In this edition of ‘In the Hot Seat’ with Larry LeBlanc, he speaks with music industry heavy-hitter and publishing pariah Merck Mercuriadis about how he’s shaking up the music business with his publicly traded intellectual propery acquisition vehicle Hipgnosis Songs Fund Limited.
__________________________________
Guest post by Larry LeBlanc from Celebrity Access
In the Hot Seat with Larry LeBlanc: Merck Mercuriadis, Founder/CEO, Hipgnosis Songs Fund, and Hipgnosis Songs.
In the ultra-controlled global music publishing space, the name Merck Mercuriadis is just short of a profanity these days.
The reason?
A revolutionist and an industry bomb thrower, Mercuriadis seeks to eradicate the word ‘publishing’ from the music industry’s vocabulary. He also dismisses “publisher” as an innocuous and dated industry term that describes someone that collects revenue for songs but rarely adds value.
Mercuriadis is in the song management business, and as other major publishers will tell you off record, he’s flush with cash to acquire copyrights on the global market
Hipgnosis Songs Fund Limited, the publicly-traded acquisition vehicle founded by Mercuriadis, is a Guernsey-registered investment company established to offer investors a pure-play exposure to songs and associated musical intellectual property rights.
Listed on the London Stock Exchange, the Hipgnosis Songs Fund was launched on July 11th, 2018, with $23.75 million to acquire a 75% stake in music rights of the 300-plus song catalog of Terius Nash, known professionally as The-Dream.
Its Initial Public Offering on the Specialist Fund Segment of the London Stock Exchange’s main market at the same time, the Hipgnosis Songs Fund raised approximately $252 million gross equity capital. Recently, it raised a further $260 million.
Hipgnosis Songs Fund has since acquired stakes or full shares in the music catalogs of such songwriters as: Johntá Austin, Sean Garrett, Rico Love, Starrah (aka Brittany Hazzard), Christopher “Tricky” Stewart, Poo Bear (Jason Boyd), Giorgio Tuinfort, Ari Levine, Jamie Scott, Teddy Geiger, Itaal Shur, and TMS.
Also acquired have been the heritage catalogs of the Eurythmics’ David A. Stewart, Chic co-founder Bernard Edwards; and Al Jackson Jr., the late drummer with Booker T. and the MGs.
An Atlantic Canadian, Mercuriadis began his career in Toronto in the early ‘80s as an A&R and marketing director at Virgin Records of Canada. He went on to serve from 1986 to 2007, as director and CEO of the Sanctuary Group, a leading UK-based management company, independent record label, merchandise company, and booking agency headquartered in London with offices in New York, and Los Angeles.
Despite a recorded music catalog of more than 150,000 tracks and considerable success with its management roster that included Iron Maiden, Beyoncé, Guns N’ Roses, Nile Rodgers, Elton John, Morrissey, Pet Shop Boys, Macy Gray, Mary J. Blige, and Jane’s Addiction, Sanctuary Group struggled against a global music meltdown, and was bought by Universal Music Group for £44.5 million in 2007.
Hipgnosis Songs Fund’s investment adviser is The Family (Music) Limited founded by Mercuriadis with an advisory board that includes Nile Rodgers, Starrah, The-Dream, David A. Stewart, Nick Jarjour, Bill Leibowitz, Ian Montone, and Jason Flom.
A separate company, Hipgnosis Songs also headed by Mercuriadis, manages Nile Rodgers, and the UK-based Afrobeat band Kokoroko.
Are you proud of Hipgnosis Songs Fund being the only music rights company listed on the London Stock Exchange?
Yes, that was very important. That took the better part of three years to do. I’m not just making a statement about my own assets, I’m making a statement about everyone’s assets. Anyone who owns a song benefits from us being on the London Stock Exchange and having the acknowledgment from the biggest institutional investors in the world that songs are as good (an investment) as gold or oil.
A song copyright has not generally been attractive to institutional investors anywhere. Not something they’d look at.
It is now.
You had a broker?
I had a broker, N+1 Singer (which services the UK small and mid-cap market) that put me in front of these people but, at the end of the day, what convinced them (investors)….investment is a very data-driven business. They are looking at data as a way of giving themselves protection, downside protection, effectively.
You obviously were enormously prepared.
Oh yes. I was not only prepared, but it took a long time. I met 177 different investors, and many of them I met several times. There are 38 people who make up the first half-billion American dollars in this fund; 38 of the biggest institutional investors in the world, and the most successful.
All British?
All of them are from Britain at the moment.
Quite an accomplishment.
Larry, you can’t imagine how thorough these people were which is why sometimes it was several meetings with each one. Basically, it came down to 8 out of 177 that said, “Never darken my doorstep again. It doesn’t matter how successful you make this, it just never will be an ‘asset class’ that we will be comfortable with. Then 38 of them, as I said, make up the half billion American dollars that are in the Fund. Then the other 130 all said, “We love this. We just cannot be your guinea pig. Go and make this successful, and then we will be back.”
The Family Music Limited oversees Hipgnosis Songs Fund.
Correct. The Family is the investment adviser to the fund.
You have talked of seeking over $1 billion in funding.
I think we will be over a billion by early next year. What was interesting is something that we don’t often see in the music business which is that the vast majority of the people that I went to said, “Look, I don’t know anything about music, but I find this fascinating. I find it intellectually stimulating and, therefore, I want to know more.” And this is where the real important aspect of this comes into play. The market has a great desire for uncorrelated assets. So in a mid-Brexit or a post-Brexit or a post-Donald Trump environment, they want assets that are not affected by the madness. They now understand that if Donald Trump wakes up tomorrow, and talks about pushing the red button, people are going to be using music as an escape.
