Hipgnosis, Song Acquisition, And The Elephant In The Room:
How The Ip Gold Rush Is Feeding Industry Consolidation
By: Tom Beedham | Art by: Tom Beedham
On January 24, Justin Bieber joined a sea of music legends surrendering their copyrights, unloading his entire music catalogue to U.K. investment manager Hipgnosis Song Management for a cool $200 million USD.
Bieber’s catalogue, Hipgnosis’s biggest acquisition to date, is the latest blockbuster deal in an IP gold rush that’s seen legacy artists and songwriters from all over the world sell their songs to private investors like Concord , Primary Wave, and Eldbridge Industry.
The appeal of such deals is supposedly that, after one exchange of rights and controlling interest for a handsome lump buyout, artists can continue making music without worrying whether technological shifts will betray them. Meanwhile, the firm relieves them of administering publishing opportunities (typically licensing and placements for commercials, television, and film), which will theoretically expand their reach in kind. While the investment firm banks on long-term revenue, the artist takes a leap of faith built on an understanding that the firm’s finance savvy and desire to juice the returns will (a) manage a flow of exposure in their favour, and (b) residually translate to ticket sales and lucrative opportunities via other platforms — typically concerts, tours, other marketing opportunities for performing artists, and talent contracts for professional songwriters. But as catalogue ownership consolidates, those opportunities narrow increasingly.
The business trend took off early in the global pandemic, when artists’ livelihoods were rendered particularly vulnerable with touring and live performance wiped off the table.
Founded in 2018 by Quebec-born entrepreneur and former Iron Maiden manager Merck Mercuriadis, Hipgnosis, whose logo features an upside down, legs stiff-in-the-air elephant, has become a prominent poacher in that sphere. Prior to the Bieber deal, a December interim report announced their portfolio comprised 146 catalogues and 65,413 songs, including complete or majority publishing rights for the catalogues of Neil Young, Skrillex, and Jack Antonoff, and labels like Nettwerk and Big Deal Music.
Like similar investment groups, Hipgnosis is fueled by a combination of debt and equity capital, raising equity and/or incurring debt to fund its acquisitions. In October 2021 they received a billion-dollar backing from private equity company Blackstone Inc. to launch Hipgnosis Songs Capital as a partnership investment vehicle. Joining Hipgnosis Songs Fund, it is the second capital fund under the Hipgnosis umbrella. The Blackstone partnership is responsible for the Bieber acquisition.
While Hipgnosis and similar song acquisition firms have built up considerable portfolios in recent years, the three remaining major labels — Universal Music Group (UMG), Sony Music Group (SMG), and Warner Music Group (WMG) — have also taken notice and increased their catalogue purchasing, which some critics say is the real elephant in the room.
“For all the ink spilled over Hipgnosis and their ilk, the biggest deals (Dylan, Bruce) have still gone to traditional labels,” Andrew deWaard, an assistant professor of media and popular culture at the University of California, points out in an emailed comment to New Feeling, gesturing to Universal and Sony’s respective purchases of Bob Dylan and Bruce Springsteen’s catalogues. The purses exchanged for each were undisclosed, but estimated at $300 million and $550 million(all figures in this story in USD), each reported at the end of 2020 and 2021. While the Universal deal only pertained to the publishing rights of Dylan’s songwriting catalogue, the Sony agreement involved two separate deals applying to the entirety of Springsteen’s recorded work and music publishing.
Having occupied the spotlight for much of 2023 so far, much of the dialogue surrounding the Hipgnosis/Bieber deal has been provided by critics and fans speculating about the price tag, but deWaard says they’re missing the point.
“Would he have gotten more if he sold earlier? Who knows (and who cares),” deWaard opines. “The bigger story amidst all of this is just the same story as ever, whether ‘financialized’ or not: musicians are retaining less and less of their copyright, revenue streams, and capacity to earn a livelihood if they’re not one of the few mass marketed through the major label and tech company ecosystem.” Pointing to the three remaining major labels, LiveNation, as well as streaming providers Amazon, Apple, and Spotify, he characterizes that environment as one dominated by seven apex predators.
The remarks echo the sentiments of an article deWaard co-authored with University of Alberta assistant professor Brian Fauteux and University of Winnipeg copyright librarian Bria Selman in 2022. Outlining the political economy of music, deWaard et al. draw from numerous reports to present that the “Big Three” labels controlled at least 70% of the global recording and publishing market in 2019 and as much as 86% of the North American market in 2016. In turn, those same labels are favoured by the payment models of streaming platforms like Spotify, and the duopoly of LiveNation and Anschutz Entertainment Group (AEG), who are left “controlling the rights to performing at the largest venues and festivals, while dictating onerous terms to musicians.” These narrowing circumstances translate into a homogenized listening landscape across the board, with fewer opportunities for regular working musicians and music labourers, and even less meaningful representation for diversity of musicians across vectors of gender, class, and ethnicity.
“It is more winner-take-all in the music industries than ever before and the vast majority of creators are struggling to earn a living,” deWaard and his co-authors write.
