A melody, a lyric, a rhythm lasting only minutes — yet capable of generating cash flows for decades. In 1985, Michael Jackson acquired the ATV catalogue, gaining control over the Beatles’ songs. In 2020, Bob Dylan sold his catalogue in a transaction reportedly exceeding $300 million. And in a move that fundamentally challenged industry norms, Taylor Swift chose not to sell — but to re-record her own work to regain control over it.

These are not isolated events. They are manifestations of a deeper transformation:

Music catalogues have evolved from artistic by-products into institutional-grade financial assets.

This shift forces a more fundamental question than is typically asked:

Who truly owns value in music — and how is that value governed over time?

To answer that, we must go back to where it began.

Tin Pan Alley — The Separation of Creation and Ownership

Long before streaming platforms and private equity funds, the foundations of the music industry were laid in Tin Pan Alley, New York, at the turn of the 20th century.

Here, music became industrialized.

Songwriters composed music not primarily for artistic expression, but for commercial distribution. Publishers controlled printing, promotion, and ultimately, the economic rights. Performers often had little to no ownership in the underlying intellectual property.

From a governance perspective, this structure introduced a defining characteristic that persists today:

The separation of creative contribution, economic ownership, and control.

This separation was not accidental. It was efficient. It allowed specialization, scalability, and capital deployment. But it also created asymmetry:

creators generated value
publishers captured value
performers monetized visibility

The implications of this model echo through every subsequent phase of the industry.

Even today, the platform economy mirrors this structure. Streaming services distribute music, labels aggregate rights, and artists navigate increasingly complex contractual frameworks. The underlying governance tension — between those who create and those who control — remains unchanged.

From Elvis to Jackson — Ownership as Strategic Power

If Tin Pan Alley established the structure, the late 20th century revealed its strategic implications.

Elvis Presley, one of the most commercially successful artists of all time, famously sold significant rights to his music early in his career. At the time, this decision provided immediate liquidity. In hindsight, it limited long-term participation in the economic value of his catalogue.

The lesson is straightforward:

Immediate monetization often comes at the expense of long-term control.

Michael Jackson understood this differently.

His acquisition of ATV Music Publishing in 1985 was not merely a financial investment — it was a governance move. By acquiring the catalogue, he gained control over licensing, distribution, and the future monetization of one of the most valuable bodies of work in music history.

This is the point where music clearly transitions into a recognizable financial asset class.

A music catalogue behaves economically like a portfolio of long-duration cash flow streams:

royalties from streaming
licensing income (films, commercials)
synchronization rights
geographic exploitation

From a financial perspective, the comparison is not with creative output, but with infrastructure assets or real estate portfolios — assets that generate recurring income over time.

And with that transition comes a shift in governance:

Control over intellectual property becomes synonymous with control over future cash flows.

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Accounting Reality — The Limits of IFRS

At this point, the financial logic is clear. Yet financial reporting tells a different story.

Under IAS 38 (Intangible Assets), the recognition of music catalogues depends on how they are acquired:

Acquired catalogues are recognized on the balance sheet at cost
Internally generated catalogues are typically expensed and not capitalized

This creates a structural inconsistency:

Two identical catalogues may have entirely different balance sheet values — or none at all.

The issue is not merely technical. It is conceptual.

Financial statements capture:

historical cost
identifiable transactions

But they struggle to capture:

internally generated value
cultural relevance
long-term earning potential

Subsequent measurement under IAS 36 (Impairment of Assets) introduces further complexity. The value of a catalogue depends on assumptions about:

future streaming volumes
licensing demand
consumer preferences
technological shifts

These inputs are inherently volatile and difficult to predict.

The result is a persistent gap:

The balance sheet reflects a partial, and often understated, view of economic reality.

For investors and governance bodies, this creates a critical challenge. Decisions must be made on assets that are either underreported or not reported at all.

Read more on IAS 36: IAS 36 – Impairment of Assets: Significant Judgements and Estimates that Define Value.

