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Is Hipgnosis viable?
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November 25, 2020

Is Hipgnosis viable?

It is no secret that the music business has had to adapt over the past several decades, and part of that has been the fact that music is relying on digital support, from creation to distribution. The music industry used to sell a massive number of compact discs, but followers of the music business are now streaming their music at their individual convenience. Some music business companies have been able to adjust and evolve with the times, while others have failed.

Hipgnosis, a music investment company founded by Merck Mercudiaris, has been aggressive about purchasing valuable catalogs, and will continue to own some of the most popular and recognizable songs in the world. Will this music investment prove to be a smart one, making investors continue to see the value of Hipgnosis?

Where does Hipgnosis come from?

First things first, the Hipgnosis Song Fund was founded by Merck Mercuriadis. Before that, he was a hugely successful music executive. Mercudiaris has managed some of the most successful artists of the modern era, including Beyonce, Mary J Blige, Elton John, Iron Maiden, Joss Stone, and more. Good thing for Hipgnosis: the company benefits from his knowledge, experience, and leadership. Another co-founder of Hipgnosis is Nile Rodgers, one of the most celebrated songwriters of all time.

The founders believe that music investments are just as valuable as other commodities and are working hard to allow retail investors to invest in music business assets. And so, the Hipgnosis Songs Fund went public in 2018.

Hipgnosis’ story

It is part of our mandate that the Hipgnosis Songs Fund believes strongly in the power of music investment, but how viable is the concept? First and foremost, it should be noted that the company isn’t the first one to think of music as an asset class. However, it has been raising millions to acquire some of the most beloved songs in history. One of the main arguments here is that, no matter what, music will always be valuable as an art form and as a commodity.

We can all agree that a global pandemic is detrimental to the business in general, but the pandemic has actually led to more people streaming music than ever before. As a result, one has to wonder whether Hipgnosis might prove to be a bit more recession-proof than other music business companies. After all, Hipgnosis has been on quite an acquisition spree. According to their annual report, their catalog already generates about $80 million a year thanks to the 14,000 songs in their catalog. 

One of the most challenging things to consider about Hipgnosis is that it is impossible to tell exactly how an artist’s music will age. Hipgnosis might purchase songs that are considered classic songs, but will they be considered classic songs a decade from now? Hipgnosis is undoubtedly betting on the fact that more retail investors are interested in music investment - but what happens if their existing catalog depreciates considerably?

What should we take from music investment?

Hipgnosis might seem like a huge risk to many other individuals in the music business, but the fact remains that entrepreneurs have always been interested in purchasing songs and licensing them out for great returns. One of the main concerns here is whether Hipgnosis actually has the ability to make lucrative deals. We know that Mr. Mercuriadis has the credibility and connections to raise money, but what about all the work after purchasing songs?

It appears that Mercuriadis feels like Hipgnosis is much different from other music business entities in this respect. He points out that he understands the importance of active management, and that his company has people managing “500 songs per person”, compared to other music business labels here that number would be in the tens of thousands. Hipgnosis has spent $1 billion on songs in the last two years, and it plans to continue spending.

He believes in the creative process, and he feels like he understands how to manage these catalogs actively, with individualized attention. Will his ability to manage artists translate into a huge music business win for Hipgnosis? Time will tell, but it certainly seems like the Hipgnosis leadership knows what they are doing.

Rethinking the music business 

Merck Mercuriadis recognizes that the current economic situation has led to more opportunities than ever before, and it might be the catalyst for music investment to go more mainstream. The founder of Hipgnosis points out that he may have spent a lot of money to acquire some incredible songs, but he also has “the faith of the greatest songwriters in the world.

Hipgnosis aims to grow in terms of song catalog and profit, but can it do so while also remaining artist-friendly? There is also the question of “administration rights” regarding songs, figuring out what catalogs they continue to purchase, and why. Ultimately, Hipgnosis may end up being a huge music business player in terms of intellectual property.

And since we’re on the topic, catalog and rights management are as important for Hipgnosis and you, a record company or music publishers. And Reprtoir can help you do just that, in one collaborative workspace allowing you to work remotely. Give us a call and we’ll take the time to talk you through it!

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