The “ultimate partnership betrayal” is what Daryl Hall has accused erstwhile musical partner John Oates of, in court documents that allege a breach of their business partnership. Oates was moving to sell half of their joint operation, Whole Oats Enterprises, to Primary Wave, a company that has been buying up song catalogues with a view to making long-term gains from streaming royalties, advertising syncs and other sources. Hall claims Oates’s move happened “completely behind my back” as they were going through a “global divorce” (Hall’s words) around the dissolution of Whole Oats, which controls their trademarks, likenesses and recorded music royalties. What could be a multimillion dollar sale is now dangling in limbo. This coincides with a multitude of crises raining down on Hipgnosis, arguably the most high-profile company currently acquiring music rights, having spent more than £1.5bn so far on catalogues by Justin Bieber, Leonard Cohen and dozens of others. Investor unrest, non-executive directors stepping down, hard questions over its governance, scrapping of dividend payments and analysts reducing its payment forecasts all paint a disquieting picture of the company. The music investment poster boy slipping down the wall; a star pop duo in a legal battle over the sale of their assets, and high interest rates making investment borrowing fraught with risk. Is the gold rush around acquiring music rights slowing to a stroll or even running out of road? Gregor Pryor, a partner at legal firm Reed Smith, has been involved in a number of big-name music rights deals. He is confident no crash is imminent, but interest rate rises mean buyers’ due diligence is necessarily becoming much more rigorous. “People examine the valuations much more carefully because they want to be sure they’re going to be able to beat the cost of money,” he says. Pryor feels investment “will cool down a little bit” in the coming years, but adds: “I don’t see the market really dropping as there is plenty of headroom.” Alexi Cory-Smith, founder and CEO of Bella Figura Music, a relatively new company that is buying rights, feels the snapping up of music publishing “got very, very overheated” recently – for example Bruce Springsteen’s catalogue was sold to Sony Music Entertainment in 2021 for an estimated $550m, while Neil Young and Bob Dylan are among the artists with deals in the hundreds of millions. But Cory-Smith says a level-headedness is guiding the market now. “We’ve always employed a very disciplined diligence procedure,” she says of her company’s deals. “As a result, some of the things we’ve looked at have fallen over midway through because they haven’t matched up.” Neelesh Prabhu, co-founder of Bella Figura, provides numbers on that. “Over the last 15 months, we’ve reviewed about a billion dollars’ worth of deals,” he says. “We ended up deploying about $80m of capital.” Prabhu suggests rising interest rates are not derailing the market – for now. “[Our investors] are still very bullish on music and they still see it as an asset class,” he says. “Even with the cost of capital going up, the cashflows that we are getting are outpacing the growth in interest rates.” When rights are split, it is essential – as Hall and Oates have found – to have good relations with the other writer or writers. “We have the Guy Chambers catalogue,” says Cory-Smith, referring to the songwriter who co-wrote Robbie Williams’s biggest hits. “Which means we have to work very closely with Williams’ management because all assets have approval and sometimes there are discussions around requests” – such as when a Chambers-penned, Williams-performed song is being considered for an advert soundtrack. Cory-Smith says her company wants some ownership of rights, but adds that it is important the artist also retains a financial interest. “You want them approving things and you want them to collaborate with you, not work against you,” she says. Acts such as Taylor Swift and Radiohead have been flag-wavers for artists owning their recorded and publishing rights and this is becoming both a moral and financial issue for acts that might not want to sell off even parts of their copyrights. One alternative is being offered by JKBX (pronounced Jukebox), a new company that lets anyone, not just large investors, buy into music royalties. Unlike Hipgnosis or Primary Wave, companies predicated on owning all (or a big slice of) rights, JKBX allows shares on income on those rights to be sold while the copyrights remain with the rightsholder, be that a label, a publisher or the artist. The music industry is a popularity contest – and always has been. If you’re at the top, you make a lot of money Scott Cohen “We are able to turn income streams into regulated securities,” says the company’s chief executive, Scott Cohen, drawing a parallel with what David Bowie did in the late 1990s with Bowie Bonds. “It’s releasing capital without giving up your copyrights.” (He caveats, because his company is currently filing an application with the US Securities and Exchange Commission, that he is not offering any investment advice.) “The music industry is a popularity contest – and always has been,” says Cohen. “If you’re at the top, you make a lot of money.” Hits will, therefore, always attract investors, be they institutional or individuals. One anonymous expert says Hipgnosis, despite its canny way of grabbing headlines, “does not represent the entirety of the market. It may be mildly discouraging for new market entrants to see those headlines, but it is not going to discourage existing operators.” Cohen agrees: “[Analysts] talk about the management of the company, they talk about their debt and how they’re leveraging it,” he says. “But nobody says the actual assets they’ve bought have an issue.” Pryor argues that, against the flashpoints mentioned here, there are still many mega-deals that are possible here if what is being offered are “evergreen assets” (ie, huge global hits). “It’s like buying the site of Selfridges,” he says. “It’s going to be a competitive process.”