The Financialization of Music — Yield in Disguise

The disconnect between accounting and economic reality did not go unnoticed.

In the past decade, institutional investors have entered the music industry at scale. Funds such as Hipgnosis Songs Fund, alongside private equity firms like Blackstone and KKR, have allocated significant capital to acquiring music catalogues.

The rationale is compelling:

predictable, long-term cash flows
low correlation with traditional asset classes
resilience across economic cycles

In a low-interest-rate environment, music catalogues offered something rare:

yield, backed by cultural assets rather than physical infrastructure.

From a valuation perspective, these assets are often modeled using discounted cash flow (DCF) techniques:

projected royalties
growth assumptions (streaming expansion)
discount rates reflecting risk

Yet this financialization introduces new governance questions:

Who manages the catalogue post-acquisition?
How are licensing decisions made?
What is the balance between short-term yield and long-term cultural value?

The asset may resemble a bond — but it behaves like something far more complex.

Governance Begins Where Accounting Ends

At this stage, the contours of the problem become visible.

Accounting provides a framework for recognition and measurement. It is necessary, but not sufficient. It does not answer the most important questions:

Who controls the asset?
Who benefits from its cash flows?
How are decisions made over time?
What happens when interests diverge?

These are governance questions.

And it is precisely in these questions that the most instructive cases emerge.

Consider three contrasting trajectories:

Artists who monetize early and relinquish control
Artists who retain ownership and build long-term value
Artists who attempt to reclaim control after losing it

Each path reflects a different governance model — and produces a different type of value.

But the most revealing cases are not those of individual success or failure. They are those where governance structures themselves are tested under pressure.

Preview — Governance Under Stress

In the next part, we move from structure to conflict.

We examine:

Queen, where collective governance aligned incentives
The Police, where asymmetry in authorship led to fragmentation
Hall & Oates, where long-term joint ownership broke down at the point of exit
Taylor Swift, where control was reclaimed through strategic re-engineering

Together, these cases demonstrate a critical insight:

Value in music is not only created in composition — it is shaped, constrained, and sometimes destroyed by governance.

Part 2 — Governance Under Pressure: Incentives, Conflict and Control

If Part 1 established that music catalogues are financial assets, Part 2 confronts the harder reality:

Value is not determined by the asset itself, but by the governance structure surrounding it.

Music history provides unusually clear case studies — not because the industry is unique, but because the underlying tensions are visible, personal, and often public.

Queen — Collective Governance as a Deliberate Strategy

At the outset, Queen operated under a conventional model.

Each band member — Freddie Mercury, Brian May, Roger Taylor, and John Deacon — wrote songs individually. Royalties were allocated per composition. This is economically rational: reward follows contribution.

But it created internal friction.

“Bohemian Rhapsody” (Mercury) generated disproportionate income
other members contributed less commercially successful songs
incentives began to diverge

At a certain point, Queen made a deliberate governance decision:

All songs would be credited equally to “Queen”.

This was not an artistic choice. It was a structural one.

Governance implications:

Incentive alignment → all members benefit from collective success
Risk sharing → failures are absorbed jointly
Strategic cohesion → reduced internal competition

But the trade-off is equally clear:

loss of direct link between contribution and reward
potential for free-rider behavior

This mirrors governance models in other sectors:

law firms (profit pooling)
partnerships
startup equity structures

Queen chose system stability over individual optimization.

And in doing so, they extended the life — and value — of the enterprise.

The Police — When Incentives Diverge

The Police illustrates the opposite dynamic.

Sting was the dominant songwriter. His compositions drove the majority of the band’s commercial success. Royalties followed that structure.

From a strict economic perspective, this is efficient:

reward aligns with contribution

But governance is not only about efficiency. It is about perceived fairness and sustainability.

The consequences:

increasing income asymmetry
growing internal tension
breakdown of collaboration

Eventually, the band fragmented.

