Two funds, the same , and £110,000 apart.
Take a catalogue big enough that two funds want it. Same songs, same income, same data room. One offers £420,000. The other offers £310,000.
It is tempting to treat valuation as a fact, a number you look up. But here are two professionals, looking at the exact same royalties, who are £110,000 apart.
Neither of them is wrong. They just answered a different question: not "what does this earn?" but "what is a pound of next year's income worth to me today?"
That question has a name. It's called discounting, and it's the engine underneath every serious .
Earlier you valued a catalogue the quick way: annual income × a . Income of £50,000 at 12× is £600,000. Fast, and fine for a back-of-envelope chat. But a multiple is a shortcut that hides two things a real buyer can't ignore.
First, the income won't stay flat. of older songs tend to fade a little each year, the catalogue decays. A flat multiple pretends year ten earns the same as year one.
Second, money later is worth less than money now. £50,000 arriving in eight years is not £50,000, you could have invested cash today and grown it. So a buyer mentally shrinks every future year back to its value today before adding it up.
Do both (project the decaying income year by year, then shrink each year back to today) and you've built a discounted cash flow. is the multiple's honest, slower cousin.