Whitney to Sony: “I Will Always Owe You”

"I owe you how much?"

There have been numerous media reports since her untimely death that Whitney Houston passed away “dead” broke. In January a Whitney insider told Radar Online “Whitney’s fortune is gone. Music industry heavy hitters are supporting her and her label is fronting her cash against her next album, but no one knows when that will be released. She might be homeless if not for people saving her…She is broke as a joke. She called someone to ask for $100. It is so sad. She should have Mariah Carey money, and she’s flat broke.” Stories in the mainstream media claiming she died near bankruptcy continued to appear in spite of reports that insisted Whitney had made $36 million from her last tour a couple of years ago and, of course, her huge new $100 million dollar record deal with Sony Music in 2002.

How in God’s name could she, or anyone, have blown through that much dough?

The answer is simple, according to one source who was close to Whitney. “It takes a lot of money to maintain that lifestyle”.

Then again, Sony never wrote out a check for $100 million either.

According to a very highly placed industry source who is very familiar with the Whitney situation, the deal most likely looks like every major superstar recording contract these days. The deal would be something like this: 4 studio albums and 2 compilation album (Greatest Hits, Number One’s, something like that) with a $25 million advance for the first album (Just Whitney) and a $10 million advance for the second album (I Look To You). Tacked on to that advance would be the costs of the music videos at approximately $500,000 each (there was a total of 6 music videos produced under the new deal which would total approximately $3 million in costs). That would bring the total amount of money that Whitney Houston would owe Sony to approximately $38 million. Maybe more. Her royalty rate was most likely $4 per album, and the new deal would have reset all future royalty payments on past catalog. Any deficits in her royalty account up to that point were more than likely wiped out, according to the source, basically giving Houston a fresh start. This means that Whitney would have to sell at least  9.5 million albums to repay here advances and start to get royalty checks.

Now we have to look at what she has sold. The first album under the new deal,  2002′s Just Whitney, has sold 763,188 in the US. The second album, I Look To You from 2009, sold 992,904. That’s a total of  1,756, 092. Let’s round it off at 1.76  million. Now let’s double it to account for foreign sales. That brings the total to approximately 3.51 million. Now let’s add in her Christmas album from 2003, One Wish: The Holiday Album, which sold 490,00 units. That brings here total sales to around 4 million units under her last deal.

Now, according to Billboard Magazine, “The late Whitney Houston has two of the three biggest jumps on the Billboard 200 this week. Her “The Preacher’s Wife” soundtrack runs 183-90 (up 93 slots) and “I Look To You” flies 118-65 (up 53 positions). “The Preacher’s Wife” sold 7,000 (up 46%), while “I Look To You” did 9,000 (up 81%). Houston, who died on Feb. 11, sold a collected 247,000 albums last week (ending Feb. 19) — the first full sales week after her death. Her biggest seller was “Whitney: the Greatest Hits,” with 175,000 (up 174%). Overall, Houston’s albums earned a 144% sales increase in the week ending Feb. 19, compared to the 101,000 sold in the week ending Feb. 12.” Clearly that sales pace will slow considerably. But let’s add the sales of the last 2 weeks, even though the Soundscan figures quoted above for Just Whitney and I look To You have already been factored in. That would come to 348,000. That brings her total album sales under the 2001 $100 million deal to approximately 4.35 million units.

Let’s now subtract the 4.35 million albums she’s sold since 2001 from the 9.5 million albums she would have to sell for Sony to recoup its investment, and that leaves us with over 5 million. Let’s assume that going forward Whitney: the Greatest Hits will be the biggest seller as it has been since her death. It sold 175,000 units at the peak of the Whitney buying surge. If that could continue, which it certainly won’t, Whitney would most likely occupy the Number One position on the Billboard album charts every week for the next six months! As one label executive familiar with Sony’s accounting said, “That ain’t going to happen. The reality is that her estate probably won’t see a royalty check from Sony in our lifetime…at least”.

On top of the millions of advances, one of my insiders says that throughout her career Whitney consistently took out loans from the label with Clive Davis’ assistance. The last big loan was reportedly from Clive for $1.2 million, though everyone knows it came from Sony and not from Clive. “No way Clive would ever reach into his own pocket for anyone’” said one former label employee.

