om

UNITED STATES TAX COURT - TRIAL

ESTATE (OF MICHAEL J. JACKSON DECEASED)

n.c
EXECUTORS: JOHN G. BRANCA. AND JOHN MCCLAIN

COMMISSIONER OF INTERNAL REVENUE (IRS)

so
February 8th 2017

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Presiding Judge Mark V. Holmes

Jacksons estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, R

lJa
obert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Sa
lkin Rettig Toscher & Perez PC, Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of
Hoffman Sabban & Watenmaker and Howard L. Weitzman of Kinsella Weitzman Iser Kump &
Aldisert LLP.
ae
The
IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Mus
en and Laura Mullin.
ich

--------------------------------------------

Previously John Branca used Felix Sebacious(Vice Pres) to sue HTWF, Declaration here
http://www.teammichaeljackson.com/declaration-of-sebacious-felix-bravado
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THOMAS BENNETT
(Bravado chief executive)
a
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w.
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THOMAS BENNETT sworn in

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DIRECT EXAMINATION

Mr Weitzman:
Q. Mr. Bennett, what's your current employment or work?

so
A. The same field ... music merchandising.

Q. And how long have you been in music merchandising?

ck
A. Thirty-seven years.

Q. Can you explain ... well, first did you work for a company called Bravado?

lJa
A. Yes.

Q. Before Bravado, I think you were with Sanctuary.

ae
A. Yes.

Q. Is that correct?
ich

A. It was, yeah.

Q. Okay. And did you have experience working with Michael Jackson?
mM

A. Prior to this event no, but ...

Q. Okay.

A. ... yes, you know.

Q. So explain to us what music merchandise is.

a

A. The most basic form of it is we sign the rights for an artist's name and likeness. For the
Te

majority of artists, most of this is based upon tour income. And for a very small poll of music
artists, they do generate money in other ways, in retail sales or through licensing, but it's a very
small percentage of artists that manage to do that in a meaningful way.
w.

Q. And what do you understand ... you use the phrase name and likeness. What does that mean
in your business ... in the music merchandise business?
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 om
A. Most of the time when we try to get these rights, we try to get them exclusively. It means that,
you know, the artist, image, logo, we would have the exclusive rights to put that on different
types of merchandise that we would sell, again, historically predominantly at tours, but as much

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as we can into retail stores and to do the licensing deals with the parties that would be interested
in licensing that artist.

Q. And what types of merchandise ... I don't mean to exhaust this, but just give an ideal ... give
us an idea of what type of merchandise you're referring to.

so
A. Generally speaking, a big piece of it would be, you know, basic upper body apparel which
would be things like t-shirts and sweatshirts and hats, etcetera. And then depending on the
success of those types of products, you get into different products. And again, the majority of the

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time, they're relatively simple products.

Q. What, you mean like coffee cups ...

lJa
A. Coffee cups ...

Q. ... posters ... ae

A. ... lighters, flags, posters, calendars.

Q. Okay. When you worked with Michael Jackson, was that in conjunction with the AEG '02
tour?
ich

A. It was, yes. That's when we first got involved.

Q. And what was your title at Bravado at that time?

mM

A. I was the worldwide CEO of Bravado.

Q. And what ... do you recall the year that that ...

A. 2009 I think.

Q. And did you get involved through AEG and Randy Phillips?
a

A. Yes. Through Randy Phillips.

Te

Q. So could you tell me what you were asked to do?

A. I would call and email Randy once we had seen that Michael was going to do the dates of the
w.

'02 in London. And very quickly, it went from, I believe, 10 shows to the potential of 50 shows,
which made it a very big thing in the world of music, and particularly in the world of music live
merchandise. So we ... or me ... aggressively pursued Randy, who was the producer, I think, as
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much as the promoter of this event, and said that we would like to get involved and, you know,
we have a certain expertise that we think makes us a good partner for yourselves.

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Q. And this was tour merchandising, correct?

A. At the beginning, yes. It was tour merchandising.

Q. I'm talking about this is all pre-death now.

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A. Yes. I understand. Yeah. I think there was a very small element. And again I'm sorry, I don't ...
you know, I don't have the ability to reread the agreements. I think there was a small element of
potentially retail or something, but the vast majority of our interest in it and our thought behind it

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was the dates at the '02.

Q. And did you agree to pay in advance for these rights?

lJa
A. Yes, we did.

Q. And the advance ... who was it payable to?

ae
A. I believe it was payable to AEG.

Q. But not directly to Michael Jackson?

ich
A. Not directly to Michael, yeah.

Q. Okay. And did you then ... first of all, did you pay the advance right away when you got
involved?
mM

A. No, we did not. The contract was still being negotiated up and until Michael's demise.

Q. Okay. So is it your recollection there was no signed agreement before Michael passed away?

A. That is correct.

Q. And there was no money paid before Michael passed away.

a

Mr. Voth: Objection. Leading.

