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Hipgnosis Is Rocking Revenue With Music Catalog Acquisitions

Leader in the Evolution of Music Licensing Says Revenue and Dividends Are Up, After $1 Billion Acquisition of Music Catalogs

In the music world, 2020 will be remembered as the year when the value of popular music catalogs soared into the stratosphere, but 2021 will be the year that strategy was shown to pay off, as Hipgnosis unveiled impressive profits and revenue growth.

Hipgnosis is a leader in the space, as the London-listed public company spent a jaw-dropping $1 billion during the pandemic to acquire the rights to hit songs. Hipgnosis now owns the rights to 65,000 songs by artists from Neil Young to Beyoncé, and those songs are raking in the dough because of a massive uptick in music streaming, and the use of licensed music on social media networks like TikTok. Hipgnosis earns money every time one of their thousands of songs is played.

The bottom line? Hipgnosis stated in its annual report that it has almost doubled its revenues in a single year, from $82 million to $160 million in the current reporting period.

Neil Young to Cash In on Music Catalogs

This financial bonanza was fueled by the company’s strategy of acquiring—at stratospheric prices—the rights to music catalogs that appeal to often older audiences, as well as leading edge performers that are more recent. For example, in the past year Hipgnosis purchased the rights to to 84 song catalogues last year, including those of artists such as Shakira and Debbie Harry. In early 2021 Hipgnosis made headlines globally, purchasing 50% of the rights to Neil Young’s catalog of music for $150 million in a deal that rivaled the $300 million Universal paid for ownership of Bob Dylan’s music.

Special Report: The Evolution of Music Licensing

Hipgnosis has since increased its pretax operating profits year on year from $41.5m to $44.5m and raised its annual dividend target by 5 per cent as a demonstration of its faith in the continued growth of music streaming revenue.

CEO Merck Mercuriadis says the success of Hipgnosis and other companies in the space is due to increased listenership during the pandemic, but also the growing popularity of music streaming, particularly among older listeners, as well as the rise of platforms like TikTok, or Peloton, which licenses music for exercise programs. Mercuriadis notes there are now 43 million people paying for streaming subscriptions with Spotify, Apple Music and Amazon Music. By the end of the decade that number is expected to reach two billion people worldwide.

“This has turned music from being a discretionary or luxury purchase to very much being a utility as a result of the convenience and access afforded by streaming,” Mercuriadis said. “Going forward this accelerated streaming will be enhanced as revenues from TikTok, Peloton, Triller, Roblox and other rapidly emerging digital platforms start to be paid through. We are entering an era where now, for the first time ever, almost all consumption of music is paid for.”

Hipgnosis said streaming income rose 18.4% in the second half of its financial year, compared with the first six months. The company’s portfolio of 138 song catalogs is valued at $2.2bn, an increase of 10 per cent over the $2 billion it cost to acquire.

The Hipgnosis strategy is also based largely on the observation that many older listeners are switching to streaming, making the more classic music catalogs more valuable, even though they may not have been a Billboard hit for years, or even decades. The proportion of songs that are more than 10 years old now accounts for 60% of its total portfolio, an increase from 32.5% at the end of March last year. Two years ago that proportion was just 10%. Just under half of Hipgnosis’s portfolio (46%) is pop music, while rock is now the second biggest genre at 27%.

Paul Simon Latest To Sell Music Catalog

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