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How David Bowie changed finance

Lawrence Lewitinn
Lawrence Lewitinn

The world lost one of the most innovative and successful artists of all time. But David Bowie was also the man who sold the world … a new type of bond.

During half a century, Bowie recorded dozens of albums. The music and fashion icon released his last album “Blackstar” on his 69th birthday, January 8, 2016, just two days before his death.

In 1997, with banker David Pullman, he created bonds backed by the royalties from 25 of his albums released from his golden years starting from 1969 to 1990. The bonds were bought by Prudential (PRU) for $55 million and had a 7.9% coupon and amortized over 10 years. Because they were technically interest-paying bonds and thus considered a loan, Bowie got the money without the tax liability.

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However, there was a scary monster that threatened the royalty income streams of recording artists: the rise of Internet music piracy. Bowie’s bonds were downgraded to just above junk status in 2004 but were paid off by 2007.

Other musicians to issue similar bonds include Rod Stewart, Iron Maiden, James Brown, and the Isley Brothers. Yet no single artist was able to match the size of Bowie’s bond sale.

The idea of selling assets backed by expected future revenue has even spread to sports. In 2013, a company called Fantex Holdings created a security allowing investors to receive a share of an athlete’s income in exchange for an upfront payment, much like the fixed-income securities brought to market by David Bowie two decades ago.

To this day, bonds issued by artists are sometimes referred to as “Bowie Bonds” in honor of the man who changed music – and finance.

 

[Disclosure: The author of this story is a very big fan of David Bowie.]

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