Copyrights as Assets

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  • #25231
    John Swanson
    Guest

    Are there any general accounting rules on what value song copyrights can be claimed as an asset on a balance sheet?

    #25232
    Art Munson
    Keymaster

    I would imagine it would be based on how much income has been generated in the past. Maybe 4-5x gross over the last 5 years? Just guessing here.

    #25235
    MichaelL
    Participant

    That’s a very good, but tricky question. If you’re hoping to convince a banker to lend you money with your copyrights as some sort of equity, you’re going to have a hard time.

    I would imagine it would be based on how much income has been generated in the past. Maybe 4-5x gross over the last 5 years? Just guessing here.

    There are companies that do business evaluations. However, it would be very hard to place a value on production music because much of it has a self life and may go through a bell curve sort of earning cycle.

    On the other hand, song catalogs of well-known artist’s pop tunes, even lesser artists, can have great value. I know of one catalog from an artist who had some success in the 50’s and 60’s that sold for seven figures.

    #25236
    John Swanson
    Guest

    Thanks for the feedback. I used the average net profit the copyrighted songs have yielded over the last three years with a 5x multiplier. Since a copyright lasts for life + 70 years I feel this is a very conservative estimate, even given the uncertainty of the market. FWIW this is just for a home mortgage refi and my main income comes from outside the music business.

    #25237
    MichaelL
    Participant

    FWIW this is just for a home mortgage refi and my main income comes from outside the music business.

    Let us know if the underwriters accept your copyrights as an asset.

    Best of luck!

    #25238
    Art Munson
    Keymaster

    There are companies that do business evaluations. However, it would be very hard to place a value on production music because much of it has a self life and may go through a bell curve sort of earning cycle.

    Ah, really good point Michael.

    #25250
    LAwriter
    Participant

    Music has value. IMO, it’s got a pretty long shelf life. Certainly more than 5 years. I’ve got music making me money from films and shows I did over 20 years ago. Those things hit syndication or end up playing foreign forever….. Then again, I don’t tend to write trendy EDM that’s passe in 6 months – I balance things out over music that (I hope anyway) stands the test of time.

    So – to the OPs question – I think a valuation has merit – I just don’t think my banker will value it as much as it will actually earn…..

    John – let us know how it works out for you. I’m intestred.

    LAw

    #25252
    MichaelL
    Participant

    Music has value. IMO, it’s got a pretty long shelf life. Certainly more than 5 years. I’ve got music making me money from films and shows I did over 20 years ago.

    Yes, it does. I have music that’s been in syndication for 16 years that is still making money, although a lot less now thanit used to. A few library tracks from back then still make a few dollars now and then. My CD’s from the mid 90’s still make a few dollars through streaming and downloads.

    Unfortunately, not every show will go into syndication nor will every piece of music stand the test of time.

    But, you hit the nail on the head here:

    So – to the OPs question – I think a valuation has merit – I just don’t think my banker will value it as much as it will actually earn…..

    Bankers and bean counters are very conservative when it comes to valuation or counting royalties as income. I handed a banker ten years worth of consistent royalty statments and was told they couldn’t use much of it. They wanted a ‘pay stub.”

    #25287
    Art Munson
    Keymaster

    Just ran across this today and while they refer to hit artists it still would follow valuing library music.

    Royalties: The Alternative Assets of the Music Industry

    http://www.finalternatives.com/node/33395

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