Valuation of Music Catalogs

TL;DR

This paper introduces a risk-neutral valuation method for music catalogs using historical revenue data and discounted cashflows, providing a practical framework for estimating catalog worth based on performance metrics.

Contribution

It presents a novel approach to valuing music catalogs through cashflow forecasting and multiplier analysis, incorporating catalog age, revenue, and contract duration.

Findings

Ask prices align with median song cashflow multipliers.

Best bids correspond to bottom decile cashflow multipliers.

Method provides reasonable valuation ranges for music catalogs.

Abstract

We propose a risk neutral approach to forecast the cashflows of music catalogs, based on historical revenue data. We use a discounted cashflows formula to produce reasonable ranges of multipliers for these assets, based on the age of the catalog, the last-twelve-months revenue and the duration of the contract. We compare the multipliers implied by the cashflows of top, median and bottom performing songs on the Royalty Exchange platform. We find that ask prices are close to the multipliers justified by median song cashflows. The best bids are near the multipliers justified by the bottom decile of song cashflows.