A music catalogue can be an asset.

If songs reliably generate royalties, a buyer may be willing to pay several years of expected income upfront to own those future cash flows.

But there isn’t one universal catalogue valuation multiple.

Start with royalty history

A buyer will normally want to understand several years of earnings.

Look at:

  • Monthly revenue
  • Annual revenue
  • DSP mix
  • Territory mix
  • Track concentration
  • Master income
  • Publishing income
  • Other licensing

A catalogue earning £50,000 consistently can be easier to value than one that earned £50,000 because one song went viral last month.

Growth matters

Ask whether royalties are:

  • Growing
  • Flat
  • Declining

A catalogue growing 20% a year may justify a different valuation from one falling 20%.

But buyers will also ask whether the growth is sustainable.

Concentration matters

Imagine two catalogues earning £100,000.

Catalogue A:

One song generates £95,000.

Catalogue B:

Fifty songs generate approximately £2,000 each.

Catalogue B may be viewed as more diversified.

If the one hit in Catalogue A declines, most of the earnings disappear.

Rights matter

Buyers want to know exactly what they are purchasing.

Do you control:

  • 100% of the masters?
  • 50%?
  • Publishing?
  • Writer share?
  • Neighbouring rights?
  • Territory-specific rights?

The cleaner the chain of title, the easier diligence becomes.

What is a catalogue multiple?

A simple valuation method might be:

Annual earnings × valuation multiple.

For example:

£40,000 annual royalty income × 6 = £240,000.

That does not mean six times is the correct multiple.

Real deals can vary considerably depending on rights, quality, durability, interest rates, growth and buyer appetite.

What raises value?

Potential positives include:

  • Stable royalty history
  • Diversified tracks
  • Global audience
  • Long remaining copyright life
  • Strong ownership documentation
  • Consistent organic streams
  • Sync potential
  • Growing revenue

What lowers value?

Potential negatives include:

  • Artificial streaming
  • Rights disputes
  • Heavy dependence on one playlist
  • Unlicensed samples
  • One-hit concentration
  • Declining royalties
  • Incomplete contracts

Build a catalogue data room

Keep:

  • Royalty statements
  • ISRCs
  • UPCs
  • Contracts
  • Producer agreements
  • Songwriting splits
  • Licences
  • Ownership schedules
  • Monthly revenue history

If somebody offers to buy the catalogue, good records can make the process much easier.

Don’t value only the cheque

If you sell today, you give up some amount of future economics.

Compare the offer with what you reasonably believe the catalogue could generate if you keep it.

A good valuation is not simply:

“How many pounds can I get?”

It is:

“What is the present value of what I’m giving away?”