The B’s of David Bowie – Booze, Bands, Bonds & Brains

This week we need to pay our respects to one of the greatest musicians of our times.  I grew up with David Bowie who was an icon and symbol of the hard rock and roll era. I remember Bowie for his music, his on stage and off stage antics and of course for his great talent. Little did I remember this man as a financial guru. To be honest I have been a trader, news analyst and educator for over 30 years and I do not remember the name David Bowie associated with the financial markets so it was a surprise to me this week when I kept reading about Bowie Bonds and Bowie’s financial prowess. I must say a new respect has grown. I must also admit that I did not even realize that Bowie was still writing and playing. It was with sadness that I learned of his death and surprise to lean that his newest album was released just two days before.

The Mail Online wrote this week that “Following the tragic news of his death this week, fans of David Bowie have flocked to various sites to listen to his music and pay tribute. The iconic star’s catalog has drawn a staggering 51 million video views within 24 hours, breaking Adele’s comeback single Hello record, which racked up 36 million views in October. Vevo, owned by Universal and Sony, hosts more than 60 Bowie videos, including Bowie’s early hits Space Oddity and The Jean Genie all the way to his most recent releases Lazarus and Blackstar.”

I was surprised to learn that the star had amassed a fortune in excess of $200 million dollars and that he released 111 singles in his career as well as 51 music videos and 25 albums but the biggest surprise of all was learning about Bowie Bonds.

Somewhere in my memory, I do remember news of the rock star being on a verge of bankruptcy, but that was not unusual in the rock music industry which was all about sex, drugs and parties as stars of stage and screen burned through millions of dollars. Despite his huge success, the singer was thought to be close to bankruptcy in the 1970s with a string of bad business deals.

But an astute financial move in 1997 brought him millions – allowing him to buy back the rights to some of his most popular work from a former manager. In the mid-1990s, David Bowie, his financial manager Bill Zysblat, and banker David Pullman came up with a new scheme to generate cash from Bowie’s extensive back catalogue.

In 1997 Bowie sold asset-backed securities, dubbed “Bowie bonds”, which awarded investors a share in his future royalties for 10 years. The securities, which were bought by US insurance giant Prudential Financial for $55m (£38m), committed Mr Bowie to repay his new creditors out of future income, and gave a fixed annual return of 7.9%. He struck a deal with record label EMI which allowed him to package up and sell bonds on royalties for 25 albums released between 1969 and 1990 – which included classics such as The Man Who Sold The World, Ziggy Stardust, and Heroes.

Mr Pullman told the Daily Mail: ‘The deal saw that the bonds were paid off and Mr Bowie then retained all his rights. ‘He was astute financially and he had the foresight to have things set up then that would look after his family. ‘He was smart enough to have confidence in himself. Most artists sell themselves short, and they don’t hold out for the rights. He was able to retain his legacy. His songs were his baby.’  

The model wasn’t necessarily good for all asset-backed financing, Mr Dane says: “Think of the later bundling of sub-prime mortgages.” Bowie’s innovation lay in using intellectual property to back securities, says financial writer Chris O’Leary. He adds that banks were already starting to package up assets like mortgages into a new type of security in the 1970s.