Jacksons vs AEG - Day 48 – July 15 2013 – Summary
Katherine Jackson is in court
Arthur Erk Testimony
[ Source : Majority of the information is from ABC7 unless otherwise indicated]
Jackson direct
Erk explained business management, paying bills, intellectual property. A master recording is when artist records track in studio, Erk said. Songwriter completes a song, Erk said. A self-published individual will write notes and lyrics, sends to copyright office in Washington D.C. Use license exists whether it is artist on internet who is not signed by a record label or record company, Erk explained. Royalty calculations have not change, he said, only distribution. Technology advances have changed the industry, Erk testified. Erk: For artist to release song must go to
publisher of songwriter or major publishing company to exploit this particular songwriter's song. The publisher gets 50 cents for every song and artist gets 50 cents, Erk said. He explained the formula radio stations use to calculate and collect over the air royaltiesIn a Print, Folio (printed song material) a songwriter gets 10% of price, Erk testified. In Film, there's synchronization license to get the right to hear the song in the film. It requires a worldwide license. Used to be songwriter gives up right and becomes a member of staff, Erk explained. As Business evolved, biz managers became more savvy, writers wouldn't give up 100% of copyright, would sell 50% still get co-publishing deal
"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. Panish asked if Erk knows some of MJ's #1 songs. He responded Beat It, Billie Jean, Man in the Mirror, Heal the World, Can’t Stop Loving You. Erk explained that to be a Gold album, it must sell 500,000 copies, Platinum is one million and Diamond is 10 million sales.
Erk said he charges normally hour rate of $475. He has worked in a little over 200 hours on this case. (ABC7)
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. “When you have that many sales, there is usually money there, that means they didn’t pay according to the contract," Erk explained. When MJ’s manager John Branca was pursuing the Beatles catalogue, with 4,000 songs, Erk was hired to determine the value. "We call it net publishers share, that is amount publisher is left after paying all co-writers and everyone else," Erk said. Erk: It was our job to go to Robert Holmes a Court, Australian billionaire who owned the catalogue. It was a testing of wills. Erk: We valued catalogue at 40 million. He assessed at 49 Million, also didn't want 2 give up Penny Lane because he had family member w/ that name. The deal got done without that song. Erk said MJ was smart enough to keep his own copyrights.
Panish: When someone dies, what happens? Erk: The average male recording is 75 years. MJ lost 25 years of copyright income. The longer you live the longer the copyright goes, Erk said.
He assessed areas of touring, the movie was going out on tour, merchandise (t-shits, hats), endorsements (ads, might get signage at arena.) Erk also calculated that MJ would've done a thematic show and would've earned additional royalties on “grand rights.”
Erk described his experience in the business. He's worked with lots of artists, intellectual property, business management, royalties. He said Bravado is largest merchandising outfit company.
Erk examined AEG's budget, which initially called for 30 "This Is It" shows. Erk reviewed depositions, AEG contract w/ MJ, picture/development deal that MJ signed w/ AEG, trial testimony, Ortega and Faye's contract. 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.
The expert said he saw evidence MJ wanted to do shows in Las Vegas and had intention to record future music.
Erk assessed a numerical value for possible losses based on extremely conservative estimates.
Panish: When you say conservative analysis, why? Erk: Because I used AEG’s budget numbers that I translated.
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. AEG prepared budgets. One was at $1.45 exchange rate and another at $1.65, since they used British pounds. Erk said AEG determined what the gross revenue would be 4 tickets, estimated merchandise sales 4 shows based on 30 shows originally, not 50. 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
Panish: How do you assess ticket prices? Erk: We took the top 5 grossing tours and took average ticket price.
