David Bowie Foresaw the Collapse of the Music Industry and Adjusted Accordingly
The singer sold "Bowie Bonds," which securitized his future royalties.
The late, great David Bowie wasn't just a
gender-bending "shape-shifter and a persona-generator," he was the rare rock star who not only survived the ravages of drug addiction but also had enough sense of self-preservation to diversify his economic portfolio before the music industry imploded.
In 1997, under the guidance of banker David Pullman, the creation of "Bowie Bonds" allowed the musician to sell the royalty rights to the 25 albums he recorded before 1990 for a lump-sum of $55 million, with the buyer of the bonds receiving all future revenue brought in by Bowie's back catalog plus 8% interest. At the time, Moody's blessed the bonds with a quality A rating.
As noted in a 2004 Reason article by Gene Callahan and Greg Kaza:
From Bowie's point of view, his financial future was too dependent on the vagaries of his popularity. By selling some of his royalty income to others, Bowie was able to diversify his investments. (We assume that he did not spend the entire $55 million on a huge shopping spree for his supermodel wife Iman.) He reduced the risk that a major shift in the public's musical taste would leave him a pauper. Meanwhile, investors who had not previously had any stake in the sales of Ziggy Stardust could diversify into that area and earn a decent interest rate while doing so.
In 2002, the erstwhile Thin White Duke presciently told the New York Times:
The absolute transformation of everything that we ever thought about music will take place within 10 years, and nothing is going to be able to stop it. I see absolutely no point in pretending that it's not going to happen. I'm fully confident that copyright, for instance, will no longer exist in 10 years, and authorship and intellectual property is in for such a bashing.
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.
Although the idea of Bowie Bonds was emulated by artists like James Brown, Joan Jett, the Isley Brothers and the state of Marvin Gaye, their value was not built to last. Peter Campbell of Financial Times writes of the downfall of music as a commodity:
But the rise of peer-to-peer music sharing service Napster blew a hole in copyright legislation, causing artists and the industry to fear for their financial future — and resulted in Bowie Bonds hitting an all-time low.
In 2004, with physical CD sales being cannibalised by piracy and the rise of online music services, Moody's cut the credit rating of Bowie Bonds to BBB+ — one notch above junk status.
The credit agency blamed "lower than expected revenues generated by the assets due to weakness in sales for recorded music" at the time.
In the prevailing spirit of today, in which music fans all over the world have taken to social media to freely share their favorite Bowie tunes (which were once only available as an expensive physical commodity), check out the link below where Bowie sings of "The Man Who Sold the World," long before he sold futures of his past.