\n<\/p>\n
Six years ago, an outspoken music executive named Merck Mercuriadis kicked off a new wave of dealmaking in the industry when his company, Hipgnosis, began buying up the song catalogs of artists like Neil Young, Shakira, Justin Bieber and the Red Hot Chili Peppers.<\/p>\n
Now, Mercuriadis, who once managed Beyonc\u00e9 and Elton John, is stepping down from the company after its assets have been sold to the private equity giant Blackstone, following a tumultuous year that has involved a shareholder revolt, an accounting scandal and a bidding war.<\/p>\n
In the company\u2019s complex structure, Hipgnosis Songs Fund is an \u201cinvestment trust,\u201d which is listed on the London Stock Exchange and owns the rights to tens of thousands of songs. A separate company, Hipgnosis Song Management \u2014 which has been run by Mercuriadis \u2014 is its \u201cinvestment adviser,\u201d doing much of the dealmaking and administration work for those songs. In 2021, Blackstone invested $1 billion to take majority control over the adviser firm.<\/p>\n
The board of Hipgnosis Songs Fund voted<\/a> on Monday to accept Blackstone\u2019s offer of $1.6 billion for the company\u2019s assets, the company announced early Tuesday.<\/p>\n<\/div>\n<\/div>\n After going public in 2018, Hipgnosis got off to a bright start, beginning a spending spree for artists\u2019 song rights that ultimately exceeded $2 billion, and making an attention-getting pitch to investors that the royalties from pop songs could be \u201cmore valuable than gold or oil<\/a>.\u201d<\/p>\n Mercuriadis also regularly attacked the corporate conglomerates that dominate the music industry, portraying them as owning too much content to properly manage it. Privately, others in the industry complained that Hipgnosis was overpaying for catalogs, driving up prices all around. In 2021 alone, the music industry had $5.3 billion<\/a> in catalog transactions, many from deals with individual artists, according to an estimate by Midia, which studies digital media and the music industry.<\/p>\n \u201cPeople look at songs as being inanimate objects; I don\u2019t,\u201d Mercuriadis told The New York Times in an interview<\/a> in 2020. \u201cI think that they\u2019re the great energy that makes the world go \u2019round, and I think that they deserve to be managed with the same level of responsibility that human beings do.\u201d<\/p>\n But by last year, investors in Hipgnosis Songs Fund became displeased with the company\u2019s share price, which had dropped well below the value of its assets, as computed by a third party.<\/p>\n In October<\/a>, shareholders voted against maintaining the company\u2019s structure. That triggered a series of changes, including a harsh review<\/a> by a new financial adviser, which reduced the value of the company\u2019s assets by 26 percent; the report also found that Hipgnosis Song Management had overpaid for the majority of its catalog and overstated the fund\u2019s revenue and earnings.<\/p>\n<\/div>\n<\/div>\n In April, Hipgnosis Songs Fund reached a tentative deal<\/a> to sell its assets for $1.4 billion to Concord, a large American independent music company whose portfolio includes labels like Fantasy, Rounder and Loma Vista. But a bidding war with Blackstone followed, with Blackstone entering the winning bid of $1.31 per share.<\/p>\n Last week, Mercuriadis announced that he would leave Hipgnosis Song Management once Blackstone\u2019s acquisition of the full catalog was completed.<\/p>\n \u201cThis is a timely opportunity for me to undertake a strategic shift of focus,\u201d he said in a statement<\/a>, \u201cand to spend more time advocating on behalf of songwriters to ensure that they are properly compensated for their work.\u201d<\/p>\n<\/div>\n<\/div>\n