Erk, who described his financial calculation as conservative, said his projections included a 37-month tour with the London shows and an average of two concerts a week in Central Europe, Asia, Australia and the U.S. He said he also included a 10-year show in Las Vegas based on Jackson's music, where the singer would not have performed. It also included sales of merchandise and endorsements. (LATimes)
Erk said he was using conservative estimates to figure Jackson's earning potential if he had lived for several more years, completed a worldwide tour and created a Las Vegas show based on his music. The estimates took into account endorsements and royalties that Jackson could have earned and are heavily dependent on the idea that Jackson would have performed a 37-month, 260-concert world tour. (AP)
Erk showed chart w/ projections of seats they figured would be sold for MJ touring in Great Britain, Central Europe, Asia, Australia and US. 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. 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. Erk said MJ's albums did “quite fantastically” worldwide, sales doubled and tripled around the world.
Erk explained that Tier 1 is what is reasonably assured MJ would've done, no speculation, very conservative estimate. 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."
Billboard is the music industry magazine, which has a top Box Office for concerts. 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. Only two artists were sold out for all the shows in 2009: U2 andMadonna. Billy Joel and Elton John almost sold out, Erk said. The jury was shown a chart from Billboard magazine of the highest-grossing tours of 2009, led by U2, Madonna and Paul McCartney. Jackson, he said, would have beat them all.
"Michael Jackson was in a class by himself," Erk said. "He was known as the King of Pop. There’s no one who comes close to him." (LATimes)
Erk calculated MJ's ticket price average of $108.18. "He's the top of the pyramid," the expert opined. Panish asked if the price could've been higher. Erk said AEG did not expect this wild demand.Erk: The demand here was so wild, they could probably sell the tickets for a much higher price and still sold out shows.
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. Total projected income based on $108.18 ticket price: $1,261,745,023
Erk figured that if AEG charged $108 a ticket for the concerts, Jackson's worldwide tour and the Las Vegas show would net him $1,127,378,787. If tickets were $200 each, what were described as his "lost economic damages" would total $1,511,182,374. “Demand was so wild that he probably could have charged more for tickets and still sold out,” Erk said.
Erk pointed to the singer's record sales. "Thriller" sold 65 million copies worldwide, "Bad" 45 million, "Dangerous" 32 million, "Off the Wall" and "HIStory" 20 million and "Invincible" 13 million.“Looking at it historically, he has a huge fan base," the accountant said. (LATimes)
His projections include Jackson spending $134,386,236 total over the next 15 years, which took him to age 65 and retirement, Erk said. (LATimes)
[ Outside the presence of jury, Judge Palazuelos told audience that someone took picture of courtroom and/or jury through the courtroom window. She admonished everyone again that no pictures are allowed in the courtroom/courthouse. The windows are now covered, Sheriffs investigating. Judge told jurors they might have to have new procedures to protect them, but judge doesn't want to discuss that just yet.]
Erk analyzed five categories: Tour, Merchandise, Endorsements, Vegas shows and Vegas royalties. 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. 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.
Erk then calculated Tier 2 category, which is for future earnings for business MJ would most likely do. 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. "My belief and perception of AEG executives as well, there's no other artist like Michael Jackson," Erk opined.
Erk projected MJ do 260 shows, average of 2 per week. He said MJ was much bigger than any other artist.
Beyonce had a Pepsi endorsement deal of $50 million in 2012. Her most recent tour gross revenue was $119,500,000. 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. He added $50 million clothing endorsement and came up with $317,354,032. Erk said he could not compare Beyonce with MJ. "He was the King of Pop," Erk explained. "There was no other like him." Projected Income to MJ - Vegas: $269 million. That was for Vegas show after MJ died, where MJ did not have to perform. Royalties, for use of music, would pay 5% of box office: $102 million total.
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." Future Loss: For 37 months $1.127 billion - $1.511 billion; For 48 months $1.462 billion - $1.96 billion. Professional fees: entertainment attorney, business manager and personal manager. Erk calculated MJ would have 20% expense in fees. 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.
"I think their opinion is that there would be no loss of future income," Erk said about AEG economist and accountant expert. Erk disagrees.
Panish asked if Erk is familiar w/ artists saying this is it and returning to tour. "Not to me personally, but I've seen in the public eye."
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.
Tier 2 is future touring. $373,985, 179 -- total projected economic damages for Tier 2, including merchandising. Erk calculated 4 more tours through 2024. Projected Income to MJ -- Merchandise $79,407,278.
