Barry Manilow vs. Hipgnosis: Inside the Deal That Led to Dueling Lawsuits

Hipgnosis Songs Fund, one of the most influential players in the catalog acquisition market run-up of recent years, and Barry Manilow are embroiled in a pair of lawsuits over $1.5 million in unpaid bonuses Manilow’s team claims Hipgnosis agreed to when it acquired his catalog.

Hipgnosis Songs Fund sued first in the High Court in London on August 12, saying they do not owe Manilow these bonuses, and that Manilow, Manilow Productions and Stiletto Entertainment are in breach of contract for not turning over certain payments they received from Sony Music. The “Mandy” singer and his management company sued back in United States federal court in California on Aug. 28, claiming that Hipgnosis does owe Manilow $1.5 million in bonuses, and that the fund did not actively promote his work, thereby avoiding these performance-linked bonuses — logic Hipgnosis calls flawed.

In other circumstances, this may have been treated like a mundane contract dispute. But Manilow’s legal team allege in the suit that Hipgnosis, through its founder Merck Mercuriadis — the man behind the formerly London-listed fund’s famous appetite for acquisitions — falsely represented that it had the people and know-how to increase the money generated by Manilow’s master recordings. Mercuriadis is not party to either lawsuit, and through a spokesperson he declined to comment for this article.

According to a copy of the contract included in Hipgnosis’ lawsuit, the company acquired 100% of Manilow’s worldwide income (excluding SoundExchange royalties) from his master recordings for $7.5 million. Two bonus payments were to be paid out if, for the first payment, the income Hipgnosis received from its share of the assets increased by at least 10% year-on-year compounding for each of the first three years; and if, for the second payment, the income Hipgnosis received increased by at least 10% year-on-year compounding for years one through four.

Manilow’s legal team says in its suit that Hipgnosis described promotional strategies that included album reissues, special compilations and synch deals, as well as less traditional strategies like a YouTube Karaoke channel, Instagram giphy packs and Copacabana-themed dance trends.

“Hipgnosis did not carry out a single one of its touted promotional strategies; upon information and belief, it did nothing at all in order to keep the cash income below the levels required to meet the condition precedent for the additional purchase price payments,” Manilow and Stiletto Entertainment’s legal team alleges in the complaint. Manilow also missed out on expected complementary increases in the value of his publishing royalties and his Las Vegas residency, they claim in the suit.

In its suit, Hipgnosis alleges that Manilow, Manilow Productions and Stiletto Entertainment breached their contract that laid out when bonuses would be paid because Manilow & co. received two royalty payments from Sony — for the period from July 1 to December 31, 2022, and January 1 to June 30, 2023 — that they ought to have turned over to Hipgnosis but didn’t. In addition, Hipgnosis says in the lawsuit that Sony Music suspended payment of royalties for the period from July 1 to December 31, 2023. Sony Music through a spokesperson declined to comment.

Regardless, Hipgnosis says in the suit it does not owe the bonuses because the income received never met the performance targets, and it is seeking to recover 100,000 pounds from Manilow and his production and management teams.

“The matter of the bonus payment is a routine contractual matter regarding interpretation of certain contract clauses,” a Hipgnosis spokesman said in an emailed statement. “While we regret that this couldn’t be resolved directly between the parties, the court is now best placed to offer a final and definitive opinion on this matter. We have full confidence in our position and the legal process.”

Representatives for Hipgnosis also dispute Manilow’s team’s logic that Hipgnosis did not promote his works so as to keep the income levels below the thresholds that would trigger the bonus payouts, saying that logic is false because acquisition deals are structured to incentivize Hipgnosis to optimize the asset. Performance bonuses by definition are paid out when the asset does well, which benefits the artist and Hipgnosis, they say.

“Hipgnosis’ model is based on a strong alignment of interest between songwriters and artists and our business,” Hipgnosis’ spokesperson said in the emailed statement. “We continue to hold Barry and his music in the highest possible regard. To suggest that Hipgnosis would deliberately withhold promotional efforts for these recordings would not make commercial sense. These claims are baseless, and we will defend them vigorously should that be necessary.”

Manilow’s case is currently a one-off. However, the board of Hipgnosis Songs Fund said that, as of Sept. 30, 2023, it was liable to pay out as much as $68.1 million in catalog bonus provisions across 10 catalogs, of which the disputed Manilow bonuses are just one. Hipgnosis Songs Fund has since been taken private by Blackstone and no longer discloses this level of financial data.