David Bowie’s bond legacy

David Bowie has died, aged 69. Known as an innovator and musical pioneer, his creativity and innovations extend even into finance

 
David Bowie, seen here performing during his New York Marathon tour in 2002, died today of cancer, aged 69. A phenomenal performer, he was also know for creating 'Bowie Bonds' 
Author: Callum Glennen
January 11, 2016

David Bowie passed away from cancer today, aged 69. He will be remembered as one of the world’s most well known musical and cultural innovators, leaving a tremendous legacy of work behind. His contributions even extend into the financial world as the creator of the ‘Bowie Bond’.

In a 1997 partnership with David Pullman, Bowie struck upon the idea of issuing bonds for his future royalties. The deal would see Bowie sell the rights to his back catalogue to investors, while forgoing the next decade of royalties he would be due to receive. The deal included his most popular works, such as Ziggy Stardust and Let’s Dance, plus numerous live and unreleased recordings made between 1969 and 1990.

The so-called ‘Bowie Bonds’ raised £35m. Investors were set to receive the 25 percent of US wholesales Bowie was guaranteed from record sales for the 10 year life of the bonds. Bowie, who owned his back catalogue, had licensed the albums to EMI for reissue. Investors were offered impressive returns of 7.9 percent, with the bonds awarded an investment grade credit rating by Moody’s.

It kicked off the brief trend of celebrities issuing bonds for their future earnings, with James Brown, Ashford & Simpson and the Isley Brothers making similar sales.

For Bowie, the deal was made at the perfect time. A few years later the internet and file sharing services began to have a serious impact on the music industry’s business model. By 2003, debt issued by EMI had been downgraded to junk status by Moody’s. The Bowie Bonds were put under immense pressure until they eventually liquidated in 2007.

In an interview with The New York Times in 2002, he predicted the challenges the music industry would face in the future. “Music itself is going to become like running water or electricity. So it’s like, just take advantage of these last few years because none of this is ever going to happen again.

“You’d better be prepared for doing a lot of touring because that’s really the only unique situation that’s going to be left. It’s terribly exciting. But on the other hand it doesn’t matter if you think it’s exciting or not; it’s what’s going to happen.”