Thirty years ago today, Michael Jackson purchased the Beatles catalog from an Australian billionaire for $47.5 million plus a personal appearance. Before that, he had been close friends with Paul McCartney and learned about the concept of purchasing song copyrights when McCartney showed him his song portfolio that was generating income for him each month.
The Beatles catalog is one of the remaining crown jewels of the remaining Michael Jackson estate, with some estimating its value to be over $1 billion against the $500 million in debt and tax liabilities being held against the estate. The only song Michael Jackson didn’t own? Penny Lane, because the Australian billionaire Robert Holmes Court retained that song for himself because he named his daughter after it.
It is an instructive case on how compounding works that Michael Jackson has grown richer through death–the tax liabilities and debt have compounded, yes, but the lucrative assets have compounded at a slightly higher rate over the past five years creating a favorable spread for the estate.
I do wonder whether the $1 billion valuation for the Beatles estate is correct, though. I’m not that familiar with British copyright law, but usually, assets revert to the creator after 56 years. That would imply, starting in 2018, the song ownership would gradually return to Lennon & McCartney who are credited as the creators of the material (the estates of Ringo Starr and George Harrison likely wouldn’t have a claim on most of the songs unless they were explicitly credited as songwriters for it because of how UK copyrights are typically measured).
This, incidentally, is the risk that I think runs through Warren Buffett’s mind every time he gives detailed accounts of his investment value investing practices. Would someone take his wisdom and apply it against him? Over the past 50 years, the answer has generally been no: People just aren’t patient enough to value invest. Heck, they’re dumping BP stock right now, which generates $7 billion in net profits even with oil so low and all of the hardships relating to the oil spill litigation and its Russian operations. Expecting people to maintain rationality when seeing daily market quotations is too much to ask for most people, but provides an immense competitive advantage for those able to master it.