Music flourishes equally in bad and good times.
Exactly, whether they are good times or whether they are challenging times. So this concept of uncorrelated assets is something that the financial community is really looking for.
Bottom line, income from music is both reliable and predictable.
Exactly.
Today’s investors are more comfortable with music assets being that they were raised on David Bowie, Nirvana, the Clash or Chic. You couldn’t have done what you’ve done 30 years ago.
Correct.
What infrastructure have you now built with the company?
Currently, we are at 11 people, all out of London. We have one person in Los Angeles, who is a bridge to a couple of major acquisitions that we are making, that will give us the rest of the infrastructure that we are looking for. This concept of actively managing these assets is something I take very seriously. I take the responsibility very seriously. So the company will continue to grow. I expect by the time we get to the end of this year, in addition to the acquisitions that we make which will give us additional infrastructure, we will be approaching 20 odd people at that point.
You will focus more on North America?
You will see us announcing some acquisitions in the next couple of months that will effectively provide the North America infrastructure. The UK company will be at about 20 people by the end of this year. North America will be bigger than that.
The 2019 Ivor Novellos, held on May 23rd, was a good night for the Hipgnosis Songs Fund.
The Ivors were terrific. Both from the point of view of great artists being acknowledged and our writers. Dido was acknowledged for her song catalog. Deep Purple, inclusive of Ritchie Blackmore, were acknowledged for their incredible legacy. We had just bought the Jamie Scott catalog, which not only includes 29 One Direction hits but also includes Rudimental’s “These Days” with Jess Glynne, Macklemore, and Dan Caplen (co-written also with Julian Bunetta, John Ryan, Caplen, and Macklemore). So we bought the catalog exactly one week earlier, and then “These Days” was named the most-performed song of 2018.
(A major international hit, “These Days” topped charts across Europe, and became the UK’s fifth best-selling single of 2018.)
That night Big Deal Music’s founder/president Kenny MacPherson slammed Spotify from the stage over the company’s American Copyright Royalty Board (CRB) appeal, concluding with. “Fuck Spotify.”
Yes ultimately he did say that but that’s not exactly what he said. He basically just said…
The full quote is. “Remember that, as songwriters, you haven’t had a (US) raise for 110 years. Fuck Spotify.” The startling news that came out around the same time, however, was Adam Parness’ announcement that he’d resigned at Spotify, and is leaving June 3rd.
Well, he was right to leave because as I have explained to many of the Spotify team, “None of us ultimately blames you for the position that your company has chosen to take, but don’t for a minute start to justify it because if you justify it then it’s on you.” Right? At the end of the day, we have all at different times in our lives, worked for someone else and recognized that, in fact, we don’t control the policy of that corporation. Sometimes that is enough to make us leave, as I would think that it is in Adam’s case, but we don’t hold those individual people responsible.
(Adam Parness joined Spotify as Global Head of Publisher Licensing, in late 2017. From New York, he handled Spotify’s relationship with the publishing industry. Previously, he had been the Head of Publisher Licensing and Relations at Pandora. Prior to Pandora, he was Principal Content Acquisition Manager at Amazon. He also served as of VP of Music Licensing at Rhapsody playing a key role in the acquisition of Napster, and in the global expansion of the company. In a note t to music publishers, Parness said it was “with mixed emotions” that he was exiting Spotify, noting that he joined the company, “in order to continue my career mission of advancing the livelihood of songwriters, artists, and producers.”)
At Spotify, Adam was the big champion of music publishers and songwriters. He played a key role in building industry-wide support for the signing of the Sen. Orrin G. Hatch Music Modernization Act. He obviously wasn’t happy with Spotify’s opposing the CRB’s recent 44% proposed increase on royalties for songwriters and publishers
Exactly.
Interactive streaming services like Spotify, Apple, Amazon, Pandora, and Google have taken control of music delivery and marketing away from the labels and artists by controlling the distribution process. The trade-off was that the giant recorded music companies wrestled meaningful equity stakes, and revenue sharing conditions out of Spotify, Apple and other streaming services which is arguably starting to replace revenue the labels used to make from CD sales and digital downloads. Meanwhile, the publishing sector has had to fight for a seat at the table.
(In a Twitter post, National Music Publishers’ Association’s president and CEO David Israelite went on the offensive against the streaming music giant. “Question: what are the differences between Uber and Spotify? Both are tech cos (not transportation/music cos) [and] lose money. Both went public and enriched owners while most important input (drivers/songwriters) struggle with low pay. Is one better than other? If so, why?”)
Spotify was very, very stupid to not have acknowledged songwriters, the importance of songwriters, and the role of the song in what people are consuming on Spotify.
To be fair, Spotify is not alone.
No, no but that’s not the point. The point is, and this can be said for Spotify; it can be said for Apple as well. You as a music fan, whether you are an enthusiast or whether you are just a passive consumer that is choosing out of convenience to consume your music this way, are not paying your $10 a month or your £10 per month for Spotify because it’s good technology. We appreciate that it’s good technology, but you can care less about their technology. The reason that you are paying for that service is that you want them to deliver the Beatles, and to deliver Dua Lipa, Eurythmics, and Beyoncé. The minute they are not able to deliver those you will take your $10 or your £10 away from Spotify, and you will give it to whoever can deliver those things. This is not like driving a car where you are choosing. These choices are being made out of convenience. You are either an Apple fan, and you are choosing Apple; or you are a Spotify fan, and you are choosing Spotify. But you are not doing so because you want their kick, you are doing it because it is your way of being able to consume the music that you want access to.