With recession putting a chill on song spending in 2022, higher-profile instances of artists like deals like Bieber’s signing away their rights are fewer and farther between than what we saw in the spending spree of 2021. At the beginning of 2023, John Fogerty even struck a deal to finally reassumesecure his majority stake in Creedence Clearwater Revival’s publishing catalogue after struggling to do so for the past 50 years. Then known as the Blue Velvets, the members of Creedence signed away their distribution and publishing rights in an exploitative contract to Fantasy Records in 1964. When their success arrived in the late ’60s, Fantasy reaped the benefits and used the residuals to fund a series of other label and catalogue acquisitions, before merging with Concord Records to form Concord Music Group (now just Concord) in 2004. Fogerty purchasing back his own song rights marks a recent weakening in the acquisition trend.
Writing about the trend shift in a November dispatch from his bi-monthly music business criticism newsletter Penny Fractions titled “Recession Looms Over the Music Industry (Part 1),” David Turner characterized the moment as “the deflation of the song catalog space.”
“The amount of money raised over the last few years means that there will certainly be a market for a certain catalog but appears from reading press over the last year there’s def[initely] a higher threshold for what buyers may want,” Turner told New Feeling in an emailed comment. “Major labels already showed this in only publicly announcing deals with artists like Bob Dylan or David Bowie, not some 90s producer with a couple platinum albums to his name. They obviously weren’t super keen on jumping into the market and now are probably feeling fine. They might’ve overpaid for some rights but at least it’s for premium works.”
Despite recessionary headwinds, new firms have continued to emerge.
At the start of December, Jamar Chess (grandson of Chess Records founder Leonard Chess) and other industry veterans began the Wahoo Music Fund with the explicit goal of purchasing Latin music catalogues, seizing on that market’s surging growth in the US.
In the same month, The Verge reported former Tidal COO Lior Tibon and vice president of business development Christopher Nolte had raised $7 million in seed funding for their venture Duetti. Self-described as a financial technology startup “aiming to provide independent artists with new and empowering financial solutions,” the firm says it is interested in “democratizing access to catalog monetization opportunities.”
Sure.
“I think any firm like this that exists at a smaller scale is likely just a few former execs who don’t wanna take a pay cut or a title stepdown and thus are doing a startup then so they can be reabsorbed into a bigger firm but with a bit more clout,” Turner comments. “When you look at the failed sale attempts by Concord Music [the publishing division of Concord] and Round Hill’s recent statement of spending $200 million, 2022 may imply these firms are still ready for someone to take them off the market.”
Drawing a comparison to Alamo Records’s emergence from 300 Entertainment, Turner argues the absorption of smaller players would be consistent with a trend in the music business (in 2021, Alamo sold a major stake to Sony Music Entertainment). Unlike artists or producers with impressive sales to their names, smaller labels represent investment niches that can attract future equity partners.
“There’s still a lot of ‘dry powder’ (financial capital) sitting around, especially with private equity (two trillion give or take), who will look for deals during the coming recession,” deWaard explains. “The biggest ‘song management firms’ (Hipgnosis, Concord, Primary Wave) will probably keep at it, especially Hipgnosis with its huge Blackstone fund. I imagine many of the smaller firms (Round Hill, Reservoir, HarbourView) will bleed whatever they can and sell, either to a bigger fish like Hipgnosis, or to a traditional label. The Big Three (UMG-WMG-SMG) are in the copyright cartel business and they will continue to strengthen their catalogues with huge acquisitions.
“It seems a very likely outcome will be even Hipgnosis eventually sells to one of the big labels, who have the long term global institutional capacity to exploit copyright to its fullest extent,” he continues. Despite an aggressive growth strategy, 2022 brought a sudden drop in interest in music catalogues, and having built its song portfolio on ~$1.6 billion of capital from eight placings since 2018, the company’s access to capital significantly narrowed in 2022 with tightened spending. (For a deep dive into Hipgnosis’s trajectory, read this entry in Alderbrook Companies founder and managing partner Jimmy Stone’s Leveling Up Newsletter.)
“Influx of capital in this space distorted things, but doesn’t really shake off the longer term trends,” Turner points out. “The trajectory of consolidating song rights and music publishing dates back to the 80s.”
That trajectory has historically set labels down a cyclical path of efficiency finding and further debt raising for future acquisitions, sowing material losses for artists and other music labourers in its wake, with further consolidation and more of the same down the line. Meanwhile, the big three labels’ strengthening media conglomerate oligopoly further augments and cements their platforms, homogenizing the listening landscape and devastating the range of opportunities across the board. With investment firms and asset managers variably building up publishing portfolios or supplying funding towards others doing the same (Eldridge supplied some of the funds resulting in Springsteen’s sale to Sony), their increased ubiquity (and their debt-happy growth strategies) in the space suggests the effects of future consolidation will be even further exaggerated.
The deals keep coming, with few signs of letting up.
Far from signaling a redistribution of industry wealth into the broader music ecosystem, the sudden surge of cash into the pockets of legacy hitmakers actively devalues the basic act of creating music by transforming it into a means to further production.
According to a report Turner co-authored with researcher Kaitlyn Davies and entertainment lawyer Henderson Cole, in 2021, both Spotify and Apple made the case to the United States Copyright Board that recent publishing catalogue purchases should in fact prove that the copyright fees that interactive streaming companies pay to rights holders should be set to the lowest rate in history.
“As for smaller musicians, it’s yet another obstacle to a living wage,” deWaard vouches. Placing the issue in the broader context of the trend toward cultural financialization, he urges artists to reject modernity and embrace tradition, so to speak. “In my opinion, old tactics like unionization, antitrust agitation, and public media are going to be far more effective than any new finance, crypto, or Web3 nonsense.”