focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
To provide shareholders with an attractive and growing level of income, together with the potential for capital growth, from investment in songs and associated musical intellectual property rights.
Find out MoreLondon South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
The Board of Hipgnosis, the first UK listed investment company offering investors a pure-play exposure to songs and associated musical intellectual property rights, and its Investment Adviser, Hipgnosis Song Management Limited (formerly The Family (Music) Limited), are pleased to announce the Company's interim dividend (the 'Dividend') for the period from 1 October to 31 December 2021 in respect of the Ordinary shares.
The Dividend of 1.3125 pence per Ordinary Share will be payable to Shareholders on the register as at 18 February 2022 with an associated ex-dividend date of 17 February 2022 and a payment date of 15 March 2022.
I don't think they announced last year (couldn't find it anyway) but it was paid on Feb 24 so Feb 28 this time sounds about right.
Still nothing announced. Dividendmax are forecasting an ex date. of 10/2 and paydate of 28/2 so hopefully it should be announced imminently.
Have I missed an RNS announcing the Q3 dividend (I expected it to be paid in mid Feb and can't see anything) or have I missed an announcement that it will be delayed? Anyone seen/ heard anything?
Analysts at JPMorgan Cazenove, broker to Hipgnosis Songs (SONG), have rejected the notion the music royalties fund faces a big financial hit from Neil Young’s withdrawal from Spotify last week, saying its shares are a ‘buying opportunity’ as they trade 9% below asset value.
This week analysts at Stifel estimated SONG could lose $7.5m (£5.5m), or 6% of its annual income, from its 50% stake in Young’s rights, now songs like Rockin’ in the Free World, Heart of Gold and Harvest Moon are no longer available on Spotify, the world’s biggest music streaming platform.
JPMorgan Cazenove’s Christopher Brown and Adam Kelly rejected this yesterday saying the impact would be a fraction of Stifel’s estimate, based on their analysis of figures from music industry magazine Billboard.
‘Our initial back-of-the-envelope estimates of 0.6% to 0.9% of annual income is supported by Billboard estimates of Young’s total annual revenue from Spotify of $754,000,’ they said.
Halving this implied an annual hit of just $377,000 or just 0.26% of their revenue estimate for SONG.
Even this could be an overestimate, said the analysts, as Billboard had reported an increase in consumption of Young’s music from the publicity generated by his opposing Spotify’s hosting an anti-vaccine podcast of Joe Rogan. His higher profile could offset any loss from Spotify, the analysts suggested.
On the issue raised by Stifel that Hipgnosis’ 50% stake in Young’s royalties had not given the fund any control, the analysts said this was clearly deliberate as Young was ‘uncompromising’ about how his music is used. They said this would have been reflected in the price SONG paid ($40-$50m according to the Wall Street Journal) and the contract it signed with the singer and songwriter.
In a further plug for the corporate client, they added: ‘However, even where SONG has full copyright control and owns 100%, it has built its reputation on being sensitive to how the music is used… and this is why artists are happy to partner with Hipgnosis even if it may not offer the highest price.’
Although SONG shares have not plunged by a third in the way Spotify’s stock has done this year - driven down by fears of slowing growth and the row over Rogan - the Hipgnosis fund has shed over 2% in the past week and is down 7% this year reaching 115.8p at Thursday’s close.
Commenting yesterday, the JPMorgan Cazenove duo said their latest estimate for SONG’s net asset value was 127.3p per share, putting them at a discount of 9.2%. ‘This is a substantial discount to Round Hill Music (RHM) which is trading on an estimated discount of 2.6%,’ the analysts said.
‘In our view, the rating of SONG is unjustified based on the quality of the two portfolios. To an extent, it is the result of concern about the financial impact from Neil Young, which is, in our view, totally overdone. Thus we see current weakness as a buying opportunity,’ they added, reiterating their ‘overweight’ recommendation.
PART 2
This is before mitigation and according to Billboard there has been an uptick in consumption of Young’s music as a result of the publicity, with his reputation enhanced for taking a stance on an issue that costs him money…it is even possible that any short term direct impact is more than offset by higher than expected revenues from other sources.
