The Man Who’s Spending $1 Billion to Own Every Pop Song
Music mogul Merck Mercuriadis raised hundreds of millions of dollars to buy the rights to hits by Taylor Swift, Timbaland, and Bruno Mars. Is he insane?
Inside the office on the second floor of music industry mogul Merck Mercuriadis’ off-white townhouse in the posh London neighborhood of Notting Hill, there is shit everywhere. Hundreds of vinyl records are piled in shelves, while others are stacked 20 deep on the floor. A Michell Engineering turntable worth more than $10,000 is still wrapped in plastic on a card table. There’s a mound of CDs teetering next to two signed copies of English rock singer Ian Hunter’s recent memoir, one of which will go to Morrissey, whom Mecuriadis managed for several years. An original 1969 pressing of the only album by the German group Organisation, a precursor to Kraftwerk, is finally on its way, after Mercuriadis — who also managed Elton John and Axl Rose in a former life — spent almost 40 years tracking it down. “I don’t believe in material things. I always wear black, and I don’t have a car,” he says. “But I’ll gladly pay 400 quid for a record.”
Which is why on this cool, late-fall day in mid-November, Mercuriadis is going record shopping — again. On his way to the seminal London record store Rough Trade, only a few short blocks from his house, with his bare head and stocky frame he could easily be mistaken for a Greek mobster. But today his mode is more tour guide as he spits out questions like quarters from a slot machine: “What’s your favorite band?” “Do you have a holy grail of a record?” Across the street, in the gray townhouse, he tells me, is where Brian Eno lives. There’s the Globe, a Jamaican-inspired dance club that the Clash loved. The Tabernacle, a venue where Pink Floyd — Mercuriadis’ all-time favorite band — used to play.
He walks into Rough Trade and ducks behind the counter. “Merck and Elton are our best customers,” says Sean, the store’s buyer. Now down to business: the records.
“There’s a Fontaines DC 12-inch,” Sean says.
“I need that,” Mercuriadis replies.
“A Madonna remix 12-inch?”
“I need that.”
“Cate Le Bon?” Mercuriadis looks at Sean incredulous.
“Do I look like I want a Cate Le Bon record?” Sean chortles.
A clerk tallies up the 25-odd albums. As he waits, Mercuriadis thumbs through another stack of vinyl, stopping to look at the cover of Taylor Swift’s latest, Lover.
“Should I add that too, Merck?” Sean asks with a sly grin.
“No,” Mercuriadis answers. “I already own 10 songs on it.”
Music royalties are the ultimate intellectual property (IP) game. Depending on who owns the copyright to a song, be it the composer, publisher, recording artist, or anyone else who may have been involved, they get paid every time someone wants to use their IP. Though valuations of the major labels are currently at an all-time high — they generated $14 billion in 2019 alone — between iTunes and Spotify, the past 20 years have been volatile for them. Royalties, however, have been the one constant, viewed as the safe long-term play: No songs, no hits, no money. Now private equity firms, institutional investors, and high-profile managers want in on it, too. In recent years, billions of dollars have flooded the music business to invest in the catalogs of songwriters.
The eye-popping dollar amounts Mercuriadis is paying have caused much consternation in the C-suites of major labels and publishing houses. “Fuck that guy. What he’s paying is obscene,” says one publishing exec.
Mercuriadis has entered the scene as the industry’s most aggressive and audacious buyer. In 2017, the former music manager launched Hipgnosis Songs Fund, which raised nearly $1 billion to snap up the publishing rights of some of the biggest songwriters in music today. Unlike other major publishing houses that spend time and resources developing undiscovered talent, Mercuriadis is focusing solely on investing in proven songs, ones that have already generated strong ROIs but have potential for much more. His logic is that by owning a handpicked number of songs, Hipgnosis can be more strategic and nimble in finding new ways to monetize them, whether it’s with TV, ads, or other merchandise. “We turn down 70% of what’s offered to us, and oftentimes we make the first move in finding writers whose catalogs aren’t publicly for sale,” he says.