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Judge Holmes: Sustained.

Mr Weitzman:
w.

Q. Was there any money paid before ...

A. There was not.

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Q. ... Michael ... okay. Did you have any concerns about creating merchandise for Michael
Jackson?

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A. More words, sorry. I don't ... in what respect?

Q. Well, had you ever been in business with Michael Jackson before?

A. Never been in business with him before, no.

so
Q. And were ... did you understand this to be kind of a ... what did you understand that this tour
represented in the music world?

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A. We realized it was a huge undertaking for somebody who had not performed for a number of
years. And as we got closer to the event ... which, you know, I think everybody was very
nervous that he would, in fact, be able to do the 50 shows.

lJa
Q. Would you have done a non-tour general merchandise deal for Michael Jackson's name and
likeness?

A. Not for any meaningful money.

ae
Q. Why is that?

A. We had no interest because, as part of this process to do the tour, we did speak to retailers
ich
around the world and to licensing potential partners, and the level of interest, even with the dates
on sale, was very low.

Q. And did any of these retailers indicate to you why the interest was so low?
mM

A. Not really. I just think that, you know, Michael historically had not been a big, you know,
merchandising property in the retail world for many, many years, and there was no demand. I
guess people ... you know, they based their demand, most retailers, upon people coming into the
stores and asking for it.

Q. And did anyone mention the allegations, which were unproven, but the allegations involving
child molestation?
a

A. Maybe, but I ... to be really honest, I didn't focus on that, and I don't remember anybody
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saying anything.

Q. Okay. So after Michael passed away ...

w.

A. Yeah.

Q. I'm sorry. I forgot to ask you. Did you create designs for merchandise for the tour?
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A. We did, yes.

Q. And did you meet with Michael Jackson about those designs?

n.c
A. Yes, we did.

Q. You personally were there at the meeting?

so
A. I was.

Q. And did he approve some of the designs?

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A. He ... we ... I ... again, very approximate round terms, we presented about 300 items to him,
and I think he approved literally 295 of them.

Q. Okay. And did you then manufacture the items?

lJa
A. No because we never, you know, consummated the deal and the shows didn't happen.

Q. After Michael passed away, did you speak with Mr. Phillips or representatives of AEG to do a
post-death merchandise deal?
ae
A. Yes, we did.
ich
Q. And what was the nature of that deal?

A. The nature of that deal is when any big celebrity dies, there's an immediate desire in the
marketplace for memorabilia merchandise, and you never know how long that's going to last.
You don't know if it's going to be Elvis or if it's going to be something that's short-lived. But
mM

there was a pretty decent-size demand. And I spoke to Randy, and I think the conversation very
quickly got to the fact that it would be the right thing to do to, you know, satisfy this demand to
make sure that the money wasn't taken by people who were doing unofficial merchandise, which
is ...

Q. You mean bootlegging?

a

A. Exactly ... which happens very quickly when there isn't a deal in place, which there wasn't
one for Michael Jackson. So it was probably a bit more of a rush than usual because there was no
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deal in place.

Q. And so did you come to an agreement, ultimately, with AEG?

w.

A. Yes we did.

Q. And do you remember roughly what the terms of the deal were?
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A. Yeah. The terms were that we had the rights to the 295 images and products that Michael had
approved prior to his death. And we paid in advance of $5 million.

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Q. To AEG?

A. To AEG, I believe.

Q. And ultimately rather than AEG, did you end up working with Michael Jackson's estate?

so
A. We did.

Q. By the way, between the time you made the deal with AEG and paid the $5 million, had you

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begun to manufacture merchandise?

A. No. We wouldn't have manufactured until we had paid the $5 million.

lJa
Q. Okay. After you paid the $5 million, did you begin to manufacture ...

A. Yes. ae
Q. ... merchandise? And was this at a time before there was a deal with the estate?

A. I believe so. Yes.

ich
Q. So the merchandise had begun to go out to retailers, and I'm assuming some were sold.

A. Yes.

Mr. Voth: Objection. Leading.

mM

Judge Holmes: Sustained. Watch the form,

Mr. Weitzman:
Q. Were some sold after ...

A. Yes.
a

Q. ... it went out to retailers?

Te

A. The products were sold. Yes.

Q. And what were the terms of the deal with the estate, if you recall?
w.

A. It was a broader body of rights where is the name and likeness for the artist over and beyond
just the 300 items, which meant that we would be able to get into things like licensing out
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Michael's name and image, and we paid in advance of, I believe, $10 million ... an additional
advance of $10 million for that.

n.c
Q. And do you recall whether that deal had to be approved by the probate court?