Being permanently off Spotify could have an impact in terms of the value of that catalogue, but his fan base will still find ways to listen to him and with the catalogue probably no more than 2-3% of overall NAV it would have minimal overall impact given the revenue mix from that catalogue. And it is possible that higher consumption of his music elsewhere as a result of his now higher profile more than offsets any loss from Spotify. It has also been suggested that SONG’s 50% interest does not give Hipgnosis much say in how to use Young’s music to generate additional revenue. Yet this is clearly by design given that Neil Young is uncompromising about how his music is used, and this would have been reflected in the acquisition price and the contract that SONG signed with him. However, even where SONG has full copyright control and owns 100%, it has built its reputation on being sensitive to how the music is used…and this is why artists are happy to partner with Hipgnosis even if it may not offer the highest price.
Our live NAVe for SONG is $1.725, or 127.3pps. The shares have weakened recently and at 115.6pps (@9.00) are trading on a discount of 9.2%. This is a substantial discount to Round Hill Music which is trading on an estimated discount of 2.6%. In our view the rating of SONG is unjustified based on the quality of the two portfolios and, to the extent it is the result of concerns about the financial impact from Neil Young, is, in our view, totally overdone. Thus we see current weakness as a buying opportunity and reiterate our Overweight recommendation.
Hipgnosis - Spotify has rowed back from its initial uncompromising stance on The Joe Rogan Experience podcast. On the earnings call they said there is still 'work to be done' and that they are rolling out 'advisory content’ where needed. Although the focus has been on $100m or so that Spotify paid for rights to Rogan’s podcast, vs the relatively small amount paid to Neil Young on an ongoing basis, the resulting media firestorm and loss of $bns of market value has forced Spotify to take a more conciliatory approach. In our view this leaves the door open for Neil Young to return having drawn attention to the issue of false information in a bigger way than he probably expected. But it is clear why Spotify likes podcasts – they are much more profitable than music as they usually pay creators a flat fee rather than a revenue share. They also differentiate it from competitors. Music can lose out in one sense from more listening to podcasts (and podcasts have been increasing their share of listening on the platform), but on the other hand if they drive higher subscriber numbers than would otherwise be the case this benefits music as well. It will be interesting to see what impact all this has on Spotify’s market share, with Apple welcoming Young’s listeners with open arms. Young also has his own streaming service that we would expect to benefit. Some commentators focus on how Spotify pays less per stream than Apple, for example, but this is not a like-for-like comparison given that per stream numbers include Spotify's free tier.
To clarify regarding who owns the right to add music or remove music from a digital service provider (DSP), it is driven by the person who owns the rights to the sound recording, though a licence is also required from the publisher, but it is difficult to see why they would not act the same way as the label. The owner of the recording will, in most cases, be the record label, and as we have written many times the labels enjoy the vast majority of the economics from streaming. In the case of Neil Young and others, the record label's support is thus required to take the music down, and this seems unlikely to hold in the long term no matter who the artist is. But what is less clear is what the DSP’s licensing agreement with the record label includes and therefore the extent to which the DSP can resist a takedown request by the label.
We reiterate our view that the impact on SONG’s total revenues from Neil Young being off Spotify for even a year are relatively modest. Our initial back of the envelope estimates of 0.6% to 0.9% of annual income is supported by Billboard estimates of Young’s total annual revenue from Spotify of $754,000. Some of this will include his income from the masters via the record label, but to be ultra cautious and take half of this (SONG’s share of his rights), it implies a $377,000 annual hit for SONG, which is just 0.26% of our T+1 revenue estimate. Part 1
I received the following from SONG IR dept:
We can’t disclose how much of our income is related to Neil Young’s catalogue, but it is worth noting a few things: ie that Streaming will only be a part of that (cf: for our portfolio as a whole it is c33%), and Spotify will only be a part of the streaming element (cf: Neil Young said it was 60% here: https://neilyoungarchives.com/news/1/article?id=Thanks-For-Standing-With-Me)
There is a number that you might have spotted in Variety magazine (https://variety.com/2022/music/opinion/neil-young-spotify-crusade-joe-rogan-opinion-1235169321/ ) quoting an estimate from Billboard that Neil Young earns $754,000 each year from Spotify, in which case Hipgnosis’ share would be half that, which would put it at 0.25% of annual income. We can live with those assumptions.