Governance failure:

Economic allocation was rational, but relational governance failed.

This is a familiar pattern in corporate environments:

key revenue generators (“rainmakers”) dominate compensation
supporting contributors feel undervalued
organizational cohesion deteriorates

The Police demonstrates that:

A governance model can be economically correct and still be strategically destructive.

Hall & Oates — The Governance of Exit

If Queen represents alignment and The Police represents imbalance, Hall & Oates introduces a different dimension:

Governance breakdown at the point of exit.

For decades, Hall & Oates functioned as a successful partnership:

shared brand
joint commercial success
long-term collaboration

Yet the conflict did not emerge during creation or exploitation — but when one party sought to monetize their stake.

Daryl Hall attempted to sell his interest in the joint entity. John Oates opposed the transaction. Legal proceedings followed.

This is not a creative dispute. It is a structural one.

Governance issue:

Who has the right to sell?
Under what conditions?
At what valuation?

These questions are not unique to music. They are central to:

joint ventures
shareholder agreements
private companies with multiple owners

The likely underlying weakness:

insufficiently defined exit mechanisms
lack of clarity on transferability of ownership
absence of agreed valuation frameworks

The key lesson:

Governance frameworks often optimize for success, but neglect termination.

And that omission becomes critical precisely when value is highest.

Taylor Swift — Reclaiming Control Through Strategy

Taylor Swift represents a fundamentally different response to governance constraints.

Her master recordings were sold without her approval. Legally, this was permissible under existing contracts. Economically, it transferred control over her work.

Rather than accept this outcome, she executed a strategy that is rare in both music and corporate settings:

She recreated the asset.

By re-recording her albums, Swift effectively generated substitute assets:

functionally equivalent songs
controlled masters
renewed commercial lifecycle

This is not merely a legal workaround. It is a governance maneuver.

Strategic implications:

restores control over licensing
shifts bargaining power
leverages brand loyalty

Governance insight:

When control cannot be acquired, it can sometimes be rebuilt.

This resembles:

corporate carve-outs
spin-offs
parallel asset creation strategies

But it is unusually visible — and unusually effective.

Four Governance Models of Value Creation

These cases are not anecdotes. They represent distinct governance archetypes.

1. Individual Dominance Model (e.g. Sting)

value flows to primary creator
high economic efficiency
high conflict risk

2. Collective Governance Model (Queen)

shared ownership
aligned incentives
potential dilution of individual contribution

3. Joint Ownership with Weak Exit (Hall & Oates)

stable during growth
fragile at monetization
prone to legal conflict

4. Control Reclamation Model (Taylor Swift)

initial loss of control
strategic reconstruction
long-term value recovery

Each model produces value — but in different forms.

Value Is Not One-Dimensional

A critical mistake in many analyses is to treat “value” as a single metric.

In reality, different governance models optimize for different outcomes:

Governance Model	Primary Value Driver
Financial exit	immediate cash (NPV)
Control retention	strategic flexibility
Collective model	longevity and stability
Dominant creator	individual wealth maximization
Reclamation strategy	option value and renegotiation power

This leads to a more precise conclusion:

There is no single optimal governance structure — only trade-offs between competing value dimensions.

Where Accounting Falls Short (Again)

From an IFRS perspective, all of these scenarios are treated in relatively similar ways:

recognition of intangible assets (IAS 38)
impairment testing (IAS 36)
consolidation based on control (IFRS 10)

But accounting frameworks do not capture:

incentive misalignment
governance fragility
exit constraints
strategic optionality

In other words:

Accounting measures the asset, but not the conditions under which its value can be realized.

This is not a flaw — it is a limitation by design.

But for boards, investors, and governance professionals, it creates a blind spot.

Governance as the Hidden Multiplier of Value

Across all cases, one pattern is consistent:

the underlying asset (music catalogue) is valuable
but the realized value varies dramatically

Why?

