HIPGNOSIS REPORT:
ANOTHER BIG YEAR

Merck Mercuriadis and his Hipgnosis team have announced their final results for the year ended 3/31, and the numbers are impressive.

The Hipgnosis portfolio has grown to 146 catalogs with an aggregate value of $2.7 billion. Using the proceeds of its oversubscribed stock offering, which raised more than $215m, the fund added to its holdings with the acquisition of the catalogs of the Red Hot Chili Peppers, Christine McVie of Fleetwood Mac, Ann Wilson of Heart, Rhett Akins and Stefan Johnson and Jordan Johnson of the production/songwriting team The Monsters & Strangerz.

Financially, the firm's operative NAV (net asset value) rose nearly 10% to $1.8491 per share and, including dividends paid, Hipgnosis saw a total NAV return of 14.2% for the year, bringing the total NAV return since its IPO to 59.1%. Meanwhile, gross revenue rose 24.7%, driving EBITDA to increase by 21.8% to $129.9m. The report goes deeper into the numbers, but that proved beyond our depth.

Other highlights for the Hipgnosis team included continued advocacy for fairness for songwriters and the securing of an important U.K. government study; signing a direct administration agreement with Sacem, the French collective management organization (CMO); and overseeing a 20% increase of formal sync licenses approved in the last six months of the financial year relative to the first half.

Merck's delight and optimism are on full display in his comments accompanying the results.

“Over the last four years we have acquired an incomparable portfolio of some of the most successful and culturally important songs of all time," the London-based distributor declared, further noting that Hipgnosis' strong operative net asset value, "is largely driven by our iconic songs' outstripping the general market growth in streaming, particularly in the second half of 2021, providing validation for our investment strategy."

Merck went on: "As we look forward, we continue to expect strong global revenue growth driven by the continued adoption of paid-for streaming. Despite the macroeconomic environment, the attractiveness of the music-streaming proposition continues to grow; it is the lowest-cost entertainment-subscription service and, with its offering of a near-complete repertoire of global music, provides the most comprehensive offering of the on-demand entertainment-subscription services. This view is shared by the leading voices in the sector, including Goldman Sachs, which recently upgraded its double-digit annual-growth forecast through to 2030 in its gold-standard report Music in the Air: Music Still Sounds Good in a Macro Downturn.

“With clear evidence of a strong recovery in global performance income, the recent CRB [Copyright Royalty Board] III determination to increase streaming royalty rates for songwriters and potential for further improvements in the upcoming CRB IV determination, all in addition to the extremely strong growth in streaming, I believe we are looking forward to very attractive market conditions. Given our incomparable collection of iconic songs, I believe Hipgnosis is perfectly placed and will continue to deliver excellent returns for our shareholders."