Issue of the week: monetising the music business
Taylor Swift’s new album epitomises music’s bankability. But not all experiments succeed
Taylor Swift’s latest studio album, The Tortured Poets Department, has “smashed records” since its release, said Anna Nicolaou in the FT. It is on track to become “one of the highest-selling music releases” since Nielsen’s Luminate data group began tracking album sales in 1991. The new collection of songs – described by Rolling Stone as probably Swift’s “most personal album yet” – was streamed 300 million times on Spotify on its first day, marking “easily the biggest debut on the platform”. Equally impressive is how well it has done in “traditional formats” (vinyl, CDs and cassettes) shifting 1.4 million US units in a day. Swift, 34, is “the biggest star the music business has seen in several decades” and a major asset of Universal Music. Her market power confers huge clout. Earlier this month, she “defied” Universal – which has been boycotting TikTok in a months-long battle over royalty payments – and put her music back on the platform. There wasn’t much the record label’s suits could do about it.
Meanwhile, in London, Hipgnosis – the FTSE 250-listed songs fund founded by Chic guitarist and producer Nile Rodgers, and Elton John’s former manager, Merck Mercuriadis – is at the centre of a takeover battle. Having reached a £1.1bn agreement last week to be taken private by the US music company Concord, the deal has been gatecrashed by Blackstone. The giant US alternative assets manager, which is offering £1.2bn, said Louis Goss on MarketWatch. “Shares surged 10%” on the news – pennies from heaven for long-suffering investors who have lost more than 40% of their cash since Hipgnosis debuted in 2018.
The premise of the fund, which bought rights to songs by artists including Blondie, Red Hot Chili Peppers, Beyoncé and Neil Young, seemed solid, said John Stepek on Bloomberg. It tapped the burgeoning market in streaming royalties to generate reliable long-term returns for investors. Red Hot Chili Peppers “may not be Taylor Swift, but there’s a reliable income there”. In practice, it was a disaster. It has been rocked by “disputes over the methodology used for valuing the songs portfolio, and a scrapped dividend, among other dramas”. Suspending dividends was “unforgivable for a fund designed to turn royalties into income”, said Nils Pratley in The Guardian. But the longer-term point demonstrated by Hipgnosis’s chequered stock exchange history is this type of illiquid “alternative” asset is “ill-suited to public markets”. As soon as interest rates started to rise, the share price wobbled. Hipgnosis was an appealing idea and may well flourish in private hands. But “there should be no rush to replay” this “noisy stock market experiment”.