Many commentators have addressed the apparent decay of value in the music industry, but there is increasing contrarian evidence that musical IP is actually more resilient than other parts of the economy—particularly since COVID-19.

One of the main drivers of dependable value in a music catalog has been the recent profitability of streaming, which has triggered expectations of higher cash-flow growth, according to this new academic report. Music royalties in this new model are recurring and more predictable (similar to what a business valuation expert might expect from asset classes such as real estate). Shot Tower Capital’s managing partner David Dunn notes that music industry revenues also have a low correlation to economic activity (they note that Justin Bieber just sold his music catalog rights at a high multiple). A 2021 report by Shot Tower Capital explains that “music assets have generally experienced non-correlated growth throughout various market cycles.” Moreover, consumers continue to spend on music during recessions. In times of economic instability, music provides stable cash flow—though rising interest rates may be causing a “general cooling-off” of the catalog market, along with many other parts of the UK economy.

For some insights into the valuation of a music catalog, Dunn discussed the valuation of Michael Jackson’s music catalog during a 2021 BVR webinar.