Hipgnosis has spent nearly $300 million already on catalogs, from Dave Stewart to The-Dream and Poo Bear. "I can't play the guitar, I can't write a song, but I can advocate very well for artists."
Hipgnosis Songs Fund and The Family (Music) founder Merck Mercuriadis, one-time manager of such acts as Guns N' Roses, Sir Elton John, Iron Maiden, Morrissey and Beyoncé, grew up in Schefferville, a remote iron ore town in Nova Scotia. It had one musical instrument store that had just one rack of records. Going miles away to Halifax, for him, was a trip to "the big city," where he'd make buying decisions at retailer Sam The Record Man based on what he read in his Creem and NME subscriptions.
"If something had a Hipgnosis sleeve, I would buy it," he tells Billboard of the famed album designers Storm Thorgerson and Aubrey Powell (Pink Floyd, Genesis, UFO) and inspiration behind his latest venture's name.
The Canadian school system was so advanced that when his parents moved to Massachusetts and New Hampshire, Mercuriadis got to skip two grades. He graduated at 16 and returned to Canada to work briefly for Motown before starting at Virgin Records Canada, and eventually moving to the U.K. In 1986, he went to work for Sanctuary Group, ultimately becoming its CEO, and remaining there until its sale in 2007 to Universal Music Group. He then founded Hipgnosis Songs Ltd.
In 2017, he formed investment company Hipgnosis Songs Fund Ltd., eventually raising more than $300 million, and making its first purchase, a stake in the 300-plus song catalog of producer/songwriter The-Dream. The company began trading on the London Stock Exchange last July. In 2019, it raised another $185 million. There have been 17 acquisitions in all, the most recent of which are the catalogs of Dave Stewart (Eurythmics), Ari Levine (one-third of The Smeezingtons) and Al Jackson Jr's ("Let's Stay Together," "Green Onions).
Stewart signed the deal in Toronto -- giving up 100 percent of his share in the Eurythmics songs and his other material, to date -- during Mercuriadis' "fireside chat" at Canadian Music Week in May.
"When Merck was talking about a song management company, it's about looking at each song as a mini brand in itself," Stewart told Billboard of why he sold his catalog to Hipgnosis. "People around the world singing ‘sweet dreams are made of this.' They might not know who I am, or the Eurythmics, but they'll sing the next line. His whole approach is take these classic songs and keep them alive and build little worlds around them. Well, that is fine by me because I'm still half of that duo [with Annie Lennox], and when I go out and play those songs, I want people to know them. He's very proactive."
Billboard spoke to Mercuriadis about what makes this music rights company different from others and why he wants to "abolish the word publishing."
Can you explain in layman's terms how your company is different from an artist signing with a Sony/ATV or peermusic?
We're not publishing songwriters. We're buying songwriters songs from the songwriters. We don't buy publishing companies. We don't buy songs from some middleman. We buy songs from the songwriter or from the Estate. The reason why they sell to me, instead of selling to peer or to Sony or someone else, is because, as an artist manager over the last 35 years, I've worked very hard to advocate for artists. I've ensured that they make the most amount of money possible while compromising the least amount. And that's given me a seat at the artist's table. I can't play the guitar and I can't write a song, but I can advocate very well for artists. That's the role that I play in the band, if you like.
The investors that you're going to, that's just to give you the ability to purchase the songs.
Correct. And giving the investors access to what they would call a new asset class because they don't have access to songs. Proven hit songs are predictable and reliable.
I always use this example of [Canadian musician] Mars Bonfire. In his 20s, in California, in the mid-60s, he'd written a few songs. He wakes up one day and finds that there's a check in the mailbox for a few grand. He doesn't have a care in the world, runs for the nearest Ford dealership and buys a Mustang. A few days later he's out driving in the Hollywood Hills and the sun is shining and he's in his new motor and he feels like he's got the world exactly where he wants it. Inspired, he starts to go, as he's driving along, "Get your motor runnin'. I'm heading on the highway, I'm looking for adventure." Before you know it, he's written "Born to be Wild." And in each of the 50-odd years since then, he's never earned less than 300 grand a year from that one song. That is predictable and reliable and that is, therefore, investible. It's as good as oil or gold. I believe it's better because it's also what the market wants, which is uncorrelated.
