Phono V Could Reshape Catalog Valuations for Years. Here’s Why Songwriters Should Pay Attention (Guest Column)
Billboard ·
The outcome of the upcoming royalty rate proceedings will have long-term consequences for songwriters.
Ask almost anyone in the music industry about streaming royalties and you will hear the same question: Are artists and songwriters being paid fairly? What receives far less attention are the mechanics that determine how royalties are calculated — and right now, those rules are being rewritten.
Earlier this year, streaming services, labels, songwriters, and publishers began the Phonorecords V (Phono V) proceedings before the Copyright Royalty Board. This rate-setting process is split into two, with one determining mechanical rates for physical records like vinyl, CDs and permanent downloads and one determining how streaming platforms calculate and pay statutory mechanical royalties to songwriters and publishers in the United States from 2028 through 2032.
While labels and publishers reached a proposed settlement on the physical and permanent download rate on June 29, which is now subject to further review by the Copyright Royalty Board, the much larger and more consequential issue of streaming royalties remains unresolved. Streaming services, songwriters, and publishers will file formal submissions in a few weeks on October 5, with the Board’s determination due by the end of 2027. The outcome of those proceedings will have long-term consequences for songwriters. When the formula to calculate royalties changes, it not only affects immediate revenue but also impacts expected future revenues. Those expected future revenues and projected cash flows are the primary driver of music catalog valuations.
The choice of whether to sell your catalog to unlock its monetary value, or to leverage its annual earnings with short-term financing is a complex decision artists and songwriters will face. As we enter the regulatory transition period of Phono V, songwriters must understand the shifting landscape they are making those decisions within and educate themselves on the financial options available to them.
Phono V: What’s on the Table — And Why It Matters
Building on Phono IV (2022), which delivered meaningful gains for songwriters and publishers, Phono V will reassess how subscription revenue is allocated and mechanical royalty rates are structured — decisions that directly influence long-term royalty income.
One key issue on the table for Phono V is bundling. Bundling first gained attention in March 2024, when Spotify added audiobooks to its plans and reclassified its duo, family, and premium subscriptions as “bundles” allowing for lower mechanical royalty payments under Phono IV. As other streaming services followed suit, the financial impact became clear: the NMPA estimates bundling has cost publishers and songwriters nearly $500 million since 2024, and is set to cost them over $3.1 billion between 2028 and 2032 if rates remain unchanged. Renegotiating bundling provisions is therefore a key priority in these proceedings.
Against this backdrop, Phono V matters for three main reasons.
First, the royalty rate may change, and even small rate shifts can materially affect long-term earnings. The effect is already visible: US publishing revenue growth slowed to around 3.7% in 2025, down from double-digit growth the year before.
Second, songwriters considering a catalog sale must be aware that the valuation of their catalog largely depends on the expected value of future royalties. When the value of those royalties is uncertain due to prospective regulatory changes, this can place downward pressure on catalog valuations.
Third, timing matters. Buyers and investors dislike uncertainty, so selling your catalog before the new rates are confirmed can mean settling on a more conservative price, building in that risk.
Ultimately, the Phono V negotiations and their outcome are not an abstract policy for songwriters; they directly affect the present and future value of their catalogs.
Catalog Sales vs. Royalty Financing: Know Your Options
Despite these moving pieces, confidence in music catalog investments remains strong, with major artists including the Red Hot Chili Peppers and Britney Spears both selling catalogs for substantial sums in the last year, while the extended market is also highly active.
While motivations can vary — liquidity, estate planning, diversification, or funding new ventures — it is important that songwriters understand that selling a catalog is not the only path to accessing the value of their creations to raise capital.
Royalty financing, for example, allows music creatives to unlock capital by leveraging future royalty income without giving up ownership or control of their IP.
As Phono V negotiations unfold, that distinction becomes especially important. If, under the new agreement, rates increase, bundling provisions change, and uncertainty resolves, royalty projections — and valuations — could strengthen.
With that in mind, songwriters considering a catalog sale might want to bide their time; depending on their individual circumstances, they may be better off retaining ownership while accessing alternative capital during this transitionary period. Plus, additional creative output in that time can further increase valuation.
Ultimately, everyone’s situation is nuanced, but what is undeniable is that understanding the available options, before making a permanent decision, is essential — particularly when the rules governing royalty income are actively being reshaped.
The Importance of Knowing Your Catalog
Phono V proceedings are technical, complex, and slow-moving — but they are foundational to the streaming economy. The outcome will shape how mechanical income is calculated and how subscription revenue flows for years to come.
In this transitionary period, songwriters are best advised to focus on what they can control, knowing their catalog in detail and understanding their platform concentration. Does it over-index on a single DSP or in certain regions? What is the balance between performance and mechanical royalties? These questions matter more in periods of regulatory change.
Catalog valuation is never static, especially when the rules are being revisited. But by better understanding their catalogs and the forces shaping valuation, songwriters can put themselves in the strongest position to make the right decision at the right time.
Alex Heiche is founder and CEO of Sound Royalties, a specialty finance company for the global creative industries which provides musicians, labels, and publishers with royalty-based funding without requiring them to sell their rights or meet 100% recoupment thresholds. Since founding the company in 2014, Alex has funded thousands of creatives across the music industry, including DJ Khaled, Wyclef Jean and Lil Wayne. Sound Royalties now works across 33 countries and last year expanded into both YouTube and TV production financing, extending the same rights-first model to new kinds of creators.