Why are all our favorite artists selling their creative souls to this new company?
Because the world’s economic climate is as terrible as advertised, legendary artist manager Merck Mercuriadis and iconic producer Nile Rodgers are currently leading the charge to evolve pop music into an industry streamlined for leaner profit margins.
Hipgnosis Songs Fund — a three-year-old intellectual property investment and song management company founded by the duo — will, very soon, have vested ownership and investment interest in numerous number-one singles of the past two decades. Though in some ways frightening, it’s a bittersweet evolution with a profound, longer-tail impact that must be considered.
The global economic downturn and the COVID-19 pandemic have loosened capitalism’s grip on international commerce. Thus, pop music’s status as a profitable business is currently sunk at the bottom of an ocean of possibilities floating in suspended animation. This is why music professionals with legendary songwriting and production catalogs — Timbaland, Jimmy Iovine, Neil Young, Fleetwood Mac’s Lindsey Buckingham and Stevie Nicks, Motley Crue’s Nikki Sixx, Mark Ronson, Lady Gaga-affiliated producer RedOne, R & B producer Rodney Jerkins, and more — have sold rights to their hits in the past six months to Hipgnosis to be marketed for royalty-generating opportunities.
Even more, Hipgnosis has also purchased the rights to the catalogs of hits administered by Kobalt Music Group’s decade-old Kobalt Music Copyrights S.à.r.l. sub-investment group. Kobalt’s S.ar.l. controls the licensing rights to 33,000 songs by artists including the B-52s, 50 Cent, Skrillex, Nelly, and songwriter Walter Afanasieff, including Afanasieff’s cut from Mariah Carey’s perpetual year-end pop-chart winner “All I Want For Christmas Is You.”
“The traditional music publishing model is something that I want to destroy,” Mercuriadis told the New York Times in a December 18th published story entitled “This Man Is Betting $1.7 Billion on the Rights to Your Favorite Songs.” Mercuriadis may be a day late to destruction, but certainly not a dollar short to the music industry’s renewal.
To wit, the tie that binds the dozens of artists and professionals who are relinquishing their music’s rights for a nominal fee is that they have a decade-plus of involvement in the music industry. When coupled with the sudden failure of industries worldwide, the relationship between recorded sound, computerization, streaming, and long-term profitability has indeed been destroyed.
Over the past five years, streaming has significantly overtaken physical sales as a leading music industry revenue generator. In 2019, streaming profits were over 80% of all profits on music worldwide. However, because of deals inked between Spotify, Tidal, Apple Music, YouTube, Pandora, and the remaining record labels, per-play revenues to non-label entities have significantly declined. Couple this development with the COVID era destroying live events, and a sad trend develops.
Suppose you’re a music industry professional without a plethora of COVID-era safe investments. In that case, consider weighing guaranteed money in the bank versus a desire to roll the dice on social media platform-driven fan engagement? The desire to sell to Hipgnosis for a viable return on what is basically an advance for aggressively-pursued future licensing opportunities sounds incredible.
As with any successful revenue model, Hipgnosis is not a lone player in the emergent industry surrounding purchasing the mechanical rights to songs. Their model is one, though, that requires significant investment and strategy if it is to be matched.
Of Hipgnosis’ initial 5,000 song rights purchases in 2018, 40% had been #1 hits somewhere in the world, and 80% had reached the Top 10. Moreover, because of Mercuriadis and Rodgers’ legendary pedigrees — plus superstars’ willingness to trust what are essentially their artistic legacies to the company — Hipgnosis raised $1 billion in global investments — including from yes, the Queen of England via the Church of England — by 2019.
Competitors Universal Music Group have recently acquired the rights to the songwriting catalogs of artists, including Bob Dylan and Lil Wayne. For Dylan’s catalog, they paid $400 million. For Wayne’s — critical in this conversation because as the principal at Young Money Records, he has a songwriting credit attached to songs released by Young Money-signed artists Drake and Nicki Minaj — rights, the company paid $100 million. They are rumored to have further acquisitions in the offing.
Global song publishing titan Round Hill Publishing became a publicly-traded company in the UK in 2020. Three separate IPO offerings yielded nearly $1 billion. With that revenue, catalogs from artists including The Beatles, Celine Dion, Louis Armstrong, The Rolling Stones, Goo Goo Dolls, Black Sabbath, Kiss, Bruno Mars, and others are expected to be purchased.
The music industry was already hurting but has now been grievously wounded by the twin terrors of worldwide economic downturns, plus the coronavirus pandemic. Now, thousands of artists, numerous songwriters, and career-long, bedrock music industry titans are willing to forgo their dividend-earning legacies for hundreds of millions in one-time payoffs. It’s rumored that the world will not economically recover from COVID-19 until 2030. Moreover, upon that recovery, the music industry’s tenuous economic bubble was on the verge of bursting, anyway.
If the idea of selling out to commerce to buy into survival sounds dire, well, it’s because the era in which we’re living is as perilous — in every manner — as it seems.
VIDEO: Merck Mercuriadis and iconic producer Nile Rodgers talk Hipgnosis on CNBC