Since opening the doors at Hipgnosis Songs in 2018, Merck Mercuriadis has not stopped for a second. As the $2 billion company amasses catalogue after catalogue, ruffling feathers across the industry in the process, its founder continues to spread the message that he is offering songwriters a new alternative. Here, Music Week meets him to find out just how far his revolution can go...
WORDS: James Hanley PHOTOS: Caitlin Mogridge/Jill Furmanovsky
Talk is cheap, as they say, but Merck Mercuriadis can walk the walk. So when, in April 2019, the eloquent Hipgnosis Songs founder and CEO informed Music Week of his plans to reinvent publishing and kickstart a £1 billion “song management revolution”, you could bet your bottom dollar he’d back up his grandiose words with action.
Since launching Hipgnosis as an investment company focusing on songs and musical intellectual property rights in 2018, the ex-Sanctuary Group chief, whose previous life as an A-list manager saw him work with superstars such as Iron Maiden, Guns N’ Roses and Elton John, has embarked on an extraordinary 10-figure spending spree, which has brought dozens of catalogues under its umbrella. As detailed in July’s annual report, deals have included songwriter’s shares in catalogues by Neil Young, Lindsey Buckingham, Chrissie Hynde and Shakira, plus Blondie’s Debbie Harry and Chris Stein. In those 12 months, the company acquired 84 catalogues for $1.089bn.
Last year, Hipgnosis acquired LA-based company Big Deal Music Group – since rebranded as Hipgnosis Songs Group – which owns a portfolio of copyright interests in hits including Shawn Mendes’ Stitches and Treat You Better, One Direction’s Story Of My Life, Panic! At The Disco’s High Hopes and Niall Horan’s Slow Hands. Round Hill Music co-founder Richard Rowe was drafted in as EVP.
The firm has also bolstered its song management team (‘publishing’ is a dirty word around Hipgnosis HQ) with the hirings of ex-Virgin EMI boss Ted Cockle and manager Amy Thomson as president and chief catalogue officer, respectively, as well as Tom Stingemore, Patrick Joest and Joe Maggini.
It was against this disrupted landscape that Universal Music Publishing Group secured Bob Dylan’s entire catalogue and David Guetta entered into a career-spanning new recordings agreement with Warner Music.
“Hipgnosis has forced the music industry to recognise the true value of great songs and this is only the tip of the iceberg,” Mercuriadis tells Music Week. “I believe our songs will triple in value in due course. I would love to have had Bob and David, who is one of my favourite people in the world, but my focus was on Neil Young, Lindsey Buckingham, Christine McVie, Red Hot Chili Peppers, Andrew Watt, Stefan and Jordan Johnson and other incomparable catalogues and songs.”
Mercuriadis’ management client Nile Rodgers is a Hipgnosis co-founder and gave evidence to the DCMS inquiry into the economics of streaming. Mercuriadis also submitted evidence to the inquiry to call for a better deal for songwriters, and declared himself “thrilled” with the report released last month.
“When I started Hipgnosis, the motive, of course, was to make money for our shareholders and ourselves, but – and this is something that all of our shareholders were aware of – we had an ulterior motive, which was to change where the songwriter sits in the economic equation,” he says. “I thought that was probably work that would take seven or so years to do, but now I think it will take two or three years to do, because of the incredible work by the DCMS.”
The 57-year-old pointed to the committee’s recommendations for a “streaming reset in law” and a Competition And Markets Authority (CMA) investigation into the economic impact of the major music groups’ dominance as key.
“I believe the reason that the songwriter is the low man or woman in the economic equation is because the three biggest publishers in the world aren’t advocating for songwriters, because they’re owned and controlled by the three biggest recorded music companies,” he claims. “The recommendation of having the CMA look at this, what I call, unhealthy relationship between the major companies and publishers is essential to bring change in a way that will finally reward songwriters. Songs are the currency of our business: there’s nothing without the song, so how can it be that the songwriter is the lowest paid?”
Hipgnosis’ flurry of activity has arguably turned Mercuriadis into the most talked-about music executive on the planet (he was even singled out for high praise by Kanye West on Twitter). But challenging the status quo has led to criticism, with his rivals lining up to take pot shots at everything from claims of irresponsible spending to a lack of disclosure to investors over the prices the company is paying for catalogues.
