When the contrary ancient hippie singer/songwriter Neil Young took a principled stand against music streaming site Spotify, he probably did not realise he was stirring up trouble for Hipgnosis Songs Fund Limited (LSE:SONG).
If he did realise, he probably would not give a toss because that’s the sort of person he is by all accounts.
But I am playing you the fade-out before hitting you with the intro so let’s backtrack.
Keep on rocking in the free world
Hipgnosis, which buys up the rights to the back catalogues of musicians, songwriters and producers, acquired 50% of the worldwide copyright and income from Neil Young’s back catalogue in January of last year.
Young, a prolific solo artist with a recording career stretching back to 1968 who was also a member of the supergroup Crosby, Stills, Nash & Young, was recently vexed by claims made about Covid-19 vaccines on a podcast hosted by Joe Rogan on Spotify.
Young accused the Spotify platform of “spreading fake information about vaccines – potentially causing death to those who believe the disinformation [sic] being spread by them” and issued an ultimatum: “They can have Rogan or Young. Not both.”
Given Spotify reportedly paid US$100mln in 2020 to secure the rights to The Joe Rogan Experience – it is the platform’s most popular podcast – there was little chance of Spotify choosing Young over Rogan.
Young reportedly received a nine-figure sum for the sale of half his catalogue to Hipgnosis – in other words at least US$100mln – so it is likely Young does not care much.
This is a man who once tested the patience of fans at a concert by playing acoustic versions of new songs with which they were unfamiliar.
In the second half of the set, he came out with his band and announced that the band were going to play some songs “you've heard before”.
The crowd cheered.
Young then proceeded to play the same songs the crowd had heard in the first set.
The needle and the damage done
Despite the revival in the sales of vinyl records (Young has a view on that as well, you'll not be surprised to learn), the majority of revenues from recorded music these days comes from streaming and downloads.
According to the US music magazine Billboard, Young could see more than 10% of his annual revenue disappear as a result of his stand against Spotify. Fellow Canadian singer/songwriter Joni Mitchell has joined Young in withdrawing her music from Spotify, sparking concerns that this might be the start of a worrying trend for the music streaming platform.
It is certainly a worrying trend for Hipgnosis as it will lose its share of the streaming revenues Young would have received from Spotify.
As it only owns 50% of the catalogue, it raises questions about how much control the investment fund actually has over the catalogue.
According to The Times newspaper, investment analysts are wondering whether it will have to write down the value of its investment in Young’s back catalogue.
“Despite owning 50 per cent of the rights, it appears that Hipgnosis does not have control or a say in how the songs are consumed,” the broker Stifel said in a research note.
“From Neil Young’s perspective, once you have taken a moral stance it is difficult to see how he will be comfortable returning to the platform without Spotify providing something in return. If the stalemate does persist for some time, we would expect that the catalogue valuation may become impaired,” Stifel said.
After the gold rush
Well, yeah. This is a bloke who sang in 1988, “Ain’t singing for Pepsi, ain’t singing for Coke, I don’t sing for nobody makes me look like a joke”.
Right now, it appears that the joke is on Hipgnosis.
Shares in the investment fund were down 1.4% at 116.6p in early trading.