A. I believe it was.

Q. Do you recall whether there were any objections to the deal in the probate court?

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A. I don't know, to be ...

Q. Okay. The $5 million that was paid to AEG ...

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A. Yeah.

Q. ... was that recoupable?

lJa
A. It was.

Q. And how much was paid to the estate as an advance?

ae
A. $10 million.

Q. Was that also recoupable?

ich

A. Yes, it was.

Q. So what does that mean when the phrase recoupable is used?

mM

A. Okay. It really is an advance against earnings, and it goes against every single income stream
within our body of rights. Until we recoup back the $15 million, there's no more money payable
from us to the rights holder ... in this case, the estate.

Q. So after the deal was consummated with the estate ... by the way, did the estate also step into
the shoes of AEG? So now there was only one deal with $15 million ... I think it was $15 million
recoupable?
a

A. I believe so. I think it was a little more complicated than that. I think AEG was still on the line
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for maybe half of the advance at some point if it didn't all recoup where they would have to pay
us some portion of that monies back, which I believe they did.

Q. Okay. So the merchandise began to go out into the retail marketplace. Were there any other
w.

deals done with the estate of Michael Jackson other than this merchandise deal you spoke about?

A. No.
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Q. And in the years 2009, 2010, 2011, had you recouped very much of your advance?

A. I don't remember the exact details, but we have recouped some of that advance. But it was not

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the bonanza that we thought it may have been.

Q. Did you try to license Michael Jackson's name and likeness to other third parties?

A. Yes, we did.

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Q. In 2009, 2010, 2011, were you successful in doing that?

A. On occasion, yes. It was much ... it was a much harder sell into these licensees than we had

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thought.

Q. So I understand it, are you saying that you didn't get the response from the market that you
thought you would get in licensing Michael Jackson's name and likeness?

lJa
A. Exactly.

Mr. Voth: Objection. Leading.

ae
Judge Holmes: Sustained. Rephrase.

Mr. Weitzman: I'm not sure how I would rephrase it.

ich

Mr. Weitzman:
Q. What ... when you tried to market Michael Jackson's name and likeness as an agent for the
estate of Michael Jackson, what was the success and what did you find in the marketplace?
mM

A. Very quickly when you do anything like this, not just Michael Jackson, but the ultimate test is
how it does in retail. So when we had shipped the original products ... basic t-shirts, et cetera ...
the sales, although they had been good, had not been great. So therefore, when we would try to
license it out to more traditional companies to do more traditional merchandise ... i.e., posters,
calendars, and the type of product that you would see in the same sort of retailer that you would
see the t-shirts in ... their response when, you know, you ring up a licensee and say would you
like a Michael Jackson license, well, the first thing they do is ring the retailers. And they say, hey,
a

you have a chance to pick up the rights to Michael Jackson, what do you think. And I think that
fairly quickly the response from the retailers was more lukewarm than we had wished.
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Q. By the way, how does Bravado get paid out of this process?

A. Two ways ... one on the basic apparel, t- shirts, sweatshirts, hats, et cetera. They actually
w.

manufacture those themselves. So they make a manufacturer's margin. And on the deals that they
did with third-party companies ... i.e., a slot machine company, or a poster company, or a
calendar company ... that becomes a license. And there's a split where Bravado gets a small ...
to keep a small piece of the revenue, and the rest goes against the un-recouped balance.
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Q. You mentioned slot machines. Did you ultimately do a deal with a slot machine ...

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A. Yes we did ...

Q. ... manufacturer?

A. Yes, we did with a company called Bally Tech.

so
Q. And when was that? Just year ...

A. 2010 ...

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Q. ... not month or day.

A. Yeah, I'm guessing. 2010 in the ... sorry. I'm

lJa
Q. And did you begin to recoup some of your advance?

A. Yes. The slot machine was a good deal because it was a nontraditional merchandising item for
ae
us, so we weren't as relied upon the retailers and their feedback.

Q. And did the slot machine involve more than just the licensing of name and likeness?
ich
A. It did. It involved the music and the video.

Q. And in your opinion, if the music and the video wasn't involved, could you have made the slot
machine deal just on Michael Jackson's ...
mM

A. No. Definitely ...

Q. ... name and likeness?

A. Definitely not.

Q. Did you finally ... did you ... that is, Bravado ... finally recoup that $15 million advance?
a

A. I believe we did after approximately five years.

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Q. Was that longer than you all anticipated?

A. It was.
w.

Q. And were there different areas of the world where Michael Jackson's merchandise for name
and likeness did ... or with his name and likeness did better than other areas of the world?
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A. There was nothing that ... no country stood out more than anywhere else.

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Q. In your opinion, do you think that you would have recouped your $15 million had it not been
for the unusual slot machine deal?

