Music catalogs have become an institutional asset class, and underwriting models have matured accordingly: multi-year cash flow forecasts, retention assumptions by DSP, PRO collections, neighbor rights, and sync performance. What has not matured at the same pace is how many buyers and lenders treat social platforms (TikTok, Instagram, YouTube, X, Facebook) in diligence and post-close operations.

That gap matters because socials are now where songs break, where brands advertise, and where commercial use often happens fastest and least transparently. For investment funds, that creates a new kind of risk surface, but also a new source of controllable upside. The core idea is simple: if you can measure and evidence use, you can price it, reserve for it, and enforce it.

Why “catalog risk” looks different on social

Traditional catalog underwriting assumes a relatively stable set of reporting channels:

• DSP streams and UGC monetization where applicable

• Publishing income via PRO/CMO statements

• Neighboring rights and direct license programs

• Sync fees and trailing performance royalties

Social platforms interrupt this neat model in three ways.

1) Social creates more commercial use than your statements show

Brand usage now flows through:

• Paid social ads (often launched quickly and iterated frequently)

• Influencer campaigns managed by agencies

• Organic UGC that is effectively promotional content

Much of that activity can be licensable, but it is not always captured cleanly in existing reporting, especially when metadata is incomplete, usage is short-form, or the platform’s own tooling is limited.

2) Social creates evidentiary and timing risk

On socials, a rights holder often faces a “blink and it’s gone” reality:

• A video can be edited, re-uploaded, or deleted after outreach begins.

• Advertisers can run dozens of variants, splitting spend across accounts.

• The same creative can be republished across multiple platforms.

From an underwriting standpoint, this is not just lost revenue. It is lost recoverability if you cannot preserve proof of use early.

3) Social creates compliance and reputation risk in parallel

Funds increasingly operate under heightened scrutiny from LPs and regulators. If enforcement is inconsistent, overreaching, or poorly documented, it can generate reputational blowback or operational risk. Underwriting “social risk” therefore includes controls: auditability, documentation, and clear escalation rules.

A practical definition: “music catalog risk on social”

For investment funds, it helps to define the risk set in a way that maps directly to diligence workstreams and deal terms.

The shift to make is treating these as measurable variables, not vague qualitative concerns.

How funds can underwrite social risk (and opportunity) in four steps

Step 1: Establish “rights readiness” before you measure anything

Social monitoring is only as good as your ability to tie a detected use back to the right rights holder and the right share.

In diligence, ask for:

• Chain of title and splits (recording and publishing)

• ISRC/ISWC/IPI coverage and mapping quality

• Any historical disputes, takedown programs, or litigation

• Existing direct license templates (if any) and standard fee logic

This is where operational diligence can materially change deal terms. A catalog with messy metadata can still be a great asset, but you will price the remediation timeline and cost.

Step 2: Run a “social usage audit” that separates organic from commercial

A social audit should answer two questions:

1. How much use exists? (volume and engagement)

2. How much of that use is licensable commercial activity? (brands, agencies, paid media, influencer whitelisting)

The key is not just counting posts. It is identifying the subset that maps to enforceable, financeable outcomes.

A strong audit output is a portfolio-style view:

• Top tracks by detected commercial usage

• Top advertisers and agencies using the catalog

• Platform mix (TikTok vs. Instagram vs. YouTube, etc.)

• Evidence packages for priority uses

• Estimated licensing value bands by category (more on this below)

Step 3: Convert detections into financeable cash flow assumptions

To underwrite properly, funds need to turn “we found a lot of uses” into a model with conservative, defensible inputs.

A practical way is to treat unlicensed commercial uses as a receivables-like pipeline with conversion assumptions.

This approach lets you treat social enforcement as an operational alpha lever, while still keeping your underwriting disciplined.

Step 4: Put controls in place post-close so risk stays priced

Underwriting does not end at acquisition. Social risk is dynamic.

Funds can formalize post-close controls as covenants or operating plans:

• Continuous monitoring across major platforms

• Automated evidence preservation for detected uses

• A prioritized outreach queue based on engagement and advertiser identity

• A documented escalation path (licensing outreach first, legal escalation when warranted)

• Monthly reporting that ties actions to recoveries and pipeline

This is the difference between “we hope socials monetize” and “we operate socials as a managed revenue channel.”

