The following is an excerpt from the book “The Music Catalog Sales Guide”, by Silvino E. Díaz, Esq. It’s a comprehensive dealmaking guide for artists, companies, and professionals in the music industry. It discusses current trends, as well as tips on how to: organize your assets; structure your team; attract major investors; value your catalog; and prepare to sell.
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While music catalog sales near-exploded in 2020—with annual deal volume rising to an estimated $7 billion by 2021—sales began to stagnate in 2022. In 2020, the rise in catalog sales was driven by historically-low interest rates during the pandemic. Investors were disincentivized from leaving their money in traditional fixed income assets and more willing to consider alternative, riskier forms of investments like music catalogs. However, eventual rising inflation led the U.S. Federal Reserve to raise interest rates, changing the economic condition that made music catalogs an attractive investment in the first place.
In fact, Universal Music Group (UMG)’s 2021 financial report showed a decrease in money spent on catalogs from 2020 to 2021. Meanwhile, private equity firm KKR recently divested its stake in Chord Music Partners, selling it to UMG. Tempo Music, another fund, has been listed for sale for several years.
What is Hipgnosis and how did it mark the end of the music catalog sales boom?
In 2018, Hipgnosis, run by music executive Merck Mercuriadis, began buying song catalogs of artists like Neil Young, Shakira, Justin Bieber and the Red Hot Chili Peppers. Hipgnosis Songs Fund (HSF), an “investment trust” listed on the London Stock Exchange, owned the rights to tens of thousands of songs. Hipgnosis Song Management (HSM), its separate “investment adviser,” conducted the dealmaking and administration work for those songs. In 2021, Blackstone invested $1 billion to take majority control over HSM.
HSF went public in July of 2018, and raised $260 million for the purpose of purchasing high-profile catalogs. It spent over $2 billion in acquisitions. Rumors whirled that HSF was overpaying for catalogs, driving up prices for everyone. Still, it built a portfolio comprising 138 catalogs containing more than 40,000 songs.
However, HSF soon ran into trouble. By 2021, a significantly decreased share price affected HSF’s ability to raise additional capital to acquire more catalogs. In 2023, frustrated shareholders voted against continuation, prompting a board review that resulted in findings of overstated revenue and earnings. Later, an independent review cut the value of HSF’s music portfolio by 26%, and shareholders voted against continuing the business as an investment trust. Mercuriadis stepped down as CEO of HSM and resigned his position as chairman.
In 2024, Blackstone acquired Hipgnosis Songs Fund, with shareholders voting in favor of the investment company’s $1.584 billion bid. Trading of HSF was halted on the London Stock Exchange by July of that year and the company is no longer publicly traded.
If you have questions or would like to discuss the purchase of music assets, please contact EPGD Business Law in Miami, Florida, at (786) 837-6787 or email us to schedule a consultation.
EPGD Business Law is located in beautiful Coral Gables. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.