A. We would not have recouped that money without the slot machine.

so
Mr. Weitzman: I don't have anything further, Your Honor.

Judge Holmes: Cross-examination?

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Mr. Voth: Yes, Your Honor. And also, Respondent has listed Mr. Bennett as a witness. Mr.
Bennett comes from New York, so we request to do the cross and also to call him out of order to
ensure that he can go back to New York.

lJa
Judge Holmes: That largely means you can exceed the scope of direct. Are there any problems
with this?

Mr. Weitzman: No, I have no problems. We agreed to that earlier.

ae
Judge Holmes: That's fine. Then you can treat this as your direct.

Mr Camp: I'll first do cross-examination, do the leading questions, and then I'll delve into ...
ich
may I do so from the podium, Your Honor?

Judge Holmes: You can do it from the podium or seated. Your choice.
mM

CROSS-EXAMINATION

Mr. Voth:
Q. Good afternoon, Mr. Bennett.

A. Afternoon.
a

Q. Bravado was one of the leading merchandisers in 2009, correct?

Te

A. It was.

Q. Worldwide?
w.

A. Yes.

Q. Bravado has worked with well-known artists?

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A. Yes.

Q. Such as The Rolling Stones?

n.c
A. Yes.

Q. Metallica?

so
A. Yes.

Q. Guns N' Roses?

ck
A. Yes.

Q. Justin Bieber?

lJa
A. Yes.

Q. Rihanna? ae
A. Yes.

Q. Adele?
ich
A. Yes.

Q. So you are aware of the concert series known as This Is It.

A. Yes.
mM

Q. And it was your idea to reach out to Randy Phillips first.

A. It was.

Q. You wanted Bravado to be the exclusive tour merchandising.

a

A. I did.
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Q. Because you thought Bravado would make money out of this deal.

A. Exactly.
w.

Q. You were not concerned about being associated with Michael Jackson.

A. It's ... you know, to be really honest, it's eight years ago. I can't remember what the thought
process was about anything else other than the 50 shows that far back.
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Q. Did you give consideration to the child molestation allegations?

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A. I personally didn't.

Q. So you had met with Michael Jackson.

A. Yes I did.

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Q. On two occasions.

A. Yes.

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Q. He was excited about the tour merchandise.

A. Yes. I think he was.

lJa
Q. So the second meeting then you presented Michael Jackson with certain designs.

A. Yes. We did.
ae
Q. With respect to the merchandise, Bravado could have produced the merchandise within days
of the start of the tour, correct?
ich
A. Yes, they could.

Q. After Michael Jackson passes away, you viewed that as an opportunity?

A. Yes.
mM

Q. Because of the renewed interest in Michael Jackson?

A. Exactly right.

Q. The increased spike in music sales?

a

A. Yes.
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Q. You subsequently entered into the deal with the estate?

A. Yes, we did.
w.

Q. You expected to make a profit from that deal?

A. We did.
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Mr. Voth: All right, Your Honor. Now I'll move on to the traditional direct.

Judge Holmes: Go ahead.

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DIRECT EXAMINATION

Mr. Voth:
Q. When did you start working at Bravado?

so
A. 1978 or '79.

Q. And what years did you work at Bravado?

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A. Assume '79, '79 to '91 and then 2004 to 2016.

Q. And what roles did you have at Bravado?

lJa
A. Early on I don't think we had things like titles in the first go-around, to be honest with you. It
was not that sort of company. But in our Atlanta stages, I was the CEO of America and then the
worldwide CEO of Bravado.
ae
Q. And in 2009, can you describe what you did on a day-to-day basis?

A. Played golf, you know ... A.... things like that. But no, listen. Truth, we would go to the
ich
office, and we were very lucky in 2009. Slightly before that, it was a growing business, and it
was doing well. And so you know, all of our efforts were aimed at trying to grow the business to
become the best merchandising company within the music in our area.

Q. And did that eventually happen?

mM

A. I think so, yeah. You know, slightly biased, but I think it did.

Q. And why do you think so?

A. I think we worked really hard. We put a good team together, and I think we had a good
worldwide distribution plan, particularly of the, you know, more basic products. I keep saying
a

that because, 99 percent of the different artists we work with, that's the area where the focus is
because it's rare that you get past that. And I think we were a very good solution for people on a
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worldwide basis.

Q. And what did you consider your competition?

w.

A. I mean, personally didn't really ever think that any ... you know, I didn't really think of any as
a competition. I felt it was up to us to do the best we could do and not worry about other people.

Q. All right. So I'm going to focus now on some of the general operations of Bravado in 2009.
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A. Surely.

n.c
Q. So in 2009, where did Bravado operate?

A. In approximately 30 countries around the world with its headquarters in the U.S. out of New
York and offices in New York and a few other countries around the world.

so
Q. And did Bravado produce its own merchandise?

