Blackstone adjusts Hipgnosis strategy through a $1 billion music investment

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The soaring value of old songs has caught the attention of one of the world’s largest private equity groups, which is injecting $1 billion into a new fund aimed at buying music catalogs.

Blackstone will fund the vehicle, which will be managed by Hipgnosis Song Management run by music tycoon Mercuriadis. The fund will acquire the rights to evergreen songs that have soared in value in the streaming era.

It said on Tuesday that the New York-based group would also buy shares in HSM, but would not disclose its size. This music company runs the Hipgnosis Songs Fund, which is listed in London. Fast-paced buying, Snapped up the works of artists such as Blondie and Neil Young, and spent more than $2 billion in the process.

Launched separately Black stoneThe backing fund-named Hipgnosis Songs Capital-comes at a time when private equity groups are increasingly targeting music publishing deals.

Apollo said last week that it would launch a new investment company, HarbourView, with a US$1 billion investment in music copyright, KKR Join hands Establish a new fund with music company BMG, and invest directly in songwriters to tap future sources of income.

According to media reports in “Billboard” magazine, KKR is negotiating to acquire a $1 billion song catalog, which includes popular songs from Lorde, the Weeknd and Major Lazer. The company declined to comment.

Investors see music copyright as a high-growth opportunity, and old songs (such as Fleetwood Mac’s “Dreams”) can generate huge returns through streaming and social media platforms. Universal Music Group was listed in Amsterdam last month and is currently valued at approximately 45 billion euros. Soaring on the first transaction Prove interest in the industry.

“This new partnership with Blackstone will provide financial strength to invest in proven songs and grow our song management team,” said Mercuriadis, who has managed artists such as Elton John and Beyoncé.

According to Blackstone, the structure of the transaction-after five months of “tensed” negotiations-will mean Mercuriadis is marketing potential acquisitions to the new fund and his existing listed funds. “The bidding is mine,” he told the Financial Times.

Music tycoon Mercuriadis, whose Hipgnosis Songs Fund is the largest music catalog and royalty investor in the UK © Matt Winkelmeyer/Getty/SXSW

Blackstone declined to say whether it holds a majority stake in HSM or a minority stake, or at what valuation.

Direct investment in the song manager will enable it to expand its workforce and improve its ability to generate more revenue from the catalog.

Blackstone’s investment in new cars will be in the form of equity and debt, and will come from its Tactical Opportunity Fund.

Qasim Abbas, senior managing director of Blackstone’s Tactical Opportunity Division, said the private equity group sees the “long-term, sustainable value” of music copyright. “As an asset class, it is still in the early stages of development,” he told the Financial Times.

Analysts at JPMorgan Chase stated in a report that Blackstone’s financial strength allows Hipgnosis to conduct transactions that are more motivated than its own. “The possibility of co-investment… may mean that in the future there will be opportunities to obtain catalogs of higher value than previously possible,” they wrote.

Since its listing in 2018, the share price of Hipgnosis Songs Fund has risen by about 18%, and has risen by 4% after Blackstone’s announcement, reaching its highest level in a year.

This year’s Stifel analysts proposed focus on About how Hipgnosis evaluates the songs it has obtained. Numis also stated that Hipgnosis’s financial situation is difficult to assess due to the lack of available information. The fund’s response was to increase the detailed information it released about its purchases.

The collaboration with Hipgnosis is not Blackstone’s first foray into the music field. The consortium it leads this year acquired the music assets of Peppa Pig maker Entertainment One from the toy company Hasbro for $385 million, including the influential hip-hop record company Death Row Records.

Additional report by Antoine Gara in New York

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