Hipgnosis Songs Fund : Blackstone bets on lucrative music rights with $1bn Hipgnosis deal
10/12/2021 | 02:40pm EST
Blackstone has moved into the lucrative music copyrights market by backing Merck Mercuriadis’s music investment firm Hipgnosis with $1bn firepower to snap up music rights and manage catalogues through a new fund.
As part of the deal, Blackstone will also take an ownership stake in Mercuriadis’ Hipgnosis Song Management (HSM), which separately runs its eponymous investment arm, Hipgnosis Songs Fund (SONG).
As well as the $1bn in added firepower that Hipgnosis benefits from the new Blackstone investment, the SONG fund will also gain rights to co-invest with Blackstone in future acquisitions.
“What we’ve lined up to buy over the next few months is truly incredibly – watch this space,” Mercuriadis told City AM.
Music veteran Mercuriadis’ SONG, which is the UK’s largest-listed investor in music catalogues and royalties, has played a central role in pushing up the booming market for music rights in recent years – what Mercuriadis himself describes as having “firmly established songs as an asset class.”
“We all have a song catalogue of our lives and when these songs become hits, they become parts of our lives and the establishment,” Mercuriadis said. “That’s why they’re a reliable, predictable investment.”
“When you’re living your best life, you’re doing it to a soundtrack of good songs,” he continued.
“Equally when you’re going through a rough patch, you seek comfort in a great song that can take you away from it all. It’s resistant to what else is happening in the market.”
He sees the initial Blackstone commitment as the start of a long-term partnership that will be defined by co-investments further down the line.
Blackstone declined to comment on what valuation it was buying into HSM, and whether it was taking a majority of minority stake.
After an aggressive spending spree that saw Mercuriadis’ fund spend almost $2bn snapping up rights to more than 60,800 songs since its IPO in 2018, it currently boasts $2.2bn gross assets.
And it hasn’t taken long for private equity firms to catch on the growing trend of music rights as a long-term value asset.
Just last week, Blackstone rival Apollo invested $1bn in a new firm called HarbourView Equity Partners that invests in music copyrights and other media assets.
Meanwhile, KKR teamed up with industry giant BMG in March in a $1 billion-plus alliance for targeting music assets.
A 2021 spending spree
Hipgnosis was particularly busy in January this year, when it bought a 50 per cent stake in Neil Young’s songwriting catalogue, comprising 1180 compositions that span his work with Buffalo Springfield, Crosby, Stills, Nash & Young and Crazy Horse, and his full solo catalogue.
Then Mercuriadis snapped up 100 per cent of Lindsey Buckingham’s catalogue, including various hits he wrote or co-wrote for Fleetwood Mac, including “Go Your Own Way” and “The Chain”.
And still within the same month, the fund also acquired Jimmy Iovine’s entire catalogue of worldwide producer royalties, comprising 259 songs. Iovine was the producer behind some of the biggest albums of the 80s, including Dire Straits’ Making Moviews, U2’s Under a Blood Red Sky, and Simple Minds’ Once Upon A Time.
Since then, Hipgnosis has bagged a catalogue of Red Hot Chilli Pepper’s hits in a $150m deal in May, and the song catalogue of Andrew Watt, who won producer of the year at the 2021 Grammy Awards for his work with artists including Justin Bieber, Miley Cyrus and Dua Lipa.
In June, Hipgnosis beefed up its slate of songs further after snapping up the catalogue of Joel Little, the songwriter and producer behind top hits by artists such as Taylor Swift and Lorde.
And in Augst, Hipgnosis snapped up rights for all the songs of Fleetwood Mac’s singer-songwriter Christine McVie’s songs in August – comprising 48 of the 68 songs on the group’s most successful albums.
An industry on fire
The music industry is cashing in on a boom in the value of music rights, spurred on by the continued popularity of streaming platforms.
This has been particularly vital to artists over the last year as the pandemic ravaged revenue from gigs and touring.
The value of British music sales and streams surpassed half a billion pounds for the first time last year thanks to the growing popularity of streaming services such as Spotify.
Global consumption of British music generated £519m in export earnings in 2020 — a six per cent increase year on year and the highest figure since records began.
And the British Phonographic Industry (BPI), which compiles the figures, has forecast that export values will double to £1bn by the end of the decade.
Long term value investment
Blackstone’s investment in the new fund will be through equity and debt and come from its tactical opportunities fund, but the firm declined to comment on which part of the fund it will invest.
Qasim Abbas, director at Blackstone’s Tactical Opportunities unit, said the private equity giant saw “long term, sustainable value” in creative content.
“The music industry has been at the forefront of the fast-growing streaming economy and is unlocking new ways of consuming content,” Abbas added.
Mercuriadis’ serial rights investments run in direct opposition to situations where record labels take a large slice of the pie from artists and songwriters – “gluttonous” behaviour which he has previously warned threatens the entire industry.
In an interview with City AM earlier this year, the music boss accused the major record companies of “trying to take everything for themselves”, warning that some artists were unable to survive off royalty income as a result.
Hipgnosis shares were up 2.89 per cent at market close on the news.