MERCK ON BIG DEALS, SONG MANAGEMENT AND THE FUTURE
Interview by Simon Glickman
We asked Hipgnosis head and disruptor extraordinaire Merck Mercuriadis about the state of play in catalog deals, the notion of "song management" and how writers get paid. And we got an earful.
The London-based song maven is feeling particularly merry at present, as Hipgnosis-held compositions hold the top two spots on the U.K.’s Christmas chart: “Don’t Stop Believin” (as reimagined by Ladbaby) and “All I Want for Christmas Is You.”
The last time we spoke at length, you said you don’t define yourself as a publisher. Since then you’ve incorporated a frontline publisher into your operation. Has the acquisition of Big Deal changed your business? I see us as a song-management company, not as a publishing company. Ten years from now, I want every artist to have a manager, a record company, a booking agent and a song manager. Possibly an administrator as well, but they need the song manager.
What defines song management? A year or so ago, we bought the Al Jackson catalog, which includes Al Green's “Let's Stay Together,” “Still in Love With You” and “Call Me”—in fact, seven or eight big Al Green songs. It also includes all the Booker T & the M.G.’s stuff, including “Green Onions,” arguably the most famous instrumental of all time. Great recordings with Bill Withers, Otis Redding and so on. Across the catalog, you're talking about 20 of the most important pop songs of the ’60s and early ’70s. Yet when we bought it, 82% of the income was from one song: “Let's Stay Together.” All the other songs were doing virtually nothing. We have this very small catalog, now barely 50,000 songs, with people very actively managing those songs, putting them in movies, putting them in TV commercials, putting them in video games, making sure they're on the right playlists at Apple and Spotify, making sure new artists are interpolating them or covering them. And when you look at the caliber of people I've brought on board, whether it's Ted Cockle, whether it's Amy Thompson, these are people who know how to manage a song. But I’ve chosen people who didn't come from established publishing backgrounds because I wanted a different type of energy, a different type of blood. I want our great songs to be managed with the same level of responsibility that great managers manage great artists with. Metaphorically speaking, we are Elliot Roberts and our songs are Neil Young.
And though I take your point that it appears I've bought a traditional publishing company with the acquisition of Big Deal, I haven't; what I've bought is the chemistry among a handful of people—in addition to Ted and Amy, Kenny McPherson, Jamie Cerreta, Pete Robinson, Dave Ayers and Casey Robison—who have the same song-management philosophy I do. So what looked like a traditional publishing company a year ago is going to look very much like a song-management company a year from now. When I'm looking at a 20-year-old kid entering the business today, I'm able to look them in the eye and tell them that the best years of the music business are in front of us, whereas I wouldn't have been able to do that five years ago. What Spotify and Apple and Amazon have done is taken the passive consumer, who enjoyed music for free on the radio or television but who never put their hand in their pocket and pulled out money to pay for music—and that passive consumer is 349 out of every 350 people in the U.S.—and gotten them to pay $120 a year for music. Money has flooded into the record companies, and it must be shared fairly and equitably with the songwriters who are the lifeblood of our business. Because If you don’t have Andrew Watt, Benny Blanco, The-Dream, Mark Ronson, Poo Bear, Jack Antonoff or Ryan Tedder, to name but a few, you don’t have hits, period!
I’ve said from day one that my ulterior motive in creating Hipgnosis was to make sure more is going to the songwriter, and I think we're having success working towards it.
What can be done to adjust the ratio between how much streaming money goes to masters and how much to songs? The first step is to take the risk out of the songwriter’s future by paying them a lot of money for their songs and putting them in a position where they’re not subordinate to the major record company or the major publishing company and don’t have to do things that aren’t in their best interest.
The second step is to organize, which is why in 2021 we’re creating and funding a proper songwriters guild, which we won’t own or control; it will be the songwriters who own and control it. It’s about songwriters literally having a seat at the table to make decisions on their own behalf. Because we have a copyright board acting on behalf of the songwriter that is doing good work, and we've got people like David Israelite at the NMPA doing terrific work. But at the end of the day, the NMPA doesn't represent songwriters; it represents publishers. And in every negotiation, the artist and the songwriter are represented by somebody else. With the guild in place, the songwriter and the artist—not the songwriter and the artist manager, not the artist and the NMPA, but the songwriters and the artists themselves—will sit down together.
We’ve empowered more than 117 of the most important and successful songwriters in the world. They're the first 117 people who will become the voice for the songwriters guild, but they will be joined by other songwriters around the world. Because this is not just for Hipgnosis songwriters.
You've got the Screenwriters Guild in the movie business, which has real teeth and every three years proves it by making sure the screenwriter is being paid more money. We just don't have that in music; no one has ever gone into the equivalent of Paramount Pictures and said, “I don't care who you've got lined up to star. If you don't have a script, there's no movie, and you're not getting the script until my writers are paid properly.” The only time you change something is when you have to change it. That’s what has to happen for songwriters to be treated more equitably.
The future is one where the songwriter dictates the terms. We are making it possible for no one to ever have to ask for permission again.
The Bob Dylan deal with UMPG is one of the splashiest recent catalog deals not done by you. Care to comment?
