no idea of the demand and when the shows were sold out in a matter of hours they knew they could take the show everywhere.
264	Strong: Do you know any tour that ever grossed that much?
265	Erk: No. This would’ve been world record breaking tour
266	Strong: You testified in your depo you have no idea whether MJ would be successful at making movies, correct?
267	Erk: That’s correct
268	Strong asked if Erk recalls Katherine Jackson saying MJ didn’t want to do the Moonwalk after he was 50. He said yes.
269	Strong played Paris Jackson’s deposition regarding future plans: Paris says her dad wanted to relax, didn’t want to tour anymore.
270	However, Paris also said it was a world tour. “How did you know that?
271	Because he told us we were going around the world,” Paris said.
272	Strong showed demonstrative with Erk’s projection for MJ’s future tours:
273	40 shows at 60 years old
274	50 shows at age 63
275	45 shows at age 66
276	Erk acknowledged MJ did 275 shows between 20-50 years old.
277	Strong: So you had him do 455 shows over 5 tours until the age of 66?
278	Erk: 260 shows were reasonably certain to happen, 195 shows was an estimate based on my professional opinion.
279	Strong finished her cross examination. Judge broke session for lunch, Jacksons attorney did re-direct in the afternoon.
280	Erk said AEG’s experts in the same field as his charge more than him for the work.
281	Katherine Jackson not present in court in the afternoon.
282	Panish: Has Mr. Jackson ever been proved guilty of any allegations that AEG mentioned?
283	Erk: No
284	Panish asked if Phillips, Anschutz, Gongaware did not enter into an agreement with MJ due to concerns of the allegations?
285	Erk: They entered into the 3 year tour contract as well as movie deal
286	Panish: Was there any emails AEG, Philips, Gongaware saying they didn’t want to make money off of MJ due to the allegations raised?
287	Erk: I didn’t see anything to that effect.
288	Panish asked Erk if Tiger Woods had some things that could be viewed as negative allegations against him. He said he believed so.
289	As to Tiger Woods, Erk said in 2012, he believes it was reported endorsements went back up to $70 million.
290	Panish: Alex Rodriguez — has there been allegations against him regarding certain activities?
291	Erk: Yes, surfacing every once and a while
292	Panish: How are his endorsements?
293	Erk: He’s doing fairly well
294	Regarding Beyonce and her endorsement deal, Erk said the calculation he made came up to 18,5%, not the 42% Strong said.
295	Panish asked if MJ’s past and the allegation have anything to do with how much money MJ could earn.
296	Erk said he based his opinion on AEG’s projection and “if it was good enough for them, it was good enough for me.”
297	AEG spent money before even getting to London, Erk testified.
298	Panish asked Erk to assume Phillips estimated MJ would make $50-100 million for London dates if it was consistent with his opinion. He said yes
299	Panish: Assume Phillips said MJ’s earnings could rise to 500 million if he did a world tour? Is that consistent with your opinion?
300	Erk: Yes
301	As to future tours, Erk said Paris testified in her deposition (played earlier today) that MJ told her they would tour worldwide.
302	Erk said Ortega’s deposition and testimony talked about take this tour on the road, to the world, and that MJ would like for him to go too.
303	Erk said Ortega discussed going to India and Japan with MJ.
304	Panish asked if MJ and Ortega working further together. Erk said MJ wanted to ultimately produce movies.
305	Erk said AEG had the resources to find out about MJ’s financial issues and there’s no reason to believe they didn’t know about MJ’s problems
306	Erk said he didn’t focus on MJ’s health because AEG signed the contract and began spending money, which determined the tour would go forward
307	Panish asked if Erk saw evidence AEG was concerned with MJ’s health. Erk said only that he passed a physical, was healthy and ready to go.
308	Panish: Did Phillips make statements as to whether MJ could perform a worldwide tour?
309	Erk: Yes
310	Panish said AEG had questions of Demerol, baby, allegations, trials so he wanted to clear whether there was demand for the tour.
311	Panish showed Gongaware’s testimony when he talked about the high demand for MJ’s tickets.
312	Panish: Did you take that into consideration as to whether or not there would be demand for MJ’s tour?
313	Erk: Absolutely
314	Panish asked why he took Phillips and Gongaware’s testimony into consideration for his projections and calculation.
315	They were the ones selling the tickets, they should be in the know, Erk said.
316	Panish: Was MJ popular and could’ve sold tickets?
317	Erk: Absolutely
318	Panish read a lengthy testimony from Randy Phillips when he said they were all surprised with the demand for tickets and standby people.
319	Strong objected, and added that there’s no question about the demand for the 50 show.
320	Panish: Is there any question in your mind AEG not only believed they could sell out in London but worldwide?
321	Erk: No question
322	Panish: Would you describe the demand for MJ’s ticket a hope?
323	Erk: No
324	Erk went through the email describing what Phillips’ plans were.
325	“If London goes smoothly, we could migrate this show to the brand new, state-of-the-art stadium in Berlin, the O2 World,” Phillips wrote.
326	Email from September 2008 plan: In July 2009 — If all goes well, we embark on a well routed and spread out worldwide tour taking advantages of the gigantic secondary ticket market, massive sponsoring opportunities subject to how well we have rehabilitated him and very lucrative “exotics”.
327	Mick Jagger is 69 years old, lead singer of the Rolling Stones. He just finished up shows that AEG promoted, Erk said.
328	Keith Richards had a long history of heroine problems, Erk said. He’s also almost 69 years old and is touring, doing quite well.
329	Barbra Streisand is 71 and just finished up shows for AEG as well, Erk testified. Erk said Streisand grossed more than $18 million.
330	Panish showed a spreadsheet with all MJ’s monthly expenses. The annual consumption based on actual receipts for MJ — $7.6 million.
331	Erk said he used $570K/month, which would work out to $6.7 million. He used higher monthly figure, but less annually.
332	For professional fees, Erk said he considered 10-20%, anywhere between $3-5 millions.