Let’s not forget that Whitney didn’t write any of her own songs nor produce her own records, thus excluding many millions more in royalties. Also she didn’t have a lot of endorsements or ongoing revenue streams like a Beats by Dr. Dre.

One Whitney insider said that there’s yet a bigger problem. Evidently the Whitney estate doesn’t have the brain trust that Michael Jackson’s has. “They just don’t have a smart guy like John Branca who would have marched into Sony the day after Whitney died and renegotiated the deal,” he said. “You can bet that the estate doesn’t even have coupling rights, and that’s something a guy like Branca would have gotten right away.” Another Whitney loyalist said that since she broke with her manager/father John Houston, there has been no other industry professional looking after het career–no one on a day-in-day-out basis to exploit any revenue opportunities or even coordinate with agents, the label, marketing departments, etc.  “Do you have any idea how much she could have gotten for her sync rights? Nobody ever even thought about it”, he said.

If Whitney did die broke, as so many reports claim, many people assumed that her heirs would be well off from her record royalties alone. That’s just not the case. Not for a while, at least. She’ll be in hock to Sony for quite a long time. It’s almost like instead of a “death tax” Whitney will be paying a “Sony tax”.

© 2012, Wayne Rosso. All rights reserved.

9 comments for “Whitney to Sony: “I Will Always Owe You”

  1. James Remer
    March 5, 2012 at 10:56 AM

    Fascinating article. I don’t know much about the commercial music workings so perhaps you could explain what “coupling rights” are?

    thanks

  2. March 2, 2012 at 7:08 AM

    “On the contrary

    WR”

    Again, my bad. Should’ve known comments were being moderated. *sigh* Anywho, thanks for approving them, it’s appreciated 100%

  3. March 1, 2012 at 8:02 PM

    *looks around internet* Hmm. Looks like my comments got deleted. *shrug*

  4. March 1, 2012 at 7:08 PM

    Auto correct error: straw poll = struggle. Apologies.

  5. March 1, 2012 at 7:07 PM

    Who are these industry insiders? From whom do these “balanced” budget speculations come? If we’re going to go about lambasting the problems with Whitney’s deals, we should at least get a name of somebody who would go ahead and let people be privy to that kind of private information. I, for 1, am sick and tired of hearing about how people who weren’t directly involved in this woman’s business seem to know so much about it. Please understand that this is most certainly not a comment to defend Sony or its legal negotiations. But until I have a right or reason to see the exact numbers are paperwork involved with Whitney Houston’s music career, the best that I or anyone else can do is pray for a positive outcome. I am by no means naive about the underhanded dealings that happen in the industry, believe me; I am just appalled at how we continue to drag the name of a legend through the mud and mire of the media, When we could’ve used this moment to show that everyone deserves forgiveness and respect, even people who were going through or have gone through a straw poll

    • CR
      March 5, 2012 at 4:22 PM

      P. Murray: If you’re bothering to read Wayne’s blog you should know that he knows of what he speaks.

  6. February 29, 2012 at 7:32 PM

    Good article. Couple of corrections though. With a superstar deal Whitney probably collected 18 percent either of gross margin or, given her mega status surpassing Madonna as the top selling female solo artist of all time, let’s be generous and say 18 percent of MSRP. Her royalty would therefore be $1.50 on the low side and $2.87 on the high side.

    Typically major artists aren’t bound to the newer advent of 360 deals that give the label a cut of other proceeds nor would they finance the videos. An independent producer would.

    So without taking into account free goods factors or any other A&R or promotions costs tacked on to the bill, she’d have to have sold 13 to 25 million copies to recoup her pooled advance and start collecting royalty checks.

    A great couple of reads on this subject are Shemel and Krasilovsky’s “This Business of Music” and Donald Passman’s “All You Need to Know About the Music Business.”

    • February 29, 2012 at 9:08 PM

      You are right about royalty rates, but those really do not apply to big superstars. Whitney was getting at least $4 per record. Same with Springsteen and several others. My sources on this are exceptional.

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