Measuring concentration properly

Every catalogue memorandum carries a line on concentration: the top ten works generate a stated share of income, the top writer a smaller share again. It reads as due diligence. Often it is closer to decoration. Measuring catalogue concentration properly requires more than counting how much income sits in the largest few assets. It requires understanding what happens to that income under stress, and whether the works said to diversify each other actually do.

A single concentration percentage is a snapshot, not a risk measure. It tells a reader how income is distributed today. It says nothing about whether that distribution is stable, whether the top earners are ageing catalogue standards or recent hits still finding their level, or whether a shock to one revenue line would ripple through several works at once because they share a sync licensee, a territory, or a platform dependency. Two catalogues can report identical top-ten shares and carry entirely different risk.

Correlation is the part the headline number hides

The more useful question is not how much income sits in the top works, but how independent those works are of one another. A catalogue built around several tracks that each earn through the same handful of sync placements, the same streaming playlists, or the same single dominant territory is concentrated in a way no top-line percentage captures. If the works move together, a downturn in one channel does not stay contained to one line item. It compounds.

This is where diligence earns its keep. It means tracing income by source, not just by work: how much comes from mechanicals, performance, sync, and which platforms or licensees sit behind each. It means testing whether the catalogue's apparent breadth is genuine breadth or the same underlying exposure counted several times under different song titles. A catalogue with fifty songs and one buyer of most of its sync income is more concentrated than its work count suggests.

Durability matters as much as spread

Concentration also has a time dimension that a static percentage misses entirely. A top-ten share driven by decades-old standards with long, verified earning histories is a different proposition from the same share driven by two recent hits still inside their peak decay curve. The first has been tested by time. The second has not. Measuring catalogue concentration properly means asking how each contributing work is expected to behave over the life of the asset, not only how it behaves today.

Lenders sizing downside scenarios and owners planning succession are asking the same underlying question from different angles: what happens to the income if the largest contributor underperforms. A private equity buyer weighing entry and a family office weighing continuity both need that answer stated plainly, not implied by a single ratio in an appendix.

None of this changes the fact that concentration itself is neutral. A catalogue can be concentrated and still be sound, provided the risk is named, measured against correlation and durability, and priced accordingly. What is not sound is treating a top-line percentage as if it were the analysis. The number is where the question starts. Too often, it is where the memorandum stops.