🔵 Hipgnosis investors rebel and vote against continuing. What happens now?
Plus: Universal confirms three year renewal deal with Spotify.
Regular readers know I’ve been covering the unfolding drama at Hipgnosis for a few weeks now. One pivotal moment we knew was coming was the vote that took place today, essentially asking investors whether Hipgnosis Songs Fund (HSF) should have another five year mandate to continue as an investment trust.
Perhaps unsurprisingly (if you’ve followed the story thus far), the investors have fairly unanimously voted not to continue. This means that HSF must now rebuild its board (having lost three key members, all to resignations - two of which were last night), before then proposing alternative options, or face being wound up.
Arguably, the options available amount to one of the following:
Replace the board completely and ideally including the management agent, Hipgnosis Songs Management (HSM)
Wind the company up and sell off its assets
I have covered before that option 1 is unlikely to happen, because a clause exists that would allow HSM to purchase back the assets HSF owns in the event of a termination notice.
The far more likely option then, is the winding up of the company, and that in turn might well result in HSF’s assets being sold off - likely at fire sale prices - to Hipgnosis Songs Capital, the private arm of the Hipgnosis business, largely (if not entirely) owned by Blackstone.
As Jimmy Stone pointed out in his analysis piece yesterday:
“there is undeniably a perverse incentive for HSM to make things worse at SONG [HSF], so that it can ultimately acquire the company for a cheaper price.”
I would argue that is precisely the position that HSF finds itself in now. Its business has cratered, the investors have rebelled, and the one final act it may be forced to execute is a sale back to the very people whose management sunk the operation in the first place.
If that does happen, it is either a breathtaking grift on the part of certain stakeholders, or a masterpiece of financial strategic play.
Perhaps the wider aspect to then focus on (assuming this sale goes ahead - and right now I wouldn’t bet against it) is what happens to the catalogue when it moves across into private ownership.
The reality is that the same team - led by Merck Mercuriadis - will still oversee the catalogue’s exploitation, so from an outside-in perspective, arguably not a great deal will have changed.
Along the way though, there will surely be some spectacularly pissed off investors.
Truly a tale for the ages.
Have a great evening,
🎶 listening to “Evil” by Cactus. Once covered to great effect by Monster Magnet, the original remains the definitive version in my books: a flat-out ballsy riff-monster replete with a guitar solo that sounds like the guitarist is actively suffering the effects of some kind of LSD/PCP overdose mid-play. File under “songs to play when you want to kick shit over”. The fact that my son stuck his head in to ask what this was as I played it Very Loudly Indeed says it all. Teen approved - nothing more to add.
🤖 playing with Music League. I have NN reader Jonathan Christiansen to thank/blame for this, so thank you sir! (I think…!) Create a league, invite your friends, and everyone has to submit a song (using a Spotify link) on the theme of each round (e.g. cover versions, songs under 2mins long, instrumentals - or whatever you might choose to create). We’re all hooked here at MU, and it’s a fine way to create some conversation/banter/flat-out-arguments with your colleagues, heheh.
I am tempted to create a Network Notes league so we can all unleash hell on one another by way of taste and judgement as only the music industry can. If nothing else it might prove a fine tool to discover some new music. Fancy it? (It’s free to play) Vote below!
Stories from the Music Industry:
At an extraordinary general meeting on Thursday, 83.2% of shareholders voted against it securing another five-year mandate to run as an investment trust. That means the London-listed company, which offers investors the chance to make money from the royalties of tracks by artists such as Beyoncé and Neil Young, must now rebuild its board and propose alternatives within the next six months or face a move to be wound up.
👆🏻Hot take: the truly incredible thing here is that by cratering the value of HSF, it only ensures a lower sales price to the only company that will bail it out - that being, of course, Hipgnosis Songs Capital, the Blackstone-backed private arm of Hipgnosis. Astonishing scenes.
Spotify is embracing elements of Universal Music Group’s ‘artist-centric’ royalties model – following a new multi-year licensing deal between UMG and Daniel Ek’s platform
Thanks to a slightly under-reported fact, MBW believes it’s fair to assume that Universal, as the world’s biggest music rightsholder (a) bore at least some influence over Spotify’s newly-planned model and (b) broadly supports Spotify’s initiatives. That slightly-under-reported fact? On July 26, on a Q2 earnings call with analysts, UMG boss, Sir Lucian Grainge, reveaed that UMG had just signed a “newly expanded agreement” with Spotify. Said agreement, MBW has since learned, amounted to a fresh multi-year (believed to be 3-year) global licensing deal for UMG’s content.
