The US private equity giant Blackstone has struck a deal with Merck Mercuriadis, who advises the London-listed music rights business Hipgnosis, to set up a $1bn (about £735m) venture to acquire music rights and manage catalogues.
Over the past three years Mercuriadis has overseen an acquisition spree at Hipgnosis, buying the royalty rights to the music of stars from Neil Young and Barry Manilow to Beyoncé and Blondie and building up a portfolio of almost 61,000 songs worth $2.2bn.
Blackstone has struck a deal with Mercuriadis’s separate advisory business, Hipgnosis Song Management (HSM), backed by an initial $1bn, in the latest move by big investors to tap into the streaming boom that has fuelled a recovery in the music industry.
“The music industry is at the forefront of the fast-growing streaming economy and is unlocking new ways of consuming content,” said Qasim Abbas, senior managing director at Blackstone Tactical Opportunities. “This partnership underscores the long-term, sustainable value we see in creative content across the wider entertainment industry.”
As part of the deal, Blackstone will take an undisclosed “ownership stake” in HSM, while the London-listed Hipgnosis business he advises will have the right to co-invest in catalogue acquisitions the new venture makes.
Mercuriadis said: “Given the strength of our [acquisition] pipeline we see the initial [$1bn] commitment as just the start of a long-term partnership between Blackstone and Hipgnosis that will also include co-investment. Hipgnosis Song Management has firmly established songs as an asset class. This new partnership with Blackstone will deliver financial strength to invest in proven songs.”
Investors have been clamouring to get a commercial side of the streaming-fuelled boom, which has transformed the fortunes of a music industry that a decade ago faced financial ruin as CD sales plummeted because of widespread digital piracy.
Last month, Universal Music, the world’s biggest record company and home to artists including Taylor Swift and the Beatles, floated on the stock exchange in Amsterdam, achieving a market valuation of €45bn (£38bn).
Last year, Hipgnosis spent $1bn buying the rights to 84 song catalogues by artists ranging from Neil Young to Shakira. In December, Bob Dylan sold the royalty rights to his entire catalogue of 600 songs to Universal Music for a reported $300m. In August, Warner Music, the world’s third biggest music company, struck a “career-spanning global partnership” with Madonna.