We reported yesterday on the publication of all the written evidence submitted to the UK’s parliamentary inquiry into the economics of music streaming. Among the strong opinions offered was Hipgnosis Songs Fund’s breakdown of what it sees as the key problem for streaming royalties.

“The conflict of interest created by the three major record companies (Universal Music, Warner Music and Sony) owning the three largest publishers (UMPG, Warner Chappell and Sony ATV respectively) is critically important to understand,” claimed its submission.

“These three publishers are being prevented from advocating for songwriters’ interests as a result of being controlled by their parent companies who wish to push economic improvement towards recorded music where they make an 80% gross margin and a 40% net margin.”

“As a guide to how the revenue from music is split, the typical income earned by a master holder is c. 80%. The typical income earned by a publisher is c. 15%. Given the major record labels own the publishers, it is in the record labels’ interest to push for the income received on the master / sale side to be greater than on the writers / publishing side.”

The three major labels would, of course, have their own views on this matter, which is why it’s a shame that none of their UK bosses was asked about it during their stint in front of the inquiry committee earlier this week. It is possible, though, that a future session will focus on publishers and the masters/songs split.

In the meantime, Hipgnosis’s bullish acquisition strategy continues. This week it picked up the production rights for famed producer Bob Rock, who’s worked with artists from Metallica to Michael Bublé. The company is also planning to issue up to 1.5bn more shares over the next year in order to raise up to $2bn in new funds to spend on catalogues.

It spurs a question. If the splits between labels and publishers were changed, and if a larger portion of streaming royalties flowed towards the songwriting side of the business, that would be a good thing for the revenues of song catalogue owners like Hipgnosis. But what would it mean for the valuations of those catalogues when they were being bought and sold, and the need / desire of songwriters to sell? A theoretical question at this point, but one worth thinking about.

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Stuart Dredge

Music Ally's Head of Insight

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