Hipgnosis’s back-catalogue spending pays off in pandemic

If there was a soundtrack to the annual results for Hipgnosis next week, Hey Big Spender would be perfect. In a deal-making flurry aimed at capitalising on a surge in music listening during the pandemic, the music rights owner has over the past year spent $1bn (£710m) on evergreen hit songs, buying the rights to 84 song catalogues by artists ranging from Neil Young to Shakira.

Its entire catalogue, which also includes songs by Beyoncé, Blondie, Barry Manilow and more, is worth $2.2bn following that spree.

The London-listed company, which earns royalties every time one of the 65,000 songs to which it owns the rights is streamed, is expected to report on Tuesday that revenues rose by two-thirds to $138m and profits climbed by half to $107m in the year to the end of March. Merck Mercuriadis, founder and chief executive of Hipgnosis, said last month that while he never “wished for a pandemic” the result was an “acceleration of consumption of classic songs through streaming”.

Since floating on the London Stock Exchange in 2018, Hipgnosis has spent $2bn on rights to catalogues, and now values its overall portfolio of 138 catalogues at $2.2bn, an increase of 13.6%, or $265m, since flotation.

Merck Mercuriadis says he ‘never wished for a pandemic’ but is benefiting royally.
Merck Mercuriadis says he ‘never wished for a pandemic’ but is benefiting royally. Photograph: Dylan Coulter/The Guardian

The streaming boom has saved a music industry that had been struggling in the teeth of piracy and the inexorable decline of CD sales. Last year, global music sales grew for a sixth consecutive year to $21.6bn, fuelled by an 18.5% rise in subscriptions to streaming services, which now account for 62% of total global sales. Total global music revenues are up more than 50% from their nadir in 2014, thanks to the 443 million users of subscription streaming services such as Spotify, Apple Music and Amazon Music.

But Hipgnosis’s model is proving that not all music is created equal, and that the oldies may well be the best. Now 60% of the songs Hipgnosis owns the rights to are more than 10 years old – a big rise from the 32.5% seen at the end of March last year. Two years ago that proportion was just 10%.

Mercuriadis is not the only one cashing in. Warner Music, the world’s third-largest music company, home to artists including Ed Sheeran, moved to float last June and has seen its share price increase 15% in the past 12 months to give it a market value of $18bn. Owner Len Blavatnik paid just $3.3bn for the company in 2011. And Vivendi – owner of the world’s largest music company, Universal Music, home to artists and rights from Lady Gaga to the Beatles – is set to float in Amsterdam in September with a valuation in excess of €35bn.

However, the boom times may be coming to an end as streaming revenue growth slows, particularly in mature western markets, and bidding wars for premium artist catalogues overheats. In an interview with the Guardian last year, Mercuriadis estimated that he had two, maybe three years at best, to secure commercially viable deals for catalogues before the music industry encounters the Netflix-fuelled problem TV faces: hyperinflation for crown-jewel content. In the meantime, though, Hipgnosis will keep spending.


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