One amazing thing about streaming is that it has brought the passive consumer to a place to where they are now paying for music at the rate of $10 or £10 a month because it is a more convenient way to consume music. Whereas in the past our focus was on the extraordinary achievement of the “platinum” record. In the U.S., one in 350 people (in trying to reach one in 350 people). Now our focus is on all 350 people because all of these passive consumers are now buying into to streaming services out of convenience. It is now more convenient to consume music this way. You have total control. It’s mobile. It’s everything. If you wake up tomorrow, and there’s a new Adele album you own it already. At the end of this year, if the Beatles release a 50th anniversary album of “Abbey Road,” you own it already. If somebody tells you about BTS, you own it already. All of that makes the $10 or £10 price point worthwhile. From that point of view, it’s tremendous that all of these passive consumers are now coming to the party, and are contributing to our ecosystem.
Above all, we music consumers seek access, and we want quick access.
Correct, and here’s what is not being said. When we look at the past 5 years of reporting, it would be fair to summarize it as Spotify nor Apple pay enough. That, to the greatest respect to the music industry, is not the full truth. Of course, we believe what Spotify pays currently or what Apple pays currently (for songs) is anemic to where we want it to be. But that’s not the truth.
Why not?
In terms of the songwriting community, the truth is that Spotify and Apple are keeping 30% of the money in exchange for the service that they provide. That is not a bad price to pay for the service that they provide. What is not fair is the spit between recorded music and songs. And what is not fair is the influence that Sony, Universal, and Warner, as the three big recorded music companies, have over (their affiliated publishing companies). Sony, Universal, and Warner which should be the three biggest advocates for songs because they are the three biggest song companies; but they cannot advocate to the degree that they should because they are owned by recorded music. With recorded music (companies), you have 4/5th of the money going that way. They make a huge margin and, in general, they own the act (their recorded catalogs) in perpetuity; and then on the song side of the business, you’ve got 1/5th of the money going that way. They (affiliated major publishers) make a small margin in relative terms, and they don’t own the assets in perpetuity.
In essence, music publishers lease songs for periods of time.
Yes, and they use the leverage that they have of recorded music owning songs to push any improvements. Right now, the business is improving even though Spotify doesn’t pay enough in our opinion or Apple doesn’t pay enough in our opinion. What they are doing–and this is where the focus of the business should be–is delivering huge audiences to us once again that are consuming our music legally, and paying for it. That improvement right now is going to recorded music at the expense of the songwriter because the recorded music companies, Universal, Warner and Sony, are leveraging the big song companies, Universal, Warner and Sony. And the three biggest (publishing) companies in this business should be advocates for songwriters. They can’t advocate because they answer to the recorded music.
We work with those people every day in those companies. Some of the finest people in this business work for those companies but what it really comes down to is that we are dealing with an outdated paradigm that goes back the better part of 100 years that cannot be changed from within. It needs to be changed externally. The reason that I created this fund was to create a rights management company, and a song management company that had assets in the billions of dollars so it could effect change because people that work at Universal won’t.
(When Spotify launched in 2008, Universal, Sony, Warner, and Merlin were cumulatively granted 18% equity between them in exchange for a start-up license for their music. After Spotify floated on the New York Stock Exchange last year, Sony sold half of its shares for $768 million, while Warner and Merlin sold their holdings for $504 million, and $100 million, respectively. Universal still holds its full stake worth an estimated $840 million.)
At the same time, music publishers and songwriters discovered they could be marginalized in industry negotiations over music use. Many of the new music services argued when they started that they had already negotiated music rights. Certainly, your point is correct in that new services, seeking to license music for online usage, can go to Universal, Sony, and Warners and practically tie up three-quarters of the world’s repertoire—the recorded and publishing sides– in three deals. If they had to pay publishers more, they feel it’d have to come from the recorded music side. There’s only so much money to be paid out.
That’s exactly what I am saying.
Meanwhile, while the major labels were fearful of having a repeat of building a business on their backs as they did with MTV, they did give the store away to Apple with downloads in that they gave away distribution, and setting price points for their music.
Correct, but everyone from the majors on down has learned how to keep that in check. And the way that you keep that in check is by insuring that you never lease your rights away for more than a couple of years. Again if you can’t get what you want on Spotify, you are going to take your money away from them.
(Speaking to Bloomberg in 2018, Macquarie Bank analyst Amy Yong noted that “It’s a strange relationship because the record labels want Spotify to succeed, but not too much. It gives them too much leverage.”)
Most people don’t realize that over $1.5 billion annually comes to music publishers and artists from outside North America. Shifts in global sales, social media, and music consumption patterns are leading to increased opportunities for non-American and non-U.K. repertoire in local markets throughout the world.
Obviously, when you and I were growing up, the United States was 50% of the world (music market). Now the United States is at best is 30% of the world. Of course, when you start to look at the better mousetrap that I think that Kobalt has built you recognize that one of the things that Kobalt and (founder/CEO) Willard (Ahdritz), in particular, have done a great job of is eliminating the various middleman that used to exist. Not that they don’t exist to a far degree that they should, but there are many, many middlemen that have been eliminated from the chain of the money getting to the rights owners, getting to the artists, getting to the songwriters over the years.
(According to the industry trade body, the International Federation of the Phonographic Industry (IFPI), total music sales for 2018 amounted to $19.1 billion, a 9.7% rise on 2017’s figures and the highest rate of growth since IFPI started tracking the market in 1997. It is also the highest sales total since 2007 when revenues reached $18.4 billion. Driving the growth was a 33% rise in paid streaming with 255 million users now paying for a subscription to a music service like Spotify, Apple Music, Deezer or Amazon Music. IFPI stated that paid streaming accounted for 37% of total recorded music revenue with revenues from subscription and ad supported streaming services combined totaling $8.9 billion, representing almost half (47% of all record label income.)