Joining Music Week over Zoom in front of a background bearing Hipgnosis’ upside-down elephant logo, here, he has his right to reply as he ramps up the rhetoric on a revolution that is changing the music industry…
Two-and-a-half years after pledging to start a song management revolution, how is it progressing?
“The revolution is going great on every level. We had three objectives when we started: the first was to establish songs as an asset class. We are now a $2.5 billion FTSE 250 company that has been the No.23 biggest yielding business on the index in the last year, which just proves the power of great songs. Of course, most companies on the index had difficulty during this very challenging time, whereas we’ve been able to just go from strength to strength. The second part was to change where the songwriter sits in the economic equation, and to use our success and the leverage of both our songs and our financial wherewithal to be a catalyst for that change. It’s important for the artist and the songwriter to have a seat at the negotiation table, so our advocacy and our desire to change where the songwriter sits in the equation is also coming to life. Then the third part of the thesis was to take what was a broken publishing model and to replace it with song management. Despite the fact that we spent $2.5bn, we have stayed true to having 500 to 1,000 songs per employee and built a company that was exciting enough to lure people like Ted Cockle, one of the most successful record company presidents of the last two decades, away from the major label system. Amy Thomson was an artist manager that was making millions of pounds in commissions, but she understands that together we can make two and two add up to 10 and bring the change that’s necessary. With those two, I feel like I’ve got my right hand and my left hand to really bring this mission to full fruition. Then you add Tom Stingemore and Patrick Joest, who came over from BMG, Joe Maggini, who previously worked at Universal, and the team that was Big Deal Music in the US. We now have 92 people worldwide that are focused on putting more into our songs in order to get more out of them.”
The volume of acquisitions Hipgnosis has made in a relatively short space of time has been astonishing. Who and what is driving that push?
“Well, I drive that – that’s my car [laughs]. What happens is I play music every morning and that makes me think of something. And before I know it, I’m making a call to someone like Lindsey Buckingham and that ends up with us buying his share of Fleetwood Mac. We’ve now bought Christine McVie’s share as well on the back of me listening to Tusk and the relationship that Lindsey and I have created. So it’s recognising that music makes everyone’s life better and using the enjoyment of music to go, ‘Oh shit, I need to buy this.’ Let’s say Pete Townshend is my artist of the moment. So, suddenly, I find myself writing to [The Who’s manager] Bill Curbishley and saying, ‘Hey, I know Pete sold his publishing [back catalogue], but did he sell his writer’s share too?’ It’s all driven by a love of music and the relationship we’ve created with songwriters. I like to say that Hipgnosis is the preferred buyer of the songwriting community.”
How have you been able to cultivate that reputation?
“I think, on the one hand, it’s my pedigree and the pedigree of people like Amy and Ted. On the other, it’s the fact that we’re fighting for the songwriter at a point in time when no one else has been, and the songwriting community appreciates that. These great songwriters know that we care and understand that, in fact, these are very emotional transactions. They’re taking these children that they’ve given birth to in the form of songs and putting them into the hands of surrogate parents, if you like. And they want to know that those parents are going to care as much as they do, and that you’re going to do the right thing. As an example, Dave Stewart and I have a relationship that goes back 35 years. And Dave knows that I’m not going to put Sweet Dreams (Are Made Of This) in a McDonald’s commercial, because that would be taking one of the greatest songs of our time and making it incredibly ordinary. There is no amount of money that would have me put it in a McDonald’s commercial, but I will put it in the new Cinderella movie by Sony Pictures because, by doing that, you’re going to have a whole new generation of four to 15-year-olds discover it for the first time. They’re going to think that it’s their song, fall in love with it and carry it with them. There is no greater barometer for what’s right or wrong for the Eurythmics catalogue than Annie Lennox. I’ll talk to Dave and get his view, and then I’ll always give Annie the opportunity to say yes or no, because you have to protect the music as much as you try to commercially exploit it. I don’t mean exploit in a negative way, I just mean to get the most out of it. You have to protect it as much as anything.”
Neil Young’s antipathy towards the business has been widely documented, that deal must have required a careful approach?
