Promoter bet house on Jackson – and lost

American company behind O2 concerts left with huge bill to refund singer’s fans

Michael Jackson's untimely death, less than a fortnight before his 50-date London residency was due to begin, marks the failure of one of the biggest gambles ever taken by a concert promoter.

The US entertainment giant AEG, which organised the pop star's unprecedented string of concerts at the O2 Arena in Greenwich, south-east London, and collected more than £50m in ticket sales, will now have to organise the largest refund in recent memory. The company is also facing serious questions over the status of its insurance policy for the gigs.

The deal was hatched in a room in the MGM Grand Hotel in Las Vegas in January, a fitting location for a gamble of such sizeable proportions. Jackson, dressed in a black suit, arrived with his youngest son, Prince Michael II, and Dr Tohme Tohme, a close friend and confidant. The unlikely trio met four AEG executives: its billionaire founder Philip Anschutz, the chief executive Tim Leiweke, the head of its live music division Randy Phillips and show manager Paul Gongaware.

Jackson's affairs were in disarray. He had run up debts of about $100m, and in 2005 was forced to pay $25m in out-of-court settlements to families who accused him of abusing their sons. He had also sold his Neverland ranch. But the meeting, at which the singer appeared fit and healthy, was enough to convince Mr Anschutz to try his luck.

AEG's pursuit of Jackson began several years ago, when Mr Phillips approached the singer to ask him if he would like to do a series of shows. Jackson refused, saying he did not feel up to it, but when the executive made a similar request in 2007, the cash-strapped performer agreed, saying he was now well enough to perform.

But barely three months after the meeting in Nevada, AEG had a big problem. After taking the decision overnight to increase the number of Jackson's shows from 10 to 50, it struggled to find an insurer willing to provide cover for the final 30 gigs. Even if one could be found, the policy would have cost about £300m.

In March, Mr Phillips said AEG was still negotiating with insurance companies but would be willing to "self-insure" the concerts if necessary because it had confidence in Jackson's health. Mr Phillips said at the time: "The insurance brokers sent doctors and they spent five hours with [Jackson], taking blood tests. But we would be prepared to self-insure to make up the dates. It's a risk we're willing to take to bring the King of Pop to his fans."

AEG reportedly managed to find cover of £130m for up to 20 concerts, but had not made arrangements for at least 30 dates at the time Jackson died. Insurers worried he would not be able to complete the residency owing to ill health. The pop star had a bad track history: in 2005, Marcel Avram, a German concert promoter, won millions of dollars in damages after Jackson pulled out of a string of millennium gigs. Yesterday, AEG refused to comment on its insurance status.

Mr Phillips insists Jackson always knew about the planned scale of the concerts but, as recently as four weeks ago, the singer voiced concern about the number of gigs. "I don't know how I'm going to do 50 shows," he told fans gathered outside his rehearsal studio in Burbank, California.

"I'm not a big eater – I need to put some weight on. I'm really angry with them booking me up to do 50 shows. I only wanted to do 10 and take the tour around the world to other cities, not 50 in one place. I went to bed knowing I sold 10 dates and woke up to the news I was booked to do 50."

On 21 May, it was announced that the residency was being pushed back by five days. AEG denied the decision was taken because of Jackson's health, instead citing problems with the stage production. The next day, after Jackson was photographed entering a clinic, it was reported that he was to receive treatment for skin cancer. The claim was never substantiated, but rumours persisted of Jackson's frailty and the organisers' worries about his ability to cope with the exhausting schedule.

Kenny Ortega, who was in charge of directing the O2 shows, was reported to be auditioning lookalikes to appear in some dance routines to ensure Jackson would be able to make it through each gig. In the end, the King of Pop did not live to attempt even one.

The fans O2 refunds

*The 800,000 ticketholders to Michael Jackson's 50 concerts at the O2 are expected to get a full refund if they bought from agencies connected to the concert organisers. Ticket prices ranged between £55 and £75.

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