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Barry Manilow is countersuing Hipgnosis Songs Fund over bonus payments tied to the sale of the singer’s back catalogue that he claims were never paid.
In a lawsuit filed in Los Angeles on Wednesday, Manilow alleged the London-based music rights owner had breached their contract and owed him $1.5mn in damages, and that it had offered fraudulent and negligent representation.
Founded by entrepreneur Merck Mercuriadis, Hipgnosis bought the rights to 917 songs by the American artist for $7.5mn in 2020, with the sale agreement stating that Manilow would be eligible for up to two further bonus payments of $750,000 if certain profit benchmarks were met.
The contract stated that Manilow would receive the first bonus payment if Hipgnosis’s income from the royalties increased by at least 10 per cent year on year in the first three years after the sale. An additional bonus would be paid out if there was a further 10 per cent increase in the fourth year after the sale.
The 81-year-old singer of hits including “Copacabana (At the Copa)” and “Mandy” believes he has satisfied the conditions for the bonus payments but the two parties dispute how much money needed to be made in the first year.
Hipgnosis this month filed a lawsuit against Manilow in London’s High Court in a case it described as a “breach of contract”, and asked for a judgment on how certain clauses in the sale agreement should be interpreted.
The company said at the time that “in discussion with Mr Manilow’s representatives it became clear that there was a difference in understanding of certain clauses in the sale agreement regarding bonus payments”.
Hipgnosis, whose portfolio also includes music by the Red Hot Chili Peppers and Shakira, was a driving force behind the emergence of music rights as an asset class, using the royalties from streaming, radio play and performances to provide income for investors hunting for returns in the era of record-low interest rates.
Manilow is also suing Hipgnosis for fraudulent and negligent representation, alleging in a court document that during pre-contractual negotiations in 2020, Hipgnosis falsely represented that it had an “extensive staff of experienced and skilled music industry executives prepared to implement a range of strategies to optimise the royalties received from Manilow’s musical catalogue through active promotion, including but not limited to album reissues, special compilations and licensing agreements in commercials, films, television and other media”.
The lawsuit claims Hipgnosis never pursued any of these strategies. In the document it is alleged that plans for a potential partnership with Urban Outfitters to market Copacabana vinyl records and for launching a series of archived Manilow concerts through Amazon Prime also never came to fruition, nor social media marketing ideas pitched to Manilow’s team to launch a YouTube karaoke channel and a TikTok Copacabana dance trend.
Manilow’s dispute with Hipgnosis is the latest in a series of problems for the troubled music rights owner after rising interest rates undercut its business model and sent its share price below the valuation that the group put on its music portfolio.
Hipgnosis agreed this year to a $1.6bn takeover by private equity group Blackstone, with Mercuriadis expected to step down following the completion of the sale.
The fund is also a co-defendant in a £200mn lawsuit against Mercuriadis by his former business partners, who have alleged that Mercuriadis stole the idea to buy up music rights from them and then financially benefited from listing Hipgnosis Songs Fund on the London stock exchange in 2018. Both deny the claims.
Hipgnosis and Manilow did not immediately respond to requests for comment.
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