What I want to know are the differences. You're going to all these companies to get investors. If one of those investors was a car or liquor company, does that give them carte blanche to use these songs in their advertisements?
No. All of of my investment comes from professional investors. There's no car company or TV company or anything like that. The 177 meetings I took, I met everyone from the Church of England to Invesco.
The Ontario Teachers' Pension Fund invested in ole (now Anthem).
Huge investment. Now ole hasn't worked out for them for whatever reason, but they believe in the thesis.
With Dave Stewart's catalogue, that's Eurythmics songs as well.
What are the opportunities for newer artists? Are you just interested in legacy artists with immense catalogues?
No, I've bought Teddy Geiger's song. The six hits that Teddy has had with Shawn Mendes, we own. We bought Poo Bear songs so all of Poo Bear's Justin Bieber songs.
Buying them outright?
Yes. Sometimes, like for example, our deal with The-Dream, The-Dream has maintained a 25 percent interest in the songs; we own 75 percent.
When you buy them outright, are there stipulations in the contract, like you can't license them to an anti-abortion campaign? Do you honor those type of things?
Yes. If someone says to me, these are things in life that are important to me -- because again, at the end of the day, first and foremost, I'm a member of the artists' community. For example, if I was buying Morrissey's catalog and he said, "You're never going to advertise meat with my songs," first of all, I'm a vegan, so I'd be very happy to follow that path. I'll never use any of these songs to sell meat. But if someone had certain beliefs, I would respect that because I want them to be extremely happy.
I'll give you an example. There's a songwriter whose catalog I bought, who's written some of the biggest songs of the last 15 years, and my office sent through an interpolation of one of his song, that's going to be a new single for [Canadian] Tory Lanez, who's a huge breaking artists in America, and has a very good chance of being a top 5 single. My artist said to me, "Will you approve this? And I said, "No," send it to Johntá [Austin]. And they said, "You're the only one with the approval rights." And my response is, "I don't care. It's not my name on it, regardless of whether I own it or not." It's Johntá's name on it and it's a new work. I want to make sure that he's happy because if he's not happy, he's going to have regret because suddenly something that he had control over is no longer in his control. And I'm never going to be that person.
Dave Stewart's catalog, including "Sweet Dreams (Are Made of This)," "Would I Lie To You" and "Here Comes The Rain Again," has got to be worth a lot of money. What is the ballpark you're spending on catalogs?
I can't give you ballparks because with being a publicly traded company, certain information is price sensitive. But what I can tell you, because it's information that we've given to the stock market already, is that we've spent
£234 million pounds [USD $291 million] in nine months out of 12.63 multiple. That's information that the market has so it's no longer price sensitive.
The deals you are doing are clearly attractive enough to get major catalogs.
Also, a big part of our thesis is that songs are not getting the attention that they deserve. I want to abolish the word publishing. I want to take that concept and throw it out the window. I want to manage songs and I want to do it so successfully that everyone else wants to be a song manager going forward. My dream is that 10 years from now, not only have we changed where the songwriter sits in the economic equation, but every songwriter has a manager, a record label, an agent, a song manager instead of a publisher, et cetera.
Is there an equivalent company?
No. this comes from being the manager of some of the greatest artists of all time and seeing where the holes are in our business.
And the key is you are buying the catalogues. That is the main difference.
Correct. Lots of other people are doing it. There's a company called Primary Wave. Ole was buying them; they have their issues at the moment, so they're not active. There's a company called Round Hill. But they're all bankers. I'm the only person that's doing it that comes from, from the artist community and that an artist can feel that he's putting their children into good hands.