Music catalog due diligence is what determines whether the data and agreements behind a catalog can actually support a valuation. Before a decay curve can be modeled or a DCF can be built, the underlying inputs need to hold up. This checklist covers what to verify across four areas: agreements, statement coverage, valuation data, and rights structure. None of them can be skipped.
The baseline article covers how to process raw statements into a clean earnings figure. This checklist is the operational companion: what to look for and what the risks are if something is missing.
Agreements and Chain of Title
Chain of title. Verify that the seller has documented, unbroken ownership of the rights being sold. For publishing: trace from the original songwriter assignment through subsequent transfers. For masters: confirm the recording agreement grants the seller the rights they claim. Gaps here are deal risk that data processing cannot fix.
Distribution and administration agreements. Identify all active agreements. These determine what income flows post-closing, which entities collect on the catalog's behalf, and whether any agreements are approaching reversion or termination. An agreement that reverts in three years limits what you can project.
Reversion and termination clauses. Check for dates or triggers within the DCF projection horizon. This includes 35-year termination rights under US copyright law.
Royalty Statement Coverage
Distributor completeness. Compare all active distribution relationships (from the agreements) against the statement feeds in the data room. Any distributor in the agreements but missing from the data is a coverage gap that understates the baseline.
History depth. Three years minimum for trend and decay analysis. Five to seven years is significantly better. Short history means the decay curve cannot be reliably calibrated.
Period continuity. Identify gaps within each distributor's statement history. A single missing quarter may be a filing delay. Multiple consecutive missing periods require explanation.
Valuation Data Quality Checks
These checks determine whether the statement data can support the analytical work that the DCF and Dollar Age calculations require.
Track Resolution
Each earnings row needs to be matched to a canonical track record with a confirmed ISRC, release date, and title. Unresolved rows are an active source of error in every downstream calculation. What to look for:
-
ISRC presence rate by earnings value (not just row count). A high count-level rate with a low value-level rate means the unresolved rows are disproportionately high earners, which is the more dangerous scenario.
-
Resolution rate. An ISRC being present does not mean it is correct. ISRCs can be mis-assigned, duplicated across works, or inconsistent across distributors. What proportion resolves to a confirmed canonical record?
-
Release date coverage. Dollar Age and decay curve positioning require confirmed release dates. Tracks with earnings but no release date should be quantified by their share of LTM.
Sales Type Classification
Every earnings row needs to be attributed to a normalized income category. Raw statements use distributor-specific labels ("digital audio," "on-demand streaming," "DPD mechanical") that are inconsistent across feeds. What to look for:
-
Label inventory. A catalog with multiple distributors typically has 100 to 300 distinct sales type strings. All must be mapped to a standard taxonomy (streaming, synch, performance, mechanical, radio, physical, downloads, live) before any sales-type-level analysis is reliable.
-
Unmapped earnings. What share of LTM sits in an unclassified "other" bucket? A large unmapped portion means concentration analysis and sales-type-level decay modeling are unreliable.
Currency Handling
Catalogs with international earnings receive payments in multiple currencies. If not handled correctly, currency movements become indistinguishable from real earnings changes. What to look for:
-
Currency identification. Is the currency on each statement confirmed or assumed? A UK distributor might pay in GBP or USD depending on the agreement. Getting this wrong distorts every figure.
-
Conversion methodology. Were conversions applied using period-appropriate exchange rates, or was the current spot rate applied retrospectively? Retrospective conversion is a common and significant error.
-
Original currency retention. If the original payment currency is not retained alongside the converted figure, period-appropriate reconversion becomes impossible.
Rights Structure
The focus here is not percentages on a scorecard. It is answering three questions: Are you getting the rights you need to do what you plan to do? Can you operate the way you intend? And are you taking on obligations to pay others?
What rights are you acquiring? Confirm exactly what is being transferred per work: full ownership, co-publishing share, NPS only, masters only, publishing only, or both. Ensure the earnings in the data room correspond to the rights being purchased, not to a broader set.
Can you execute your strategy? If you plan to be an active buyer, verify that the rights you are acquiring allow it. Can you switch distributors? Approve sync placements? Re-register with new administrators? Some agreements restrict these actions. If you are buying full masters, check whether artists have approval rights over certain uses. If you are buying full publishing, confirm whether the writer share flows through you or goes directly to the songwriter via their PRO.
What obligations come with the rights? Producer royalty points, performer shares, SoundExchange statutory splits, administration fees payable to third parties, and any other ongoing payment obligations reduce what you actually net. These must be identified before close and deducted from the earnings baseline before it enters the DCF.
Administration vs. ownership. Administered income (earned as administrator of third-party rights) is not owned and will cease when the administration term ends. It must not be included in the ownership earnings base.
Copyright term. For the highest-earning works, confirm remaining copyright in key territories. Works approaching expiry need explicit terminal date modeling, not a perpetuity assumption.
When Due Diligence Finds Gaps
Gaps do not automatically kill a deal. Minor ones, a missing quarter from a small distributor, a handful of unresolved ISRCs, can be documented, adjusted for, and priced in. Material gaps are different. A missing major distributor, unresolved chain of title, or master and composition income that have been conflated: these require remediation before the valuation is anything more than indicative. Proceeding past them without fixing them means the price is not grounded in the actual asset.
The state of the data room is also information. A seller who has maintained clean, complete statements across multiple distributors over several years is running the catalog actively. One who cannot produce three years of consistent history probably is not.
Frequently Asked Questions
What does music catalog due diligence involve?
Music catalog due diligence covers four areas: agreements and chain of title (confirming the seller owns what they are selling), royalty statement coverage (verifying that the statement history is complete and consistent enough to support a valuation), valuation data quality (checking that track resolution, sales type classification, and currency handling are reliable), and rights structure (understanding exactly what you are acquiring, what it lets you do, and what obligations it carries). All four need to be assessed before any modeling work is meaningful.
What is chain of title in music rights?
Chain of title is the documented history of ownership for a copyright, showing every transfer from the original creator to the current holder. For publishing rights, it traces from the songwriter’s original assignment through any subsequent sales or transfers. For master recordings, it confirms that the recording agreement grants the seller the rights they are claiming. A gap in chain of title, such as a missing assignment, an undocumented transfer, or a disputed ownership claim, is legal risk that cannot be resolved by cleaning the data. It needs to be addressed before close.
What is ISRC resolution and why does it matter for catalog valuation?
ISRC (International Standard Recording Code) resolution is the process of matching each earnings row in a royalty statement to a confirmed canonical track record with a verified ISRC, release date, and title. It matters because Dollar Age calculation and decay curve modeling both depend on confirmed release dates; without them, neither can be reliably run. An ISRC being present in a statement does not mean it is correct: ISRCs can be mis-assigned, duplicated across works, or inconsistent across distributors. The threshold for reliable valuation work is above 90% resolution by earnings weight (not just row count), because unresolved high-earning tracks distort the model more than unresolved low earners.
What is the minimum royalty statement history needed for music catalog valuation?
Three years is the minimum needed for trend and decay curve analysis. With only one or two years of data, you cannot distinguish a catalog in stable tail from one still in active decline. Five to seven years is considerably better: it gives enough data to calibrate a decay curve reliably, identify unusual income events (a major sync placement, a viral moment), and assess whether the earnings trend is genuinely flat or masking a slow decline. For catalogs with Dollar Age below 5, longer history is especially important because the decay rate is still changing.