When valuing a business – or part of a business, a financial professional must take into account such intangible assets as patents, trademarks, trade names, goodwill, literary works, and even songs, according to a leading Philadelphia forensic accountant and Certified Valuation Analyst.
“Although the phrase ‘I got it for a song,’ meaning for practically no cost or value, might be applicable if I wrote or sang the song,” said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of business valuation services in the Delaware Valley, “the result would be very different if the song came from Bruce Springsteen, Taylor Swift or U-2.”
Usually, Anderson said, entire catalogs of songs are assigned a value – such as when the Beatles songs were purchased by Michael Jackson in 1985 or when Michael Jackson’s songs were part of the damages in his wrongful death suit against AEG Live in 2013. Individual songs, however, also can be valued. For an example of this approach, one only needs to look at this year’s lawsuit by Marvin Gaye’s estate against Robin Thicke and Pharrell for Blurred Lines as well as Sam Smith’s settlement with Tom Petty over the song Stay With Me.
So how do professional business valuators value songs? This can be done, said Anderson – a forensic accounting expert in Philadelphia with experience conducting business valuation services in the Delaware Valley – by following the same principles for valuing a business . . . by considering the income, market and asset approaches.
Under the income approach, Anderson – a Certified Valuation Analyst in Philadelphia – said the valuator would consider the historical and projected cash flows for the song or catalog. Revenues typically flow from royalty and license fee agreements. The valuator would have to consider all of the pre-existing sources of such revenues along with reasonable projections for future revenue sources. An example of this, Anderson said, would be the new music streaming service, Apple Music.
The valuator also must consider a variety of factors regarding the song or catalog when analyzing projections of future revenue, said Anderson, a Philadelphia forensic accountant whose firm provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. These factors can include the artist’s reputation, both current and trending; the genre of the song or catalog; trends regarding past and future sales from each revenue source, and music industry trends for royalties and license fees. The valuator, forensic accountant Anderson continued, also will consider historical and projected costs for marketing/promoting and distributing the song or catalog.
Under the market approach, the valuator would consider recent historical transactions involving songs and catalogs, explained Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of business valuation services in the Delaware Valley. As with the income method, the valuator must consider such factors as the artist’s reputation, both current and trending, and the genre of the song or catalog. Obviously, other recent transactions or valuations of this artist’s songs or catalogs of songs within the same genre will have the most weight in determining the song or catalog’s value.
Under the asset approach, Certified Valuation Analyst in Philadelphia Anderson said, the valuator would have to consider the costs incurred in writing, producing and releasing the song or catalog. As with many business valuations, the asset approach generally results in the lowest value (of the three approaches), and usually serves as a floor to potential value.
So, how much is a song worth? In the case of Blurred Lines, the jury decided that just the songwriting value alone (it did not include any additional value for performance rights, which was not a part of the case) was $7.4 million, said Anderson – a forensic accounting expert in Philadelphia with experience in conducting business valuation services in the Delaware Valley. In the case of the Beatles catalog which Michael Jackson purchased in 1985 for $47.5 million, Forbes in 2014 estimated that it was worth more than $2 billion.
If you require the services of a Certified Valuation Analyst in Philadelphia or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.
About David Anderson & Associates
David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson is a forensic accounting expert in Philadelphia who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Valuation Analyst and a Certified Fraud Examiner in Philadelphia.
