In 1985, pop music superstar Michael Jackson advised his lawyer, John Branca, to quote for the Northern Songs music brochure, which consistedof the tunes of the Beatles. In a tough settlement, Branca protected the rights to the collection.
Over the next 3 years, veryfirst as Jackson’s lawyer and lateron as the administrator of his estate, Branca carriedout various complex settlements to safeandsecure and broaden Jackson’s music publishing empire upuntil it endedupbeing the biggest music publishing business in the world.
Harvard Business School teacher James K. Sebenius signsupwith host Brian Kenny and a live audience of Harvard Business School alumni to goover how to offer with hard arbitrators efficiently and fairly in his case, John Branca: “Negotiating the Beatles’ Northern Songs Catalog.”
BRIAN KENNY: Webster’s Dictionary specifies the word “negotiation” as a conversation or discussion inbetween 2 or more celebrations with the objective of reaching an arrangement or dealingwith a dispute. The word stems from the root of 2 Latin words: “neg” significance “without,” and “otium” significance “ease.” Put them together and you get “without ease,” which mostlikely appears apropos for anybody who has ever been engaged in high-stakes settlements, or with youngchildren and teens. It’s not for the faint of heart. As Henry Kissinger stated, “It is honestly a error of beginners to think that you can gain the upper hand in a settlement.” Which is a not-so-diplomatic method of stating, “Some things are muchbetter left to experts.” Today on Cold Call, we welcome Professor James Sebenius to goover the case, “John Branca Negotiating the Beatles Northern Songs Catalog.” I’m your host Brian Kenny and you’re listening to Cold Call on the HBR Podcast Network.
So, for those of you who are listening to our podcast as our normal listeners, you’re not mindful, however we’re really taping this in front of a live audience at Harvard Business School throughout Alumni Reunion weekend. Folks make some sound so they can hear you.
Right now I’m going to start with Jim. Let me present you Jim. Jim Sebenius isn’t simply a member of the settlements system at Harvard Business School, he established it. He likewise directs the Harvard Negotiation job at Harvard Law School. In addition to his researchstudy and mentor on the subject, Jim hasactually been straight included in many complex settlements and he brings that experience to his brand-new podcast, Dealcraft. He’s a fellow podcaster and you can discover that podcast on Apple Spotify, all the podcast locations. So, make sure that you tune into that. And Jim is signingupwith us fresh back from the Middle East where he was there last week talking to Israeli and Palestinian diplomats and company leaders. You needto be a little tired.
JIM SEBENIUS: A little exhausted, however I guess that’s not a fantastic marker of success, is it?
BRIAN KENNY: I guess it’s not. But fantastic that you’re there doing some essential work and mentor some diplomacy in a part of the world that truly seriously requires it. And terrific to have you here today to talk about this specific case, the John Branca case. I discovered it truly intriguing. Many of us will keepinmind that when this offer tookplace, this was an huge offer of Michael Jackson protecting the brochure, the Beatles brochure. I wear’t think anyperson actually provided a lot of idea to the settlements that went on behind the scene. And having read the case, I can inform you it brings up all kinds of truly fascinating subjects. So thanks for composing it. Thanks for being here to talk about it. Let me ask you to start by informing us what the main style is in the case and what your cold call is when you start the conversation.
JIM SEBENIUS: So thanks Brian, I value it and thank you for revealing up. I believe this will be kind of enjoyable. This case, I believe having taught it now a coupleof times is truly about one of the subjects that trainees and senior executives in those discover most vexing. Because it’s one thing to state settlement has all sorts of cooperative possible and win-win and produce worth and so forth, which I’m a company follower in. But I believe the concern that it vexes lotsof individuals is how do you offer with actually hard bargainers both efficiently and morally? And that’s truly the wider style that this case is about. And the particular cold call that I utilize, you sanctuary’t read the case, so I’m going to fill in simply a small bit of background. Michael Jackson, he began to endedupbeing rather rich, Thriller was an massive success, and individuals came to him and stated, “Do you desire tax shelters? Do you desire to buy genuine estate? Do you desire to buy something else?”