Electronic, hip-hop and pop have greatly transformed individual domestic music markets in recent years. A hit today can come from anywhere in the world.
Well, that’s it, and when it comes to our publishing fund we can have an interpolation (constructing new data points) come out of anywhere or samples come out of anywhere. As we grow towards the predicted two billion paid subscribers using streaming services around the world by 2030, what we are looking at is about 1.4 billion of them coming from emerging markets that currently don’t contribute at all to our ecosystem. As you know, where was China on the IFPI list for world biggest record markets 10 years ago?
It wasn’t there.
Exactly. Having broken into IFPI’s Top 10 global rankings for the first time last year, China is now the 7th largest music market internationally.
(China has 15 different audio streaming services with at least one million daily active users, including radio and karaoke services. For on-demand album streaming similar to Spotify, there are nine different services backed by large Chinese technology and telecom companies.)
Rumors about a sale of Vivendi’s Universal Music Group to Chinese giant Tencent have been swirling for months. Such a sale would elevate UMG’s already formidable international presence in the tightly controlled Chinese market. However, recent trade tensions between China and the U.S. could complicate such a deal. Nevertheless, China is certainly a growing market.
Correct. China is currently #7. In the next couple of years it could be number one or two.
Today, as I said, international hits can come from anywhere, and translate everywhere. Countries, not traditionally considered global A&R centers, are now producing worldwide hits and new stars, brought about by streaming and social media. The majors, in particular, have been successful in “slingshotting” releases and artists from one territory to another territory.
You will see more and more of those. BTS (the 7-member South Korean boy band) is an example as is (South Korean girl group) Blackpink as well. When you and I were kids in Canada we would find imports, and sometimes these imports would turn into a real movement, whether it was records by Split Enz, or Roxy Music, or Sherbet, or Cold Chisel. Or having “Cheap Trick at Budokan” (1978).
For me, one of the most romantic stories is Kid Leo (as music director at WMMS) starting to play Mott the Hoople on the radio in Cleveland. There are many artists (including Bruce Springsteen, John Mellencamp, Pat Benatar, Roxy Music, Cyndi Lauper, the Pretenders, New York Dolls, and Southside Johnny) that Leo would take credit for breaking. He was a guy who had great taste.
Prior to Kid Leo, Donna Halper as music director there broke Rush and Bachman Turner Overdrive out of Canada. Kid Leo went on to a great career at Columbia Records.
That’s where we became great friends. So the idea of “sling-shotting” isn’t new. Also right now if you pick up a paper, and you happen to be in Germany and it tells you artist X, Y or Z–whether you are in New York or Germany–your Spotify or Apple account gives you access to that music.
We know that Spotify’s deal with Universal has already lapsed, and all three major record companies will soon be out of contract shortly.
Yeah, exactly. So from that point of view in the distribution aspect of it is key. Having had the iTunes experience. And remember the iTunes experience was very, very simple. Again, it was the fault of the labels, if you like, not Apple in the sense that you had the bottom falling out of the record business. So what did (label) people do? They tried to make their numbers by making 5 and 6 year deals with Apple that improved the numbers for the reporting period, but the price to pay was that it ceded the control, and the offering to Apple.
In the download era, one of the things that destroyed the music business was that labels gave up the power of distribution to Apple. Record sales plummeted and labels, as you say, responded by making lengthy distribution deals with Apple which then took control of releasing and distributing music, and deciding its price point.
Exactly. They were even able to control the offering not just from the point of view of price but from the point of view of dictating, guess what? We are selling even Pink Floyd’s Dark Side of the Moon’ on a song by song basis.”
The unbundling of albums.
Correct.
Also, iTunes set the price point. A three-decade-old music track should not be the same price as a new superhot track. Eventually, new tracks came to priced at different levels, but not initially. Premium tracks would cost up to $1.49. Still, older tracks mostly remained at .99¢.
Exactly.
And that sandbagged catalog sales. Digital download sales for individual tracks declined for the first time ever in 2013, dropping 6%.. Just as iTunes was the bellwether for consumers who needed a better alternative to piracy, new online streaming services showed consumers just how outdated iTunes really was.
Well, absolutely because what it (iTunes) also did was change the artistic integrity of what was being offered. Suddenly you could listen to “Breathe in The Air” by Pink Floyd from “Dark Side Of The Moon” (1973) on its own, and it wasn’t like when you and I had to listen to it in its entirety, and the more that we consumed it, the more sense it made to us. Now you listen to something on its own, and it may not have the same impact at all.
Other than a handful of heritage catalogs, including those of Dave A. Stewart, Al Jackson Jr., Nile Rodgers, and Bernard Edwards, I’m impressed by how many contemporary the songwriters that Hipgnosis Songs Fund has aligned with, including Starrah, Tricky, Poo Bear, The-Dream, and Giorgio Tuinfort, all songwriters with recent international hits. Your focus doesn’t seem to be yet as much scoring heritage catalogs.
I’m going after old catalogs. I am getting a ton of them. I just haven’t announced them all yet. I just bought the Al Jackson Jr., and Dave (Stewart) catalogs and a bunch of things. If you had asked me a year ago would we have access to all of these young catalogs and new songs, that certainly was not something that I was anticipating. I am delighted about it. I am delighted that this community is putting its faith in us, and selling us their catalogs, and allowing us to get into business with them, but it was not something that I could foresee
Will you do splits of ownership where right holder are determined to hold back a share of the copyright?
