ARTIST KNOW YOUR VALUE
Updated: Nov 9, 2021
Since the pandemic, investors have been clamoring to acquire music catalogues. And it has been widely reported that catalogues have been selling at all-time high values. However, based upon MRD’s research, this appears patently false. In fact, artist may be leaving millions of dollars on the table. This may be occurring because the individuals representing the artist do not possess a sound understanding of the valuation process to properly assess whether artist are being fairly compensated.
MRD’s report, Artist Know Your Value: Lawyers look Beyond the Multiple (“The Report”), lays out the financial fundamentals for catalogue valuations, and it highlights the shortcomings of the valuation process in the music industry. Not only does the report rely on finance theory to back its findings, but it cites legal authority as well.
The report finds that the fundamental issue causing artist to potentially leave millions of dollars on the table is that artist may be selling their catalogues based upon its investment value, instead of its fair market value. And the difference between investment value and fair market value is that investment value is concerned only about the value of an asset to a particular investor, whereas the fair market value is determined by two parties, a hypothetical willing buyer and willing seller. And the investment value will traditionally produce a value less than the fair market value, causing sellers to give up their property at a discount.
Lastly, the report covers an appraisal litigation case, In re: Appraisal of the Orchard Enterprises, Inc., which appears to be the only US case that values a business based upon its catalogues. This case supports the report’s findings that music catalogues should be valued based upon their fair market value and not their investment value.
The report covers all these topics and more, including interviews of valuation experts outside of the music industry. Enjoy the full report.