Because governance acts as a multiplier — or a constraint.

aligned governance → sustained value
misaligned governance → conflict, destruction, or leakage
adaptive governance → value recovery

This applies far beyond music:

family businesses
private equity structures
joint ventures
founder-led companies

Preview — From Music to Markets

In Part 3, we move from case studies to systems.

We examine:

how private equity reshapes governance of catalogues
how ESG considerations influence ownership models
how AI challenges the very concept of authorship and ownership
and what this means for financial reporting and regulation

Ultimately, the question becomes broader:

Can existing governance and accounting frameworks adequately capture assets whose value is cultural, digital, and increasingly autonomous?

Part 3 — Financial Systems, AI and the Limits of Reporting

If Part 2 demonstrated that governance determines how value is realized, the final step is to place music catalogues within the broader financial and regulatory system.

Because once music becomes an asset class, it no longer belongs only to artists or labels.

It becomes part of capital markets.

From Cultural Asset to Financial Instrument

The entry of institutional investors into music catalogues is not incidental. It reflects a broader trend:

The transformation of intangible assets into tradable financial instruments.

Funds such as Hipgnosis Songs Fund, alongside private equity firms like Blackstone and KKR, have reframed music catalogues as yield-generating assets.

The logic is straightforward:

predictable royalty streams
global scalability via streaming
long duration (often multi-decade cash flows)

In financial terms, a catalogue begins to resemble:

an infrastructure asset
or a bond with variable coupons

But this analogy has limits.

Unlike traditional financial instruments, music catalogues depend on:

cultural relevance
consumer behavior
technological platforms

This creates a fundamental tension:

The asset is financialized, but its drivers remain non-financial.

Governance in the Age of Institutional Ownership

When ownership shifts from creators to investors, governance priorities shift as well.

Under artist ownership:

focus on artistic integrity
long-term legacy
selective licensing

Under institutional ownership:

focus on yield optimization
portfolio diversification
monetization strategies

This raises difficult questions:

Should a song be licensed to any commercial use if the price is right?
Who protects the cultural meaning of the asset?
What happens when financial incentives conflict with artistic intent?

These are not hypothetical concerns. They mirror debates in other sectors:

real estate vs community impact
private equity vs employee welfare
infrastructure ownership vs public interest

The difference is that here, the asset is cultural.

ESG and Cultural Capital

This leads to an emerging but underdeveloped theme:

Music catalogues are not just financial assets — they are cultural assets.

From an ESG perspective, this introduces new dimensions:

Social:

fair compensation of artists
transparency in royalty distribution
access to cultural works

Governance:

ownership structures
licensing decisions
control over legacy

Environmental:

largely indirect, but linked via digital infrastructure

Yet current reporting frameworks — including CSRD — do not explicitly address cultural capital.

This creates a gap:

Assets with significant societal impact are governed primarily through financial logic.

AI — The Structural Disruption

If financialization reshaped ownership, artificial intelligence may redefine the asset itself.

AI systems can now:

generate music in specific styles
replicate vocal characteristics
compose at scale

This raises a fundamental question:

What constitutes originality in a world of machine-generated creativity?

The connection to earlier themes is direct.

Sampling disputes — such as those involving Kraftwerk — revolved around the reuse of fragments of existing works.

AI extends this concept exponentially:

instead of sampling seconds, it learns from entire catalogues
instead of replication, it produces statistically derived variations

This can be understood as:

Sampling at scale.

Ownership in an AI-driven environment

Traditional copyright frameworks rely on:

identifiable authorship
clear boundaries between works

AI challenges both:

authorship becomes diffuse
derivation becomes probabilistic

For governance, this creates uncertainty:

who owns AI-generated output?
do original rights holders have claims?
how should revenues be allocated?

