Increased rates of interest dampen the investor urge for food for tune catalogs, as showcased by a deeply troubled Hipgnosis. Now extra staffing adjustments are on the way in which.
Hipgnosis hoped to show tune catalog royalty funds into normalized investments, however the greater rates of interest might go away the fund fully belly-up. The London-based tune catalog fund, which owns the rights to songs by Crimson Sizzling Chili Peppers, Shakira, and lots of extra, noticed shareholders vote towards one other five-year mandate on the firm’s annual common assembly this week. Now, Hipgnosis has six months to give you a plan.
Although lots of Hipgnosis’ points are undeniably self-inflicted, the broader downside of upper rates of interest has put a damper on the attraction of music rights investments. That bubble, which hit its peak in 2020 and 2021, appears about to pop, following a yr of traders spending $12 billion on music catalogs — greater than they’d for a decade main as much as the pandemic.
Huge names like Bruce Springsteen, Bob Dylan, Tina Turner, Stevie Nicks, and Paul Simon all reduce important offers on their catalogs throughout that point. Right now, fewer music catalogs are altering fingers. Decrease costs may postpone those that didn’t benefit from the growth in 2021.
That mentioned, the demand for music continues to be sturdy — after all individuals haven’t stopped listening to songs simply because the rates of interest have elevated. The US music business grew by 9% within the first half of 2023, solely barely under that of 2022. Firms report a rise in paying subscribers on streaming platforms, resembling Spotify’s 16% increase within the third quarter in contrast with the identical interval final yr.
Final month noticed Hipgnosis battle with a record-low inventory worth and the rejection of its proposed catalog sale. Shareholders voted towards the continuation of the tune fund’s dividends and Hipgnosis appointed a brand new chairman shortly thereafter, figuring out it “won’t declare dividends earlier than the brand new monetary yr.”
With its inventory buying and selling at a considerable 50% low cost to the estimated worth of its music catalogs, Hipgnosis is struggling to breathe because the funding panorama continues to dry up. At the moment, it’s smaller offers, significantly in Latin genres and hip-hop, that may supply some helpful returns for traders nonetheless seeking to flip a buck within the music catalog scene.