David Bowie, Musical Visionary And Financial Pioneer? A Look Back At ‘Bowie Bonds’

Share

Forbes | Maggie McGrath | Jan 12, 2015

David BowieDavid Bowie, a rock-n-roll icon and groundbreaking artist, passed away on Sunday at the age of 69. In a global outpouring of grief, mourners are remembering Bowie as a musical visionary, someone who was once hailed as “music’s most exquisite artifact,” and an artist who made a real difference to the lives of his fans.

He was also, as it happens, a financial pioneer.

In 1997, Bowie — then the world’s most valuable musician, worth an estimated $917 million – became the first artist to package and securitize the rights to his future royalties.

That year, Bowie struck a licensing deal with record company EMI for the 25 albums he recorded between 1969 and 1990. The deal allowed EMI to release these records and any related unreleased live or studio recordings over the following 15 years. But rather than slowly earn the royalties to these records– which contained 287 songs and included smash-hits like “Space Oddity” and “Ziggy Stardust” — over the ensuing 15 years, Bowie decided to take the rights to those royalties and sell them.

With the help of banker David Pullman, Bowie securitized the royalty rights and sold them, in a private transaction, to Prudential Insurance Company. In return for the notes, which offered a 7.9% annual coupon over a 10-year period, Bowie received $55 million. Though dubbed “Bowie Bonds,” the notes were not actually bonds. It was a privately-placed securitization of music royalties, and it was the first of its kind.

At the time, the deal was viewed a win for both artist and investor.

See:

“The fact that Bowie retained the copyrights in his musical compositions was key in structuring the Bowie bonds deal, because the royalty income generated by the copyrights and received from music publishing licenses and record sales were the assets that backed the bonds, ” wrote Jennifer Sylva in an article in the Santa Clara High Technology Law Journal in 1999. “In addition to the tax advantages, Bowie gained the greater present value of the royalty payments for investment purposes by receiving the cash before the periodic royalty payments would have been made to him,” Sylva added, noting that getting a lump sum meant Bowie could diversify his income by making revenue-generating investments outside of the music industry.

And on the investment side, the deal seemed rock-solid. In February of 1997, Moodys Investors Service issued its first ever music royalty securitization rating and gave Bowie Bonds a grade of A3, indicating that the notes were of investment grade. Moody’s cited the “historical performance of the assets” as one of the reasons for its rating.

”This was a very good deal, offering a superior return compared to the risk,” Rick Matthews, then a spokesman for Prudential, told the New York Times in 1997.

Continue to the full article --> here

 

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit www.ncfacanada.org.

Share

Leave a Reply

Your email address will not be published. Required fields are marked *