For investors, it introduces new risks:

erosion of scarcity
dilution of catalogue value
legal and regulatory unpredictability

Implications for Valuation

From a valuation perspective, AI introduces asymmetry:

Upside:

increased demand for music content
new licensing opportunities

Downside:

commoditization of sound
reduced uniqueness
pressure on pricing

This directly affects DCF models:

revenue projections become less stable
discount rates may need to increase
terminal value assumptions become more uncertain

In other words:

The very models used to justify catalogue valuations become less reliable.

The Limits of IFRS — Revisited

Against this backdrop, the limitations of current accounting frameworks become more pronounced.

IFRS provides tools for:

recognition (IAS 38)
impairment (IAS 36)
consolidation (IFRS 10)

But it does not address:

governance structures
control conflicts
cultural relevance
technological disruption (AI)

Nor does it capture:

option value (e.g. Taylor Swift’s re-recording strategy)
exit constraints (Hall & Oates)
incentive alignment (Queen vs The Police)

This leads to a broader conclusion:

Financial reporting captures the existence of assets, but not the conditions that determine their future value.

Towards a Governance-informed View of Intangibles

If traditional accounting is insufficient, what is required?

Not necessarily new standards — but a broader perspective.

Boards, audit committees, and investors must consider:

1. Governance structure

ownership concentration
decision rights
exit mechanisms

2. Incentive alignment

distribution of economic benefits
sustainability of collaboration

3. Strategic control

flexibility in licensing
ability to adapt to market changes

4. External disruption

platform dependency
regulatory developments
AI impact

These factors are not visible in the financial statements — but they determine outcomes.

From Music to Markets — A Generalizable Insight

While this article focuses on music, the implications are far broader.

The same dynamics apply to:

software (code ownership)
data (data rights and usage)
brands (trademarks and reputation)
pharmaceutical patents

In all cases:

value is intangible
ownership structures are complex
governance determines realization

Music simply makes these dynamics visible.

Final Conclusion — The Balance Sheet of Culture

Music catalogues expose a fundamental truth about modern economies:

The most valuable assets are increasingly intangible — and increasingly governed rather than merely owned.

From Tin Pan Alley to Taylor Swift, the evolution is clear:

creation became industrialized
ownership became strategic
assets became financialized
governance became decisive

And now:

technology is redefining the asset itself

For accounting professionals, this presents a challenge.

For governance professionals, it presents an opportunity.

Because ultimately:

Value is not only created in the asset — it is unlocked, constrained, or destroyed by the structures that govern it.

FAQ’s – IAS 38 music rights

1. How are music catalogues accounted for under IFRS?

Under IFRS, music catalogues are generally treated as intangible assets within the scope of IAS 38. The accounting treatment depends primarily on how the catalogue is obtained. Acquired catalogues — for example through a business combination or standalone purchase — are recognized on the balance sheet at cost, which includes the purchase price and directly attributable transaction costs.

In contrast, internally generated catalogues are rarely capitalized. Costs associated with creating music — such as recording, production, and marketing — are typically expensed as incurred, unless strict recognition criteria are met. This creates a structural asymmetry in financial reporting: identical economic assets may be treated differently depending on their origin.

Subsequently, catalogues are subject to impairment testing under IAS 36 if indicators of impairment exist, or annually if classified as indefinite-lived. Valuation relies heavily on discounted cash flow models, incorporating assumptions about future royalties, licensing income, and market demand.

The result is that IFRS provides a framework for recognition and measurement, but often fails to fully reflect the economic value and strategic importance of music catalogues.

2. Why do investors consider music catalogues attractive assets?

Music catalogues have become increasingly attractive to institutional investors due to their predictable and long-duration cash flow profiles. Royalties generated from streaming, broadcasting, licensing, and synchronization rights provide recurring income streams that can extend over decades.

In a low-interest-rate environment, these characteristics resemble fixed-income instruments, albeit with variable returns. This has led to the financialization of music, with private equity firms and specialized funds allocating capital to acquire catalogues as yield-generating assets.

