Jackson Tour Promoter Stands to Lose Millions

AEG Live, the promoter of Michael Jackson's planned 50-show run at the O2 Arena in London, could have a serious financial problem on its hands.

AP

More than $85 million worth of tickets have been sold for the "This Is It" tour, and as much as $30 million has already been spent on production, according to sources and media reports.

Estimates put Jackson's advance from AEG at as much as $10 million. Additional production costs would mean AEG could be in debt for the concert series to the tune of $40 million if insurance coverage is not sufficient to cover the contingency.

AEG reportedly was able to find insurance coverage for the initial 10-day set of concerts at an estimated cost of $130 million. But insurance companies were not interested in insuring a proposed seven-month extended tour, in spite of premiums that would have amounted to $500,000, according to reports. AEG did not immediately respond to CNBC requests for information.

Meanwhile, Lloyd's of London told CNBC it did not expect to incur significant losses as a result of Jackson's death.

"We can confirm that some insurance for Michael Jackson’s concerts has been placed in the Lloyd’s market, but any losses are not likely to be significant," a Lloyd's spokesperson said.

A source familiar with the situation told Billboard that a traditional nonappearance policy was never written. But even if AEG had a policy, it wouldn't mean that Jackson's death, and the losses incurred, would be covered.

"If it was a pre-existing condition or drug- or alcohol-related, a normal cancellation policy would not cover that, even if he had passed a medical exam," the source told Billboard. AEG could be on the hook "if death was from something that's excluded in the policy."

According to Examiner.com, Randy Phillips, chief executive of AEG, reassured UK reporters that Jackson was in good health. Purportedly, insurance brokers had sent their physicians to perform a battery of medical tests including blood tests that took five hours to complete.

And Billboard Magazine's touring guru Ray Waddell said AEG's yearly financial results may now depend on Jackson's cause of death.

"One entertainment insurance industry insider says that if Jackson died from a drug overdose or a preexisting condition, the producer could be on the hook for any loss — which would include any money already sunk into the production, as well as the considerable cost of refunding consumers for the 750,000 tickets already purchased," Waddell wrote. "If Jackson signed a contract saying he would return his advance in the event he didn't perform, the company could end up in court with a long line of other Jackson creditors."

Greg Maffei, CEO of Liberty Media told CNBC Friday that the company would be impacted through its stake in Ticketmaster.

"I think Ticketmaster was hoping for great success for this event," Maffei said. "We will see how it plays, but clearly Michael Jackson — a great performer, high interest among fans — it's not a positive for the industry."

Jackson was expected to personally reap between $50 million and $100 million from the tour.

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