Financialization of music: song management firms and fractionalized copyright

ABSTRACT

This paper examines the growing interest of financial markets in investing in music rights, arguing that this is a manifestation of the financialization of music. While music rights have been traded for a long time, the vast majority of these transactions have been between entities within the music industry. However, in recent years, we have observed the entrance of pension funds, banks, and private equity firms into the music rights market. This study explores the causes and consequences of the emergence of new players in the music rights market, particularly entities such as song management firms and fractionalized copyright trading marketplaces. Through the examples of Hipgnosis and ANote Music, the paper illustrates the operations of such entities and considers the potential consequences of their activities for artists and culture.

KEYWORDS:

• Intellectual property
• music publishing
• music royalties
• fractionalized copyright
• Hipgnosis

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 For the sake of clarity, it should be explained that Hipgnosis Songs Fund is part of a broader capital structure established by Merck Mercuriadis. HSF is a song management fund listed on the London Stock Exchange and is the primary focus of this paper. Other entities include Hipgnosis Songs Capital (HSC, owned by Blackstone - a private equity business categorized as an alternative investment fund), Hipgnosis Songs Group (HSG, song creation and administration division), and Hipgnosis Song Management (HSM), which serves as an advisor to both HSF and HSC. This text focuses on HSF, but it should be noted that some tasks (e.g., rights administration) may be actually handled by other entities within the Hipgnosis group.

2 Revenues from streaming platforms also can be considered performance royalties. However, how they should be treated is subject to debate, and different countries have varying regulations, see Passman (2019).

3 Note that other entities within the Hipgnosis Group, such as HSM and HSG, may handle such tasks on behalf of HSF.

4 It should be noted that HSF and other entities in the Hipgnosis group in some cases may outsource administration of a catalog to external companies (music publishers or labels).

5 It should be remembered that even before the rise of song management companies such as HSF, there were variations in the operating models of music publishers across different countries and music genres. In conducting our analysis, we use the term 'traditional music publisher' to refer to a generalized ideal type of a company that manages songwriters' copyrights. Naturally, exceptions to this portrayal exist.

6 Please consider that this is not necessarily true.

7 One gets the impression that this is precisely what transpired in 2023, when, in response to the decision to withhold dividends and a substantial decline in share prices, HSF shareholders took actions that compelled the company's board to ‘put forward proposals for the reconstruction, reorganization or winding-up of the company’ (Hipgnosis, 2023) within six months from 26 October 2023.

Additional information

Notes on contributors

Patryk Galuszka

Patryk Galuszka is an associate professor at the Faculty of Economics and Sociology at the University of Lodz in Poland. His articles were published in journals such as International Journal of Communication, International Journal of Cultural Studies, Popular Music, Popular Music & Society, Media, Culture & Society, and Continuum: Journal of Media and Cultural Studies. He has edited/co-authored three books: ‘Made in Poland: Studies in Popular Music’ (Routledge, 2020), ‘Eastern European Music Industries and Policies after the Fall of Communism’ (Routledge, 2021), and ‘Crowdfunding and Independence in Film and Music’ (Routledge, 2021). His research interests include creative industries, popular music studies, and economic sociology. Currently, he investigates showcase festivals from economic and cultural studies perspectives [email: [email protected]].

Tomasz Legiedz

Tomasz Legiedz holds a PhD in economics by the University of Lodz and is an assistant professor of its Department of Development Economics. His main area of interest is the institutional economics and the development economics, in particular problems of transition economies and East Asia countries. His articles have been published by such journals as Communist and Post-Communist Studies, and Journal of the Asia Pacific Economy.