A. It produced the vast majority of all the basic upper body apparel items that it sold around the
world.

ck
Q. And where did Bravado produce this type of merchandise?

A. All different places based upon which country they were selling in, and as I ... retailers are

lJa
very ... most retailers have preferred vendors where they have gone out and vetted them and
made sure that they're working in the right environment, these factories. So you tend to have to
use factories other retailers have approved.ae
Q. And so in general, can you describe for us how licensing deals work with artists?

A. The way this one started, okay, 9 out of 10 deals that we do are predominantly aimed at being
around concert tour cycles. So you would do a deal with an artist where an artist would say I'm
ich
going to play 100 dates around the world. Everybody has a different opinion, you know. The
other side thinks they're going to earn way more money than you think, and you normally try to
come somewhere in the middle and end up with a deal where you're basically paying the rights ...
the money for the rights, majority of which is earned back from the actual tour dates.
mM

Q. And is there an average revenue split?

A. Yeah. For the tour, yeah, there's an average revenue split for the tour.

Q. And what would that average be?

A. In a very round term, somewhere between 85 and 80 ... 85 ... 80 to 85 percent of the profits
a

would go to the artist.

Te

Q. And earlier you talked about licensing out to third parties.

A. Yeah.
w.

Q. Can you explain that a little bit more, please?

A. Yeah. Again, in ... for most artists, that would involve items as simple as mugs, keychains,
posters, calendars. And then for the very odd one, which, you know, we just talked about a few
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minutes ago with Mr. Weltzman, you would get into something like a slot machine deal, if
you're, you know, one of the ... very lucky because there's good income associated with
something like that.

n.c
Q. And with respect to this type of licensing, is there an average revenue split?

A. Well, within the deals, our splits would be anywhere from 90 to ... you know, 85 to 90
percent of that monies would go back to the artist's account.

so
Q. Okay. All right. Let's delve a little bit into retail versus tour merchandising in 2009. So at ...
specifically with respect to 2009, where did Bravado produce its tour merchandise?

ck
A. It would depend which country the artist was touring. So if we're specifically talking about
Michael Jackson in the '02, it would have been in England.

Q. And if it's in a different country, would it be near that country, or

lJa
A. If it's in America, it would be in America. If you produce the products in Europe, you produce
most of those products within the UK and just export them around Europe. Asia you make in
Asia; Australia in Australia.
ae
Q. So in general, how quickly could Bravado produce merchandise for a tour?

A. Assuming there was designs and things like that, literally in days.
ich

Q. What about delivering the tour merchandise to the venue?

A. It's a quite simple thing. You know, in England, you know, the printers that we use to print t-
shirts are in London. So to make it to the '02s (ph), an hour.
mM

Q. All right. Let's talk about retail. Where did Bravado produce its merchandise for retail
purposes?

A. It would be in the territory that you were selling the merchandise in. That would be the ...
where you make it.
a

Q. And can you give us an ... some examples as to the different territories that were involved in
...
Te

A. In the U.S., you would make the vast majority of the goods within the U.S. With some
retailers with longer lead times, you would possibly get it made in Mexico or in Honduras,
countries like that where they can deliver the product at a better price, to go into lower price
w.

retailers. And in Europe, most of them would be done in the same territory they sold in.

Q. And is there a particular country in Europe where some of the retail merchandise ...
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A. Yeah. I mean, just places like Turkey that are very big for apparel manufacturing.

Q. Now, can you give us an overview? With respect to the U.S., for example, in 2009, where

n.c
did ... where is Bravado's merchandise sold at?

A. Do you mean Michael Jackson merchandise or just Bravado generally?

Q. No, just in general. Just in general.

so
A. Bravado generally would be retailers along the lines of Hot Topic, Spencer's Gifts, JC
Penney's, those types of retailers.

ck
Q. And let's say in Europe. What type of retailers?

A. Back then some ... sorry ... the retail landscapes changed quite a lot in the last 7-8 years ...
but you know, places like H&M, Zara in the UK, Primark, stores like that.

lJa
Q. And so you have different factories around the world that produce the merchandise?

A. Yeah. We don't have them, but there are different factories around the world that do, do that.
ae
Q. So there ... okay. And is the merchandise sent directly from the factory to the retailer?

A. The majority of the time, yes.

ich

Q. So looking at 2009, were there any particular markets that you focused on?

A. Yeah. I would say that we focused, you know, in 2009. Again, I'm not sure. I'm a little bit lost
now when we did the deal with the estate or not. So in 2009 I think we were really focused on
mM

the UK because of the '02 dates.

