As former manager of Guns n’ Roses and Morrissey, Merck Mercuriadis knows a few things about the comeback. Now, the veteran music executive is about to stage himself after taking a roller coaster ride into the public market, leaving him out of work and leaving the bystanders of the industry that he helped transform.
Hipgnosis, launched in 2018 to purchase song rights and sold last year, has returned with greater ambitions. Mercuriadis will plan a new investment group under the same name, bringing together artists and their managers as co-owners of a partnership structure to create music and buy song rights from others.
The 61-year-old Canadian-born executive can be argued that he transformed the modern music business, owned the once esoteric industry, and helped create billions of dollars asset classes on the radar of the world’s largest investors.
He was a pioneer in a wave of institutional funding for the sector as Hipgnosis spent $2 billion and purchased catalogs of artists such as Shakira and Mark Ronson.
Now, since Hipgnosis remained silent when it was sold to Blackstone (and rebranded as recognition music), he says he has an unfinished business. He admits that he has questions about why he wants to return to the industry, given that he discovers that the investment community is as much a cutthroat as the music business. But he adds: “The work we started isn’t perfect yet, because the music industry has begun to be institutionalized.”
Meet at his London home with a vast collection of floor-to-ceiling vinyl – Mercuriadis dresses in the trademark black Prada that he says he always wears so that he doesn’t spend time choosing something else. He says he wants to think about music, a lifelong passion, and art forms that still permeate all his conversations.
Mercuriadis says he came up with the idea for Hipgnosis in 2009 when he saw Spotify’s growing popularity. The US platinum record meant selling 1 million copies in a country with nearly 340 million people, but he says, “streamed (gived) a reason to pay 339 million other people.”
Mercuriadis often seems to know everyone in music, dropping anecdotes about 1970s legends help Glastonbury and others prepare to reform their careers. He has the neat trick of asking people about his favorite artists. He responds that he has worked with them, counted as friends, owned songs, or at least saw them before they became famous.
This is why many musicians trust him as their music manager or owner. One former colleague describes him as a musical obsession, “the ultimate fanboy who just wants to be part of the world his hero lives in.”
However, the investors had a tricky relationship with the LA-based executive. The LA-based executive was previously an artist manager and boss of Sanctuary, a UK-based music company.
In addition to his own higher-oriented ambitions to encourage Wall Street, who is hungering for new revenue streams, to support a long-term asset class vision, and to support songwriters who can work, he says, “they were after they spent hit parade time.”
He sold the concept of song rights and by encouraging this use based on the abilities of television, games, film, hip gnosis and its rivals, he breathed new life into many tracks, resulting in stable income based on the rival’s ability to “work” assets.
“The opportunities for institutional investors were huge, large enough to change their valuations and give people a huge benefit,” he says.
By the end of 2021, his public company was trading at the highest stock price ever. But when the sharp rise in interest rates after the start of the Ukrainian War pushed up the discount rates used to calculate the value of assets, and its dividends seemed unattractive, its assets changed.
Questions about Hipgnosis’s portfolio have reduced the value of its debt level and corporate governance have led to a strategic review by the new board that led to the company’s sale last year. Mercuriadis resigned after the acquisition, and some industry rivals predicted that this time the music executive would be difficult to bounce back.
Mercuriadis was accused of overpricing the market and promoting excessive pricing by rivals by overpaying for rights. He refused, saying that Hipgnosis’ portfolio has been assessed in line with nearly 16 industry “average” multiples guaranteed by “101 copyrighted revenue streams.”
A former colleague says he often appears to be more suited to being a music manager than money. However, he does not appear to be hurt by the downfall of the Hippgnosis and the criticism he faces, denounces activist investors for the sudden end of his previous company. The $1.6 billion sale to Blackstone, as well as the subsequent returns of the US private equity fund, shows the deal he led to good, he says.
“I’m proud of this job. I’m extremely proud of the catalogue. I’m proud of the returns I’ve given to investors. You pay a price you know that the assets are more valuable, so you know that they’re at the price you know.
The wave of trade started by Hipgnosis shows no indication of a halt. Last year, only Sony was worth more than $1 billion for the songs Queen and Pink’s Floyd wrote and performed.
Mercuriadis’s new venture already has an investor commitment to “hundreds of millions” dollars, according to those familiar with the issue. A talk has been given regarding the first two acquisitions.
“I bring together five or six very important management companies, all of which have superstar artists and superstar managers together,” says Mercuriadis. “It’s about what they’re in control and how they make all their money (not labels).”
He says more and more artists who gathered massive followers on social media before record labels approach them have power. Why do they need to hand over their financial benefits to the label?
Mercuriadis describes this as a “value shift” from music companies to artists and managers. The company will work with labels, streaming platforms and talent agencies as a “service provider,” but “equity (and income) will benefit the artist.”
Mercuriadis has purchased a music catalogue that offers “very predictable, reliable, low-risk” income and sits with new music that artists are creating. His ultimate ambition is to buy back the $2 billion in music he has accumulated in Hipp Gnosis.
“One of my goals is to buy back the catalogue. Blackstone is a very smart person. They get big returns for the catalogue I put together, so I’ll have to pay properly for it.
Mercuriadis also wants to create a “guild” of songwriters to help them negotiate with the streaming platform. “It all starts with a song, but these people continue to be the lowest paying people in the room,” he says.
“It was these people who helped me make my own.
