Doubt in the rate, fact in the forecast
Catalogue valuations argue over the discount rate and take the income base on trust. A registration gap is a fact about the base, and it belongs in the forecast.
For buyers, lenders, valuers and the advisers who act for them: why a rate premium is the wrong tool for a registration gap, and what to check before the letter of intent.
In April 2026, Chord Music Partners raised $500 million against a catalogue of more than 3,750 compositions and recordings. An independent valuer had put the catalogue at about $830 million, using a discounted cash flow at an 8% discount rate. In a recent discussion among catalogue investors, that 8% got all the attention.
Nobody asked about the other input.
A discounted cash flow valuation has two inputs. One is a forecast of the income the songs will earn. The other is the rate at which that income is discounted back to a value today. This article is about the first, and about a habit the industry has of putting a measurable fact into the second.
The discount rate
The discount rate is where uncertainty goes. The risk of the asset class, the risk of this catalogue, the risk that the forecast is wrong: all of it is expressed as a number of percentage points, and that number is where the argument lands.
It is a powerful lever. On the simplest arithmetic, a perpetual income stream valued at 8% is worth one seventh more at 7%. Applied to the Chord figures, that is roughly $950 million for the same songs, a difference of about $120 million from one percentage point. The arithmetic is ours, not the valuer's; a real model with growth and decay assumptions would move by a different amount. The direction and the order of size are the point.
The market watches the rate for the same reason. When Hipgnosis Songs Fund's board commissioned a second valuation of its portfolio in March 2024, the figures that led every report were the rates and the totals: 8.5% and $2.62 billion in the valuation it had, a midpoint of 9.63% and $1.93 billion in the new one. Two professional firms, two rates, two values for the same songs. The point here is not which was right. It is which input everyone argued about.
At 8%
At 7%
The income base
The income base
The forecast starts from royalty statements. Three years of statements from societies, publishers and distributors; a growth or decay curve fitted to them; the rate applied. The statements are treated as the settled part of the exercise. This is what the songs earn.
It is not. A royalty statement shows what was collected and paid to this owner. It does not show what the songs earned. The difference is income that a use of the song generated and that never reached the owner, because the song was not registered at the society where the use happened, or was registered with the wrong shares, or under a title the society could not match to a payee.
That money is not hypothetical. The societies publish it. Streaming services handed The MLC (The Mechanical Licensing Collective) in the United States about $397 million in royalties they could not match to an owner; by September 2026 The MLC had paid out about $239 million of it and about $159 million was still waiting. PPL (Phonographic Performance Limited), the UK society for performers and recording owners, reported £15.7 million allocated to members but unpaid at the end of 2024, held up by incomplete performer registrations and missing bank details. TrackForge's own published analysis of The MLC's bulk matching data found that 72.5% of 954 million sound recording resources had no matched musical work.
None of this appears on a statement, because a statement is a record of what a society could match to a payee. A song unregistered at a society earns on that society's books and shows nothing on its owner's. So the income base in a valuation is understated for any catalogue with registration gaps, and nobody knows by how much, because nobody looked.
Why a rate premium is the wrong tool for a registration gap
In the discussion mentioned above, the reply to this point was fair: doubts about registrations, splits or collection end up priced in a higher rate rather than in a lower forecast. That is an accurate description of practice. It is also a description of the problem.
A higher discount rate can only lower a value. It is a penalty. But a song never registered at a society is income missing from the base, which means the catalogue is worth more than its statements show, not less. A rate adjustment cannot carry an upside. Whatever the premium is doing, it is not representing the registration gap. It is representing the valuer's unease about it.
The shape is wrong too. A rate premium applies to every pound of forecast cash flow, in every year, for the life of the model. A registration gap is specific: this work, at that society, for these shares. It can be found, it can be fixed, and once fixed it stops. The usual rule in valuation is that asset-specific, verifiable items go in the expected cash flows, and the rate is kept for risks that apply to the whole stream and cannot be diversified away. A registration gap is the first kind of item being treated as the second.
For a catalogue nobody has checked, the doubt is unquantified and lives in the rate by convention, because there is nowhere else to put it. For a catalogue someone has checked, the gap is a fact: a list of works, societies and shares with a number attached. A fact belongs in the forecast. The hinge is whether anyone checks.
