The Problem — Why Catalogues Are Hard to Value
The lemons problem in music rights
The core problem in the music catalogue market is information asymmetry. Sellers know the true state of their metadata. Buyers do not. And there is no standardised, affordable way to close that gap.
This creates a textbook "market for lemons":
Sellers with good catalogues are penalised. A rights holder who has invested in clean metadata, complete registrations, and accurate writer data has no credible way to prove it. Without a recognised quality metric, their catalogue is priced the same as one with incomplete data. Rational sellers of high-quality assets either accept a discount they don't deserve or withdraw from the market entirely.
Buyers discount everything. Unable to distinguish quality, rational buyers assume average (or worse) metadata health and price accordingly. Deals that should close don't. Capital that should deploy stays on the sideline.
The market shrinks. Over time, the highest-quality assets are priced out and the market is left with progressively lower-quality inventory. Everyone loses — owners, investors, and the creators whose royalties go uncollected.
Why metadata is the whole game
When you buy a catalogue, you are buying the right to collect royalties. Those royalties only flow if the metadata is correct:
- Every recording needs an ISRC (International Standard Recording Code) to be identified on streaming platforms.
- Every composition needs an ISWC (International Standard Musical Work Code) to be identified in the publishing system.
- Every writer needs an IPI number to receive their share.
- Every work must be registered with the collecting societies in each territory where it earns.
If any of these identifiers are missing, incorrect, or inconsistent across systems, the payment chain breaks. The money doesn't disappear — it accumulates in suspense accounts, gets distributed to the wrong parties, or is eventually written off. The Mechanical Licensing Collective in the US alone accumulated $427 million in unmatched mechanical royalties between 2007 and 2020 — and that covers a single royalty type, in a single country. Globally, conservative estimates put unmatched royalties above $1 billion.12
For a buyer, this means the yield you think you are acquiring may be materially lower than the headline figures suggest — and you have no reliable way to quantify the gap before closing.
The due diligence bottleneck
The only current option for assessing metadata health is to hire a specialist advisory firm. The process costs $100,000–$300,000, takes 4–8 weeks, and produces a bespoke report that cannot be independently reproduced or compared to other assessments.3
This works for megadeals. At $500M+, the cost is a rounding error. But look at what happens as deal sizes shrink:
| Deal size | Due diligence cost | Cost as % of deal | Feasibility |
|---|---|---|---|
| $500M+ | $100–300K | 0.02–0.06% | Standard practice |
| $50–500M | $100–300K | 0.06–0.6% | Marginal |
| $5–50M | $100–300K | 0.6–6% | Prohibitive |
| $1–5M | $100–300K | 6–30% | Economically impossible |
For the mid-tier catalogues that represent the majority of the market by count, traditional due diligence is economically impossible. This creates a hard barrier that locks out both buyers and sellers from the most capital-efficient segment of the market.
What this means for you
If you're a catalogue owner: You may have spent years maintaining clean metadata, but you cannot prove it to prospective buyers without paying for expensive due diligence yourself — and even then, the report is not portable or verifiable by other parties.
If you're a buyer or investor: You cannot quantify the metadata risk you are taking on. Every acquisition is priced in the dark. The deals you don't do because you cannot assess quality represent lost opportunities.
If you're a lender: You cannot underwrite music rights without standardised quality metrics. The asset class remains unquantifiable, no matter how attractive the yield profile looks on paper.
What happens when due diligence fails
The Hipgnosis Songs Fund provides the most documented case study of what happens when catalogue valuations are wrong.
Hipgnosis assembled a portfolio of approximately 45,000 songs through aggressive acquisitions between 2018 and 2022. In 2024, an independent forensic review revealed the scale of the problem:4
| Metric | Before review | After review |
|---|---|---|
| Portfolio valuation | $2.62 billion (Citrin Cooperman) | $1.93 billion (Shot Tower Capital) |
| Value destroyed | — | $690 million (−26%) |
| Acquisitions overvalued | — | 67 of 105 |
| Portfolio missing forecasts | — | 75% |
The two independent valuers used different discount rates (Citrin Cooperman: 8.5%; Shot Tower: 9.63%), different growth assumptions, and arrived at valuations $690 million apart for the same assets. Blackstone subsequently acquired the fund for $1.6 billion — a discount to both valuations.3
This was not fraud. It was the predictable outcome of a market where there is no standardised way to measure the quality of what is being bought.
No price discovery, no market
In functioning markets, standardised quality assessments enable price discovery. Bond markets have credit ratings. Real estate has standardised appraisals. Equities have audited financial statements.
Music catalogues have none of these. Each advisory engagement produces a proprietary, non-comparable opinion. There is no portable quality score, no published methodology, and no way for a second party to reproduce the analysis. The result is that every catalogue transaction is priced in the dark.3
This is the gap TrackForge fills.
Next: The Market — Music Catalogues as Financial Assets
Sources and notes