👆🏻Hot take: I asked in yesterday’s NN what Universal’s response to Spotify’s new revenue model might be, and here is our answer: it has already re-upped for 3 years, meaning it is absolutely fine with it.
Daniel Ek just banked $64M selling Spotify shares – three months after he banked $100M doing the same thing
The single largest shareholder in Spotify at the close of 2022 was Ek, who held 31.93 million ordinary shares in the company, or 16.5% of the total, according to SEC filings. At SPOT’s current share price on the NYSE (USD $161.82) those 31.93 million shares are cumulatively worth USD $5.17 billion. Earlier today (October 25), as spotted by MBW, Ek sold a relative thimbleful of his Spotify stock… for a pretty penny. According to a Spotify company SEC document, Ek today filed to sell 400,000 shares in Spotify for total proceeds of USD $64.21 million.
👆🏻Hot take: I would imagine detractors will have a field day citing these stats whilst pointing to artists’ own paltry revenues etc, but just as with Lucian Grainge’s huge payout last year I feel it’s not even close to a like-for-like comparison, though it might prove where the real money lies in music - and it’s not at the creator level for the most part.
Grimes and CreateSafe partner with Slip.stream to make 200+ GrimesAI songs available to content creators
The artist teamed up with Los Angeles-based design and development studio CreateSafe and music technology platform Slip.stream to allow creators to incorporate GrimesAI songs in their videos, podcasts and livestreams on any platform. Grimes’ AI project Elf.Tech, powered by CreateSafe’s Triniti API, allows musicians and artists to integrate Grimes’ vocals into their original compositions and distribute them to major streaming platforms like Spotify, Apple Music, and Tidal. Users can create songs using Grimes’ voice in exchange for a 50% share of the master recording royalties.
👆🏻Hot take: you have to respect Grimes for the way she has leveraged AI to create significantly more music, which is now being licensed all over the place to generate further revenue. Very, very smart - though arguably not something that really scales such that everyone can start doing this.
One of the music industry’s most prominent startup accelerators is shutting down. 2023’s Techstars Music cohort will be its last, with MD Bob Moczydlowsky saying that the accelerator model is no longer the best way to invest in music-related startups. “Even though the way we have been investing has been working, it has been held back by the constraints of an accelerator, which we feel is an outdated model,” he told Billboard. “The amount of capital we can provide is limited. It is also held back by the constraints of labeling it ‘music.'”
👆🏻Hot take: a very interesting point is being raised here. If accelerators are not the answer to supporting emerging startups, what is? Keen to learn more.
Stories from the Broader World of Tech:
It's finally happening: X (formerly known as Twitter) has begun rolling out yet another feature nobody asked for. Now, users will have the option to call each other via audio and video calls on the platform. This doesn't come as a total surprise, as CEO Linda Yaccarino previously confirmed that video chat would be coming to the social media site back in August.
👆🏻Hot take: I am increasingly of the view that in time people will use the downward spiral of X/Twitter as a kind of case study for how not to do, well, anything.
“We’re witnessing a race to the bottom that must be stopped,” Tegmark told the Guardian. “We urgently need AI safety standards, so that this transforms into a race to the top. AI promises many incredible benefits, but the reckless and unchecked development of increasingly powerful systems, with no oversight, puts our economy, our society, and our lives at risk. Regulation is critical to safe innovation, so that a handful of AI corporations don’t jeopardise our shared future.”
👆🏻Hot take: I do feel the “existential threat” arguments are a little extreme, but equally I’d agree with anyone asserting that AI badly needs better regulation, as is the case here.
Need something else to read? Here you go:
What do “arpeggiated synths and light-up dancefloor grooves” sound like, exactly? MusicLM has an answer.
👆🏻Hot take: a fantastic read that turns music journalism on its head by taking copy from reviews and attempting to turn that into facsimiles of the songs being reviewed. A brilliant idea - one that left me wondering if maybe, just maybe, there may be a bitter irony emerging in which music journalists - who have arguably seen their work devalued to the Nth degree through the years - may find themselves of HUGE value to AI music creators.
In 2012, someone stole 50,000 bitcoin from the Silk Road, an illegal dark web marketplace. Over time, the value of the stolen bitcoin skyrocketed to more than $3 billion dollars and for years it remained one of the biggest mysteries in the world of cryptocurrency. Almost a decade after the 2012 hack, the thief made a critical mistake that allowed the IRS-CI to crack the case.
👆🏻Hot take: another page-turner of a read about crypto crime. For some reason these always turn into gripping stories, largely I suspect due to the anonymity elements that ensure culprits are always tough to catch.
The latest from Motive Unknown’s world:
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