The convention has its reasons, and they deserve saying. Song-by-song verification has not been part of a transaction, so the rate was the only tool to hand. A verified gap still needs a forecast of its own: whether the income will be collected, when, and at what cost. And observable trade prices bundle all of this together and are useful whatever the mechanism underneath. None of that argues for leaving the gap in the rate once it can be measured. It argues for measuring it.
What a buyer should check
Registration per society per work
For every work in the schedule, and every society in the territories where it earns, is there a registration, and does it name the interest being sold? A work registered at PRS and absent from ASCAP, BMI and The MLC is three gaps, not one.
Shares that agree across societies
Compare the writer and publisher splits at each society with each other and with the contracts. A 50% share at one society and a 33.33% share at another is not a rounding difference. One of them is paying the wrong person.
Suspense and unclaimed positions
Search the societies' unclaimed and suspense pools for the catalogue's titles, writers and ISRCs. Money there is earned income that is not in the base, and some of it has a deadline: PPL closes a distribution year about six years after its first payment and then stops accepting claims for it.
The recording side, separately
Neighbouring rights at PPL and SoundExchange, and the link from each recording's ISRC to its registered work, are separate systems with separate gaps. A composition registered perfectly earns nothing from a stream whose recording is not linked to it.
What the pack covers, and what it never checks
The standard diligence pack covers chain of title, agreements and encumbrances, the royalty statements and a quality-of-earnings analysis built on them. It takes the registrations for granted. No section of it asks whether each work is registered at each society with the shares the contracts say. That is the one question whose answer changes the income base.
What it means for the valuer
Checked facts in the forecast, doubt in the rate. For a checked catalogue the forecast gains a line: income the statements never showed, with a probability and a timing of collection attached, like any other forecast line. The rate loses the part of its premium that was carrying registration doubt, because the doubt has been resolved into a number. Both inputs become more observable, and the value becomes an argument about evidence rather than about a convention.
It cuts both ways. A check also finds works the seller is registered as owning that the contracts do not support, and shares claimed at a society that another party disputes. Those are facts too, and they lower the base. The point is not that checking raises values. It is that a value built on checked facts can be defended line by line, and a value built on a rate premium can be defended only as a convention.
A doubt goes in the rate. A checked fact goes in the forecast. Checking is what turns one into the other.
Chord Music Partners: Chord Music Partners Prices $500 Million ABS Backed by Diversified Music Catalog, press release, 27 April 2026: $500 million of Series 2026-1 senior notes, backed by royalties from more than 3,750 musical compositions and master recordings, valued at approximately $830 million by an independent third-party valuation agent. KBRA, 16 April 2026: the catalogue was valued at $830.0 million as of 30 September 2025. Asset Securitization Report (American Banker), reporting the rating agency's analysis: a discounted cash flow method with an 8.00% discount rate assumption; about 34% of recent net revenue from publishing and 66% from sound recordings. The $950 million figure at 7% is TrackForge's perpetuity arithmetic on those published numbers, not a figure from the valuer or the rating agency.
Hipgnosis Songs Fund: Music Business Worldwide, 4 March 2024 and Billboard, 4 March 2024, reporting the fund's announcement: Citrin Cooperman valued the portfolio at $2.62 billion as of 30 September 2023 using an 8.5% discount rate; Shot Tower Capital valued it at between $1.80 billion and $2.06 billion as of 1 March 2024, a midpoint of $1.93 billion, using a midpoint discount rate of 9.63%.
The MLC: The Mechanical Licensing Collective, Historical Unmatched Royalties, September 2026 snapshot: $238.72 million distributed of $397.29 million transferred by streaming services.
PPL: Phonographic Performance Limited, 2024 Transparency Report: £15.7 million allocated but unpaid at 31 December 2024 because member accounts were on hold awaiting completed performer registrations or valid bank details; undistributed UK revenue is closed six years after first distribution, after which PPL no longer accepts claims for that year.
TrackForge: How ISRC Registration Gaps Cost Labels Money: of 954 million sound recording resources in The MLC's bulk work-resource matching dataset, 691.7 million (72.5%) had no matched musical work. The due diligence bottleneck page describes what a conventional diligence engagement costs and covers.