Investment fund backed by song royalties signs up hits from major stars

Key Points
  • A newly listed company is building an investment fund backed by song royalties.
  • Hipgnosis has announced a catalogue featuring hits from Justin Bieber, Beyonce and Rihanna.
  • The company behind the fund was listed Wednesday on the London Stock Exchange.
Hipgnosis: We want 20 percent of the global publishing market

A new investment fund backed by song royalties has revealed that huge hits by Justin Bieber, Beyonce and Rihanna will form part of its first catalog.

Hipgnosis Songs Fund, which was listed on the main market of the London Stock Exchange (LSE) on Wednesday, plans to build a portfolio of songs that generate a long-term income stream.

Following the listing, the company revealed that it has acquired a 75 percent interest in its first music rights catalog from musician Terius Youngdell Nash, better known as The-Dream. Included in the 302-song collection are Justin Bieber’s smash hit “Baby,” Rihanna’s “Umbrella” and Beyonce’s “Single Ladies.”

Hipgnosis is to pay $23.75 million for the stake.

The investment vehicle was founded by Merck Mercuriadis, the former manager of internationally renowned acts such as Elton John, Guns ’n’ Roses, Iron Maiden and Beyonce.

Founder of Hipgnosis, Merck Mercuriades (L) with board adviser and musician Nile Rodgers at the London Stock Exchange on 11th July 2018.
London Stock Exchange

He told CNBC’s Tania Bryer on Wednesday that the fund will immediately spend £70 million ($92.7 million) of the initial £200 million raised, with the entirety to be invested in songs within nine months. Mercuriadis said he wanted to then return to capital markets with an aim to balloon the fund to a £1 billion value.

“At £1 billion, we will be 18 or 19 percent of global publishing. At that point, we will have the critical mass to effect the change,” he added.

Mercuriadis said he believed his firm would be able to squeeze more value from a song as the world of streaming continued to grow. He added that a songwriter who doesn’t perform or sell merchandise could particularly benefit.

“If you are a songwriter and you are making $2 or $3 million a year and you are at that place where you need to get a check for $30 million, this is the only thing that gets you there,” he said.

Music legend Nile Rodgers performs at the London Stock Exchange on 11th July 2018
London Stock Exchamge

Musician and producer Nile Rodgers is acting as a board advisor for Hipgnosis. The co-founder of Chic has enjoyed a profitable career in music, releasing his own smash hits as well as working with artists including David Bowie, Michael Jackson and Mick Jagger.

Also present in London to help promote the initial public offering (IPO), Rodgers told CNBC that sometimes musicians failed to realize the value of their product.

“Every song has its own profit and loss statement and people don’t seem to realize that. Each song is its own independent business.

“Exponential growth is built into what we do. I’ve never ever seen a song become worth less.”

Trading under the ticker “SONG,” shares in Hipgnosis Songs Fund were trading at 102-105 pence (bid offer) on Wednesday morning, valuing the company at around £210 million.