Barry Manilow has sued Hipgnosis in a bid to secure bonus payments he says are due under his 2020 deal with music rights company.
The lawsuit is also scathing about Hipnosis’s management of his rights, claiming that founder Merck Mercuriadis “misrepresented” his company’s “experience, skill and expertise” to “fraudulently induce” Manilow into signing the deal.
Hipgnosis promised to market and promote Manilow’s music to expand its reach and secure lucrative sync deals, all in consultation with the musician.
But, says the lawsuit, “none of the promised marketing or promotion ever materialised. It has never consulted with Manilow or even attempted to so consult. It became clear that Hipgnosis made profoundly false promises. It lacked the skill, experience and expertise to optimise” the hits covered by the deal.
We already knew there was a dispute between Manilow and Hipgnosis over bonus payments, because Hipgnosis previously filed its own lawsuit in London’s High Court. Manilow’s litigation has now been filed in California and provides more detail about the dispute.
In 2020, Hipgnosis acquired Manilow’s revenue and royalty rights for many of his recordings. As part of the deal, Manilow got an upfront payment of $7.5 million, but was also promised two bonus payments of $750,000 each if the revenue streams Hipgnosis acquired grew by 10% a year during the first four years of the deal. Manilow insists those targets were achieved.
However, Hipgnosis has “abjectly refused to pay” the bonuses, says Manilow, and instead has engaged “in a prolonged game of cat and mouse” to avoid paying.
Whether Hipgnosis is withholding the bonus payments because it “lacks the resources to make good on its contractual commitments” or whether the company is “just willfully violating” the 2020 agreement, is unclear, says Manilow’s legal filing.
What is remarkable about the lawsuit is the amount of information it gives about the performance of Manilow’s catalogue. That $7.5 million deal saw $404,338 in royalties flow to Hipgnosis in the first year, $539,822 in the second, $493,309 in year three and $550,383 in year four. In total, Hipgnosis has made $1,987,852 from its $7.5 million investment, averaging $496,963 per year over the four year period, or a return of around 6.6%.
According to Manilow, the royalties generated each year since the deal took place are over the threshold of 10% annual growth needed to trigger Hipgnosis having to make the bonus payments totalling $1.5 million.
Although the bonus payments are at the core of this dispute, the lawsuit describes in some detail why Manilow thinks that Hipgnosis failed to make good on all the promises it made.
In particular, these included promises Mercuriadis and his team made about how they would create new opportunities around his recordings. Given the Hipgnosis deal did not cover Manilow’s publishing, had those promises come to fruition, he would have benefited from a royalty boost on the songs side.
They did not, though, says Manilow, adding that the “plans Hipgnosis presented… were inept and incompetent to a degree that would have been comical, had they not detrimentally impacted” him.
Amongst the promises made, alleges Manilow, were a “dedicated team of qualified industry professionals” that would set out to “pursue and achieve album reissues, special compilations, and licensing agreements in commercials, films, television and other media”.
These were designed to help Manilow’s music “transcend into a new generation”, harnessing social media to make “reaction videos” and spark a “Copacabana dance trend” on TikTok, with an accompanying “Giphy pack and stickers” for Instagram.
There was subsequent talk of a karaoke channel on YouTube, a tie up with Urban Outfitters and an NFT drop on defunct NFT platform Nifty.
But none of this happened, the lawsuit claims. Instead, Hipgnosis “proved to be a remarkably unstable organisation”.
After the company’s Chief Catalogue Officer Amy Thompson “exited in September 2022 and was not replaced”, says Manilow, “various other staff exited in what became a revolving door”. The most recent expert to jump ship from Hipgnosis was, of course, Mercuriadis himself.
Had Manilow and his team had “any idea that Mercuriadis’ statements about Hipgnosis’ skill, experience and bandwidth were simply not true”, the lawsuit adds, “they would not have contracted with Hipgnosis and would have instead sought out opportunities with a competent business partner”.
When Manilow signed up to Hipgnosis, the company was in the process of rapidly expanding its catalogue of hit songs, constantly announcing mega-bucks deals with superstar artists.
In more recent years, of course, the official announcements have mainly involved the various different arms of the many-tentancled Hipgnosis badmouthing each other as the company’s share price imploded, investors fell out of love with the music-as-an-asset-class dream, and Blackstone swooped in to snap up the catalogues Hipgnosis had acquired.
That deal - concluded in July - allowed the company to simplify its corporate structure and step back from the scrutiny that comes with having part of your business listed on a stock exchange.
With that drama now a distant memory, the management team at Hipgnosis were presumably hoping that they could get on with managing their music rights without having to deal with constant corporate dramas. The only thing worse than that would be if artists on the Hipgnosis roster began to regret the deals they did when Hipgnosis was in full-on hype mode and started lashing out in public about broken promises.