For further disclosure, Hipgnosis bought 50% of all writers copyright & income rights (ie publishing side, not masters). There are 590 songs, as listed in the annual & interim reports (latter is page17)
Interestingly, as a result of recent publicity, Neil Young’s profile has never been higher and his music is actually seeing a significant increase in consumption despite being removed from Spotify – in the 7-day period after Neil Young asked Warner to take down his music from Spotify, the US streaming of Neil Young was up 28% and album sales were up nearly four-fold. Neil Young is also being listened to by a new younger audience that support his position on vaccination – a core part of Hipgnosis’ thesis has always been that introducing music to a new audience will increase the long term revenues.
The use of music on streaming platforms is controlled by the Master Right’s holder i.e. the record label.
In the case of Neil Young this is Warner Music who have the master recording rights and they made the decision to remove their recordings from Spotify Neil’s request. We can only assume that Warner took the view that:
1. That this is temporary – & I note that Spotify has now apologised. On their earnings call last night, they mentioned that there was “still work to be done” but “advisory content is being rolled out as we speak”, which I hope means he is having a constructive dialogue with Neil / Warner.
2. To not do so would alienate Neil’s fans who are responsible for the revenues on his catalogue being predictable and reliable; and
3. That this is likely to have minor negative impact and, as per above, could potentially be positive to both revenue and long term value as Neil’s profile is now higher than it has been for years. Other digital service providers have been promoting him actively; Apple Music, for example, put a slide called "We Love Neil" if you went on the Browse tab on Apple Music.
SW, many thanks for your effort to contact their Investor Relations and taking the time to share a summary of their reply.
It helps clarify a few issues (for me). The control over the music rests with the recording company and artist. However, there is obviously some degree of contractual protection that the artist can't act in a way that damages the "product". Fine, I'm happy with that but it's not the same as being in complete control. Being nosey, I'd love to know what else is safeguarded in the contract to provide redress if it came out! But it slightly reduces the value because SONG could be a hostage to fortune in certain, unpredictable, circumstances. Diversification is probably the answer.
I am still interested in SONG if only because with the changes my working life has experienced in the last 2 years I personally "use" streaming music way more than I ever thought I would! And I am not alone!
Guitarsolo
I received a response from the Director of Investor Relations at Hipgnosis late last night. I am not going to cut and paste the full response but will summarise what he said:
Streaming is only be a part of their revenue (for SONG as a whole it is c33%), and Spotify will only be a part of the streaming element. Variety magazine quoted an estimate from Billboard that Neil Young earns $754,000 each year from Spotify, in which case Hipgnosis’ share would be half that, which would put it at 0.25% of annual income. They are fine with that assumption.
Hipgnosis bought 50% of all writers copyright & income rights (ie publishing side, not masters). There are 590 songs, as listed in the annual & interim reports.
As a result of recent publicity, Neil Young’s profile has never been higher and his music is actually seeing a significant increase in consumption despite being removed from Spotify. Other digital service providers have been promoting him actively; In the 7-day period after Neil Young asked Warner to take down his music from Spotify, the US streaming of Neil Young was up 28% and album sales were up nearly four-fold. Neil Young is also being listened to by a new younger audience that support his position on vaccination – a core part of Hipgnosis’ thesis has always been that introducing music to a new audience will increase the long term revenues.
The use of music on streaming platforms is controlled by the Master Right’s holder i.e. the record label.
In the case of Neil Young this is Warner Music who have the master recording rights and they made the decision to remove their recordings from Spotify at Neil’s request.
In the context of whether Hipgnosis can control the use of our songs, we structure the contracts such that the writer cannot do anything that would negatively impact earnings. In this case (quite aside from the fact the figures show a positive impact), SONG supported Neil’s decision, given that intrinsic in the value of his songs is the way he conducts himself, and to not do so would alienate his audience who make the attractive income on his catalogue predictable and reliable, and in the context of this being a temporary measure. This should also help attract other important songwriters of Neil’s stature and importance to Hipgnosis. They fully expect this to be a temporary one off. Finally, he noted that Spotify (on their earnings call) apologised and noted that there was "still work to be done" which could hopefully lead to constructive dialogue with Warner/Neil.
