The battle for George Michael

Three years, scores of acrimonious meetings and millions of pounds later, the singer and songwriter George Michael is free at last to make music with the record company of his choice. Simon Garfield reveals, for the first time, the full story of how Michael was sprung from the Sony Corporation by Virgin, David Geffen and a courtroomful of lawyers and advisors

On Tuesday morning, a solicitor named Tony Russell arrived at George Michael's Hampstead home with more than 400 pages of legal documents. Michael has displayed a curious knack of creating litigious havoc since his very first days in Wham!, and for the last 12 years, Russell has guided him through many drawn-out negotiations and complex contracts. Now he had come to conclude the most acrimonious confrontation of all: the battle between George Michael and Sony Music Entertainment that had lasted a little under three years and had cost both sides many millions of pounds.

Russell read a summary of the new deals. Michael's present contract with Sony would be annulled, thus cancelling his requirement to deliver six more albums. This ended the stand-off in which the singer claimed he would never record for the company again, and the company said it would never let him go. For their part, Sony would receive $40m, plus a royalty payment on future recordings to be paid by Virgin and Dreamworks SKG, the singer's new record labels. Dreamworks, the new multimedia company formed by Steven Spielberg, former Disney chairman Jeffrey Katzenberg and record tycoon David Geffen, would manufacture, market and distribute Michael's records in North America, and Virgin would handle the rest of the world. It would be a two-album deal, for which the singer would receive advances of at least $12m and royalties in the region of 21 per cent.

That was the simple stuff. Russell then read sub-clause after sub-clause, page after page covering every eventuality. The meeting lasted five hours. When it was over, when every agreement had been signed, the singer went to Sarm Studios in west London to resume his creative career, content that his new work at last may be heard - and bought - by the millions who had secured his fame.

Throughout his dispute with Sony, Michael had maintained that his complaint was never about money; he had pleaded in court that he already had "more money than I know what to do with". His beef was always about those great intangibles - creative control, musical direction, mutual understanding between artist and multinational conglomerate. But the saga has also been about status, and about the problems that inevitably occur when teen pop star attempts the transformation to adult performer.

This is the first time George Michael has tested his worth on the open market, and the process provides a rare insight into the workings of the music business. It is clear that a valued commodity is still a commodity, albeit one with a freed soul. The story might not have been about money when it began, but one would have to be a very pure fan indeed to believe that it was not about money now.

26 October 1992: George Michael calls a meeting in New York with Michael Schulhof, the head of Sony's operation in the US, and Sony worldwide president Norio Ohga. He tells them he wants a divorce, claiming that since CBS Records was taken over by Sony in 1988, he has been treated not as a long- term artist but as "little more than software". He says: "Sony have developed hard-sell, high-profile sales techniques, and their stance is that if [an artist] does not wish to conform to Sony's current ideas, there are plenty of hungry young acts who will."

30 October 1992: Michael files a High Court writ, claiming restraint of trade and inequality of earnings and bargaining power. Sony says it will contest the action and will not let him go without the six further albums he is contracted for. Michael acknowledges his huge personal gamble, saying that if he loses, he may never record again.

October 1993: The case begins. Michael claims that ever since his poor first deal in 1982, for which he received a pounds 500 advance, he felt that he had always been forced to renegotiate his contracts from a position of weakness. He argues that his last album, Listen without Prejudice (1990), only sold about seven million copies (compared to 14 million of Faith (1987)) because Sony failed to market him adequately in the US. His QC reveals that in the five years up to December 1992, Michael had made worldwide profits of pounds 7.35m, compared to Sony's profits from his work of pounds 52.45m.

June 1994: Michael loses his case, as Lord Justice Parker concludes that he has renegotiated the terms throughout his career and thus his deal is fair. Michael suggests that this misses the point, that he is still a professional slave, and says he will appeal immediately. Total court costs are estimated at pounds 6m. Michael tells his friends that for the first time in his career, he is unable to write new material.

July 94: Sony offers to talk again, but Michael says the situation is irreversible. Michael and his manager, Rob Kahane, part company, a split agreed well before the judge described him as an extremely unsatisfactory witness.

August 94: Appeal lodged. David Geffen, an old friend of Michael's and Kahane's, calls to say he thinks the whole situation is absurd and wants to act as a broker. He talks to Michael Schulhof, suggesting that case must be turned from a position in which everyone loses into one in which everyone wins. Though unable to express a personal interest publicly, Geffen makes no secret of his interest in signing his friend to his own label.

September 94: At the request of Schulhof and Sony international president Mel Ilberman, Michael meets them in New York, and is told that he is free to talk to other companies about a potential buy-out deal. A source says: "They just needed to hear from George that there was no way back."

October 1994: Tony Russell and Michael's music publisher Dick Leahy call meetings in New York with Warners, Virgin, Geffen and Arista. Michael tells them he is looking for a short-term deal, ideally with one company worldwide, and has no interest in talking to either PolyGram or MCA. The meeting with Warners is a disaster, not least because its executives keep calling him George Michaels. Rob Dickins, head of Warner Music in Britain, sits cringing throughout, as he sees his colleagues destroy their chances. Warners is rife with political in-fighting, and within a few months, all the American executives in this meeting had left the company.

