Hipgnosis Songs Fund cancel dividend payout after new copyright law changes royalty income

Hipgnosis Songs Fund, the investment group responsible for the back catalogues of Justin Bieber and Shakira to name a mere few, have announced that a planned dividend payout to their investors will no longer go ahead, leading to stock prices for the music IP investment and song management company founded by Merck Mercuriadis and Nile Rodgers in 2018. The cancellation of the dividend was blamed on a significant reduction in the expected royalty payments, as Hipgnosis decided to withdraw the proposed interim dividend. 

The reduction in royalty payments comes after a decision by the US Copyright Royalty Board to recalculate the rate, leading to a significant cut in the anticipated amount of royalties that Hipgnosis Songs Fund can expect to receive from tracks played between 2018 and 2022, which much of their portfolio of work lay in. 

The publicly traded company based in London stated that an external assessor of its collection had significantly decreased its evaluation of royalty payments across the industry following a decision made by the US Copyright Royalty Board in the previous year to adjust the rate. As a consequence, the assessor, Citrin Cooperman, has reduced the anticipated royalties that the Hipgnosis Songs Fund would receive from tracks played during the period from 2018 to 2022, lowering it from $21.7 million (£17.9 million) to $9.9 million.

The company's decision they state was motivated by the need to avoid breaching covenants related to its revolving credit facility with lenders. The reason for this decision was to prevent any violation of the agreements or promises made to the lenders who provide the company with a revolving credit facility. By not paying the dividend, the company aimed to ensure that it adhered to the terms of its credit arrangement and did not breach any of the specified conditions related to the credit facility. 

The drop in share price was a direct response to the announcement of the reduced dividend and the revelation of the company's financial challenges as investors reacted negatively to the news, leading to a decrease of over 10% in the share price during early trading.

The news comes after an announcement by Bandcamp that they will be laying staff members off after the music retail platform was sold by Epic Games to Songtradr; several staff members of the site's editorial arm, Bandcamp Daily, were among those laid off, they shared on X