Additionally, music consumption has proven relatively resilient across economic cycles. Streaming platforms have globalized distribution, increasing accessibility and extending the lifespan of popular works. This scalability enhances the perceived stability of future cash flows.

However, these investments are not without risk. They depend on platform dynamics, changing consumer preferences, regulatory developments, and technological disruption, including artificial intelligence. As such, while music catalogues may resemble financial instruments, they remain fundamentally linked to cultural and behavioral factors.

3. What governance challenges arise in music catalogue ownership?

Governance challenges in music catalogue ownership arise primarily from the separation between creators, rights holders, and investors. Key issues include control over licensing decisions, allocation of economic benefits, and the management of long-term strategic interests.

Different governance models produce different outcomes. Collective structures, such as those adopted by Queen, align incentives but may dilute individual contributions. Dominant creator models, as seen in The Police, can lead to economic efficiency but increase the risk of internal conflict. Joint ownership structures, such as Hall & Oates, may function effectively during growth phases but become problematic when exit or monetization decisions arise.

Furthermore, institutional ownership introduces additional layers of complexity. Investors may prioritize short-term yield, while artists may seek to preserve legacy and artistic integrity. These competing objectives can create tension in decision-making processes.

Ultimately, governance determines not only how value is created, but whether it can be realized, sustained, or transferred over time.

4. How does Taylor Swift’s re-recording strategy affect valuation?

Taylor Swift’s re-recording strategy introduces a significant governance and valuation dimension that is not fully captured by traditional accounting frameworks. By re-recording her earlier albums, she effectively created substitute assets that replicate the economic functionality of the original recordings while restoring ownership and control.

From a valuation perspective, this impacts both the original catalogue and the newly created one. The original assets may experience a decline in expected future cash flows if consumers and licensees shift toward the re-recorded versions. Conversely, the new recordings gain value through enhanced control over licensing, distribution, and branding.

This strategy introduces option value — the ability to reshape economic outcomes through strategic action. Traditional discounted cash flow models often fail to capture this type of flexibility, as they rely on static assumptions about future income streams.

As a result, Swift’s case highlights the importance of governance in valuation: control rights and strategic adaptability can materially alter the economic profile of an asset.

5. What risks does artificial intelligence pose to music catalogues?

Artificial intelligence introduces structural risks to music catalogues by challenging the concepts of originality, ownership, and scarcity. AI systems can generate music that mimics existing styles, potentially reducing the uniqueness of original works and increasing the supply of substitutable content.

From a legal perspective, the use of existing catalogues to train AI models raises questions about copyright infringement and compensation. Current frameworks are not fully equipped to address large-scale data usage and derivative creation.

Economically, AI may exert downward pressure on royalty rates if the market becomes saturated with generated content. This affects valuation assumptions, particularly in discounted cash flow models, where future revenues may become more uncertain.

At the same time, AI may create new opportunities for licensing and content generation. The net effect depends on how regulation, technology, and market behavior evolve.

For governance, the key challenge is managing uncertainty: ensuring that ownership rights, contractual protections, and strategic positioning remain robust in a rapidly changing environment.

6. Why does financial reporting struggle with intangible assets like music catalogues?

Financial reporting frameworks such as IFRS are designed to provide reliable, comparable, and verifiable information. However, intangible assets like music catalogues present inherent challenges due to their dependence on non-financial drivers such as cultural relevance, consumer behavior, and technological change.

IAS 38 restricts the recognition of internally generated assets, leading to incomplete balance sheets. Even when assets are recognized, measurement is typically based on historical cost rather than fair value, unless specific conditions are met. Impairment testing introduces estimates, but these rely on assumptions that may be highly subjective.

Moreover, financial reporting does not capture governance-related factors such as control rights, incentive alignment, or exit constraints. These elements can significantly influence the realization of value but remain outside the scope of accounting standards.

As a result, there is often a disconnect between reported figures and economic reality. This underscores the importance of supplementing financial statements with governance analysis and strategic context when assessing intangible assets.