Details on One Direction’s Secret Financial Investment in 5 Seconds of Summer

When One Direction ­members Louis Tomlinson and Liam Payne tweeted at fellow boy banders 5 Seconds of Summer back in February, announcing to their millions of followers that the Aussie pop-rockers had a new single out, casual observers may have chalked up the endorsement to chummy camaraderie. After all, 5 Seconds, which formed a year after 1D debuted on the U.K. X Factor, were represented by the same company, London-based Modest Management, founded by music industry veteran Richard Griffiths.

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But relations between the two groups go deeper. According to multiple sources, 1D holds a financial stake in 5SOS. An Aug. 9 report in a U.K. paper was the first to make the connection, reporting that the five members of 1D, which also includes Harry Styles, Zayn Malik and Niall Horan, own a share of London-based company 5SOS LLP. Billboard has since confirmed that the registered partners listed for the company are the four members of 5SOS and One Mode Productions, whose directors include the five members of 1D in addition to Modest’s Griffiths and Will Bloomfield.

According to the documents filed at London’s Companies House, the split allots for 120 shares: 1D holds 50 percent, and the managers hold the other 50. Looking at 5SOS music sales so far, for instance — 788,000 albums and EPs and 2.4 million song downloads sold, per Nielsen SoundScan — that would amount to $250,000 in earnings for Modest and 1D, or $25,000 added to each 1D member’s bank account, Billboard estimates. Consider bigger revenue generators like merchandise, and 1D could see far greater returns.

Of course, that also means the members of 1D have an interest in growing the Aussie pop-rock band, which they have faithfully done. Tweets and public acknowledgements aside, 5SOS has benefited from a 66-date international tour ($277 million grossed since April 25, according to Billboard Boxscore) as 1D’s opener — a trek that has, as many ticket-buying tweens might contend, started to shift 5SOS’ status from warm-up act to more of a co-headliner.

The pairing is a no-brainer, says one insider privy to the arrangement. “The thinking is, ‘The bigger these guys get, the more money we make,’ ” says the source. “They’re going to put someone on as the opening act on the tour anyway, why not put somebody that they have a financial interest in?” Modest principals Griffiths and Harry Magee, who manage both groups, declined to comment, but in an interview with Billboard in March, Magee credited 1D as “early adopters of 5SOS” explaining that Horan and Tomlinson played the music to the rest of the band who agreed 5SOS should support 1D on their arena tour.

Call it the new sharing economy, a far cry from the boy-band boom of the ’90s, when acts like Backstreet Boys and ‘N Sync were seen as rivals. Both bands went on to tour arenas and stadiums on their own, but it’s easy to imagine the whole being greater than the sum of its parts if the two had supported one another. “If I had both [BSB and ’N Sync], I’d sit them down for a discussion about them working together,” says Johnny Wright, who has represented both acts and still manages Justin Timberlake. “New Kids on the Block’s Donnie Wahlberg, he got it,” he adds, referring to the $40 million-grossing 2011 NKTOBSB tour, which saw the two boy bands hit the road together. “Back in the day, there was this shadow created — that these bands didn’t like each other, but the truth is, when that all started, they hadn’t even met. It was always my vision that audiences of ’NSync and Backstreet Boys could like both bands. Instead, you had to be a Backstreet fan or an ’NSync fan.”

Today, Wright offers: “If you’re going to have a stable of artists, you have to create a family. Take a cue from what Berry Gordy did at Motown, where you had The Temptations, the Four Tops and the Supremes and all the acts went on tour together as part of a Motown Revue.” (Of course, dubious publishing deals were the norm in those days, too.)

No longer a dark secret of the industry, the modern-day version of the profit-sharing model is best demonstrated by partnerships like Cash Money’s, where Lil Wayne has a vested interest in Nicki Minaj, and also Justin Bieber’s “signing” of Canadian singer Carly Rae Jepsen to School­boy Records, a Universal Music Group-housed label owned by his manager Scooter Braun. Does that make Braun, who leveraged Bieber’s 20 million-plus Twitter followers to help sell 11 million downloads of “Call Me Maybe,” the new Weezy? He may not have the mic skills, but as a pioneering force in the concept of acts investing in each other (see: Bieber benefactor Usher), Braun is only looking for more.

“Music is at its best when it’s collaborative, and that can be the art of making music and also of marketing it,” he says. “There’s more than enough to go around. People aren’t limited to only one album or one act. We can all share this together.”

Additional reporting by Richard Smirke.

A version of this article first appeared in the Oct. 11 issue of Billboard.