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Jackson's Beatles catalog at risk

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Who should own The Beatles' songs?
Michael Jackson
The Beatles
Hedge funds
Public domain
Michael Jackson
Bank of America Corporation
Sony Corporation
Paul McCartney

(CNN) -- Michael Jackson may have earned more than half a billion dollars over his career, but now he's having trouble paying the bills -- and his lenders say the pop star's entire fortune is at risk.

"He is not broke, he is still asset rich -- he has assets of value," says Brett Pulley, senior editor at Forbes magazine.

Those assets include music catalogs. Jackson owns half of Sony/ATV Music Publishing, which controls 200,000 songs, including most of The Beatles and Elvis Presley's hits.

He also owns a catalogue of his own songs called Mijac Music. Whenever any of these songs are played on the radio, Jackson makes money.

"Mijac is worth somewhere around $150 million. Sony's publishing business is worth between $900 million and $1 billion, 50 percent of which is Michael," says Pulley.

Add Jackson's Neverland Ranch in Santa Barbara, California, estimated to be worth at least $25 million, and his assets come to at least $600 million.

So why does he owe anyone anything?

Because, like so many people, the King of Pop has a cash flow problem.

At Jackson's child-molestation trial in California, now in the hands of a jury, government witnesses testified he is facing a severe cash crunch.

No new hits have meant no new sources of money, but his lavish spending continued -- including having more than 60 outfits made for his trial so he never had to wear the same one twice.

Forensic accountant John Duross O'Bryan testified Jackson is spending about $20 million to $30 million a year more than he earns.

Jackson, Duross O'Bryan testified, has long-term liabilities of about $415 million. The result is "an ongoing cash crisis," Duross O'Bryan testified.

To fund his lavish lifestyle, Jackson has borrowed against his assets.

By 2000, he owed Bank of America, the No. 2 bank in the United States, a quarter of a billion dollars. And he used his music catalogue -- and his stake those Beatles and Elvis hits -- as collateral.

The bank told CNN that as Jackson's situation worsened, it feared he might default. So to lower its risk, Bank of America did what banks typically do in similar situations -- it sold the loans, in this case to a hedge fund, the New York-based Fortress Investment Group.

Duross O'Bryan said that one of the loans that Bank of America sold to Fortress, valued at $200 million, is due to be paid in full in December 2005.

Pulley said "there was a point five or six weeks ago where (Jackson) missed a payment."

If Jackson continues to miss payments, the hedge fund could force him to sell his share of the music catalogues and pay off the loans -- which would wipe out his income.

And Jackson still faces some pretty big expenses -- including his legal bills.

Jackson's legal fees have topped $20 million in the last few years because of all the lawsuits that keep popping up every few weeks -- lawsuits filed by potential business partners, accountants, lawyers, former employees and concert promoters.

Now Jackson has to cut costs, or he's got to figure out a way to make more money from what remains of his legend, which may not be an easy task.

"It is going to be very hard for Michael Jackson to resurrect his career," says music producer Bruno Delgranado. "It's impossible to recapture that. If he does it, he will be the first. But no one has done that, it's close to impossible."

Jackson makes money each time a Beatles song is played on the radio.

If Jackson loses the rights to The Beatles' catalog, it could put into play one of the world's most valuable song portfolios, CNN/Money reported. (Full story)

Jackson, 46, acquired the Beatles song catalog in 1985 for $47.5 million, outbidding ex-Beatle Paul McCartney. Jackson then sold a piece of his stake to Sony a decade later.

Song catalogs have become hugely lucrative in the last two decades due to the compact disc boom, rising sales of Internet downloads, and movie studios and advertisers willing to pay royalties to use hit songs in film scores and commercials.

Jackson, through Sony/ATV, owns all but a small selection of the Fab Four's compositions, including megahits like "Yesterday," "Let It Be," and "Sgt. Pepper's Lonely Hearts Club Band." He does not, however, own the actual sound recordings; those rights are held by EMI's Capitol Records.

Jackson and Sony receive a fee each time a Beatles song is played on the radio or a Beatles album is sold.

Industry royalty rates for single-song plays can run under 10 cents, while rights holders typically earn a small percentage on each album sold. The small amounts add up to millions of dollars in revenues a year.

Another major revenue stream for Jackson is Mijac Music, the copyright holder on all of his hits and other artists' songs. Mijac is thought to be worth roughly $75 million, according to reports.

Jackson was indicted last year on charges he molested a boy, then 13, providing him with alcohol, and then conspiring to hold him and his family hostage after a damaging TV documentary about Jackson and the boy aired.

Jackson has denied the charges against him.

CNN Correspondent Ali Velshi and CNN/Money contributed to this report

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