And he went to his buddy Paul McCartney, who stated, “I gather publication rights, the words and the music, not the master recordings, however the words and the music for usage anywhere, and possibly you’d be interested in that too?” And Jackson truly was. And in truth, he started to ask his attorney, John Branca, to start to discover various brochures. So he purchased Sly and the Family Stone and some other things. Well, long story brief, it endedupbeing nearly out of the blue that the Beatles brochure, which was Northern Songs owned by something called ATV was readilyavailable, was on the market. And we’ll go through some of the procedure, however the cold call concern is, you, John Branca on behalf of Michael Jackson haveactually been informed, “Do not let this brochure go, it is mine. But wear’t overnegotiate or pay too much.”
And so, he’s done a couple of handshake offers with Robert Holmes à Court who owned and regulated this. Holmes à Court hasactually reneged on those handshake offers. He’s gone up 2 or 3. Another set hasactually come up and quote much more than most individuals believe it’s worth. Branca is attempting to figure out, here’s the concern, what do you do?
BRIAN KENNY: I’m constantly curious about not just what inspires professors to compose about a specific subject, however why does it make for a excellent case? What do you believe in this circumstances makes this a great case?
JIM SEBENIUS: Well, you constantly get interest when there’s a extremely significant market and individuals who are widelyknown, and in my world, individuals who likewise turn out to be actually exceptional arbitrators. If I can both interview them thoroughly, usage clips for those in the class, which makes it really real. And it’s a case of something that individuals actually care about. And I believe here, the thing, which I pointedout earlier, is when you’re dealing with truly hard bargainers who deal in a method that you discover rather dishonest, however they’re offers that you actually desire and you truly requirement to have takeplace, what do you do? How do you manage that? And this is not an unusual issue, and I believe this case truly shows that. So the other piece is, although we’ll focus on a subset of the settlements in this case, this is not a particular offer per se. Yes, it includes the acquisition of the Beatles brochure for Michael Jackson, however numerous subsequent offers, which is real of lots of settlements. It’s not simply one shot, however you’re then dealing with other individuals around the exactsame concern as it develops. So the brochure endsupbeing a really huge part of a joint endeavor with Sony. The Sony offer really endsupbeing larger. And when Jackson passes away, that has other locations. Branca’s included all the method through. So it’s not a offer. It’s a offer over time with lots of gamers that affected each other.
BRIAN KENNY: Yeah, Branca was truly young when this case begins. Michael Jackson was such an enigmatic figure. Particularly at this point in his profession, there’s a lot of mystique around him. How does Branca come to understand him and come to work for him?
JIM SEBENIUS: Well, Branca’s a remarkable guy, and I got to understand him through an odd coincidence. He turns out to be a co-executor of the Jackson Estate when Jackson passedaway in2009 And a 5th of Jackson’s estate was expected to go to charities including kids. And the program on settlement, I’m not a attorney, however I do head the Harvard settlement job throughout the River at the Law School, they were really interested in settlement for young individuals. And so Branca came to us and I started talking to him and I understood that he truly was a interesting guy. Just a couple of factoids. He’s had over 30 of his customers in the Rock and Roll Hall of Fame. That begins with Dylan and the Rolling Stones and Fleetwood Mac and the Beach Boys all the method to Dr. Dre-
BRIAN KENNY: Amazing.
JIM SEBENIUS: … and Elton John. When you talk to him, this is not my world, however it’s kind of enjoyable to hang around. In any case, when he reveals up for classes, which he insomecases does… And he has kind of a checkered history in the sense that he dropped out of high school, he endedupbeing a drug addict, he had a band, the band got a significant agreement, and for a year it opened for The Doors. So this guy is truly kind of uncommon. He simply recognized he mostlikely wouldn’t make it in that world. So he went back to junior college, then eventually law school and endedupbeing a fracture legalrepresentative. He was 29 years old when Michael Jackson endedupbeing 21 and might get out from under the thumb of his truly prideful dad, Joe Jackson, who had kind of handled the then Jackson Five and Michael was actually eager to get out. They fulfilled in a law workplace. Branca was a junior guy in an homeentertainment law company in Los Angeles. And Jackson generally stated, “Haven’t I fulfilled you before?” And John stated, “I puton’t think so.” But he raised his sunglasses and then in impact, “I like you, however are you as excellent as Mickey Rudin?” Mickey Rudin was Frank Sinatra’s famous music legalrepresentative. He stated, “I’m muchbetter.” Confidence is not in brief supply with Branca. And in the early years, simply to kind of bring us up to this case, Branca relatively rapidly showed himself by getting a lot more cash for Jackson in specific agreements. He raised cash for a totally uncommon and unconventional at the time movie, which was Thriller. That was a remarkable circumstance. By the method, he was exclusively accountable on the service side of this. When you stated infamous or mystique, there’s a dark side to that as well. And it was an on and off relationship. He went from the 80s to the 90s and then he was off the payroll and then he was on, and then he was off and back on. When you appearance at his veryfirst weddingevent photo, which I might program you, however we’ll hold off on that, you have Little Richard officiating. Michael Jackson is the finest guy. Anyway, I won’t state that that was his last maritalrelationship either, however that’s another story.
