Music catalogues have become an established alternative asset class, but most acquirers still run due diligence as if they were buying a company rather than a bundle of rights and registrations. This checklist covers the three layers a catalogue acquisition actually depends on - income verification, chain of title, and the metadata infrastructure that most deals never examine.
What music catalog due diligence actually covers
Music catalog due diligence means verifying three things before money changes hands - that the claimed income is real, that the seller owns what they say they own, and that the metadata infrastructure the income depends on is intact. The first two are standard practice on any acquisition. The third is the layer most acquirers skip, and it is the most expensive one to skip, because it determines whether the income you are buying will actually keep arriving after completion.
Why catalogue acquisitions need specialist diligence
Over the past decade, music catalogues have become an established alternative asset class, bought by dedicated rights funds, private equity firms, family offices and major music companies attracted by long copyright terms and streaming-driven recurring income. Under UK law a musical work is protected for the life of the author plus seventy years, so a catalogue is a genuinely long-duration asset. But it is not a company. There is no management team to warrant the numbers, no audited accounts in the conventional sense, and the income arrives through a chain of collection societies, distributors and licensees that standard financial diligence was never designed to test. The diligence process has to be built around how music royalties actually flow, which is what the rest of this checklist covers.
Why catalogue income statements mislead in both directions
A seller's income summary can overstate true earning power. One-off sync placements, non-recurring settlement payments, income from distribution agreements that are about to expire, and revenue routed through related parties can all inflate a trailing twelve-month figure that will not repeat under new ownership. Less obviously, the same statement can understate earning power. If works were never registered with a performance rights organisation (a PRO - the collective body that licenses public performance and broadcast of music and pays the resulting royalties, such as PRS for Music in the UK), or if recordings carry incomplete identifiers, the royalties those works should be generating never reach the seller's statements at all. That missing income is real, collectable, and invisible in the data room. Due diligence has to test for both errors, because a purchase multiple applied to the wrong income base compounds the mistake across the whole deal.
Chain of title - verifying the master recordings
Master recordings (the copyright in the recorded performance, as opposed to the underlying song) pass through more hands than most buyers expect. Verifying chain of title on the masters means tracing an unbroken line of written assignments from the original recording session to the seller. That includes producer agreements and any points or ownership shares granted to producers, session musician clearances, band member agreements where the act was a group, and any historic label deals under which rights may have reverted - or may not have. It also means checking that what the seller holds is genuine ownership rather than a distribution licence, because a licence expires and an assignment does not. The UK Intellectual Property Office publishes guidance on copyright ownership and duration, and any gap in the documentary chain should be priced or cured before exchange, not discovered after it.
Chain of title - verifying the publishing
Publishing rights (the copyright in the song itself - the composition and lyrics) must be verified separately from the masters, because they are legally distinct assets that are frequently owned by different parties. The core checks are that co-writer splits on every work total exactly one hundred percent, that written agreements exist for every split claimed, that any publishing or administration deals covering the works have either expired or will transfer cleanly, and that reversion clauses in old agreements have not quietly returned rights to writers. Split disputes are the single most common defect found in publishing diligence, and a work with contested splits will have its royalties withheld by societies until the dispute is resolved.
The metadata audit layer most deals skip
Every royalty stream in recorded music depends on identifiers. An ISRC (International Standard Recording Code) identifies a specific recording, and an ISWC (International Standard Musical Work Code) identifies the underlying composition. Collection societies - PRS for Music and PPL in the UK, and The MLC for streaming mechanicals in the United States - use these codes and the registrations behind them to match income to owners. A metadata audit checks whether every work and recording in the catalogue carries correct identifiers and complete registrations across the societies in every territory where the music earns. Where registrations are missing or wrong, income does not disappear - it accumulates in society suspense accounts as unmatched royalties, often called black box income. For an acquirer, that suspense income is hidden upside sitting outside the purchase price, and no standard financial diligence process will ever find it.
The music catalogue due diligence checklist
A complete diligence process on a music catalogue works through six areas in order:
- Income verification - reconcile the seller's income summary against source statements from the societies and distributors themselves, not against the seller's own spreadsheets. Every material line item should trace to a PRS, PPL, MLC, distributor or sync licensee statement.
- Registration audit - confirm that every work and recording is registered with the relevant societies in every material territory, with correct ISRCs, ISWCs, and splits, and quantify what is missing.
- Distribution agreement review - identify every active distribution deal, its term, its termination rights, and whether it transfers, terminates or must be renegotiated on a change of ownership.
- Sync licence inventory - list every synchronisation licence granted, its term, territory, exclusivity and fee structure, and check whether any grant conflicts with the rights being sold.