I actually find it interesting that there is still no comment at all from Hipgnosis. It makes me think they are having to think very carefully about what they say and how they position their response. I am disappointed that the email I sent to their investor relations on Friday got no response at all, not even an acknowledgement.
I think it takes a while for Spotify to delet songs from their site. Not just a case of "switch off now" all Neil Young (or also Joni Mitchell) songs.
Well, as I say, I can still stream both of them on Spotify so it might be a moot point. Perhaps the contract gives SONG the control but to appease artists they won't make a public point about that and will allow NY et al a moment in the sun! SONG may prefer not to be too loud about that in public in case it deters future artist catalogue sales.
Let's see if they get back to SWS' query.
You're right - it's not as good a deal as we thought it was.
Give it time - maybe NY will be persuadable (although as his income isn't being compromised there isn't really much incentive other than him wanting his music to reach as big an audience as possible).
Laughton: "" but they can't take the money for their music rights and then say to the new owner you can't play my music there" - except that if that's part of the deal then yes, they can."
OK, put it another way, that's a terrible deal to have agreed and handed over many millions of $$$!
If a Neil Young objects to a podcast on Spotify, he would find something on Apple Music, Amazon Music, radio stations etc. It would severely limit income generation from the catalogue one would think.
It's a noble objective to be artist-friendly in terms of (e.g.) advertising Macdonalds or something. But pulling music from a platform like Spotify because NY objects to a podcast has got to be bad news for this as an investment. No?
" but they can't take the money for their music rights and then say to the new owner you can't play my music there" - except that if that's part of the deal then yes, they can.
And, of course, MM wanting to stay songwriters'/performers' best pals and persuade potential future catalogue sellers that their material is safe with him will limit his options.
Thank you SWS,
I note that Joni Mitchell is now following suit. A BBC news article says "Spotify agreed to remove his songs from the platform, and said it hoped he decides to return to the platform soon" (https://www.bbc.co.uk/news/world-60177933) but I can still stream both of them.....so I am not sure what is going on!
But keeping this about the investment side of the business, I can understand an artist wanting to prevent their music being used post-sale for specific advertising they don't agree with (e.g. gambling, certain lifestyle, politics (e.g. Trump!)) but saying it can't be aired on a streaming platform because of other content nothing to do with SONG as owner of the rights just seems bizarre. What next, songs can't be played on XYZ radio station because someone doesn't like one presenter?!
It's odd behaviour by Neil Young and Joni Mitchell but they can't take the money for their music rights and then say to the new owner you can't play my music there!
Will be interesting to see how SONG respond.
Guitarsolo
I have emailed investor relations to see if the company are planning to make any comment.
SW, have you had any replies to your query or dug up any more information yourself? I'm not a SONG holder (yet) but am intrigued by this as an asset class and income generator. The Neil Young situation raises serious questions about who retains the power to direct where the catalogue is used to generate income. I recall when SONG purchases NY's catalogue (well 50%) that Merck made a point of saying the NY retained what the latter would probably call "integrity" - citing that if NY didn't want his music used for (e.g.) Macdonald's adverts then it wouldn't be. But to take it off a platform as large as Spotify entirely? If that is also part of the artist's "integrity" then there are some serious questions about what a portfolio is worth, surely?
I'd be interested to hear what those who are more involved/ knowledgeable think.
GS.
Neil Young threatened to pull his music from Spotify because of Joe Rogan's show. Spotify have decided to side with Rogan and are removing Neil Young's catalogue. What I didn't realise is that in Jan 2021 Hipgnosis bought 50% of the rights to Neil Young's entire catalogue for $150m. This is obviously not good for Hipgnosis and I wonder what recourse they have?
" Also how much focus will Merck be able to put into SOMG as opposed to HSC."
Maybe others are worrying about this too.
Why the continuing sell off?
Not sure what to think about the direction here. One of my largest holdings but will SONG be able to compete with the mega investment funds and major labels. Also how much focus will Merck be able to put into SOMG as opposed to HSC.
Nothing for us here:-
https://variety.com/2022/music/news/kenny-chesney-sells-catalog-to-hipgnosis-song-management-1235156772/