The Social Risk Scorecard (a diligence tool you can actually use)

Below is a scorecard many funds adapt to quickly compare catalogs and surface hidden work.

Using a scorecard like this, you can decide whether to (a) price in remediation, (b) require operational covenants, or (c) pass on an asset with unbounded downside.

Deal structuring: turning social uncertainty into priced risk

Once you can measure the exposure, you can allocate it in the deal.

Common structuring moves include:

• Revenue normalization adjustments: If a catalog’s trailing cash flows are depressed due to missed social licensing, you can model an upside case while keeping the base case conservative.

• Escrows or reserves: If there is meaningful uncertainty around ownership, disputes, or enforcement viability, reserve for legal and operational costs.

• Earn-outs tied to recoveries: Particularly useful when a seller claims “there’s a ton of brand usage we never chased.”

• Representations and warranties focus: Tighten reps around chain of title, claims history, and the right to enforce.

The point is not to “solve” social risk in legal language. It is to ensure the economics reflect what your monitoring and enforcement plan can realistically convert.

Operationalizing underwriting: what best-in-class monitoring changes

Investment funds often underestimate a basic truth: social enforcement is not only a legal function, it is an attribution and operations function.

A purpose-built system should help you:

• Measure every use across platforms with unified engagement reporting

• Differentiate organic UGC from commercial activity (brands, agencies, influencers, paid placements)

• Preserve evidence automatically so claims do not collapse when content disappears

• Find verified contacts so outreach actually reaches decision-makers

Third Chair is built around this workflow with three core motions: Monitor, Enforce, and License. For funds that acquire catalogs, this matters because it connects diligence findings to a repeatable post-close process, rather than leaving social value as an unmodeled “maybe.” If you want a fund-relevant example, Third Chair has worked with catalog finance and services platforms (see the Duetti case study) to surface historical uses and identify licensee contacts.

A note on compliance: enforcement programs need governance, not just muscle

Underwriting is also about avoiding self-inflicted risk. If your enforcement strategy scales without clear policy, documentation, and review gates, you can create:

• Inconsistent outreach that damages relationships with advertisers and agencies

• Poor audit trails that make disputes harder to resolve

• Operational bottlenecks that slow collections

Many investment teams now treat rights enforcement governance similarly to other regulated workflows, with documented policies, remediation steps, and auditability. If your organization wants to systematize that layer, an AI compliance workflow automation platform like Naltilia can complement your rights operations by streamlining internal risk assessments and policy-driven processes.

A 30-60-90 day playbook for funds after closing

If you are acquiring or lending against a catalog, the fastest path to de-risking is sequencing.

First 30 days: stabilize data and monitoring

Focus on rights readiness and detection coverage.

• Validate ownership and splits for top-earning assets

• Confirm identifier coverage (ISRC, ISWC, IPI) and ingest the catalog into monitoring

• Establish a baseline report: uses, engagement, and top accounts

Days 31-60: prioritize commercial uses and start outreach

Shift from visibility to conversion.

• Triage detections into commercial vs. non-commercial

• Build an outreach queue based on advertiser identity and engagement

• Begin licensing-first outreach with clear documentation

Days 61-90: scale enforcement and lock reporting into your fund cadence

This is where underwriting becomes operational reality.

• Formalize escalation rules and counsel pathways

• Track pipeline metrics (contacts reached, negotiations opened, licenses closed, collections)

• Roll up reporting into monthly investor-style dashboards (actions and outcomes)

The underwriting takeaway

Social platforms have changed the distribution of risk in music catalogs. Some of that risk is genuine uncertainty (ownership, jurisdiction, evidence). But a large portion is simply unmeasured and unmanaged exposure.

Investment funds can underwrite music catalog risk on social the same way they underwrite other complex cash-flow assets: build a measurable risk taxonomy, audit the surface area, convert detections into conservative cash-flow assumptions, and install controls that keep performance inside the model.

Done well, this does not just protect downside. It can create repeatable upside through scalable licensing and enforcement that most sellers never operationalized.