Well, we are going to grow the asset value dramatically. So if a songwriter wants to keep 25% or 50% on the basis that they buy into the thesis and understand in due course that the remaining 50% will be worth as much as 100% is worth today then I’m totally happy for them to be our partner in that.
A lot of these heritage catalogs sit collecting dust in larger publishing companies under mostly modest administration deals.
Absolutely.
Heritage copyright holders sell or license their music catalogs or seek administration deals for different reasons. As they grow older, many may start looking into estate planning, and capital gains issues and figure it’s more practical to make an admin deal. Many families or heirs are at a loss for what to do if the songwriter gets older or passes away. What are your selling points to younger songwriters?
At the end of the day, we are giving them the opportunity to set themselves up for life. So the decisions that they make going forward creatively are ones that I would say are the right decisions for them because they now don’t have to think about money. As long as they are smart with their money, and they are smart with their investments, and they are focusing on their money working for them at a rate that is greater than what their predictable, reliable songs would have provided that now allows them to be able to focus on the creativity, from the perspective of doing what they believe is right as opposed to doing what someone else wants them to do.
Due to income streams on hit songs being predictable and reliable?
Correct.
That is the argument you are making?
That is the argument that I am making. And that, by the way, is when we look at Starrer, and Camila Cabello’s “Havana,” which is globally the #1 record of 2018. If we go back and look at the past 40 years of what was the #1 global song has been annually all of those songs are still with us today; are still songs that are a fabric of our society, and continue to get consumed at a massive, massive level.
(“Havana,” co-written by Cabello, Jeffery Williams (aka Young Thug), Frank Dukes, Starrer, Ali Tamposi, Brian Lee Andrew Watt, Pharrell Williams, Louis Bell, and Kaan Gunesberk, reached #1 in multiple countries including Australia, Brazil, Canada, France, Mexico, Scotland, the UK, and the U.S. It became Spotify’s most-streamed song ever by a solo female artist in Sept. 2018, with more than one billion streams.)
A similar song is Carly Rae Jepsen’s “Call Me Maybe,” co-written by Carly Rae, Josh Ramsay, and Tavish Crowe. It was the top-selling single of 2012 worldwide, with sales of 12.5 million units.
I would buy that song in a heartbeat. And when people look back at our purchase of “Havana,” or with Poo Bear, “Where Are You Now” or with “Despacito,” or “What Do You Mean” or “Girls Like You” or any of these songs I think we will look very very smart with what we did; which is that we have taken some of the finest songwriters in the world, albeit it young ones, and we have now de-risked the future for them. They now have total artistic freedom to make the decisions that are the best decisions for them going forward. We are in business with all of them from Giorgio Tuinfort to Starrah to Tricky, The-Dream, Poo Bear, Nile Rodgers, David A Stewart, and Nick Jarjour are part of our advisory board. They all participate in the bigger picture.
What I want is that I want to create an environment where not only do we own these great songs but we create an environment for these great songwriters to really have success going forward because the ulterior motive in doing this fund is to use the leverage of having billions of dollars and pounds worth of assets to change the economical equation that the songwriter fits.
Returning to your point of recorded music owning the big affiliated music publishers and not having the freedom to advocate for these songwriters…
When I look at the movie industry, I see something that I find missing in the music business, and that I think is really important to bring into the music business. You’re Larry from Paramount Pictures, and I’m Merck from the Screenwriters Guild. I come to you and I acknowledge that you’ve got Denzel Washington, and Taraji P. Henson or Reese Witherspoon or whoever to star in your film. But I’m very clear with you that there’s no film to be made if you don’t have a script, and you are not going to get your script unless you pay my writers properly. That happens every three years in Hollywood. It’s happening this very very second. Every three years people throw their toys out of the pram. They threaten to bring production to a standstill. They call each other names, but at the end of the day they figure out a way to pay the writers more money, and as they say in Hollywood, “Everybody lives happily ever after.”
That has never happened in the music business. No one has ever said, “Guess what artist X? Zara Larsson isn’t there with these songs if you don’t pay my songwriters properly.” That needs to happen. The reason it has never happened is because no one has ever brought the songwriting community together and no one has ever had the financial leverage to change this 100 year plus paradigm that exists. I believe very very strongly that, ultimately, everybody who works for Universal, Warner or Sony–or in fact any other company out there–agrees with me that songwriters should get paid more, and should receive a bigger slice of the pie.
Are you advocating taking a much more aggressive role in negotiating rights in contrast to traditional collective bargaining? Like what Irv Azoff’s performance rights organization Global Music Rights (GMR) is doing in America?
Yeah, I’m talking about at some point there will be a disruptive event that is not just me but all of the finest songwriter advocates in the world coming together to disrupt the system that currently exists. I think that it is very, very possible that before we ever get to that disruptive event that the system will change through logic, through advocacy, and though talking to each other. It would be very difficult fight now for Lucian Grainge (chairman/CEO, Universal Music Group) to walk into the Vivendi board and say, “I just have had this epiphany. We should be paying songwriters more money.” They would just say, “No. The paradigm is this. That is what we are going to stick to. And it’s been that for 110 years.”
The problem is that each sector of the music business has a piece of the pie that they seek to protect. For example, American music publishers suffer from a legal framework that prevents the creation of a stand-alone buyer-seller marketplace with mechanical and performing rights, specifically compulsory licensing where they are forced to give a license.
There’s no negotiating room. A contrast to Europe and other markets like Canada.
That is where there will need to be in due course a disruptive event among the people.
The U.S. is the only territory with compulsory licensing.
That’s right. You don’t have that in the rest of the world. Going back to your point who is Harry Fox Agency supposed to be working for?