“Neil is known as being very particular – he wouldn’t have sold his catalogue to just anybody – so I’m very privileged. But the reason I’ve got the catalogue and Universal, Warner, Sony or someone else doesn’t, is because Neil knows that I’m going to make decisions that are commensurate with the decisions he would have made. He knows he can trust me. I’ve demonstrated over a period of years that I can’t be corrupted to just do anything with the songs. What I recognise the most is that what makes Neil’s songs so valuable is that he’s a wonderful artist and writer. But what also makes them so valuable is the way that he’s conducted himself. If you were to take a song like Ohio that is anti-violence, anti-authority, anti-war, and use it in a way that was gratuitous, Neil Young fans would check out on you. You would damage the value of the song. So often the most important tool in the box is knowing what to say no to.”
Why do you think songwriters are more open to selling their catalogues now?
“Well, there are a number of different [reasons]. Obviously, the value being fully realised is an important one. The pandemic has had some impact as well, because artists that relied on touring for their cash flow have lost that. Three, great artists have now matured to the point where they’re dying of natural causes. That wasn’t the case in the ’70s, ’80s, ’90s or the ’00s. Starting with David Bowie, artists started to pass away from, let’s call it ‘old age’, as opposed to what was previously almost always death by misadventure. So now, estate planning is an incredibly important part of many of the most important artists in the world’s lives. They want to ensure that their families are going to be left set up, but they want to know that their songs are going to be looked after as well. I take my responsibility to this community incredibly seriously.”
How did you react when Kanye West described you as one of “the most powerful and knowledgeable people in music”?
“To be acknowledged by somebody that I consider to be arguably the greatest creator of his time is very meaningful. I think it says a lot about Hipgnosis’ ethos and the way that we do things. This is a guy that knows no compromise; he’s making music at the top of his game at all times and is constantly reinventing himself. He’s a soft target for people because he’s very public in what he says and does sometimes, and people don’t necessarily always understand his motivation. But the most important thing is that there literally is not an artist or an executive in the world that would not want to work with Kanye West, and there are very, very few people you can say that about. I have a great relationship with Kanye and it’s one of respect, as opposed to professional interest. I’ll help him whenever he needs my help and he’ll help me whenever I need his help.”
How disruptive has Hipgnosis been to the music industry?
“We’ve forced the world to look at what the true value of these great songs and recordings are and that is something that remains part of our mission. But the thing that I’m delighted about the most is not just that we’ve given our shareholders an incredible 41% return on their investment over the last three years, but that we’ve then used that power to at least get us started on changing where the songwriter sits. There was a point in time where the only buyers in our business were Universal, Warner and Sony. What they would buy would normally be something that was in their own catalogue already for administration purposes. They would then dictate what they would pay for it and you had to accept that valuation. There used to be what the majors would tell you it’s worth and now there’s the opportunity to get what it’s really worth. Yes, there were a couple of buyers in the marketplace – people like Larry Mestel at Primary Wave, who was doing this a long time before we were, but he’s a buyer and a seller. The same thing is true of Round Hill and, all well and good, these are people that have done good work, but ultimately we’re on an entirely different mission. We’re not just here to make money, we’re here to change this business – and I think we’re actually doing it.”
Did you anticipate the barrage of criticism that has come your way?
“Look, whenever you are disrupting the marketplace and taking a model for a company like Universal and turning it on its head by offering a better alternative to songwriters and artists, they’re not going to just go, ‘Oh gosh, it’s a shame that’s happening to us,’ they’re going to fight. They’re going to try and throw everything that they can at you. We’ve invested $2.5bn in a period of time where I don’t think everyone else combined has done that, so they’re going to have their views but, as they say, all is fair in love and war. I’m only interested in two things: are my shareholders happy? And are my songwriters happy? I’m delighted to say that, on both sides, we have many happy people and that’s all that matters. I didn’t do this to disturb anyone else’s business, I did this to build a business that would be in the service of songwriters and reward our shareholders for their belief in that community, and that’s all come to fruition.”
Perhaps the most common accusation Hipgnosis has fielded is of irresponsible spending. What is your response to that?
“As a public company, all of our information has to be disclosed. We announced our year-end results recently. Within those we disclosed that we have spent $2bn to date at a 15.3 multiple and that portfolio has been independently valued at $2.3bn or a 17.86 multiple. That’s an almost 10% uplift in a year and a total NAV return of 16% for the year and 41% since we started. Those are facts that immediately demonstrate that we have bought well and that includes 36 out of the 156 songs on Spotify’s Billions Club and 12 out of their 30 most streamed songs of all time!”
