The 5 Music Royalty Questions That Reveal Everything

71 likes, 50+ DMs, and one pattern: even sophisticated investors are missing the real opportunity in music catalogs

We got a lot of email about the piece from this morning about Sam Hendel and the near $3B of music licensing and royalties he manages. People really liked it. It received more “likes” than 90% of the stuff we’ve posted.

And they wanted to know more.

They wanted to know how to THINK about music royalties, and how to evaluate that type of asset, as qualified purchasers.

So, here are the 3-4 biggest questions that explain what family offices and institutional investors have trouble understanding.

1. "How do you value a music catalog?"

2. "What happens when the artist dies?"

3. "How do you compete with Universal/Sony?"

4. "What if streaming rates go down or Spotify changes its model?"

So, we’re gonna unpack it.

Also, while we’re here, I have a small favor to ask. I was chatting with former Yellowcard drummer Longineau Parsons last Friday night and he’s still dealing with some serious and urgent health problems. If you could take a moment to contribute $25 to his fundraiser, I’d really appreciate it. He received a co-write credit on many of Yellowcard’s best songs like “Ocean Avenue,” “Only One,” and “Lights and Sounds”

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Now, for the questions!

1. "How do you value a music catalog?" -

   Why this reveals confusion: Family offices are looking for a simple multiple like EBITDA, but music catalogs are valued on decay curves - that’s the predictable pattern of how songs earn less money over time.

   You gotta think of it like this:

   • Year 1 after release (2026) : A hit song might earn $1M

   • Year 5 (2030) : Maybe $400k

   • Year 10 (2035) : Perhaps $200k

   • Year 20 (2045) : Stabilizes around $100k annually

   The “art” is predicting when that decay curve flattens out. Neil Diamond’s “Sweet Caroline” has been earning steady money for 50 years. Some crappy TikTok hits decay to zero in like 18 months.

   Smart buyers model these curves, then bet on catalogs where the decay has already flattened but cultural relevance remains. That's why The Weeknd's catalog is really valuable - we already know “Blinding Lights” has legs.

2. "What happens when the artist dies?"

   Why this reveals confusion: When family offices ask this, they're applying mortality risk from life insurance models, missing a tragic reality of the music industry.

   The Uncomfortable Truth: First, let's be clear: every artist death is a tragedy. The music industry loses far too many talents to mental health struggles, addiction, and lack of support systems. This is why forward-thinking funds are increasingly funding artist wellness programs and mental health resources.

   That said, the financial reality is that artist deaths often trigger significant catalog value increases:

   • Prince (2016): Catalog generated ~$25M annually before his passing. Post-death: $300M in 2016. We lost a genius.

   • Mac Miller (2018): Streaming increased 970% after his overdose. He was 26 years old.

   • Juice WRLD (2019): Died at 21. His posthumous releases outperformed lifetime sales by 3x.

   Why This Happens (And Why It's Troubling):

   • Cultural Crystallization: The artist's legacy becomes fixed, but at the ultimate price.

   • Mythology Building: Death transforms artists into legends, but we'd rather have them alive.

   • Streaming Spikes: Fans mourn through music, creating massive consumption surges (investors note this)

   The Ethical Approach: Responsible catalog buyers should:

   • Invest in artist mental health and addiction programs

   • Support living artists with fair deals

   • Create sustainable career paths that don't burn out talent

   • Fund the infrastructure that keeps artists healthy and creating

   The real question isn't "what happens when they die?" but "how do we keep them alive and thriving?"

3. "How do you compete with Universal/Sony?"

   Why this reveals confusion: Family offices think this is about competing for new artists, when it's actually about buying what the majors have already squeezed dry.

   The Multifamily Analogy That Explains Everything: Asking this question is like asking a multifamily REIT: "How do you compete with Toll Brothers?"

   They don't. They're playing different games:

   • Toll Brothers (Major Labels): Build from scratch, take development risk, need 25%+ returns

   • REITs (Catalog Buyers): Buy stabilized properties with predictable income, happy with 8-12% returns

   How It Actually Works:

   Major Labels:

   • Hunt for unknown artists (raw land)

   • Invest millions in development

   • Extract maximum value in years 1-5

   • Move on to next project

   Catalog Buyers:

   • Wait for songs to age 5-15 years

   • Buy after decay curve flattens

   • Collect predictable streaming checks

   • Hold for decades

   Real Example: When Hipgnosis bought The Weeknd's catalog, they weren't competing with Universal. They were buying Universal's "stabilized property" - songs with proven cash flows that Universal had already maximized.

   Universal needs the next Billie Eilish. Hipgnosis needs the next utility payment.

   They’re different buyers. Different risk profiles. Same ecosystem.

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   4. "What if streaming rates go down or Spotify or Apple Music changes their model?"

   Why this reveals confusion: Family offices often focus on platform risk when they should focus on consumption permanence.

   Consumption permanence means betting on human behavior, not technology platforms.

   Ask yourself: Will people still play 'Happy Birthday' in 2074? Of course.

   Will they play it on Spotify? Who knows - but who cares?

   Music existed before Spotify and will exist after.

   The Test:

   • High Consumption Permanence: Wedding songs, holiday music, 'Bohemian Rhapsody,' anything parents sing to their kids

   • Low Consumption Permanence: Most TikTok hits, songs tied to specific platforms or memes

   • The Gold Standard: Songs that survived vinyl → cassette → CD → streaming are likely to survive whatever comes next

   The History Lesson:

   • 1920s: "What if radio kills sheet music?" (Music revenues grew 10x)

   • 1980s: "What if CDs kill vinyl?" (Industry hit peak revenues)

   • 2000s: "What if piracy kills everything?" (Streaming saved the industry)

   • Today: "What if TikTok kills Spotify?" (Who cares - people still need music)

   Platform Agnostic Reality:

   • Beatles songs earned through vinyl → 8-tracks → cassettes → CDs → iTunes → Spotify

   • Each platform shift created temporary disruption but permanent growth

   • Consumption is the constant; distribution is the variable

   The Real Questions They Should Ask:

   1. "What genres have multi-generational staying power?"

   2. "Which catalogs work across all formats?" (sync, streaming, covers, samples)

   3. "How does cultural relevance persist across platforms?"

   The Sophisticated Take: Smart buyers model platform risk like this:

   • Streaming: 40% of revenue

   • Sync (TV/film/ads): 25%

   • Radio: 15%

   • Physical/Vinyl: 10%

   • Emerging formats (gaming/VR/AI): 10%

   

   If streaming dies tomorrow, you still have 60% of revenues. But streaming won't die - it'll evolve, and "Bohemian Rhapsody" will still get played. Party on

   -ajm