Valuation of a catalogue

On ANote Music, each catalogue (royalty interests) has a specific set of attributes, among which duration and type of rights covered, that make each contract a unique non-standardized case. As a general remark, we point out that royalty interests are complicated to price: both contract-specific and macro factors come into play. 

When discussing a single song, possibly the most important value driver stems from the position in the life-cycle of a song. The popularity and royalty streams of a song generally exhibit a bell-shaped evolution with a fat right tail. Investors buying into new songs should evaluate the chances of the song to exhibit growth and to peak in the near future, while buyers into old catalogues should focus on the stability of the historical income streams.

An essential aspect worth considering is the health of the music business in general. The increase in revenues from streaming and innovative channels is likely to strongly benefit also existing royalty interests. As a last point, occasionally idiosyncratic aspects come into play, where a revamp in popularity of a song may come from new sync deals. Also, music trends, habits of music consumers, economics of music rights, licensing agreements, legal aspects all have an impact on the amount of royalties generated over time, thus on a catalogue valuation.

Nonetheless, Royalty Interest generates Royalty Payments, a stream of revenues, that may be evaluated using traditional financial metrics. Typically, Royalty Interest is valued as a multiple of historical net revenues, as mature music rights usually trade at multiples ranging between 6 and 16 times previous-years’ net royalties, with the expected growth rate being a key determinant.

On ANote Music, you will only find catalogues that have consistently generated royalties, with clear information on past royalty generation, genre, top songs and a series of additional useful information.