Hipgnosis’ Merck Mercuriadis Explains His Company’s Vision

Merck Mercuriadis, founder and CEO of Hipgnosis Songs, was the man of the hour – make it the day – Thursday during Canadian Music Week in Toronto, returning to his native country for three separate sessions. While he was seen presenting the Nile Rodgers Global Creators Award (named, of course, for the legendary co-founder of Chic and his partner in Hipgnosis) to singer, songwriter and record producer James Fauntleroy and, virtually, hip hop record producer Dion “No ID” Wilson and another gave Public Enemy founder Chuck D the organization’s first annual Social Justice Honor Award, most notable being his commencement speech , during which he reinforced his company’s stated mission to change the dynamics of the music industry so that songwriters are on top.

After reiterating that he had raised over $3 billion for Hipgnosis and given his investors a “total return of 48% on their investment to date”, he outlined the origin, vision and goals of the company. company in a 45-minute introductory conversation with his friend of 30 years, Joey Scoleri, head of industry relations at Live Nation Canada. His quotes, excerpted below, speak for themselves:

“Songs are the currency of the music industry – there’s no music industry without them,” he said. “But the songwriter is the lowest man or woman in the economic equation. And I wanted to change that.

“I realized, studying it more, that the real reason the songwriter isn’t paid properly is that the three or four – there were four when I started, now there’s has three [after EMI was acquired by Universal and Sony] — the major recorded music companies own and control the three or four major publishing companies, and they have prevented these companies from defending the interests of songwriters because on the recorded side of the music industry, they get the four-fifths of income; they get an 80% gross margin; 40% net margin and usually they own these recorded masters in perpetuity.

“Conversely, on the songwriting and publishing side, you have one-fifth the revenue, you have one-fifth the margin, and rightly so, whether it’s too good management or of a good lawyer or renegotiations or reversions, the songs come back into the hands of the creators or co-creators, so it’s in the interest of Universal, Warner and Sony — that’s how I got them appointed — to push our company’s economy as much as possible into recorded music, because that’s where the lion’s share goes to them.

“And the more I became convinced of that, the more I realized that in order to really be able to fight it, I would need an incredible platform. I was lucky enough to be able to see in that moment what was going to happen with streaming. And in 2009-2010, I went to see [Spotify founders] Daniel Ek and Martin Lorentzon, and said, ‘Look, I don’t know if you can really understand what’s going to happen. Your platform will change the face of music.’ And that laid the foundation for the investment thesis for Hipgnosis.

“So I started seeing institutional investors in London. And I was like, “Look, these songs have really predictable and reliable revenue,” and I wanted to create a vehicle that wasn’t a publishing company but more of a song management company. I wanted to create a new paradigm where we would bring efficiencies to collections of these great songs, and blockchain was going to change things for the future as well.

“But it wasn’t just about making money, and that had to be clear from the start. They had to agree that we had ulterior motives to use the platform to change the place of the songwriter in the economic equation.

“The average publishing house has 20,000 songs per [A&R rep]. Hipgnosis has 500 songs per person. So we have a very small catalog of only 65,000 songs, but those are massive songs. Our people are really adept at putting them in movies, TV commercials, and video games and making sure new songwriters interpolate them, new artists cover them, etc., so we can add value . But what’s really important about all of this is that when I presented this investment case to the financial community, I told them what the motive was, which was that it would be a great way to make money. money, because Spotify and streaming are going to go from 30 million paying subscribers to a hundred, two hundred, three hundred, four hundred, five hundred million. When we come to the end of this decade, we will be over a billion. And by the time we enter the next decade, we’ll be at 2 billion paying subscribers, and that money is coming from all over the world.

“And I would go to war – not with Universal, Warner or Sony, but more on behalf of the songwriting community which would then compel Universal, Warner and Sony and everyone else in this industry, to help bring about change necessary for the songwriter to move from the bottom to the top of the economic equation, and I won’t stop until that happens.

“If you had asked me four years ago, I would have told you it was going to take 10 years,” he concluded. “If you ask me today, I will tell you that it will take another four years. So we are two years ahead of what we expected.

Will this vision come to fruition, especially now that the catalog acquisition market that Mercuriadis has done so much to accelerate is slowing down? Time, as always, will tell.

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