Q. Okay. And with respect to other artists, were there any particular countries that you were
looking at?

A. Yeah. I mean, yes. You know, but you know, just in a normal course of business, America's
probably the biggest market of retail merchandising. Parts of Europe are very good. You know
a

and no one specific country sticks out, outside of America.

Te

Q. Okay. And in Europe are there any specific countries that stick out?

A. Yeah. The UK is probably the biggest market per capita for music.
w.

Q. Okay. So let's talk about contracts in general, like in 2009. Tell us what your role is with
respect to contracts.

A. I didn't understand a word of that.

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Q. So with respect to contracts ...

n.c
A. Yeah.

Q. ... that are entered into with different artists, can you describe what your role was?

A. My role?

so
Q. Yes.

A. I would be involved in the general agreeing of the actual deal. And then in-house business

ck
affairs people would actually do the drafting of the contracts and ...

Q. Would you be the one in charge of approving the deal?

lJa
A. Approving the deal, yes.

Q. Regardless of who the artist is? ae

A. Pretty much, yes.

Q. Now, in general are contracts always finalized ... are they finalized well in advance of the
tour?
ich

A. No. They never are, no.

Q. During your time with Bravado, did you work with any deceased artists?
mM

A. Yes.

Q. Can you name them?

A. Bob Marley, Johnny Cash, part of The Doors is deceased, but you know, it's a non-working
property so I would say The Doors. They would be three ... Kurt Cobain for a period of time, so
that would probably be about it.
a

Q. All right. So let's go back for a second to the meetings that took place with Michael Jackson.
Te

What was the topic of the first meeting?

A. The first meeting I'd flown out to meet Randy to try and, you know, get the deal and he said,
hey, why don't you come with me. And we went over to one of the rehearsals. I think it was a
w.

dancer's audition that was over there at the ... whatever that small building is at Staples.

Q. Okay. And can you describe the topic of the second meeting?
ww
 om
A. The second meeting we'd actually put together an art presentation and we went out to meet
with Michael. I don't know when that was, but we came here to meet with Michael in Los
Angeles.

n.c
Q. Okay. Can you describe what art presentation means?

A. We'd put together a book with approximately 300 items of different designs of which we were
hoping to sell, or to sell some of, at the concerts that were scheduled to take place in the '02.

so
Q. Can you describe visually for us some of these designs?

A. They were fairly basic based around the artwork for the '02, t-shirts, sweatshirts, hats, mugs,

ck
and different types of memorabilia that we thought would work ...

Q. Did they ...

lJa
A. ... at the shows.

Q. Did they include Michael Jackson's name and likeness?

ae
A. Yes, they did.

Q. Can you give us some examples of some of the designs with respect to his name and likeness?
ich
A. It would be ... the majority of the time it would be a picture of Michael, and it would have his
name on it.

Q. All right. So let's go ... you know, Michael Jackson passes away. Let's talk a little bit about
that. What happened to the tour items that were approved ... the designs that were approved?
mM

A. They were part of the first deal that we did with AEG where we knew that they had been
approved and we were ... I believe as part of that deal with AEG we got the rights to sell the
approved items that were within the book, the 295 items that were approved.

Q. And so those items that were approved then were eventually produced?
a

A. Yeah. And probably not all of them, but some of them, yes.
Te

Q. Okay. Tell us why Bravado was willing to enter into a contract with the Estate of Michael
Jackson.

A. It was the business that we were in representing celebrities, you know, dead and alive. And
w.

we saw it as a good business opportunity at the time.

Q. Why?
ww
 om
A. Because the initial feedback from retailers was that there was real interest there. And we
were ... you know, we'd already gone a certain ways down the path where we had all the designs
approved for the actual concerts, so we thought it was a good business decision to make a deal

n.c
with them, with the estate.

Q. Let's go back for a second to the pre- death. There's some arrangements with AEG. Did
Bravado, at that time, prepare any revenue projections?

so
A. Yes, they did.

Q. And do you recall what the forecast of those projections were?

ck
A. Yeah. I think that we ... our hope was that ... here we go. This is all to my memory, so I'll do
the best I can. I believe that we did not anticipate recouping the entire advance at the shows at
the '02. So our hope was twofold: one, that we would get some retail action out of the fact, that
there would be dates in the UK and everybody would now know that Michael was back as a full-

lJa
time recording music performer, and that we'd get some online sales. We hoped that these shows
would, you know, drive up the interest level and the demand.

Q. Now, let's go post death. You enter into a deal with the Estate of Michael Jackson. Did
ae
Bravado prepare any revenue projections at that time?

A. Yes, they did.

ich
Q. And can you tell us what you hoped for?

A. We hoped it would do ... I remember it quite specifically. We hoped it would do well, but in
my projections I actually, you know, I don't want to say it just because I knew I was right
ultimately, but I had said that I think we could well take 12 ... 5 years to recoup this money. But
mM

I felt that we would over the long term get there. I didn't see it as a quick win, so to speak. I
really thought it was a ... we were paying full price for the rights.