Do you think the 100% singer/songwriter is a dying breed?
“No, I think it will always be there. You’re always going to have a Phoebe Bridgers or a Lucy Dacus – wonderful artists that do their thing – at the same time as incredible songwriters leading the way, like Andrew Watt, Jack Antonoff, Joel Little, Stefan Johnson, Jordan Johnson and Ali Tamposi. Songwriting, in the first instance, is an art, but making songs for radio is also an art. I’ve had many conversations with Andrew Watt, who talks about how, when he’s making records for radio, that is a focused, structure-based work. Whereas when he’s making an Ozzy Osbourne record, that is performance-based. So he recognises there’s a difference between performance-based work and writing something for Dua Lipa that is going to be one of the biggest songs of 2020/2021 – this is stuff that requires a skill set that doesn’t last for ever. Nile Rodgers is still one of the greatest songwriters in the world today, but what’s really smart about Nile is that he works with people like Andrew, Stefan and Jordan, Poo Bear and Tayla Parx that have that magic touch when it comes to radio in 2021. Five years from now, it’s going to be, for the most part, a different set of people that have that magic touch. That’s what makes the radio so exciting – that it constantly evolves, sometimes to the point where it sounds like it’s gone backwards. [Lady Gaga’s] Just Dance is my favourite example of the last 12 or 13 years where it could literally have been on the radio next to Le Freak in 1978 or Good Times in 1979. But in 2008, it sounded like the complete fucking future.”
Do you expect modern catalogues to have the same longevity as classic works?
“We only buy extraordinarily successful songs and what I consider to be songs of cultural importance. So with the greatest respect, we’re not going to buy Lit or Collective Soul, we’re going to buy Ed Sheeran’s Shape Of You. Round Hill, who are one of our competitors, are keen on the fact that they only buy things that are 10 years [old] or more and that somehow gives them protection, if you like, in terms of earnings. But the truth is that no one’s going to be listening to Collective Soul or Lit 10 years from now. I’m certain that Ed Sheeran’s Shape Of You, which is only four years old and is the biggest streaming song ever, is going to be listened to 50 years from now. We own 40-odd Beyoncé songs, dozens of Rihanna songs, Justin Bieber songs, Ariana Grande songs, Jay-Z, Kanye and so on. I’m pretty sure we’ll be talking about those artists at the end of this century.”
Your initial goal was to build a £1 billion company. Now that has been ticked off, what is your target now?
“We are now a £2bn company. In the next two years or so we will double in size. At the same time we will go from 60,000 songs to 120,000 to 150,000 songs, we’ll also go from the 90 or so people we currently have to 200-plus people so that we always have less than 1,000 songs per person. At that point we are probably the perfect size song management company and managing our songs with responsibility will be our only focus.”
Finally, what’s your message to the majors?
“The time is now to do what is right for the songwriter and the artist. Let’s give applause to Rob Stringer for leading the way with the moves that he’s made recently on recoupable balances. I think that’s just the beginning; I think Max Lousada and Len Blavatnik are prepared – and in many ways they are perhaps best situated – to be able to make changes in favour of the artists. I think that Lucian Grainge is the most successful record executive of all time. He’s done incredible work, taking Universal and turning it into the 900lb gorilla that it is in a period that encompasses the worst time ever for the music business. Between 2001 and 2016, it was all down, down, down, because people were able to consume music illegally and not pay for it and that killed the industry. Thanks to people like Daniel Ek and the efforts of Apple, that technology has turned into streaming. When we started three years ago, there were barely 100 million paid subscribers to music streaming services. Today, there are 487 million and by the time we get to the end of the decade, there will be two billion. We’re talking about an industry that’s going to grow by almost five times in the space of the next eight or nine years. I like to say that I’ve made my success with artists and songwriters and producers, as opposed to at the expense of them. The major companies now have to evolve, where hopefully in 10 years’ time, they can say the same thing. I’m a catalyst for change, but I can’t do it without someone like Lucian Grainge, Rob Stringer, or Max Lousada and Len Blavatnik jumping on board the train. What I hope is that people will recognise that there is enough money flooding into this industry now to share it fairly and equitably with the songwriters that give us the currency of our business.”