Music publishers and songwriters, but the large music publishing companies are so dominant.
It all leads back to the same point doesn’t it?
Irving Berlin initially balked at joining the American Society of Composers, Authors, and Publishers (ASCAP) in 1914 because he was accustomed to collecting his own royalties. Dismissive of what benefits ASCAP could offer him, he refused to endorse the organization at first as did many other prominent songwriters. In 1919, he founded the Irving Berlin Music Corporation, which gave him full control of his copyrights.
Correct. And if Irving Berlin was with us today he would be blowing the whole thing up. He would be the Guy Fawkes of this generation that would be sitting there and saying, “You must be joking.”
What is the argument you have used for some of the heritage catalogs that you have picked up like Al Jackson Jr., and Dave A Stewart?
There are several arguments. On the one hand, as you quite rightly pointed out the mantra that I have been singing from is that proven songs are predictable, and reliable, and what I have demonstrated to the financial community in London which has backed me is that they are as predictable and reliable as gold and oil and, in fact, they are just as investible and to some degree more attractive because they are not correlated.
But would you not concede that some of those heritage catalogs have arguably not been well-serviced over the years?
No, no, no. I’m getting there. I’m giving you my full speech if you like.
Yes, I’ve read your recent Music Week front cover profile.
The first step is that they are predictable and reliable. The second step is in most cases, again going back to the Sony, Universal, and the Warner of it all, that is where most of these catalogs sit, as far as administration is concerned, at least at this moment in time. Those companies have as many as 20,000 songs for every creative person working for them worldwide. They don’t have the bandwidth to be able to focus on these catalogs. In truth, what they are really, really good at is identifying, and breaking new writers. If you work for one of these companies today your reputation is going to be made not on what you can do with “We Are Family” (composed by Bernard Edwards and Nile Rodgers) because everybody expects “We Are Family” to have a certain amount of incoming traffic. What you are expected to do is to find a new writer, and break that new writer. That is what your reputation is going to be made on.
There are companies that have broken away from the pack like Primary Wave and Kobalt that are taking advantage of the same forces in the music publishing marketplace as you are.
Absolutely, but there is plenty of room for all of us to be in this business as long as we are buying assets that we are proud of, and that we are prepared to be responsible to. The difference is between what I am doing, and what Larry Mestel (CEO/Founder, Primary Wave Music) is doing or what Kobalt is doing. We are in business with Kobalt. There’s a tremendous alignment between that we feel very similarly about the future of this business. but I’m trying to eradicate the concept of publishing and replace it with the concept of song management. I’m an artist manager. Larry Mestel is not an artist manager. Kobalt is not an artist manager. I bring the same responsibility to the management of songs that I bring to the management of artists.
How so?
I make sure that I manage these songs with a degree of responsibility that I don’t think that the general (Music) business thinks about. I treat the songs as if they are living, breathing entities that require nurturing, that require love. And I also I look at it from the point of view of it being very human which is that surely they have someone, whether it’s parents, whether it’s a brother or a sister, that they (the songwriters) are responsible to. So if I let them down they are letting somebody else down, and I am not prepared for that to happen on my watch.
(Among Primary Wave’s management clients, in fact, are Brandy, CeeLo Green, Melissa Etheridge, Fantasia, Cypress Hill, Eric Benét, Yanni, Plain White T’s, plus music writers/producers Jon Levine, DANJA, Mag and Mitch Allan.)
You have had a several decade management relationship with Niles Rodgers. But also in 1977, when you were 14, you bought Chic’s “Dance Dance Dance” within a few weeks of release.
I bought “Dance Dance Dance” as a 12-inch single at Kelly’s music store in Halifax, Nova Scotia. I hated the “Yowsah, Yowsah, Yowsah” part. I hated it. But I could not get away from how unbelievable the guitar, and the bass were. I remember clearly thinking to myself, “I hate the ‘Yowsah, Yowsah, Yowsah’ part, why am I so into this?” And I just kept locking into the guitar and locking into the bass. Then I heard the B-side “São Paulo” which just blew me away. Of course, the next record was “Everybody Dance” and, at that point, it was a slam dunk.
(The “Yowsah, Yowsah, Yowsah” part of “Dance Dance Dance,” which appears as a spoken interjection in the middle of the song, originated with the American jazz violinist and radio personality Ben Bernie who popularized it in the 1920s.)
At 14, you were a hardcore music fan?
I had already seen Kiss with Cheap Trick opening, and Supertramp with Chris deBurgh opening. Both in Halifax. I went to see Joe Cocker with the Greaseball Boogie Band opening. I saw (Toronto’s) Greaseball Boogie Band, and it was in the wake of Sha Na Na (with it ‘50s-styled repertoire) success and all that, Joe then fell off the stage and passed out. My father had said, “You can go to the show but I’m dropping you at this spot. You need to be back here at 10 o’clock. No matter what. I knew if I didn’t obey it would affect my ability to see future concerts.
By then your family was living in Middleton, the half-way point between Halifax and Yarmouth on Highway 101?
We started living in Halifax and Dartmouth and felt that as kids we needed to grow up in the countryside so he moved us to Middleton.
What did your father do?
My father was a soccer player (in Greece), but he retired from soccer before I was born.
A professional soccer player?
Yes, a professional soccer player for Paok (founded in 1926). I was born in Canada. He was a soccer player. His big brother, Chris Mercuriadis, was a topographer who had emigrated to Canada and worked for the Iron Ore Company Of Canada, and he was brought in to design the infrastructure of the town there.
That led to your family coming to live in rural Schefferville in northern Quebec.
