The key characteristics of the Hipgnosis business model are:
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Every Song has two copyrights: Composition (lyrics & melody), held by the Songwriter and Sound Recording (the sound heard), held by those involved in the recording of the Song. Royalties stemming from the Composition Copyright are referred to as Publishing Rights (aka Songwriter Rights). Hipgnosis Songs Fund focuses primarily on acquiring these, but owns selective Sound Recording Rights as well.
The diagram shows the flows to Hipgnosis Songs Fund from its ownership of its Copyrights.
These are rights in a musical composition (lyrics and/or music) and generate Mechanical and Performance Royalties. In the UK, “blanket licences” are issued to organisations including radio and TV.
These are triggered when a copy of a Song is made, whether physical (e.g. CDs, DVDs) or digital (e.g. permanent downloads, streaming, webcast). The Streaming of a Song is a hybrid: a temporary copy is made, so it generates a Mechanical Royalty, but it is also treated as a public performance of that Song, generating a Performance Royalty.
These royalties largely come from live performances and licences taken out by shops, restaurants, clubs and bars etc to publicly perform or broadcast a Song.
Master (Recording) Royalties
These (aka Recording Royalties) are generated on behalf of a sound/master recording. This is the most basic royalty performing artists and labels earn when their master recording is downloaded, physically bought, or streamed.
These (aka Related Rights) are public performance royalties due to the sound recording copyright holder. One has to distinguish between terrestrial broadcast platforms (like radio, TV, and venues) and digital platforms (like Internet and satellite radio) because not every country, notably the US, recognises or pays terrestrial neighbouring rights.
These are generated when a visual image (e.g. TV, film, advertising or video games) is matched to a Song.
There are multiple channels through which royalties are collected. These are depicted by the arrows in the diagram opposite.
Our Purpose is having not only a “motive” of providing great returns for Shareholders but also an “ulterior motive” of using the influence of the Company and our great Songs to improve the Songwriter’s position in the economic equation.
1. Access and Culture of our Investment Adviser
3. Active Management
4. Efficiencies In collection