Talks with Geffen and Virgin fare better. The singer had been impressed with Virgin's huge campaigns for Janet Jackson and the Rolling Stones, and is promised a similar treatment for his own releases. Virgin Music Group chairman Ken Berry and Jim Fifield, president of Virgin's parent company, EMI, are soon talking about two deals - the expensive buy-out from Sony, and a new one- or two-album contract.

David Geffen announces he has formed a new, as yet nameless company with Spielberg and Katzenberg.

November 94: Although Virgin want a worldwide deal, it is agreed in principle to go with Geffen in North America and Virgin elsewhere. Peter Gabriel has a similar arrangement with the two companies. Michael says he feels this progress has freed him creatively, and appears at the MTV awards in Berlin to perform "Freedom 90" and "Like Jesus To A Child", the first new song for three years. A source says: "All parties are weeping that the Jesus song can't be released in time for Christmas."

Russell meets Geffen in Los Angeles and Ken Berry in London to agree the terms of the new contract. Both companies want to sign Michael for far longer than the two-album deal he insists on, and offer much more money as an inducement. Russell says that this is how his client got stung before, and that the usual reasons for a long-term agreement - the costly high-risk development of an unknown artist - do not apply. Advances of about $12m over two albums agreed in principle, with a royalty of 20-21 per cent - far higher than Michael's Sony deal.

Days later, Russell meets Mel Ilberman and Sony vice-president Michelle Antony in New York for the first detailed talks of the buy-out. Sony wants $50m, later reduced to $40m. An "over-ride" is also discussed, the royalty Virgin and Geffen will pay Sony on sales of future Michael releases. Four per cent is later reduced to 3 per cent, but this is only payable after several million records have been sold. It is calculated that Virgin and Geffen must sell more than 10 million new George Michael albums to show a profit from their investments.

The main sticking point concerns a greatest hits package: Sony owns Michael's back catalogue, and wants to release a hits album at the end of 1995, to include "Careless Whisper", "A Different Corner", "Faith", "I Want Your Sex", "Don't Let the Sun Go Down On Me" and "Freedom 90". Michael is horrified at this prospect, and insists the package should only appear after his next solo album has been on sale for at least 18 months.

December 94: Appeal date set for February 1996. Neither party wants to go to court again, but Michael insists publicly that he will take the case to the House of Lords and then the European courts, reasoning that he cannot come out of it in a worse position than he is in already.

Russell meets Berry in the Caribbean, where both are holidaying over Christmas, to finalise Virgin/EMI's contribution to the buy-out. It becomes clear that Virgin will pay more than Geffen, as it stands to make more from the new deal: the profitability in Virgin's territories are greater per unit than Geffen's, as record pricing more competitive in United States. Rumours circulate that Virgin/EMI will be bought by Disney.

24 January 1995: Russell, Ilberman, Geffen and Antony gather in New York for further negotiations, a meeting Russell will later describe as disastrous. All negotiations grind to a halt as the ground-rules change. Sony wants more money, and expresses doubts as to whether it will let Michael go at all. There are claims that several parties are now engaged in a conflict of interests. There is disagreement over who will pay for the court case: despite Sony's victory, Russell wants each side to pay its own costs. The stalemate holds for seven weeks.

Mid-March 95: Russell sees Ilberman alone in New York, and says he already has all the money in place with Virgin and Dreamworks SKG (as the Spielberg- Katzenberg-Geffen triumvirate is now known). It is agreed that the Greatest Hits package will appear in 1997, and include at least three new tracks (this was the established trend for hits packages: Springsteen and Michael Jackson have released old songs with new, thus maintaining career momentum). Sony would still own the majority of the album, and would handle manufacturing and distribution. George's new songs would be licensed to his old company at an agreed royalty. Michael also agrees to promote it vigorously, something he has declined to do for Sony since 1990. The deals are on again, and 80 per cent of terms are agreed. Court costs are to be split.

April 95: Documentation is submitted by all parties. Michael splits his time recording in London and at his new home in St Tropez. There are 15 songs in various stages of completion.

April to July 95: Documentation travels back and forth between all parties, as clause after clause is re-evaluated and redrafted.

11 July 95: George Michael signs.

13 July 95: Monies are transferred and all deals completed.

14 July 95: Michael flies with friends to a party in St Tropez.

It is the nature of these things that all parties claim to be very happy with the outcome - the record companies, the singer, the lawyers - especially the lawyers. Certainly, it has been a unique adventure. An artist has freed his soul but lost three years of his career, Sony has lost its battle to hold on to one of its biggest acts, and two record labels have spent a fortune on a 32-year-old singer-songwriter who has not released an album in five years.

One deal remains unresolved - the deal with the consumer. Does the world need another George Michael song? Virgin and Dreamworks will see that we do. A new single is expected on the new labels in autumn, and an album is due in spring. Nobody is even entertaining the thought that these will not be hits of considerable magnitude.