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We made a written offer this month that most catalogue buyers won't write. Worth walking through it, anonymised, because the structure says something about how we underwrite and we'd rather show it than describe it.

An artistowns a catalogue that's been earning steadily. The standard offer they'll get from the market is a multiple of annual earnings, paid upfront, done. The buyer takes a view on the future, prices in their uncertainty by paying less today, and the seller eats that discount whether the catalogue goes on to do well or badly.

We offered something different. A fixed sum upfront, plus a sliding-scale bonus that can pay the seller more than 100% of the catalogue's annual returns, for several years, provided the catalogue keeps performing at roughly its current level.

Read that again, because the shape of it matters. The seller gets guaranteed money on day one. And then, if the catalogue holds up, they get paid again, at a rate that can exceed what the catalogue actually earns in that year. The downside sits entirely with us. The upside leverage sits with the seller.

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Why the discount usually goes the other way

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In a normal catalogue sale, uncertainty gets priced against the seller. The buyer doesn't know if streams will decay faster than expected, if a sync engine dries up, if the whole rate environment softens. So they protect themselves by paying less today. The seller carries the cost of the buyer's caution, in cash, upfront, forever.

Our structure flips who carries it. If the catalogue underperforms, we've overpaid on the upfront and the earn-out simply doesn't trigger, and that's our problem, not the seller's. If it performs, the seller keeps collecting. They've handed us the risk and kept the reward. That's an unusual thing to write into an offer, and it's worth being clear about why we can.

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Why catalogue M&A resists this

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Earn-outs aren't new. Private equity uses them constantly. Film libraries get bought this way. We're not going to tell you we invented something. What's rare is seeing this structure written into music catalogue deals specifically, at least the ones that get disclosed publicly. The question is why the music side resists a tool the rest of the M&A world reaches for without thinking.

Part of it is data. To write a sliding-scale earn-out with a straight face, you have to believe you can forecast the catalogue's performance well enough to know when the bonus triggers and what it'll cost you. If your view of the catalogue is a multiple of last year's royalties and a finger in the air, you can't underwrite an earn-out. You'd be writing a cheque against a number you can't model. So most buyers don't. They pay a discounted lump sum precisely because they can't see well enough to structure anything cleverer.

Part of it is administration. An earn-out means you're tracking performance year on year, reconciling it, and paying against it. If your back office is a spreadsheet and a prayer, that's a burden. If you've built the infrastructure to audit and monitor a catalogue anyway, it's just a report.

And part of it is that a discounted lump sum is better for the buyer, and buyers set the terms. Taking the downside onto your own side of the table is not the profit-maximising move on any single deal. You do it when you're confident enough in your read that you'd rather win the deal on seller-friendly terms than win the negotiation on buyer-friendly ones.

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What writing this risk says about how we see the catalogue

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That's the real tell. We only offer this on catalogues we've already run through our own models. We've looked at the stream decay, the cover recordings flowing back to the compositions, the registration cleanup that lifts collected royalties, the sync potential. By the time we put a sliding scale bonus on the table, we're not hoping the catalogue holds up. We've done the work that tells us it should, and we've done the work that we think will help it.

So the structure isn't generosity. It's confidence, priced. We can afford to take the downside because we've measured it, and we can afford to hand over the upside because a catalogue we've cleaned up and worked is more likely to trigger those bonuses than one left on autopilot. The seller gets a better deal and we get a catalogue we wanted. That's the circle working the way it's meant to.

If you own or represent a catalogue and nobody's ever offered you terms where the buyer eats the downside, that's worth sitting with. It doesn't mean everyone should write deals this way. It means the ones who can are the ones who've done the work to know what they're buying. Ask whoever's making you an offer whether they'd write it that way. The answer tells you how well they can actually see what they're valuing.

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