Just as David Bowie left an indelible mark on music, he also played an important but lesser-known role in the world of finance.
In 1997, Bowie became the first musician to package his future royalties into a security that could be bought and sold by investors, an asset that came to be known as a "Bowie bond."
The sale of the bonds to Prudential Securities netted the musician $55 million. They were downgraded to junk by Moody's Securities in 2004, amid a wave of illegal downloading and weak overall music sales.
Rob Ford, a London-based money manager, told Bloomberg News that the Bowie bonds "were as groundbreaking as his music." He added, "Not only were they followed by a number of other artists, but they set the template for deals backed by a whole range of assets."
Investment banker David Pullman told the Wall Street Journal that Bowie came to him considering selling his catalog of songs. "But then he realized these were his babies and he didn't want to," Pullman said.
He then suggested Bowie securitize his music instead:
"His first response was, 'What's securitization?' But once I explained, he didn't hesitate for a second. He embodied the idea that it was important to try something new."
As the Financial Times reported, the revenue underlying the bonds included royalties from 25 Bowie albums released between 1969 and 1990:
"These included his most popular work — Ziggy Stardust, Aladdin Sane, Hunky Dory and Let's Dance — as well as unreleased studio and live recordings. He was guaranteed more than 25 per cent of the royalties from wholesale sales in the US."
Pullman later sold bonds based on the works of numerous other musicians, including Marvin Gaye, James Brown and the band Iron Maiden. As NPR reported in 2009:
"Pullman has figured out a way to take music royalties earned by people like Ashford & Simpson, David Bowie and the late James Brown and convert them into a bond. The investor gets to invest in the music business, the musician gets a big wad of cash upfront."
In the years that followed, securitization became much more common. Large numbers of bonds based on mortgages, credit cards and student loans have been sold over the years and played a role in the collapse of the subprime mortgage market in 2008.
Copyright 2021 NPR. To see more, visit https://www.npr.org.