- Dispute and claim history - request details of every past or pending split dispute, ownership claim, takedown, or society counter-claim affecting the catalogue, because disputes freeze income.
- Territory coverage - map where the catalogue actually earns against where it is registered, because a catalogue streaming globally but registered only in its home territory is leaking royalties in every other market.
Red flags that should slow a deal down
Certain findings justify pausing a transaction until they are explained or priced:
- Income concentrated in line items that cannot be traced to a society or distributor source statement.
- Works registered with the publisher name listed as Copyright Control - a placeholder societies use when no publisher has claimed the work, which means the publishing income is not being collected by anyone.
- A catalogue that has never been independently audited, particularly where it has passed through multiple owners.
- Splits that do not total one hundred percent, or splits the seller cannot evidence in writing.
- A seller unable or unwilling to grant access to their society and distributor accounts for verification.
Why clean metadata increases catalogue value
Catalogue prices are set as a multiple of income that a buyer can verify and expect to keep collecting. The mechanism is direct. Every unregistered work and every recording with broken identifiers represents royalties that are being earned but not collected - money accruing in society suspense accounts or simply never allocated. Cleaning the metadata converts that leakage into documented, recurring, collectable income, which raises the verified base the multiple is applied to. It also removes the discount a careful buyer applies for uncertainty, since a fully registered catalogue with evidenced splits carries less risk of post-completion disputes and income interruptions. The size of the effect varies with the state of each catalogue, so treat any claimed uplift figure with scepticism - but the direction is not in doubt.
Post-acquisition cleanup as value creation
For catalogues bought with known metadata defects, remediation is the first value-creation lever available to the new owner. The work in the first six to twelve months typically includes registering unregistered works with the relevant societies, correcting identifiers and splits, filing claims against unmatched income held in suspense, consolidating fragmented distribution into a single accountable agreement, and establishing routine statement reconciliation so leakage does not recur. None of this requires the music to perform any better. It simply makes the catalogue collect the income it was already earning, which improves yield on the price paid and strengthens the verified income base for any future sale.
When to commission an independent catalogue audit
An independent audit belongs before heads of terms are agreed, or at the latest during the exclusivity period - not after completion, when every defect found becomes the buyer's problem at the buyer's cost. The audit should be run by a specialist with working access to society and distributor systems, not inferred from the seller's own reporting, and it should produce a work-by-work register of ownership, registrations, identifiers and income sources that the deal team can price against. Sellers benefit from the same exercise in reverse, since a catalogue that arrives at market pre-audited commands more confident bids.
How to start
If you are acquiring a music catalogue, advising on a transaction, or preparing a catalogue for sale, the first step is a structured assessment of what the catalogue contains, where it is registered, and where income is leaking. Code Group Music audits catalogues for acquirers, investors and rights holders, remediates metadata and registrations, and manages ongoing collection on a commission basis, so there are no upfront fees and the incentive is aligned with income actually recovered. Begin at codegroupmusic.co.uk/#catalog-assessment.
Frequently Asked Questions
What is checked in music catalog due diligence?
Three layers. Income verification reconciles the seller's claimed earnings against source statements from collection societies and distributors. Chain of title confirms unbroken written ownership of both the master recordings and the publishing, checked separately. The metadata audit confirms every work and recording is correctly registered with the right identifiers across all earning territories, and quantifies any unmatched royalties sitting uncollected in society suspense accounts.
How long does music catalogue due diligence take?
Typically four to twelve weeks, depending on catalogue size, the quality of the seller's records, and how many territories and societies are involved. Income and contract review moves quickly when the seller grants direct access to society and distributor accounts. The registration audit is usually the longest phase, because it checks each work and recording individually across multiple databases.
What is a music catalogue audit?
A music catalogue audit is a work-by-work review of a catalogue's ownership documentation, society registrations, identifiers such as ISRCs and ISWCs, and income sources. Its purpose is to establish what the catalogue actually contains, whether royalties are flowing correctly to the rights holder, and where income is being lost to missing or incorrect registrations. It is the evidential core of any acquisition diligence process.
Why do acquired catalogues underperform projections?
The most common causes are non-recurring income treated as recurring in the purchase model, distribution agreements that lapsed or changed terms on the change of ownership, split disputes freezing society payments, and metadata defects that were never remediated, so income keeps leaking into unmatched accounts. Almost all of these are detectable before completion with a proper registration audit and source-statement reconciliation.
What does Copyright Control mean on a royalty statement?
Copyright Control is a placeholder societies and licensees use when no publisher has registered a claim to a musical work. It signals that the publishing share of that work's income is not being collected by anyone and is accumulating unpaid. In due diligence, works marked Copyright Control represent both a defect in the seller's administration and a recoverable income opportunity for the buyer.
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