A Deep Dive on Dollar Age: The Single Most Important Metric for Stability
When you look at a music royalty asset for sale, what’s the first number you check? For most new investors, it’s the Last 12 Months' (LTM) earnings. While that’s important, the smartest investors look at a different number first: Dollar Age.
Why is this single, often-overlooked metric the best predictor of a catalog's future stability? Let's take a deep dive.
What is Dollar Age?
Dollar Age is a metric that measures how long a catalog's songs have been generating meaningful royalties. It's a "weighted average," so songs that earn more have a greater impact on the final number. Think of it not just as the age of the song, but the age of its earnings. A 20-year-old song that only started earning last year would have a very low Dollar Age.
Why It Matters: The Link to the Decay Curve
The true power of Dollar Age is that it tells you where an asset likely is on the Royalty Decay Curve.
Example of Decay Curve
Low Dollar Age (< 3 years): An asset with a low Dollar Age is likely still in the steep, unpredictable part of the decay curve. Its earnings are volatile, and a significant decline is probable. This represents a higher risk.
High Dollar Age (> 7 years): An asset with a high Dollar Age has likely passed its initial decay phase and entered the stable, predictable "long tail." The earnings are more consistent, making future projections far more reliable. This represents a lower-risk, more stable investment.
A Real-World Comparison
Let's make this concrete with an example from the book. Imagine two catalogs are for sale:
Catalog A (The New Hit): Has a Dollar Age of 2 years and earned $10,000 last year.
Catalog B (The Stable Classic): Has a Dollar Age of 10 years and earned $3,000 last year.
A novice investor, looking only at LTM, would be drawn to Catalog A. But a disciplined investor sees the story in the Dollar Age. Catalog A's earnings are likely to fall sharply, while Catalog B's earnings will be much more predictable for years to come. You are not just buying earnings; you are buying certainty.
The Bottom Line
LTM tells you where a catalog has been. Dollar Age helps you predict where it is going. It is the single most important metric for understanding an asset's future stability and predictability. Before you ever look at a spreadsheet, look at the Dollar Age.
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