State of Michael Jackson's Estate, A Year Since Death

What a difference a year makes.

In June, 2009, Michael Jackson was on the cusp of a comeback tour which might have netted him a new fortune. But he faced a mountain of debt, seemingly unable to get his finances under control. His family's home was about to go into foreclosure, as even their utility bills were reportedly thousands of dollars past due.

Michael Jackson
Michael Jackson

We'll never know what kind of fortune Jackson could have generated on tour. His drug-related death--ruled a homicide--put an end to that. Yet one year later, his estate has managed to create in death what Jackson had trouble creating late in life: a series of significant, stable revenue streams . Sources close to the estate say sales of Michael Jackson records, publishing rights, ringtones, movies and merchandise have generated between $250 million and $275 million for the estate in the year since he died. CNBC has learned that debts which once totaled $500 million have been reduced to approximately $400 million, and that figure will soon be lowered to $350 million. The mortgage on the Jackson family home has been paid off.

The estate taxes, however, have yet to be paid.

The beneficiaries of Jackson's estate are his three children, his mother, Katherine, and charitable causes he cared about. The task of managing through the millions of dollars coming in, and the millions yet to be paid out, is being administered by co-executors John Branca, his longtime attorney, and music industry veteran John McClain, who grew up with Jackson and his brothers. Both not only had worked with the King of Pop, but had been close to him for decades.

Getting Jackson’s finances back on track was a priority before he died. "We had seen Michael the week before," Branca has said. When Jackson died, Branca added, "It caught us by surprise," as he and McClain had not only lost a partner, but a friend. Yet as they moved forward with managing the estate, because of that earlier meeting, "We had a game plan."

Sources tell CNBC that "plan" had four goals: generate a lot of short term cash to pay bills, develop long-term projects for regular cash flow, restructure debts, and restore Jackson's image. By any measure, the plan has worked. Two-thirds of the estate's income is coming from outside the United States, and the Jackson estate has surpassed the estate of Elvis Presley in sales.

The biggest payoff in the last year has been $125 million paid upfront by Sonyin a $200 million, 10-album deal over the next 7 years . Sources say those albums will include the re-release of Jackson's first hit solo album as an adult, "Off The Wall", complete with outtakes and remixes. There will also be an album of unreleased recordings.

The next biggest revenue-generator has been the $60 million upfront payment--also from Sony — for the film rights to "This Is It". The movie has gone on to become the biggest concert film of all time, grossing $300 million in global box office. The estate will eventually collect back end revenues from the film, plus DVD and soundtrack sales, which could potentially be worth another $20 million to $30 million.

Other income includes $35 million to Mijac Music Publishing, which owns Jackson's songs. However, sources say this money went to pay off a $75 million loan to Jackson from Mijac. The estate also managed to restructure the loan, lowering the interest rate from 16 percent to less than four percent. About $45 million of the loan remains, and it could be completely repaid in 12 to 18 months.

Another $25 million came in from revenues for other projects like books and merchandise, and $11 million came from a valuable song catalog owned jointly with Sony/ATV.

The largest remaining debt is a $300 million loan from Barclays due by the end of the year. A source close to loan negotiations says a restructuring deal should be reached soon.

Then there are the upcoming projects: two shows with Cirque du Soleil--one traveling and one permanently housed in Las Vegas--where the estate is sharing production costs, plus a videogame from Ubisoft.

Other projects are being negotiated.

The executors did take a pass on some ideas. They were approached with a myriad of offers considered inappropriate, like a potentially lucrative gaming tie-in. Crain's New York reported there was a potential book deal based on Jackson's personal writings, but the project was deemed premature.

One item on hold is the future of Neverland, Jackson's rambling estate in Santa Barbara County . Colony Capital owns the note, but if the property is sold, or if the house is moved to, say, Las Vegas, to create a tourist destination, the estate could benefit. However, sources say Neverland remains an emotional topic for the family. ( Highlights of Michael Jackson's auction here )

Finally, CNBC has learned that Jackson had an insurance policy to cover some of his estate taxes, but much of that tax will have to be covered by incoming revenues. Sources believe the estate tax return will be filed in the next few months and the taxes will be paid.

Can Michael Jackson's estate match this year's blockbuster performance over the long haul? Unlikely, but several projects are in the works to generate enough significant long-term income so that Jackson's mother and children will never have to worry about money. It worked for Elvis.