When my father retired from soccer, his brother said “Come over here. I have things for you to do.” The brother becomes a multi-millionaire and decided at the age of 42 or 43 that he’s going to retire back in Greece. He moves back to Greece in 1967 with my three cousins, all of them older than I was. Within a few months, the military junta (the Regime of the Colonels) takes over, totally devalues the drachma. So as long as my uncle is in Greece he’s a really wealthy guy, but if he leaves, he’s a pauper. My two oldest cousins end up getting into a lot of trouble. They are young hippies, into dope, and into music. They get sent back to Canada to live with us in Middleton. These two knew about music. They not only knew the things we knew like Black Sabbath, and Led Zeppelin, but they also knew Fleetwood Mac, Wishbone Ash, and Curtis Mayfield. All this music that blew my 10 or 11 or 12 or 13-year-old mind for a long, long time. They were a massive influence on me. They exposed me to music that I would otherwise not have known about because it wasn’t being played on the radio in Nova Scotia, and it was also revolutionary. The needle would drop on the vinyl, and it would go from Black Sabbath’s “Paranoid” to “Superfly” by Curtis Mayfield to “Low Spark of the High Heeled Boys” by Traffic to “Argus” by Wishbone Ash, and to Nina Simone’s “Live at Town Hall.” My mind was like on fire. David Bowie’s “Hunky Dory,” Cat Stevens’ “Tea For The Tillerman,” and Neil Young’s “Harvest.” I was really getting a university education. Suddenly I was experimenting with music. I was buying (imported) Can records. I was going to places I wouldn’t have gone into if it wasn’t for the influences of what they were playing me.
Sam The Record Man’s store in downtown Toronto would close in the ‘70s so Elton John could go through the record racks.
We would do the same at Tower’s in L.A. Or even today. I was at the Rough Trade shop (in London). The two biggest consumers there are myself and Elton. We each have our own section. We each drop by there once or twice and week, and pick up all the stuff that we want.
You didn’t attend university?
No, never. My university was the University of Neil Young. The University of Lou Reed. The University of Patti Smith.
In 1983 you landed a job at the newly-launched Virgin Records of Canada in Toronto.
I was the third person at Virgin Toronto. It was Bob Muir, Laura (Bartlett), and me. I used to write (Virgin Records’ co-founder) Simon Draper letters. He brought me to Bob Muir’s attention. Bob gave me this job. As I said I was the third person in. Bob Muir had some level of success (at Columbia Records of Canada). Laura and I had no experience whatsoever but what we had was incredible enthusiasm. Before you knew it Culture Club was happening, Simple Minds was happening. Orchestral Manoeuvres in the Dark was happening.
Simon Draper’s contributions to Virgin Records are greatly overlooked today.
Simon Draper, short of John Hammond, is the greatest A&R man to ever have existed. That is my opinion, of course. Simon and I had very similar tastes. Certainly, I had no problem following in love with anything that Simon fell in love with. There was a real affinity there. I was fascinated by the fact that you could have Mike Oldfield, Henry Cow, Robert Wyatt, Simple Minds, Peter Gabriel, Human League, and XTC; all under the same roof, and it was effectively the taste of one person. That had a massive effect on my flexibility as far as taste was concerned because I was able to look at music from the point of view of, “Is it good” or “Is it bad?” As opposed to, “Well, this is what we do here.” We had total freedom to do anything.
As a young A&R executive, how good were your ears?
I knew what I liked. The reason that I worked for Virgin was that it was a British company and my affinity was more in line with what was happening in England. The band that I championed the most, and I’m still incredibly proud of, was Simple Minds. We had these incredible albums, “New Gold Dream” (1982) and Sparkle in the Rain (1984).
You have said you weren’t sophisticated enough to understand working at a label like Virgin at the time.
I looked at Virgin Records as being the most artist-friendly label in the world, From that point of view, I was right. The part that I wasn’t right about was that I looked at it like I was working for the artist. I didn’t fully recognize, and I wasn’t sophisticated enough to recognize that I wasn’t working for the artist, I was working for Richard Branson. Sometimes that meant we were in alliance with the artist, but other times it meant that we weren’t. It wasn’t until they let me be a part of Mary Margaret O’Hara’s “Miss America” (released in 1988) that I came to realize that I’m not, in fact, working for the artist; that I am working for Richard Branson. As much as I love working for Richard Branson I wanted to be working for the artist. That is what I want to do with my life.
How long were you at Virgin Music?
Four years. From 1983 to 1987.
Then you approached Iron Maiden’s co-manager Andy Taylor and Rob Smallwood about launching Sanctuary Music (Overseas)?
Exactly.
In 2007 Universal Music Group purchased Sanctuary Music Group for £44.5 million. What the hell happened? How did Sanctuary run into such financial problems?
Sanctuary was the biggest independent in the world so when the bottom fell out of the recorded music business we felt it before Universal, Warner, Sony, and EMI felt it.
A few years earlier Sanctuary had pivoted toward developing artist and song rights management when you became its CEO. Was that a response to lost revenues due to Napster and the massive illegal downloading that followed?
Yes and no. Sanctuary was created in a way that was in the best light of the original Island, and Chrysalis labels. Sanctuary was the modern day 360-degree record company/management company/merchandise company/booking agency etc. The deals were generally 360 deals; where the 360 component wasn’t a profit center. It was a pot that the artist heavily participated in. I got a lot of credit for it but, in truth, it wasn’t original. I was just doing what Chris Blackwell had done before me (with Island Records). But when it ran into trouble because of illegal downloading, and the bottom falling out of the record business, people thought that the problem was unique to Sanctuary. But, of course, within a year you had Sony and Universal firing hundreds of people. We, unfortunately, just did not have the critical mass to be able to sustain it (a business downtown). For me, that was a heartbreak because it was a truly innovative company. We had the most incredible roster from Elton to Beyoncé to Iron Maiden, our original band, to Morrissey and everyone in between. For that company to be dismantled, was incredibly heartbreaking for me.