Q. Okay. Let's talk about infringement in general, like going back to 2009. Can you describe
Bravado's process in identifying how merchandising being infringed upon?

A. Yeah. Different in every country.

a

Q. Sure.
Te

A. And there's different laws in every country. But in America which has probably got some of
the better laws to protect yourself in this instance, we would hire an outside counsel. Whether it
was because of our sales reps or the retailers, you would do your best to find out who was selling
w.

what and where and then you would ... with the outside counsel you would do everything you
could to shut this down.

Q. And when Michael Jackson passed away were there any concerns about infringement?
ww
 om
A. Absolutely.

n.c
Mr. Voth: All right. No further questions, Your Honor.

Judge Holmes: Any redirect or initial cross Mr. Weltzman?

Mr. Weitzman: A little bit of the former. Not so much of the latter.

so
REDIRECT EXAMINATION

ck
Mr. Weitzman:
Q. Dealing with retail merchandise today for musicians, there are some artists that do very well
in that area, correct?

lJa
A. Yes.

Mr. Voth: Objection. Leading.

ae
Judge Holmes: Sustained.

Mr. Weitzman:
ich
Q. Are there some artists that do very well in that area?

A. Yes, there are.

Q. Can you give us a couple of names of artists that do well?

mM

A. In the last say five years, people like Justin Bieber and One Direction have done really, really
well and then looking for more classic artists, people like The Rolling Stones do well on a
consistent basis in the marketplace.

Q. And as I understand it, in 2009 you did not believe that Michael Jackson would do well
enough on the retail market for you to make a general merchandise deal, correct?
a

Mr. Voth: Objection. Asked and answered, Your Honor.

Te

Judge Holmes: Overruled.

Mr. Weitzman:
w.

A. Yes. We did not see a big opportunity in the non-touring marketplace.

Q. And why do you think there wasn't a big market for Mr. Jackson in the general retail
merchandise area at that time?
ww
 om
A. Hadn't been active in the music space for elongated period of time. There had been issues
which I believe I answered honestly earlier which I didn't pay much attention to on a personal

n.c
level, but I do believe that maybe retailers and other people did. But you know he wasn't active
in the music world at that time.

Q. And was it your belief that the tour would have an impact on Michael's ability to become a
better item in the merchandising business?

so
A. I believed that the majority of the income would be from the live shows.

Q. And why did you believe that the majority of the sales would come from the live shows?

ck
A. Because there was only a handful of artists that traditionally do well on a long-term basis in
the music retail space.

lJa
Q. The ... do you recall whether you were still negotiating with either AEG or Mr. Jackson
before he died on terms of the deal?

A. I believe that we were negotiating right up to the day of his death, and I believe there was
even negotiations that morning.
ae
Q. And did that negotiation have to do with the advance?
ich
A. I think so ... you know, again, sorry if my memory's not great. I do know that the first run of
the dates had been postponed, and I do know that made us very nervous.

Q. When you say "very nervous," did you have some concern that the tour may not actually take
place?
mM

A. We had concerns that it may start, but we didn't know if it would finish.

Q. In my words, but ... or ... my words in this question. Was the deal contingent upon Michael
doing the show?

A. Yes.
a

Q. Oh. People like Mr. Bieber ...

Te

A. Yeah.

Q. ... for example, how much money does someone like that make through licensing name and
w.

likeness with Bravado a year? And I realize you can't be specific, so if you'll give us just a
general ...
ww
 om
A. Yeah. I'm not sure, you know. I'm just sort of general . I'm not sure I can really answer that
because it's not my business ...

n.c
Q. Okay.

A. ... to answer that.

Q. So not referring to Mr. Bieber, individually, but in generally a successful artist in Bravado's

so
view, or in your view looking back would make approximately how much per year, not including
Justin Bieber himself.

A. Okay. Looking at something like a more heritage classic type of artist it would really depend

ck
but say $2 to $5 million.

Q. And would Michael Jackson have been in that ...

lJa
Judge Holmes: Over ... I'm sorry. Per year?

The Witness: Yes, sir. ae

Judge Holmes: Per year.

Mr. Weitzman:
Q. Would Mr. Jackson have been in that classic heritage legacy box?
ich

A. He was not in 2009.

Q. Okay. And that's because of why?

mM

A. The very little retailer interest.

Mr. Weitzman: I have no further questions. Thank you.

Judge Holmes: Let's see. You have the floor now, Mr. Voth, for a little bit.

Mr. Voth: No further questions, Your Honor.

a

Judge Holmes: Okay. Well, I have some. DIRECT EXAMINATION

Te

Judge Holmes:
Q. Sir, from the backed ... who are heritage artists? Meaning?
w.