BRIAN KENNY: You pointedout earlier Michael Jackson stated, “I wear’t desire to lose this offer.” Clearly he was enthusiastic about it. When anyperson’s enthusiastic about something, even if you love a home, you’re home searching and you desire to buy that home, you puton’t desire to lose the offer, ideal? How does that impact Michael Jackson’s capability to be neutral in this thing? And what does that mean for Branca as he’s believing about negotiating it?
JIM SEBENIUS: Branca has on the wall in his workplace, this note. Branca had brought the possibility of purchasing the Beatles brochure and Jackson had a set of financialinvestment consultants, individuals he actually reliedon. And these were severe market individuals like David Geffen, who for Geffen records, John Johnson, who at that time was the wealthiest African American, began Jet and Ebony and a series of other individuals he had. And the music market individuals, the record labels had all passed on this since they idea it was method too expensive. But Jackson simply believed, “This is a gem.” You’ve got financial concern marks, however Branca is then generally informed, “Don’t over-negotiate.” And then he informed him independently, “Don’t pay too much, however do not come back without it.” Okay. Because as Branca stated, “You puton’t state no to Michael.”
BRIAN KENNY: Yeah, and I’ll simply state for our listeners who are listening, what we’re looking at right now is a handwritten note it looks like from Michael Jackson to Branca.
JIM SEBENIUS:
He passed that note to Branca in the conference where they were examining whether or not to go ahead with the-
BRIAN KENNY: He essentially states, “Don’t deal. I’ve lost offers that method inthepast.”
JIM SEBENIUS: “Lost a lot of offers that method, wear’t do that. Except, puton’t paytoomuch.”
BRIAN KENNY: Michael Jackson undoubtedly moved in heady circles and Branca ultimately had to check with some of the individuals in those circles, consistingof Paul McCartney and Yoko Ono before moving forward with the offer. Why did he feel it was essential to do that?
JIM SEBENIUS: Well, Michael Jackson was close pals with both Yoko Ono and Paul McCartney, and he stated, “I frantically desire this, however I puton’t desire it if they wear’t desire me to have it.” In other words, if they puton’t desire it offered. Jackson provided Branca Yoko Ono’s number called up. She stated, “I’d much rather have another artist own this than some business.” And then he talked to John Eastman, who was Paul McCartney’s brother-in-law and lawyer and stated, “Would Paul have any issue with this?” Because why does he desire to pay 40 or 50 million to ransom the tunes that he himself owned? And there’s a long story about how they lost control of it, however it had to do with British tax laws and this and that. And Eastman stated, “No, that’s method too much cash. Paul would neverever desire to buy something that in impact he developed.” And that infact turned out not to be real. But he got the consent straight from Yoko Ono and indirectly from McCartney’s brother-in-law and lawyer.
BRIAN KENNY: Yeah, and I guess it’s ignorant to believe that’s an possession that you develop, you own it permanently. That’s simply not how it works.
JIM SEBENIUS: No, ask Taylor Swift.
BRIAN KENNY: Yeah. Yeah, precisely. Yeah. Let’s talk about Robert Holmes à Court. So he was the individual who had control of this brochure. He was the one that you’re workingout with. What’s he like to offer with?
JIM SEBENIUS: In Branca’s experience, they shook hands on more than one offer, one for an preliminary 37 and a half million dollars, then for 40, then for47 And each time he idea he had a handshake offer, in reality,