You went into a personal tailspin afterward which is a natural response.
Absolutely.
Sanctuary Music was always deemed as a bastion of rock music due to its management of Iron Maiden, Guns N’ Roses, Elton John, Morrissey, and other rock legends coupled its recorded music catalog of more than 150,000 tracks with newer bands like the Libertines and the Strokes.
Yet, you made two significant urban music-based deals: Paying $10 million in 2003 for Texas-based Music World Entertainment the management group behind Beyoncé as well as Destiny’s Child’s Kelly Rowland and Michelle Williams who had solo careers, and Solange, Knowles.
The following year Sanctuary Music acquired Erving Wonder with such music clients as Eve and Sleepy Brown, Floetry, Angie Stone, Jadakiss, and actors Leila Arcieri, Idris Elba, and Alyson Renaldo. At the same time, its founders J. Erving and Troy Carter joined Sanctuary Urban as executive VP.
Both deals were incredibly successful deals but again suffered because of the bottom falling out in recorded music. We took Beyoncé…. helped her—trust me Beyoncé was going to be the biggest artist in the world regardless of who was helping. We helped her get there. Her father…
Mathew Knowles had joined Sanctuary Urban as its president.
Correct. He was a much-misunderstood guy but nobody believed in Beyoncé more than he did and it was a tremendously successful relationship for a long, long time. We gave Troy exactly the platform that he needed to be able to go on, and do Gaga and all of the other wonderful things he’s done. We did the same thing with Bill Curbishley (buying Trinifold Management, Trinifold Music and Estupendo Records from him and co-owner Robert Rosenberg) and his work. It was a really exciting place to be. But sometimes things happen for a reason. And, what I learned from that that Sanctuary experience is something that has made Hipgnosis Songs Fund a better company.
Through the years, you have worked with some notably difficult music icons.
That’s my specialty. I can’t play the guitar. I can’t sing a song. So the only reason that any great artist would want to have me at the table is because I do my job really well. My job is to advocate for the artist and really listen. My job is to help these people remove the roadblocks that they might place in their own way.
Many of these icons left you.
Yeah, but at the end of the day, I’m proud of the artists that fired me. When I say I’m proud; I’m proud of being fired because I’m only going to tell the truth and sometimes the truth is not the thing that an artist wants to hear. That’s fine. If they are at that place in their life where they are not ready to hear that truth, that’s fine, but my job again is to tell them the truth. And hope that I can get them from point A to point B. But the most important thing that I can do is to listen to an artist because success is not difficult. What’s difficult is the success that you want to have, and that requires discipline. So when you are sitting there and going, “How do we get from point A to point B?” The path or the journey might be different than what you expected but my job is to help you get to where you want to be.
What do you do when you feel the artist is about to make a major career mistake? What do you tell them?
You should always, always, always tell them the truth because that’s what you are there for. The greatest managers as far as I’m concerned are Paul McGuiness, Elliot Roberts, Jon Landau, Rob Smallwood, Tony Smith. These are all people that at the end of the day have no other skills in the world but to guide an artist properly. and to tell them the truth. Elliot Roberts has been fired by Joni Mitchell and Bob Dylan. He’s proud of it, but one of the greatest artists in the world, Neil Young, has been with him for over 50 years. Iron Maiden has been with Rob Smallwood for 40 years and Andy Taylor for 38 years. Also, Bruce Allen (Michael Bublé, Bryan Adams, Loverboy, Bachman-Turner Overdrive) is one of the great managers in the world. You know why? Bruce and all of these people I just mentioned have one thing in common, and I believe that I have that in common as well which is that when it comes to our representation of the artists, we are incorruptible.
I use that word incorruptible to describe Morrissey as well when people talk about how difficult Morrissey is. He’s incorruptible. He knows what is right for him and it doesn’t matter whether or not it’s right for you he is going to end up doing what’s right for him. If you are going to work with Morrissey the only basis that you can work with Morrissey is if you believe that the work is important. A level of importance that it doesn’t really matter that what happens with the conventional rules of relationships because on sort of a Dylan Thomas/Oscar Wilde sort of level the work is more important.
One could argue the late Lou Reed was incorruptible His last deal was with you at Sanctuary Records Group in 2004.
I have one of the final emails that Lou Red sent. Lou Reed and I had an agreement which was very, very simple. He asked what would happen if the company was ever sold or I left. I said, “You have my word. If I ever leave or the company gets sold that your contract will be ripped up.” And I did it, and Lou loved me forever as a result of sticking to my word. He then knew he had someone to rely on for the rest of his life to tell him the truth.
Does your heart skip a beat viewing Celine Dion in James Corden‘s Carpool Karaoke, singing “Flying On My Own” which Hipgnosis Songs Fund has a piece of?
Oh yes, Giorgio Tuinfort co-wrote that with Sia and David Guetta. Just wonderful.
Larry LeBlanc is widely recognized as one of the leading music industry journalists in the world. Before joining CelebrityAccess in 2008 as senior editor, he was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-80. He was also a co-founder of the late Canadian music trade, The Record.
He has been quoted on music industry issues in hundreds of publications including Time, Forbes, and the London Times. He is a co-author of the book “Music From Far And Wide,” and a Lifetime Member of the Songwriters Hall of Fame.
He is the recipient of the 2013 Walt Grealis Special Achievement Award, recognizing individuals who have made an impact on the Canadian music industry.