ARE THEY WORTH ALL THAT CASH?

By CHRISTOPHER JOHN FARLEY

AS MICHAEL JACKSON AND HIS WIFE Lisa Marie Presley began divorce proceedings last week, his little sister Janet Jackson was renewing her vows in a very big way. Janet's bond, however, was not to a man, but to a company. Virgin Records had just signed her to a new record contract that could be worth as much as $80 million and is, by some accounts, the most lucrative record deal in history. Questions remain about the pre-nups to this corporate marriage. Did she get what she wanted? Was this megadeal a strategic coup for Virgin? Then there's this expensive issue: What will other superstars be asking for next?

The Jackson clan's youngest and most lucrative star wasn't saying much about her deal, beyond a predictably platitudinous press release: "Working with individuals who support an artist's need to express a vision and who are willing to maintain the integrity of that vision...is extremely important to me." But clearly money, and lots of it, is also important to her. Late last year she and her lawyers approached four record companies, Sony, PolyGram, DreamWorks SKG and Disney, asking for a $100 million deal. Unsatisfied by their offers, she returned to Virgin, for which she has previously recorded, and got her $80 million. In part this may be because Thorn EMI, Virgin's parent company, is rumored to be looking to sell its music holdings and thus needs to hang on to assets like Jackson to ensure those holdings remain attractive.

Published reports had the deal breaking down like this: she will get a $35 million bonus just for signing the contract, $5 million for each of her next four albums and a $25 million advance on top of all that for making videos and promoting her music. As is true with the film industry, a new monetary bench mark like Jackson's becomes the standard by which every star in town measures his or her ego. "The bigger the deals get, obviously everybody starts to shoot for the moon," says Bob Krasnow, former chairman of Elektra Records who now runs his own record label for MCA. "The marquee value of a well-known artist's name means a lot." Accordingly, R.E.M., the Rolling Stones and Paul Simon--all of whom have deals that are close to expiring--will probably soon be shopping for heftier contracts.

If Jackson sets off a new round of megawheeling and megadealing, it would not be the first time. In 1991 Virgin signed her to a $40 million contract--which was then unprecedentedly large--and that pact led the way for big-money deals by Prince, the Rolling Stones and others. This wasn't totally ego driven: the development of the CD has led to a decade of steady growth in the recording industry, which has seen its sales increase from $4 billion a year to $12 billion a year since 1986.

But still, are megadeals really worth it? They have a mixed track record. In 1992 RCA signed the bearded one-note rockers ZZ Top to a $35 million deal--and the band hasn't had a million-selling record since. Janet Jackson's brother Michael has a $60 million megadeal with Sony that looks too princely in retrospect. His latest CD, HIStory, has sold 6 million copies so far, in contrast to 17 million copies worldwide for his previous CD, Dangerous--a considerable letdown after a $30 million ad campaign that was almost as sweeping and fearsome as Germany's taking of the Rhineland.

But a deal's ancillary elements can make it tricky to assess. Warner Bros. signed Madonna to a $60 million deal and even gave the Material Girl her very own record label. Madonna's last few records have sold only about 3 million copies apiece, substandard for her, but the deal's overall returns look better because her private label has fared well (its latest success: imported Canadian diva Alanis Morissette, whose Grammy-nominated CD Jagged Little Pill has hit No. 1). The Rolling Stones' two albums since their 1992 $35 million contract with Virgin have had mild sales, but the fact they brought with them a chunk of their lucrative back catalog has made the deal more palatable.

The attempt to resurrect George Michael is being watched closely in the industry. Last year DreamWorks SKG bought out his contract from Sony for $40 million and gave him a $12 million, two-record deal. Michael was famously unhappy at Sony, claiming that the label had not supported what he saw as his musical maturation. He sued to get out of the contract, lost, refused to record for Sony anyway and eventually worked out his deal with DreamWorks. The former Wham! singer's first single for Dreamworks, Jesus to a Child, is rather solemn but is starting to get some airplay, especially on adult-contemporary stations. Since the rest of the album won't be out until April or perhaps even later, the jury is still out on his comeback.

A troubling early sign for Virgin is that Jackson's current CD, the greatest-hits collection Design of a Decade 1986/1996, has performed only modestly, selling 2 million copies in three months. Says Krasnow: "If I were to pay an artist $80 million, I would want to know that I was going to sell at least 40 million units over five albums." But the only thing worse than signing superstars to deals that are too rich is not signing them at all. No record-company suit wants to be known as the guy who lost Janet Jackson. Plus big names lure other big names. Bruce Springsteen's manager brought him to Columbia in 1972 in large part because the label had Bob Dylan. Says Jackson's lawyer, Don Passman: "There's some trophy value to having artists of this magnitude."

Another silver lining: record companies don't necessarily have to pay out the vast sums that get bandied about in the press. Jackson's megadeal might, like her stage show, be partly smoke and mirrors. Record contracts, like movie deals, are often larded with clauses and subclauses that make interpreting the value of a deal a brain-wilting affair, as mystifying as the recent reports that Forrest Gump hasn't turned a profit. "When you read the fine print, you find lots of changes," says record-industry attorney Don Engel. "Some of these contracts are 80 to 100 pages. There are various ways a record company makes a $60 million deal worth $20 million or $30 million." For example, many contracts come with performance clauses: if the hits stop coming, so do the big paychecks.

There's one other thing to keep in mind as record-company suits moan about the rising costs of keeping talent happy--those groaning record-industry executives are pulling in huge salaries too. Robert Morgado, former chairman of Warner Music Group, made $7 million to $8 million annually, and when he was fired last May he was given a platinum parachute that by some estimates was worth $60 million. A fair number of other record executives--who still have their jobs--are earning $10 million a year and more. Says music-industry analyst Robert Broadwater: "This is the entertainment business. The rules that apply in industrial America don't apply here."

--Reported by David E. Thigpen/New York and Jeffrey Ressner/Los Angeles

With reporting by DAVID E. THIGPEN/NEW YORK AND JEFFREY RESSNER/LOS ANGELES