MERCK MERCURIADIS – The Music Business Pioneer

1. How did you start your career in the music business?

I knew from the time I was 7 years old that I was never going to be a performer and I read voraciously about managers and record executives to figure out what role I might play. I went to work at Virgin Records while still in my teens when it was still Richard Branson’s record company. Virgin was the best label in the world in the early 1980’s with the most amazing artists from Simple Minds to Peter Gabriel. It was an incredibly artist friendly environment and I thought I was happy there until I became sophisticated enough to realize that ultimately I was working for Richard and not the artist. A lot of the time they were in alignment but at crucial times not and I realized I wanted to work with / for the artists best interest at all times.

2. You used to run Sanctuary Records, one of the most important labels for the resurrection of rock music in the 00s. What do you remember from those days and did you ever have second thoughts support about selling the company to Universal afterwards?

I was at Sanctuary for 21 years and with my mentors Rod Smallwood and Andy Taylor managed Iron Maiden. We then developed the company into the biggest independent company in the world that was truly 360 with the best management company, Merchandise company, record company, booking agency et al. I was managing not only Iron Maiden but also Elton John, Guns N’ Roses and Morrissey and overseeing the management for Beyonce, Mary J. Blige, Fleetwood Mac and many of the most important artists of all time. We were recording Morrissey, Megadeth, King Crimson; Booking tours by Metallica, The Red Hot Chili Peppers and Kraftwerk; selling t shirts for the Spice Girls, Depeche Mode and Motorhead. It was an incredible company so I was heartbroken when we could not sustain it and ultimately sold to Universal. We were very naive in our dealings with the financial community and received bad advice. That experience in many ways has played an important part in the success of Hipgnosis Songs as I have ensured that I have incredible advisors that truly understand the financial community. I take the responsibility to our investors more seriously than anything and I’m not shy to spend my money to be certain we are always over delivering.

3. Do you think that it is still cost effective to run an indie label today?

With the incredible growth of streaming there has never been a better time to be a manager, have a label or song company and be in the music business.

4. How different is working on the side of an artist as a manager compared with the position of an executive in a label?

Ever since I left Virgin I have only ever worked in the best interest of and in alignment with the artist.

5. Which is your mission about Hipgnosis Songs Fund?

I wanted to establish proven songs as an asset class. I demonstrated to the biggest institutional investors in the world that proven hit songs have a pattern of predictable and reliable income and are therefore investable just like gold and oil but in fact they are better as they are uncorrelated. This is because they become a part of the fabric of our lives and stay with us forever. When people are living their best lives they are celebrating to a soundtrack of music. Equally when they are experiencing challenges they are escaping or taking comfort in music. Music is always being consumed and generating revenues. They are also protected by rule of law which around the world is in general 70 years after the death of the last co-composer. So not only is the income, like the song, evergreen but on average it has a life of about 100 years. This therefore makes them an excellent way to make money. That was the motive. The ulterior motive is to use the leverage and financial power of our fund and great songs to change where the songwriter sits in the economic equation. The songwriter is currently the low man or woman in the economic equation because the 3 biggest song companies in the world do not advocate for songwriters as they are owned by the 3 biggest recorded music companies in the world. Recorded music gets 4/5ths of the revenue and an 80% gross margin whereas the song gets 1/5 of the revenue and margin. As revenues are growing dramatically, thanks to streaming, those big companies are using their leverage of recorded music owning their song companies to push the improvement to recorded music, where they get the lion’s share of the margin, at the expense of the songwriter. We want to change that. it’s a medium / long term goal that will take 7 or so years but we will change it and put songwriters at the top of the economic equation – which is in complete alignment with our shareholders interests. I am confident we will be the catalyst in changing the paradigm and getting the songwriters everything they deserve!

6. Do you think that music publishing is still a profitable share of the music industry?

We had 15 years of technological disruption in the way of illegal downloading which almost destroyed the music business. The only good thing to come out of that is that it left the songs at attractive prices at a time when that technology evolved into streaming and started to grow the business again. When we started 2 years ago there were less than 75 million paid subscribers to music streaming services. Today there are more than 300 million and projections from JP Morgan, Goldman Sachs, Morgan Stanley etc are for more than 2 billion within 10 years. Many of them come from emerging markets like China, India and Africa but also places like Greece that previously contributed very little to the data on which we buy the catalogues. Everyone is now streaming and paying for music because of the access and convenience. The best years of the song business are in front of it as a result.

7. How do you evaluate the purchase value of an artist catalogue?

In order for us to consider a song or catalogue it not only has to be extraordinarily successful but it has to be cultural as well. That’s how you know a song will endure. We look at the last 3 years plus of verified income and remove any income we do not believe can be repeated before applying a multiple to it. We’ve invested over $1 billion dollars and we announced to the market not long ago that we did the majority of that at an average multiple of 12.99 which is the envy of the industry when you consider we have bought some of the most famous songs of all time including “Don’t Stop Believin’”, “Sweet Dreams (Are Made Of This)”, “Smooth”, “Livin’ On A Prayer”, “Green Onions”, “Let’s Stay Together”, “We Are Family”, and “Good Times” to name some of my favorites. We own 4 of the Top 5 songs of the last decade and 8 out of the Top 30 most played songs on Spotify of all time.