In less than three years, Hipgnosis has purchased nearly 7,500 songs, more than 1,000 of which have been number one hits. Mercuriadis has done eight-figure catalog deals with the writers of five of the songs in Billboard’s Top 10 of the Decade: Bruno Mars’ “Uptown Funk,” co-written by Jeff Bhasker; Ed Sheeran’s “Shape of You,” co-written by Johnny McDaid (also the song with the most streams in Spotify history); the Chainsmokers’ “Closer”; Maroon 5’s “Girls Like You,” co-written by Starrah; and the Latin crossover smash “Despacito” from Luis Fonsi, Daddy Yankee, and Justin Bieber, co-written by Poo Bear. Hipgnosis has also acquired catalogs of hip-hop icon Timbaland, Jack Antonoff (Taylor Swift’s co-writer on Lover), and Shawn Mendes’ collaborator Teddy Geiger. In late December, Hipgnosis announced its acquisition of Savan Kotecha’s catalog, the songwriter behind Ariana Grande.
Mercuriadis is interested in cashing in on the past, too. His fund has also purchased the catalogs of legends like Dave Stewart of the Eurythmics and one of Mercuriadis’ closest friends and management clients, Nile Rodgers. (Rodgers’ credits range from his own classics, such as “Good Times,” to the Sugar Hill Gang’s pioneering hip-hop track “Rapper’s Delight” to Daft Punk’s multiplatinum “Get Lucky.”) Mercuriadis is now working on closing his biggest deal yet: acquiring the entire catalog of one of the music industry’s most iconic female artists and songwriters from the past 50 years.
The eye-popping dollar amounts Mercuriadis is paying have caused much consternation in the C-suites of major labels and publishing houses, entities that historically have ruthlessly fought against change. “Fuck that guy. What he’s paying is obscene,” says one publishing exec, who, like the 15 other industry sources contacted for this story, declined to comment on the record. In the music industry, paying for assets at a 10x multiple is considered top dollar. Mercuriadis is reportedly paying up to 20x, making it impossible for others to compete. “Executives from major publishing houses are by nature very acquisitive,” says Mark Mulligan, one of the industry’s most respected analysts and head of the London-based research firm MIDIA. “They’re walking away from deals because they can’t figure out how to make the numbers work with the multiples that are being paid.”
What Mercuriadis is doing with Hipgnosis isn’t so much innovative as it is opportunistic. With a fertile contact list from his decades as an artist manager, the ability to raise at least another billion from investors, and a healthy amount of hubris, he located an opening in the music industry and is going all-in on exploiting it. Ultimately, his goal with Hipgnosis — which went public on the London Stock Exchange in June 2018 — is to own 15% to 20% of the overall publishing market. “Everyone that writes songs today can be confident that the financial community understands that as these songs become proven, they are predictable and reliable,” Mercuriadis says.
Unless, of course, they’re not.
When Mercuriadis was eight, an older cousin arrived from Greece to live with his family in Nova Scotia and brought with him a stack of records. “He knew everything about girls, he knew everything about drugs, and he knew an awful lot about music,” Mercuriadis says. “And I become interested in all three of those things.”
In 1982, determined to find a job in the music industry, he called the Toronto office of the then-upstart label Virgin Records every day for months until it hired him in the marketing department. But after three years at Virgin, Mercuriadis was itching to work on the artist side of the business. He moved to London to join Sanctuary Music, a rapidly expanding management firm whose initial client was the British heavy metal band Iron Maiden.
Mercuriadis became infatuated with maintaining Iron Maiden’s career after years of creative upheaval between its main songwriter and its lead singer. He endeared himself to them with his passion for the music, as well as his rapidly evolving marketing skills. For the launch of the band’s 1992 album, Fear of the Dark, Mercuriadis flew dozens of journalists, radio disc jockeys, and label personnel to London. The guests were ferried by double-decker buses to a site where an elaborate indoor casino and carnival set had been built, complete with pinball machines, card dealers, and extravagant food. The band played only one song. “It was surreal. I had one journalist say to me, ‘I feel like I’ve won an MTV contest,’” recalls Ellyn Solis, who at the time was the band’s publicist at Epic Records. “It had to have been six figures.” Afterward, while the guests partied in the hotel bar, Mercuriadis printed out the next day’s itinerary and went to every room and slid the paper under the door. “He’s like the Pied Piper. Everyone follows him because he has such a creative passion for what he does,” Solis says. “He’s a true music and artist guy, and he’s always one step ahead of everyone else.”
In 2000, Mercuriadis moved to New York to become the president of Sanctuary Music’s North American office. By this time, Sanctuary was a publicly traded company, and Mercuriadis was charged with developing a record label and publishing arm in addition to growing the management roster to eventually add Beyoncé, Elton John, and Axl Rose. Rose was still toiling on Guns N’ Roses’ sixth album, the long-delayed Chinese Democracy. But as the album’s release date continued to be pushed back, Sanctuary started hemorrhaging money in 2004, coming up woefully short on meeting revenue expectations and laying off a good portion of the company’s staff. Sanctuary was eventually sold two years later to Universal Records for $41 million. A manager’s single greatest skill is protecting their artists. After Sanctuary’s dissolution, most of Mercuriadis’ management clients left him, a rare setback for a man so committed to his artists and their art. “I definitely felt like a failure,” he admits.