It’s been good for me. I'm in the middle of buying some iconic things, which you can imagine are on the expensive side. Nowhere near as expensive as Dylan, but the combination of that deal and Primary Wave paying what it did for Stevie Nicks has prevented me from feeling distress about what I'm paying for these three or four iconic catalogs. I couldn’t absorb something like what UMPG paid for Dylan, but I don't think it's too expensive. These deals confirm my thesis about the value of these songs. What these publishers have demonstrated is that they’re prepared to pay what the catalog is worth, and I applaud them for it. I also congratulate Lucian and Larry, respectively.
How many more catalogs of that stature would you say remain to be bid upon?
Neil Young would be close to that. Paul McCartney, his post-Beatles work. The Pink Floyd catalog is certainly of that stature. The Led Zeppelin catalog is of that stature, the shares of Robert Plant and Jimmy Page, particularly. Joni Mitchell belongs in this conversation, as do Paul Simon, Stevie Wonder, Maurice White, Gamble & Huff, Carole Bayer Sager, Mick and Keef, Bruce Springsteen, Joe Strummer, Joey and Johnny Ramone and many others. There’s actually an endless incredible pipeline.
One of the ways you seem to have had an impact is in a movement away from artists hanging onto their publishing to pass it on to their heirs.
It’s true that if the economics work, there’s more openness to doing a deal that works for you and your heirs, even if it doesn’t give your heirs control of the catalog. I do insist that the songwriter show us a plan for what they're going to do with the money. I want to make sure they’re using it to make more money and not just spending it. Because I don't want to be responsible for someone blowing their pension and finding themselves in a difficult position.
Most of the songwriters whose catalogs we’ve acquired know that their songs are better off in my hands than in their kids’. They know I won’t buy anything that I’m not personally obsessed with and care deeply about. They know I know the ethos they’ve built their careers on, that I will make decisions commensurate with the ones they would have made. They know I’m prepared to take absolute responsibility for these great songs they’re giving me the privilege of being the custodian of. They know I give a fuck. They’re still leaving a great chunk of money to their heirs, but they’re also making sure their creative legacy doesn’t languish. Both sets of heirs, the children and the songs, need proper husbandry.
For the uninitiated, let’s get into some of the economics of these deals.
We’re buying catalogs on a multiple. Say a songwriter is making a million dollars a year—we look at a three-year average—and we've paid them $15 million for their catalog; in that case, the multiple is 15. For us, the multiple of the £1.2 billion we've invested so far is 14.76. We're in the business of buying catalogs with investment from institutional investors, who are looking for income and net-value growth. The income comes in the form of a dividend. And there's a mathematical formula that will quickly tell you whether or not you can continue to pay those dividends. So I operate to a blended multiple because I have a responsibility to pay my shareholders their dividends. If I let down my shareholders, I ultimately let down the songwriting community. The multiple of 14.76 has worked out well, but that will increase because income is increasing. And that will impact valuations going forward.
When you look at the financials we've released, you’ll see that the value of our catalog has increased by 10% in the last six months. People say we're paying a lot of money for these catalogs, but look at how the value is increasing. 
What role have your deals played in how catalogs are being priced?
I'm paying fair value. My background is in management—I want people to be remunerated properly, in the same way you'd wish for your child to get a job that truly recognizes their talent and pays them for it.
The way I’d characterize pricing overall it is that for a long time, people were paying for these catalogs based on what it was worth to them, not on what it was worth to the songwriter. I'm very clear with songwriters that I believe these assets are going to increase in value with the growth of streaming. So I've built bonuses into my deals to account for that. And I'm still trying to get the best deal possible; I'm just doing it in the fair-value range, which dovetails with my mission to change where the songwriter sits in the economic equation.
Are you getting the impression from songwriters that they see their status changing?
They’re ready. The songwriting community is going to knock on the door of the major record companies that control the major publishing companies, and that knock is going to have to be answered. There will be a reckoning. The problem is the structure of the system songwriters have inherited. But when you look at the reliance of artists on outside songwriters, it’s now the songwriter’s paradigm; it’s no longer the artist’s paradigm. The fact is, you can take someone with talent and, with the right song, make them a great artist. A hit song is more important than an artist’s profile in the present economy.
Do you see a greater economic infusion into the song business diminishing the master business?
No, not at all. The balance will be more equitable, but streaming will continue to grow so the pie will grow, too.
Christmas is actually the perfect microcosm of the imbalance, because you have this relatively small group of songs. One of our acquisitions this year was Walter Afanasieff, so that’s half of “All I Want for Christmas Is You,” which just went to #1 in the U.K. for the first time, after 26 years—it was streamed over 10.8 million times over the last seven days, making it the most-streamed song in a week in 2020. Everyone is listening to “All I Want for Christmas Is You” right now, yet every Tom, Dick and Harry record company that puts out a cover is making more money off that cover than Mariah Carey and Walter are as the songwriters, which is just wrong. There are something like 4,000 cover versions of “Yesterday,” and every one of those 3,999 artists is making more money off their covers than Paul McCartney or John Lennon's estate.
If you don't have financial leverage, you can't fight this battle. So I created the Hipgnosis Songs Fund to be able to fight this battle on behalf of songwriters.
Which brings us back to the Songwriters Guild.
Yes. Look—I recognize that the current paradigm has existed for 75 years. But I'm determined to change it. The people who don’t think it can be done are the same people who said I couldn’t build a multibillion-pound company doing what I’m doing. I'm looking forward to proving them wrong on behalf of the songwriting community.