AEG Cross
AEG's attorney Sabrina Strong did the cross examination.
Erk said he spends half of his time doing business management and other half of royalty compliance. Largely, Erk said he made estimations based on touring, but he is not a tour manager. Erk testified he prepared tour budget before. But in his deposition, Erk said tour budget was not part of his responsibilities.
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.
Strong questioned Erk's expertise in tours, endorsements, merchandising, Las Vegas shows. Erk: I relied of what should've been an expert, AEG's numbers. Erk never met Michael Jackson. Strong asked if Erk had personal conversation with MJ about his future plans. He said no.
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.
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? Erk: 4 more tours, until age 66, was my professional opinion.
"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. Strong: At the time MJ passed away, TII was expected to be 50 shows, correct? Erk: First leg, yes. Erk said TII sold 750K tickets in 5 hours, 525K people waiting to buy tickets. "Never done before, never done again," Erk testified.
Erk said he had triple fusion surgery just before giving deposition.
"Had he lived, I believe he would've performed the shows," Erk testified. "I believe had he lived he would've taken the stage."
For his projections, Erk assumed MJ was in good health. Strong: Did not consider MJ was taking Demerol in a regular basis? Erk: No, I did not. 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. Erk said he would not have changed his opinion if he knew MJ was using Propofol.
Strong asked Erk if he knew MJ was ordered to pay $5 million in breach of contract for backing out of the Millennium Concerts. 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. "Did Mr. Jackson break the Jan. 14, 1999 contract by failing to perform the Millennium Concerts?" Jury answered "Yes.". 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. Strong laid out several lawsuits MJ had for failing to perform. Erk said he had not reviewed any of the prior lawsuits.
Strong: Did you take into account any of his prior failed projects? Erk: No. He needed to work. 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.
AEG Live defense attorney Sabrina Strong questioned Erk's assumption during cross-examination because Jackson had never completed a tour that long and hadn't performed a tour in more than a decade. Strong also questioned Erk about three instances where Jackson got into legal disputes over canceled performances, but the accountant said those didn't factor into his analysis. "He needed to work," Erk said. (AP)
Strong played KJ's deposition. She said he was a bit surprised with MJ going on tour since MJ didn't want to do Moonwalk on stage at 50. (ABC7) On the video, she said she was surprised when her son announced the "This Is It" shows in London. "He would always make a joke about he don't want to be doing the Moonwalk on stage when ... he's over 50," she said. "He wanted to be doing something else." (AP)
Strong asked if Erk's opinion was based on pure speculation. Erk said it was not speculative, he had reasonable assurance MJ would perform.
Strong: Mr Erk, are you aware Mr. Jackson generally spent more than $570K a month to live between Jan 2000-June 2009? Erk: I don't know that. Erk relied on a memo to come up with MJ's monthly consumption. It has handwritten notes amounting to $570k. Strong said there's testimony MJ was a heavy traveler, used charter planes and stayed at the finest hotels, would take over entire wings. Strong also said MJ spent $435,000 on air fare and hotels in two months period in early 2000s. (ABC7) Strong also questioned why Erk didn't take into account Jackson's lavish spending, which the lawyer said another witness testified in deposition consisted of $435,000 spent over two months on hotel and airfare in the early 2000s. (AP) He said he did not consider the fact that Jackson was an estimated $400 million in debt when he died as a factor in his future earning potential. (AP)
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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. Panish asked if he should present all the lawsuits AEG has been a defendant, like the boy who fell and died at Staples Center. "I certainly hope it is final judgment," judge said, adding she doesn't want to have to undo anything.
Attorneys discussed future calendar, it looks like jurors are having problems and need time off. Apparently in August and September, there will be a lot of days off. There are 3 weeks with only 2 day of session scheduled. Judge said mid-September has school starting, "it is just the nature of the beast."
Panish said he will try to finish this week. Witnesses to come: Erk, an economist, Dr. Brown, Katherine Jackson and maybe Tom Barrack. Judge told defendants' attorneys to be prepared to start their case in chief on Monday.