333	Panish: Does people usually lend money for people who can’t pay it back?
334	Erk: No
335	Erk said MJ had assets to secure loans. Erk explained how the loan of significant amount of money works.
336	Erk said MJ did not have working income in ten years.
337	Panish: If you don’t have work income, is it possible you’re going to spend more than you earn?
338	Erk: Most likely
339	Panish: What was it that secured the debt?
340	Erk: Primarily his Sony/ATV catalogue
341	Panish: Did you just make-up this world tour idea?
342	Eark: No
343	Here’s a first-draft look at worldwide MJ tour.
344	Email from Gongaware: MJ first draft worldwide tour projection
345	Right now we project 186 shows… Net to Mikey $132 million. On paper, it starts Jan 9 and runs thru April 2011... It’s a big number, but this is not a number MJ will want to hear. He thinks he’s so much bigger than that. Talk in terms of gross receipts, he suggested.
346	186 shows over 27 months — Gongaware projection
347	260 shows over 37 months — Erk projection
348	Erk said AEG had 1.59 show per week in their projection and Erk had 1.60 shows per week in his projection.
349	Panish showed a document Gongaware attached to his projection with a list of tentative venues all over the world.
350	World tour included: Berlin, Hamburg, Munich, Paris, Zurich, Milan, Johannesburg, Dubai, Japan, India, Australia, New Zealand
351	More tours:, South America, US starting in Florida, Texas, New Orleans, California, Denver, Utah, Chicago.
352	Panish said this is a document prepared by Gongaware in addition to the 50 shows in the O2 arena.
353	There was a projection of $3-$10 million for private shows. Except with the private shows, Erk says his calculation was similar.
354	Panish asked if shows in AEG’s projection were carried over to 37 months, how many shows would that be?
355	Erk: Almost 260
356	Panish asked why 37 months. Erk said contract between MJ and AEG was 3 years, and he added a month.
357	Panish asked Erk is he saw multiple AEG documents detailing plans for worldwide tour. He said yes.
358	Panish: What are the figures AEG used for worldwide tour?
359	186 shows for 27 months
360	260 shows for my budget, 37 months
361	Erk said that prorating the same amount of shows in 37 months, it is almost 260 shows.
362	AEG projection is $132 million in the low end, $150 million in high end for less shows, less months, Erk said.
363	Erk said he used stadium shows and bigger arenas because of unprecedented demand.
364	Email from Phillips to Leiweke on April 15, 2009: He is happy and they picked all male and female dancers. I intend to shove those 50 shows up Irving’s and Rapino’s asses and march on to do another 3 years of a world tour.
365	Email Thomas Overseen saying he had a client with serious interest in MJ’s tour in India.
366	Phillips answered: Thanks, Thomas. MJ will definitely heading your way
367	Panish asked Erk if he reviewed this email to determine if the tour in India wasn’t just a hope, but plan. He said yes.
368	Erk said Phillips was striking deal with Bravado to rent empty store in Oxford Circle to offer nothing but MJ merchandising.
369	Panish asked if Erk believed it would help sell the merchandise. He said yes.
370	In re-cross Strong asked if Erk saw the June 2009 AEG budget and how much money AEG projected for the sale of merchandising.
371	Erk said he saw it and believes it was maybe in the $10 million range or thereabouts. Erk projected $121 million, the expert said.
372	Strong: And the merchandise projection AEG had was between $8 and $10 million, right?
373	Erk: Yes, that’s what was in the budget
374	Strong pointed in the email where there was an indication for “a” date in India, not 60 dates in India like Erk projected.
375	Strong: AEG Live had a lot of hope after selling the show?
376	Erk: I think it’s more than hope
377	Strong: Wasn’t AEG hopeful for a successful tour?
378	Erk: You’re always hopeful
379	Email from Phillips to Nanoula in June 2008 detailing the plans for MJ’s future: Richard, these are just my off the cuff ideas…
380	The email mentions 12-14 new songs and then release of series on new singles. Erk said he doesn’t know that MJ finish them.
381	Strong: Randy Phillips acknowledged that all had to go well, didn’t he?
382	Erk: It appears that way
383	Strong asked if Phillips hoped he could have massive sponsorship opportunities if all went well. Erk said yes.
384	Erk said he has no knowledge of what AEG tried to do to get sponsorship opportunities for the tour.
385	As June 2009, Strong asked if Erk saw any evidence or sponsorship in place before his death. He said no.
386	Strong talked about the September 2008 email with $132 million projection.
387	She asked Erk if the email was written without knowing whether MJ would ever agree to it. He said yes.
388	Back to India, Gongaware projected 3 shows plus one private show. He contemplated 8 shows in Japan plus one private.
389	Strong said Gongaware’s projection was not near what Erk calculated.
390	Email from Phillips to Leiweke: Colony is receptive but skeptical like us as to whether MJ will really work.
391	Strong: No one at AEG projected the numbers you projected, correct?
392	Erk: That’s correct
393	Strong: MJ agreed to only 50 shows at the time he passed away in June 2009, isn’t that correct?
394	Erk: Yes
395	Panish in re-re-direct: What did he tell his children
396	Erk: We’re going on a worldwide tour
397	He took his children wherever we went, Erk said
398	Panish asked if selling out in a matter of hours is going well. Erk responded “Yes and then some.”
399	It can always go better, but it was fantastic, Erk said.
400	Panish asked if Gongaware, as good promoter and with the sales he saw, would want more shows. Erk said he would’ve done as many as he could.
401	Next witnesses: Dr. Emery Brown (on Propofol) and economist Peter Formuzis
402	Erk is excused. Judge adjourned session until 10 am PT tomorrow.
403	During arguments late in the day, judge asked AEG if they intend to call Dr. Murray to testify. Putnam responded he has no intention.
404	For all the latest, watch @ABC7 and visit http://www.abc7.com . We hope to see you tomorrow for complete coverage of the trial.
405	Here’s a link to today’s story with Paris’ deposition: http://abclocal.go.com/kabc/story?section=news/entertainment&id=9176665 …

