‘Merck Mercuriadis wants to raise a billion dollars. And then he wants to change the face of the music business.’
That was the headline on MBW in July 2018, just as Hipgnosis Songs Fund was floating on the London Stock Exchange.
Twenty-one months on, Mercuriadis, CEO and Founder of Hipgnosis, hasn’t just raised a billion dollars – as he tells MBW in our latest podcast, he’s now officially spent a billion dollars, across approximately 60 deals.
Those deals have seen Hipgnosis buy – or partly buy – 12,000 songs, including those which have powered an array of hits such as Rihanna’s Umbrella, Ed Sheeran’s Shape Of You, Al Green’s Let’s Stay Together, Eurythmics’ Sweet Dreams (Are Made Of This) and Beyoncé’s Single Ladies.
You can listen to the MBW Podcast with Merck Mercuriadis through this link.
Confirms Mercuriadis: “We’ve made something just under 60 deals in the last 21 months and invested just north of $1 billion. Out of those 60 deals, 40 are ones where I went after the songwriter or artist and developed a rapport – if I didn’t have one before – before we got into the nitty gritty of making a deal. The other third are people approaching us based on what they’ve read about us or read about me.”
There’s certainly been plenty to read about Mercuriadis in the past couple of years, of course, whether that’s regarding Hipgnosis’s ever-growing war chest, or the company’s headline-making deals – including the acquisition / part-acquisition of catalogs from the likes of Tricky Stewart, Richie Sambora, Benny Blanco, The-Dream, Mark Ronson, Starrah, Dave Stewart, Poo Bear, Savan Kotecha, Johnny McDaid, Jack Antonoff or The Chainsmokers. (The list goes on. And on and on.)
“The important thing to remember in that context is, in order to spend $1bn, you have to have $1bn to spend.”
Merck Mercuriadis, Hipgnosis Songs Fund
Mercuriadis is well aware what many of his industry critics say – that Hipgnosis is responsible for driving industry acquisition multiples to unsustainable heights – and he’s swift to shoot down the suggestion.
He argues: “As a public company, we have disclosures that we have to make to the marketplace that outline exactly what we’re doing, and those disclosures are verified and 100% accurate. We’ve announced that the better part of that billion dollars has been spent on an average of a 12.99X multiple [of net income].
“A lot of people in the industry telling stories that we have been paying much higher multiples are doing so because in 20 months we’ve bought 60 of the greatest catalogs of all time, and invested a billion dollars, at a point when many of our competitors who have raised money have found it very difficult to invest. And the reason why they’ve found it difficult to invest is because we’ve come along, and our thesis is not just a financial play – we have a strategy [and] a place in the artistic community, and ultimately that gives us a competitive edge.”
“[A lot of people] telling stories that we have been paying much higher multiples than [we have] are doing so because in 20 months we’ve bought 60 of the greatest catalogs of all time, and invested a billion dollars, at a point when many of our competitors who have raised money have found it very difficult to invest.”
Merck Mercuriadis, Hipgnosis Songs Fund
He adds: “If you’re one of our competitors and you’re talking to your investors, and they’re asking you how Hipgnosis is able to invest at the rate that we’re investing and yet you have this incredible cash drag on the money invested in you, the easy response is to say, ‘Oh they’re paying more than we are.’ [In fact], we’ve been outbid on many catalogs by our competitors.”
On the subject of competitors, Mercuriadis adds: “I saw that MBW did an interview with someone the other day who facetiously talked about ‘anyone being able to spend $1bn’. Of course, even though it didn’t name me, I knew it was aimed at me, because I’m the only person that has spent $1bn.
“The important thing to remember in that context is, in order to spend $1bn, you have to have $1bn to spend. And you have to have a thesis that is appealing to investors to want to back you with that sort of money – and beyond that you have to have my sort of pedigree and my sort of strategy.”
You can listen to the MBW Podcast with Merck Mercuriadis through this link.
Mercuriadis is clearly proud of his position in the artist / songwriter / producer community. He suggests that his three-plus decades of working in the industry – working with the likes of Elton John, Beyoncé, Morrissey and others – gives Hipgnosis a unique advantage over its rivals.
The exec, who continues to manage Nile Rodgers today, says: “At the end of the day [when buying catalogs] you have to demonstrate to songwriters, artists and producers that you are the right pair of hands for them to put their children in. That’s not something you can do if you’ve never spent time – both good times and bad times – dealing with great artists, songwriters and producers in helping them achieve their dreams.”
“As painful as the experience of Sanctuary’s downfall was, I was able to come out of it with my integrity intact.”
Merck Mercuriadis, Hipgnosis Songs Fund
Talking of “good times and bad times”, we ask Mercuriadis what he learned from his 21 years at Sanctuary Group PLC, where he climbed to CEO before the firm’s downfall – when it was sold to Universal Music Group in 2007 amid financial difficulties.
Says Mercuriadis: “We had an incredible amount of expertise within Sanctuary in the music community, but we did not have the same level of expertise and guidance from the financial community. [With] Hipgnosis, I learned from that experience… we’re advised by some of the most important people in the financial community. ”
Mercuriadis says the most important lesson he learned from his Sanctuary days was that “as painful as that experience was, I was able to come out of it with my integrity intact with the artists because I always told the artists the truth, and I always prioritized their wellbeing over my wellbeing”.
You can listen to the MBW Podcast with Merck Mercuriadis through this link.
As Mercuriadis has discussed before, he says his “ulterior motive” with Hipgnosis is to gain enough market power in the music rights space to bring about a change in the recompense seen by songwriters in the streaming age.
He argues that the “the important of the songwriter has never been more pronounced” in the music business, and they are treated as the “low man or woman on the totem pole”. Mercuriadis says that, prior to founding Hipgnosis, he came to the realization that “in order to be a catalyst for change in this business, “it’s not millions, tens or millions of even hundreds of millions – it requires billions of dollars”.
“Ultimately I believe in the next two years, Hipgnosis will be at £2bn [pounds, circa $2.5bn] invested, and at that point we’ll probably own [around] 50,000 songs.”
Merck Mercuriadis, Hipgnosis Songs Fund
With an eye on the future, Mercuriadis suggests that over the next two years, Hipgnosis Songs Fund aims to take its current 12,000 song catalog closer to the 50,000 mark – continuing a ratio of a fifth of these compositions being No.1 chart hits, with another three-fifths being Top 10 hits.
To get there, he says Hipgnosis will have to spend another ten-figure sum of money, while growing its company to a headcount of 75 to 100 people.
“Ultimately I believe in the next two years, Hipgnosis will be at £2bn [pounds, circa $2.5bn] invested, and at that point we’ll probably own something less than 50,000 songs,” he says.
He adds: “On the one hand, we’ll have reached perfect size at £2bn invested, [while] I also think the value of these incredible songs will be driven up; in six or seven years they’ll probably be worth two to three times what they’re worth today.”
You can listen to the MBW Podcast with Merck Mercuriadis through this link.
Hipgnosis Songs Fund’s UK HQ is based at Tileyard, London. Located in Kings Cross, Tileyard is Europe’s largest community of artists, studios and businesses, all revolving around music, ideas, collaboration and creativity.