A. After last week's Super Bowl, Lady Gaga is one. So I think it's anybody that's been around for
a certain period of time and I think that's up for interpretation. So maybe if an artist's been
around for say 20 years and is still relevant and has big hits from over that course or period.
ww
 om
Q. Okay. You talked about what sounded like what in publishing would be an advance
agreement. They're called recoupable royalties or something you called them.

n.c
A. Yes. In the merchandising world, all the advances are recoupable.

Q. Okay. Under what terms are they recoupable? You said a percentage of retail that is then
applied against the advance?

so
A. Exactly. Yes.

Q. What percentage was that in the Michael Jackson deal?

ck
A. It's different by every tier of retail based upon what level of retailer is. If it's a specialty
retailer or a mass market retailer because the mass market ...

Q. Give me an example.

lJa
A. The royalty rate would be lower in Wal-Mart than it would be in a Hot Topic.

Q. Oh, okay. And do you have those different kinds of different tiered royalties in the Michael
Jackson deal?
ae
A. I believe so, yes.
ich
Q. And was ... were the tiered royalties comparable to other deals that you had at the time?

A. Absolutely.

Q. Okay. In setting the advance that you're willing to pay to the artist, do you have a rule of
mM

thumb as to how to calculate the anticipated royalties versus the advance? Do you advance what
you think is going to be 50 percent of the total that you will make?

A. As far as concert tours go, I would say 635 that you probably advance approximately 70
percent of what you think the artist will earn.

Q. Is it the same for like the posthumous death ... the non... concert retail merchandise?
a

A. It's not so easy to work out because you obviously don't have the fixed events like the
Te

concerts, so you know, you pull the team together, you get everybody to make projections, and
then it's a business risk.

Q. What was your estimate in setting the deal with the Estate for Michael Jackson? What were
w.

you expecting the total revenues to be?

A. I'm not sure what the total revenues were, but I could approximately answer what we thought
the total earnings would be.
ww
 om
Q. And what were the total earnings?

n.c
A. We had it over the five years that we thought we would get back the ... that he would recoup
the $15 million over the five year period.

Q. Okay. I mean you wouldn't make the deal; you wouldn't give him advance royalties if you
didn't think you could ultimately recoup them, would you?

so
A. That's ...

Q. Or do you sometimes do that ...

ck
A. ... that's the idea. You try to make sure that you can recoup the money.

Q. It's conceivable you're in a relationship so you're willing to give up one deal for the next deal,

lJa
but ... does that happen?

A. I think it's a competitive space and I think that we're competitive by nature.
ae
Q. Okay.

Judge Holmes: That's it for me. Any follow- up questions?

ich
Mr. Weitzman: Quickly.

Judge Holmes: Okay.

mM

RE-REDIRECT EXAMINATION

Mr. Weitzman:
Q. Was any of this advance refundable by either AEG or the Estate of Michael Jackson?

A. AEG I believe was refundable.

a

Q. Can you tell us the difference between refundable and recoupable?

Te

A. Recoupable means that you actually recoup the money through your business activities and
refundable would be at the very end of the term. There would be a payback option for both sides
normally, as the normal course of events. So we could call back any unrecouped balance and the
other side could give us back the unrecouped balance during the term as well.
w.

Q. So the reason you would include ... well what is the reason you would include the refundable
term as part of the merchandise agreement?
ww
 om
A. Because historically music related merchandising is a very slim margin business, and it's not
the most profitable business. You know, you've heard the splits being 90/10 to the artist or 85/15,
so the advance is purely what it says. It's an advance, and if at the end of the term the artist either

n.c
doesn't do the concert dates or even does, but doesn't recoup the money, they would be having to
refund the balance.

Q. And the Estate of Michael Jackson ... the AEG and the Estate of Michael Jackson deal ...

so
A. Yeah.

Q. ... if you hadn't recouped whether it was over five or six years or a shorter term ...

ck
A. Yeah.

Q. ... whatever it was, what would have happened?

lJa
A. I believe the deal ran ... would extend until recoupment.

Q. So it could extend another two or three years, whatever it was.

ae
A. Absolutely.

Q. And the slot machine deal you told us about, if that deal had not been made, is it your opinion
you would have recouped through today?
ich

A. Probably not.

Mr. Weitzman: I have nothing further.

mM

Judge Holmes: How about Mr. Voth?

Mr. Voth: Nothing further, Your Honor.

Judge Holmes: And he can truly go back to New York, or where did you say?

Mr. Weitzman: Or wherever he's going.

a

The Witness: Well, that would be nice. Thank you.

Te

Judge Holmes: Thank you, Mr. Bennett.

w.
ww