Music Royalties Look Like Stocks Over Five Years

A song catalog is no longer just nostalgia—it can also behave like an investment. But music royalty markets are messy: deals are rare, prices are hard to observe, and transaction costs are high. This paper tackles that problem by fitting three discounted cashflow models to 1,295 transactions on the Royalty Exchange platform, then using the best model to backtest returns after transaction costs. The headline result is striking: Life of Rights music assets had risk and return characteristics comparable to stocks in the S&P 500 when held for five years. The authors also say music assets and stocks are likely uncorrelated, which means these assets could be viewed alongside a more traditional stock and bond portfolio. In other words, the study does not just ask what a song catalog is worth today—it asks how it might have performed as an investment over time, using real transaction data rather than guesswork.

A song catalog can now sit on a balance sheet. That is the new twist in music rights. The market is messy. Trades are rare. Fees are high. Price tags are hard to see. That makes buying a song catalog feel like guesswork. This study tackles that problem with real trades from Royalty Exchange. It uses 1,295 transactions. Then it asks a simple question. If you bought these rights and held them, how would they have done? That matters for anyone who thinks about stocks and bonds. Music royalties pay cash over time. So they can act like an income stream, not just nostalgia. Some catalogs may also share risk with other assets. That makes them easier to compare in a portfolio. The study tries to put a price on that idea.

Why a song catalog is hard to price

The five-year result does the heavy lifting. Life of Rights, or LOR, means the royalty lasts for the full life of the song right. Those assets had risk and return traits that matched S&P500 stocks closely. That comparison held after transaction costs. The study also backtested one-year and five-year holding periods. The longer hold gave the clearer picture. That fits the way royalties work. Cash comes in slowly. Value builds over time. The study also says music and stocks may not move together. If that is true, a song catalog could play a new role in a mix of stocks and bonds. It would not replace stocks. It would sit beside them. That is the key surprise. An asset tied to songs can look stock-like over five years. Yet its cash comes from a very different source. That difference may matter more than the asset's name. It may help spread risk across a mix of holdings.

How the cashflow model rebuilds value

Discounted cashflow analysis turns future payouts into today's price. It asks what a stream of royalty checks is worth now. The study fit three simple versions of that idea. It used 1,295 Royalty Exchange transactions to tune them. That matters because the market is thin. Thin means trades are rare. Close matches are hard to find. With a fitted model, past song revenue can stand in for a price history. Backtest means run the model on past trades. The same setup then lets the study backtest returns for one year and five years. It also lets the math include transaction costs. Those costs are part of the real deal.

What the numbers mean for investors

That result gives music buyers a new yardstick. They can judge a catalog against stocks, not just against similar songs. The model also helps with a hard market. Deals are rare. Information is uneven. Fees bite into gains. A fitted cashflow model can turn scattered revenue into a return guess. That does not make every catalog a winner. It does make the asset easier to compare. For people building a mix of stocks and bonds, that is the real use. Music rights stop being a black box. They become something you can place on the same table as other assets.

What should be tested next

The surprise is not that songs pay. It is that five-year LOR returns can look stock-like. One clear next test is other Royalty Exchange trades. The same model should face more deals from the same venue. If the pattern holds, buyers get a sharper price lens. If it breaks, the stock-like result may sit inside a narrow slice of the market. Either way, the study gives music rights a real return story. That is a big shift for a market built on sparse trades. It turns a song catalog from a hunch into something testable.