ENTERTAINMENT

The Bidding War That Could Change the Music Industry: Inside the Battle for Hipgnosis

For decades, music labels were the only investors in the music industry — offering artists upfront cash in exchange for a share of their future earnings. But with legacy music businesses languishing, investment firms like Apollo ($APO) and BlackRock ($BLK) are pouring billions into buying stakes in artists’ catalogs, hoping to cash in on the music industry’s growth. However, not all investors are hitting the right notes.

Hipgnosis no more: Take Hipgnosis Songs Fund ($HPGSF), the first publicly traded music investment company. They’ve splashed out nearly $2.2B to acquire over 57K music royalty rights. But with shares dropping 11% over the last five years to a record low and facing a slew of auditing and management controversies, shareholders finally voted for the company to be reorganized. Now, Hipgnosis is at the center of a bidding war among top music royalty investors.

• Last week, Hipgnosis agreed to sell itself to the world’s largest music investor, Concord, for $1.4B — financed by Apollo Asset Management.

• Days later, Apollo’s competitor Blackstone ($BX) also threw their hat in the ring with a $1.5B cash offer, capturing the attention of the fund’s board.

Make music, not money

Hipgnosis may have overestimated the value of their catalogs — expecting music royalties to rise in value. Except they didn’t expect 5%+ interest rates and inflation to take a bite out of the industry’s growth since 2020. Other investors might be more lucky. Streaming services (representing over 80% of industry revenues) are planning price increases — which could boost catalog values and royalty payouts.

• Take Spotify ($SPOT), which charged $9.99/mo since its US launch in 2011, raised prices last year on all of its plans — and intends to do so again this year.

• With the company paying ~70% of its revenues to music rights holders, even slight price hikes could mean big bucks for the music industry.

It’s not all harmonious: Spotify’s 60% surge this year comes at a cost to artists and labels. In its latest earnings yesterday, the company reported record profits— but it took laying off a quarter of its staff, scaling back its podcast ambitions, and charging musicians for promotional features that used to be free to get there.

Read: Music Companies Wage a War on AI-Generated Music

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LARGECAP RECAP

🏥 UnitedHealth says Change Healthcare hack could cost $1.6B

In the aftermath of a disruptive cyberattack affecting US pharmacies and hospitals, UnitedHealth Group ($UNH), the parent company of Change Healthcare, has confirmed that a hacker group stole sensitive medical data from a “substantial proportion of people in America.” Although UnitedHealth paid $22M to one of the hacking groups involved, the real cost will be much higher.

• According to UnitedHealth, the attack, which involved the theft of 6TB of personally identifiable information as claimed by hacker group ALPHV, could cost the company $1.6B this year.

• To address concerns among customers affected by the breach, the company has set up a website and support line, but direct communication with affected customers has not yet been initiated.

Hacker blitz: 2023 marked the worst year for data breaches on record, but 2024’s hacks are already becoming a bigger deal in scale and sensitivity. The incident involving Change Healthcare could potentially rank among the worst hacks in American history. However, other major breaches — such as the recent attack on AT&T ($T), which compromised the social security numbers of 73M customers — indicate that 2024 might just surpass last year’s record-breaking cyberattacks.

CBDC, FedNow and the risks to your financial privacy. Global central banks are studying the implications of CBDCs (Central Bank Digital Currencies), including their impacts on the financial system, monetary policy, and financial stability. Navigate these turmoils and position for financial success by staying informed, diversifying your investments, and engaging in prudent financial planning. Achieve that with this Free Wealth Kit →*

Markets & Economy

NYSE considers 24-hour trading: Market players are pondering the idea of nonstop trading stocks — inspired partly by crypto’s 24/7 trading. A Steve Cohen-backed startup, 24 Exchange, is seeking SEC approval for round-the-clock trading. [Read]

Bank of America ($BAC) bullish on Apple ($AAPL) for 2024: Setting a $225 price target for $AAPL, BofA is optimistic about the iPhone maker’s earnings next week, predicting strong margins and growth in its services segment. Morgan Stanley is more cautious, trimming their price target to $210 over worries about sales in China and weaker earnings. [Read]

General Motors ($GM) shines in Q1, lifts 2024 outlook: Hearty truck sales led to a 7.6% revenue increase compared to last year, with net income rising by 26%. North American retail sales were particularly strong — prompting a ~$500M uptick in projected earnings for the year. [Read]

Business & Wealth

FTC blocks Coach-Michael Kors merger: Antitrust regulators fear such a fashion conglomerate could stifle competition for handbags and negatively impact employee compensation. Both companies plan to contest the decision in court. [Read]

Over 70% of global workers endure extreme heat: Every year, ~18.9K workers succumb to excessive heat, while 22.9M suffer injuries. And there’s little relief in sight, as legislation in Texas and Florida prohibits local governments from instituting heat exposure protections like mandated breaks. [Read]

Costco ($COST) customers struggle to sell gold bars: The retail giant made it easy to buy gold… but selling it is another story. Costco doesn’t buy back gold bars, and many refineries and local shops don’t offer market prices for gold. Selling gold isn’t as simple as selling stocks. [Read]

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DIGIT OF THE DAY

Investors Pull $2.2B From Cathie Wood's ARK ETF In 2024, More Than The Last Two Years Combined

Cathie Wood’s ARK funds have hit an iceberg, but will it sink or sail on? Just four months into 2024, the investment firm's once-revered exchange-traded funds (ETFs) have seen $2.2B in outflows — with its flagship ARK Innovation ETF ($ARKK) hit the hardest. The recent downturn surpasses last year’s outflows, bringing total assets down to $11.1B — a stark drop from a high of $59B in 2021.

• Back in 2020, ARK funds attracted $20B in deposits — but since then, the firm has seen a staggering $14.3B in investor money vanish, making it the biggest loss among asset managers over the past decade.

• To start 2024, $ARKK shares slumped by 19% — primarily driven by Tesla ($TSLA), ARK’s largest holding, which plummeted ~45%, along with the absence of Nvidia ($NVDA).

But can ARK weather the storm? ARK hopes to bounce back, especially if the Federal Reserve lowers interest rates. During its boom days, ARK’s funds rallied amid demand for growth stocks — and it hopes to capitalize again with the most growth-y stocks it can through its publicly-traded ARK Venture Fund ($ARKVX). Cathie Wood maintains a bullish stance, standing firm in her belief in ARK’s core investment themes and her confidence in Tesla’s future, for which she predicts a five-year price target of $2K, despite its current struggles.