Congrats to N+1Singers in pulling off a big fundraising. The various fund research wires are saying that the Hipgnosis Songs Fund has just raised gross proceeds of £200m after issuing Ordinary shares at 100p, with the ticker SONG. Crucially the offer was over-subscribed.
I say this is impressive largely because roughly this time last year, this fund tried to list – with a higher income target yield (of 6.5%) – and failed. An anchor investor was in place but the fund couldn’t quite hit its target. Now the manager’s might even raise more than £200m if the placing programme remains open.
I’ve got a MoneyWeek column coming on the subject next week, so I won’t share too many of my views. The investment adviser is called The Family (Music) Ltd whose main principal is Merck Mercuriadis, former manager of recording artists such as Elton John, Guns N’ Roses, Morrissey, Iron Maiden and Beyonce. As well as a bunch of “hit songwriters” such as Diane Warren, Justin Tranter and The-Dream. Mercuriadis is also former CEO of The Sanctuary Group plc. The table below has more information on the fund.
My only observation here is that
- Raising £200m for this fund is a big coup for Singers
- The target yield of 5% is a little underwhelming IMHO but if it provides uncorrelated returns it’ll fly
- Expect to see rival US online platform RoyaltyExchange bring out its own listed markets vehicle fairly soon
- Can’t wait to see the roster of artists in the portfolio.
|The prospectus behind the Hipgnosis fund makes absolutely fascinating reading – you can download it online at https://www.hipgnosissongs.com/. T
First off, a few top line music industry facts which include the following observations:
· that global recorded music revenues peaked historically in 1999 at U.S.$29 billion after which there was a 15 year decline, with a corresponding decline in royalty income for songwriters, which occurred as a result of value destruction led by piracy.
· In 2017 there was a 16 per cent. increase in U.S. retail spending on music, a 43 per cent. increase in U.S. streaming revenues and a 56 per cent. increase in U.S. streaming subscriptions.
· In addition, the payouts to songwriters or copyright owners have increased. In January 2018, the Copyright Royalty Board ruled to increase songwriter rates for interactive streaming by nearly 50% over the next five years.
· In 2017, global streaming revenues exceeded those of other recorded music revenues for the first time,16 and have been projected to rise to U.S.$22.9 billion by 2030.
At launch, the Hipgnosis fund will include a minimum of 300 Songs but as many as 1000 over time, and will also “include songs performed by more than 50 global recording artists”, with “exposure to at least eight songwriters” and will “include Songs from each of the past five decades”. Crucially the fund will contain “more than 10 number 1 hit Songs in the UK and the US, and more than 20 Grammy Award winners or nominees.”
So, how will these songs generate revenue? According to Hipgnosis, the revenue streams from music royalties are varied and include:
* mechanical royalties – when a copy of a Song is made, whether physical (e.g. CDs, DVDs) or digital (e.g. permanent downloads, streaming, webcast);
* performance royalties – when a Song is performed live or broadcast on TV or Radio, or when a song is streamed online; and
* synchronisation fees – when a Song is used in another form of media (e.g. movie, TV show, video game, advertisement).