8. Back catalogue Vs New tracks, which side do you prefer and why?

We do not buy anything unless it its already proven so while “Don’t Stop Believin’”, “Sweet Dreams (Are Made Of This)”, “Livin’ On A Prayer” and “Good Times” all have a 35 or 40 year history the newest songs in our portfolio are also extraordinarily successful before we buy. Camilla Cabello’s “Havana” was the #1 song of the year globally of 2018 before we bought Starrah’s catalogue, The Chainsmoker’s were the #14 most streamed artist of all time on Spotify before we bought their catalogue. It’s important to be in both old and new. 70% of the consumption on streaming services is catalogue but it is spread across tens of thousands of songs. We are lucky to have “Don’t Stop Believin” which is the number 1 most streamed song of the 20th century, “Sweet Dreams (Are Made Of This)” is the #1 most streamed song of 1983 and “Livin’ On A Prayer” the same for 1986. The other 30% of consumption is on the last 3 years of hits so extremely highly concentrated listening on only a few hundred songs and in this area we own the best songs by The Chainsmokers, Justin Bieber, Taylor Swift, Ariana Grande and Ed Sheeran. That balance is important to delivering the strongest results possible.

9. Which is your plan for the next step of the Hipgnosis Songs Fund?

We have achieved an incredible amount in a short space of time. Not only are we a $1 billion company but we have just entered the FTSE 250 making us one of the biggest companies on the stockmarket. We’ve done that faster than any company previously. We have subsequently been named as the #42 highest yielding company on the stockmarket which is incredible when post Covid more than 100 companies are not paying a dividend at all! We have an enviable shareholder list of 60 of the biggest institutional shareholders in the world from The Church of England to Aviva. More than 99% of our money comes from the UK and now that we have proven ourselves there is a massive desire from US and International investors to be a part of what we are doing. They will help us get to $3 billion invested in the next two years. This is important as these great songs are still available at attractive prices even as streaming is growing quickly. Subscriptions have even grown during the pandemic! As a result there will not only be big revenue increases for us but also dramatic net asset value growth. This is much more than just an income story as we expect these great songs to triple in value in the coming decade. This will allow us to not only create the perfect storm for shareholders but to also bring about the reform that is needed for songwriters.

10. How does the streaming music model affect the projected profits of a recently acquired artist catalogue?

As I said before we have gone from 75 million paid subscribers to more than 300 million in barely two years. We’ll be at more than 450 million within the year, Apple just opened in 52 new countries, and more than 2 billion within 10 years. This is systemic change in the way that people are consuming music as a result of the combination of access, price and convenience. Music is going from being a luxury purchase to a utility and the passive consumer who has never paid for music before would rather cut off their right arm than not pay for their Apple or Spotify subscription. It’s also great for Greek catalogues as there are more Greeks outside of Greece than there are in Greece and they now have easy and immediate access to the songs all over the world. The same is true of almost every nation. Equally well Greeks now have access to all International music. In India consumption of International repertoire has increased from 8% to 42% in the last 12 months.

11. Which is your advice for artists or labels that have plans to sell their catalogue?

Please call me! I am recognized as the preferred buyer by the artists, producers and songwriters as I have made my money and my reputation with them as opposed to at their expense. I also know music extremely well as I will always protect the artist’s legacy.

12. Do you have Greek roots?

My grandparents were born in Constantinople when it was still Greece. They were forced out in the 1920’s. My father was born in Thessaloniki and lived there and Florina and he played for PAOK before eventually emigrating to Canada in 1954. My mother was from a tiny town in Peloponnesus and went to Canada the same year. I’m the first generation to be born outside of Greece so I am very much a Greek! I’m very young in relative terms but I know all the “Hashishlikia / Rembetiko” songs from Bithikotsis, Tsitsanis, and Theodorakis straight to Kazantzidis, Kokotas and even Violaris. My knowledge stops at Dalaras! My favorite Greek song would have to be Roloi Komboloi or the more serious work by Theodorakis.
The Greek political problems of the early 70’s also play an important role in my knowledge of music as my cousin Mike was forced to leave Athens and he came to Canada to live with my family. He brought records by Fleetwood Mac, Wishbone Ash, Pink Floyd, Curtis Mayfield and Black Sabbath. He was about 9 years older and knew a lot about music and drugs and girls and he taught it all to 7 or 8 year old me. I’m not where I am today without him.

Company info: https://www.hipgnosissongs.com/

*Interview picture: Merck Mercuriadis, pictured at Abbey Road Studios in 2018. Photo by Jill Furmanovsky/rockarchive.