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Monetizing the Celebrity Meltdown

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Barrack’s turn into entertainment investing began with a visit to Michael Jackson’s home in Las Vegas in 2008. Barrack had received a call from Tohme Tohme, a fellow Lebanese-American who had become Jackson’s business manager. Jackson hadn’t released a new album or done a world tour in years, but he had three significant assets: the Neverland property, the MiJac catalogue of his own music, and the enormous Sony/ATV catalogue, which included, among other songs, most of the Beatles’ oeuvre. Jackson was facing a crisis, Tohme said. The holder of $270 million in loans to Jackson was foreclosing on Neverland and planned to sell it in five days. Would Barrack meet with Jackson? “It’s so not Tom’s thing,” Lowe says. “Getting roped into spending half an hour with Michael Jackson in some weird house is just not on his agenda.”

Somewhat grudgingly, Barrack arrived at Jackson’s fifties stucco rental on Palomino Lane. “Not one blade of grass,” Barrack says. “The house was old and musty.” The 1,000-plus-page Sony/ATV catalogue was on the table between them, and Barrack was quickly won over. “For sure, the guy is an absolute genius,” Barrack says. “He was remembering not just songs but every performance, every date, every script.” When it came to business matters, though, Jackson was lost. He knew only that if Neverland was foreclosed on as scheduled, it would trigger a cascade of financial devastation. For the past decade, he had repeatedly staved off financial reckoning by borrowing. Now he was out of options.

As a rule, Barrack is drawn to distressed situations. One of his rules for success.

Barrack had a relationship with the loan holder, Fortress, and was able to get an extension to give his Colony team time to crunch the numbers. They concluded that the only way to make a deal work would be for Jackson to start generating new revenue, which meant performing old material. Two days later, Barrack called Jackson. “I told him: ‘Where you are is an insolvable puzzle unless you’re willing to go back to work. If you’re willing to do that, then we can help, but if you’re not willing to do that, it’s just presiding over a funeral.’ ” At first, Jackson demurred. “He really had a hard time with that, and he struggled for about three days. Finally, he calls back and says, ‘You’re right, I’ll do it.’ ”

Colony agreed to bail out Jackson; in return, the firm would take ownership of Neverland and arrange for AEG, the concert promoter owned by Barrack’s friend Phil Anschutz, to stage a comeback. An unforeseen complication arose when Barrack received a call from the King of Bahrain, whom he knew from Sardinia, where Barrack owns much of the Costa Smeralda; astonishingly, Jackson had apparently forgotten that while being hosted in Bahrain, he had signed over a number of recording and performance rights to the king's son. Colony had to buy out that interest. Jackson moved into a gated $100,000-a-month mansion in Bel-Air to prepare for a run of 50 concerts in London that would relaunch his career. Instead, it ended it. He was struggling physically and heavily medicated by a live-in doctor. He died, from a sedative overdose, eighteen days before the first concert.

But in the frenzy of posthumous adulation of Jackson—in those first days, it was hard to find an FM radio station that wasn’t playing “Billie Jean” or “Beat It”—Barrack watched as Jackson’s value was suddenly and spectacularly realized. This Is It, a documentary about Jackson’s preparation for the comeback concerts, grossed $261 million worldwide during its theatrical run, a record for a concert film, and the Jackson estate signed a series of lucrative deals, including a video game and a Cirque du Soleil show.

“What’s amazing,” Barrack says, “is he attained in death what he could never attain in life.” It may be an obvious observation, but it’s one with huge financial implications for a long-term investor. Anyone who had seen past the momentary distractions of controversy and scandal could have identified the intrinsic preciousness of Jackson’s talent and fan base. Colony hadn’t predicted Jackson would die, of course, but it had wagered correctly that, over time, Michael Jackson the asset would outshine its liabilities (and even Michael Jackson the person).

As a rule, Barrack is drawn to distressed situations. One of the adages in a list of “rules for success” that he sometimes distributes to employees is “befriend the bewildered.” And when you start applying the thought process of a vulture investor to pop culture, suddenly the world can seem dizzy with opportunity. Is Lindsay Lohan a drug-addled train wreck or an underestimated future cash machine? What about Mel Gibson? Rob Lowe himself, now a ubiquitous television star, would have made for a profitable distressed investment if Rob Lowe shares had been floated in the late eighties. It’s all a matter of correctly analyzing an asset’s fundamentals and buying at the right time.


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