As to the number of shows AEG was planning for Michael Jackson we can make our rough calculations ourselves.

The article below quotes the details of Jackson’s deal with AEG and says that Michael could make $400 mln. for the four years of touring the world. The Wall Street journal estimation of his earnings was $30mln to $50mln for 30-50 shows which roughly made $1mln per show.

But if one show was to pay Michael $1mln. (according to the Wall Street journal) how many shows was AEG planning for Michael if they promised him $400 mln all in all?

400 shows?

No matter how much money this suit boils down to isn’t this AEG business an eye-opening experience for all of us?

March 6, 2009

Michael Jackson Could Make as Much as $400 Million from Comeback Concerts

Yesterday, Michael Jackson engaged in a rather awkward fan conference that was assembled to announce his run of dates at London’s O2 Arena. Today comes word that Jackson could make a boat load of money from the dates–as much as $30 to $50 million— and if he decides to take the shows international (which he reportedly is considering), he could make upwards of $400 million over the next four years. 

The Wall Street Journal has the details of Jackson’s deal with AEG Live, which is planning a similar run of dates for Jackson in Asia and North America (which couldn’t go down until 2011, for unexplained reasons).

Depending on how many dates he adds, Mr. Jackson’s take from the London concerts alone could be between $30 million and $50 million, according to people familiar with the matter. Tickets to the London performances are to go on sale, via an online lottery system at MichaelJacksonLive.com, next Wednesday for £50 ($70) to £75 ($105) each.

Mr. Jackson would then have the option to add more dates in Europe, Asia and finally North America. But he is not committed to play any shows beyond the original 10, and would in any event not reach the U.S. before 2011. “He has been the biggest star in the world and it’s time for him to get back on the stage,” said Randy Phillips, president and chief executive of AEG Live.

http://www.prefixmag.com/news/michael-jackson-could-make-as-much-as-400-million-/26683/

*  *  *

It is Friday July 19th and Michael’s mother is to testify today. Sina has sent us wishes for Mrs. Jackson which I am posting here on behalf of many of us:

We wish Mrs Jackson courage, strength and spiritual guidance to stand her ground today against AEG .

The love for your son, your search for justice and clarity what happened to him and the heavy but honorable task you were given to guide Michaels children for him will see you through.

There will be attempts to distract you, to bring you down, to discredit you, like they did to your son.

But as T. Mesereau said, you have morality on your side.

You have the love and support of your family, friends and the silent majority of fans who have been loyal to you from the first time we heard of your family nearly 50 years ago, and still today.

We are sure that members of TeamMichael, who we thank for their hard work, will be there to show their support for the part of the fans who want justice, who believe in the righteousness of the case and in you.

Let me also add that we shall be praying for you…