Originally Posted by Walleris

I think you are quite wrong here. I haven't done a lot of research myself either, but what I read gives me a very different view.

To me, this appears to be a classic investment fund business model. Hipgnosis acquires an artist's music catalogue for a large amount of money (avg. 13 times the annual earnings of that catalogue) and then either profits from an expected increase in asset value of the catalogue (if they sell) or/and future cash flows from its sales, streams, and other revenue streams, which they expect to increase in the future as music streaming continues to grow.



Whether they intend to eventually start selling parts of their portfolio many years down the line, after the increase in value (like a private equity fund would, for example) or are cash flows from royalties while holding the asset are enough to make the investment profitable, is unclear to me. Also, what's unclear is, whether the original songwriters (who have sold) retain a percentage of those earnings, do they get additional commission (based on how well those songs do, e.g. Rick Astley's Never Gonna Give You Up became a lot more valuable after the Rickroll meme in 2007 (20 years after the original release) than it was before) or do they surrender royalties completely. This is where spreadsheets are built and I've nowhere near enough understanding of the music business to make even an educated guess.

While they have an operational / management function that you mentioned (publishing, advertising and royalties, etc.), this seems secondary to the fund business. Especially, as Captain_jovi pointed, given how most of those songs (esp. the valuable ones) are co-written and they only own Richie's share of the pie, I don't think they have much power to dictate the strategy of how to use that catalogue to make those revenues bigger than they would be otherwise if Richie was still holding it.

Based on this, I would guess that Richie needed/wanted cash and was willing to sell the ownership of his work for a large amount, rather than keep collecting periodic payments for royalties.