When Spotify launched in 2008, Mercuriadis became intrigued by streaming music. Central to Spotify’s user experience was the ability to create personalized playlists by culling songs from all genres and artists. The start-to-finish thread of a full album was becoming less important to streaming adopters. In decades past, he observed, the majority of artists wrote their own songs. Kurt Cobain wrote all the lyrics and much of the music for Nirvana’s 1991 album, Nevermind. Contrast that with Adele, who worked with 10 different songwriters for her 2015 smash, 25. “It became clear to me that the power was shifting from the artist to the songwriter,” Mercuriadis says. “But the songwriters weren’t in a position to reap the benefits.”
Today, the music industry is in the midst of an arms race to tap the next song and artist who rockets into the pop culture. Columbia Records has thrown millions at Lil Nas X for “Old Town Road” and Arizona Zervas for his song “Roxanne,” both of which first exploded in 2019 on the video-sharing social app TikTok. A forward-thinking manager can find new ways to grow his clients’ reach. Take Moe Shalizi, who landed his EDM client Marshmello 10 million users when he played a virtual concert inside the world of the wildly popular video game Fortnite.
In 2018, he launched Hipgnosis Songs Fund with a head-turning acquisition: $23.75 million for a 75% stake in The Dream’s catalog — the songwriter behind hits like Rihanna’s “Umbrella” and Beyoncé’s “Single Ladies (Put a Ring on It).”
Despite the wellspring of fresh moneymaking opportunities for artists, Mercuriadis recognized that the structure of the music business has largely remained the same for the songwriter. Artists make most of their money by touring and selling merchandise, while the songwriter has access to none of that. But shouldn’t they? After all, it was the songwriter who gave the artist material to tour behind.
“I liken the music industry to an oil tanker,” says Vickie Nauman, who serves as an adviser to firms looking for a piece of the publishing market. “And there’s all these speedboats zipping around the ship trying to get it to alter course with new technology or ideas. But as history has shown, that oil tanker takes a long time to turn.”
With Hipgnosis Songs Fund, Mercuriadis bypassed all of them. Songwriters are able to generate revenue from three sources: mechanical royalties (the sale or legal download of a song), performance royalties (paid every time a song is heard in public, whether it’s a live performance, on TV, or in a movie; played in a bar or restaurant; or streamed), and synch fees (song licensing for use in movies, video games, and commercials). Mechanical royalties are the only stream with a set rate; performance and synch royalties are negotiated percentages. Synchs are often more lucrative for the songwriter, since they generally split 50% for the writer and the artist, with the label taking its cut from the artist’s piece of the pie. Synch is where Hipgnosis Song Fund could make them money, as Mercuriadis explained to the 177 hedge fund and private investors he pitched between 2015 and 2018.
Soon after launching, Mercuriadis made his first head-turning acquisition: $23.75 million for a 75% stake in The Dream’s catalog — the prolific songwriter behind hits like Rihanna’s “Umbrella” and Beyoncé’s “Put a Ring On It.” “He told me I could be the next Quincy Jones and laid out the plan. How can you not listen to him?” says The Dream (whose real name is Terius Youngdell Nash). “I’m recruiting people all the time.”
“He told me I could be the next Quincy Jones and laid out the plan. How can you not listen to him?”
Today, the business operates like a cross between an investment fund and a talent management agency. While Mercuriadis brokers the catalog deals, each of his 19 employees is responsible for monetization opportunities for a portfolio of songs. He plans to at least double the number of people working for him this year. “I want to get rid of the word ‘publishing,’” he says. (His preferred description: “song management.”) “Major publishers have small staffs working with hundreds of thousands of songs. We’re shooting for thousands of songs and having synch managers who are each responsible for a much smaller amount,” he says. “We’ll make a lot more money than anyone else.”
Plenty of artists are happy with their current publishing deals. But don’t think for a moment that songwriters aren’t seeing the fat checks Hipgnosis is cutting and pushing their managers to get a meeting. In 2017, the attorney for Justin Beiber’s songwriter Poo Bear cold-called Mercuriadis. After a few meetings, Poo Bear backed out of a different publishing deal. “I didn’t know who he was, but for Merck, it’s music, music, music, all of the time,” says Poo Bear, who has since sold Hipgnosis every song he’s written up until July 2018. “As an artist, I want to work with people that are as passionate about my songs as I am.” As for his future works? “I wouldn’t do a deal like that with anyone else other than Merck.”
It’s 11 a.m. and champagne is circulating around a stuffy conference room at the London Stock Exchange. It’s the day after Mercuriadis’ record-shopping spree, and he’s here to celebrate the upgrade of Hipgnosis’ stock to a premium listing. Mercuriadis took Hipgnosis public in 2018. The stock gained nearly 10% value in its first year; in the six-month period ending on September 30, Hipgnosis’ profit increased from $4 million to $15.5 million. With the upgrade, Hipgnosis is now open to a whole new breed of investors beyond institutional. It’s also validation of Mercuriadis’ operating theory — that songs can be viewed as a measurable uncorrelated asset class akin to gold, diamonds, or oil—entities sheltered from the swings of the market. “I think that in due course other people will be saying, ‘I need to be in songs,’” he says.
But none of this is guaranteed. Streaming revenue is strong today, but it could be more idiosyncratic than analysts predicted; emerging markets such as China and India are paying pennies on the dollar compared to mature markets. Interest rates could climb, forcing Hipgnosis to burn more cash. And Jimmy Iovine recently told the New York Times that unlike streaming video companies that generate their own content, the streaming music market is commoditized, since they all have access to the same music.
Then there’s the math around proven hits: There are only so many catalogs of songs with a stellar track record available to purchase, and even then, the future streaming revenue figures generated by catalog songs over time remains murky. Eighty-eight percent of current streaming revenue is from songs that were released in the past 10 years. “The Beatles are the fourth-biggest band for Universal in terms of revenue, but the amount generated from streaming is minuscule,” says industry researcher Mulligan.
Meanwhile, skeptics think the sky-high multiples Hipgnosis is paying make it incredibly risky. In December, Warner Music closed a $650 million deal with private equity firm Providence to acquire publishing rights. The deal is structured so that Providence assumes most of the investment risk with Warner, initially offering only administration and marketing expertise, having an option to buy in at a later date. “Warner is one of the most educated buyers in the market, and they are letting private equity write the checks and take the risk,” says Matt Pincus, who sold his publishing company Songs to Kobalt Capital’s fund for a reported $150 million in December 2017. “Why would they do that if they thought pricing was rational?”
Pincus acknowledges that Hipgnosis may have other deals in the works that would offset the high prices he’s paying — and indeed, Mercuriadis is working on diversifying beyond songwriter catalogs. The company just purchased the masters of UK band the Kaiser Chiefs, which gives it complete ownership of the recordings. Purchasing producers’ rights is another new point of emphasis. Mercuriadis bought Jeff Bhasker’s inventory (the Grammy’s 2016 Producer of the Year behind “Uptown Funk”), along with the entire 1,855-song output from Brendan O’Brien, best known for his work with Pearl Jam. There are also the merchandising possibilities: Mercuriadis’ yet-to-be-announced mega-deal with that iconic female artist reportedly includes, in addition to the thousands of songs the artist has written, the use of her image and likeness. This deal will cost Mercuriadis well into the nine figures but has the potential for him to eventually sell more T-shirts than the Gap.
Many of Hipgnosis’ hedge fund and private investors argue that something catastrophic would have to happen for the company to stumble. “Honestly, the only thing that concerns me is if Merck suddenly died,” says Mitchell Humphries, manager of an investment fund for the Church of England. “But I’m sure he’s thought of a contingency plan already.” (Indeed, the 55-year-old has: Three members of the company’s advisory board and its chairman would run things.)
Later that evening, after the London Stock Exchange celebrations, Mercuriadis heads to Abbey Road Studios, where he keeps a small office above it. Music from the recording session downstairs drifts into the room as he unbuttons his jacket and sinks into the leather couch with a giant exhale. The packed day of events is just a precursor to what Mercuriadis is planning next: to raise as much as $3 billion over the next year. Along with owning a bigger chunk of the publishing market, he wants to continue altering it. He’s considering launching a songwriter’s union, something akin to the Screenwriters Guild, that would give songwriters more leverage to extract better deals from the industry’s power brokers. “What makes the music business wrong is when executives start to believe that they’re more important than the artists,” Mercuriadis says. “I’ve never gotten to that place.”
