Music

David Bowie Foresaw the Collapse of the Music Industry and Adjusted Accordingly

The singer sold "Bowie Bonds," which securitized his future royalties.

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The late, great David Bowie wasn't just a

Where are we now?
123RF/MikeWaters

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. 

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  1. Securitized? Sounds like that word got Bushified.

    1. Bowie securitized his royalties back in the late ’90s, so the “Bowie Bond” plan actually did kind of pave the way for the CMO boom of the early ’00s that climaxed in the 2008 crash.

  2. copyright, for instance, will no longer exist in 10 years

    Oops.

  3. I’m fully confident that copyright, for instance, will no longer exist in 10 years,

    It seems Mr. Bowie didn’t quite anticipate how strongly the vested interests would fight to protect their cash cow.

    1. Give him a break. When Orwell wrote 1984, he was off by a few years too.

    2. Eh. He was over-stating, but not ridiculously so. His point was that recording royalties weren’t going to be the cash cow in the 21st century they had been in the 2nd half of the 20th century and he wasn’t wrong. For people like himself who were not reliable chart toppers, he’s absolutely correct that touring is the only reliable revenue generator.

      1. True. Intellectual property is, hopefully, on the way out, both practically and legally. Unfortunately we are still stuck in a gray zone of arbitrary enforcement.

      2. Touring and selling your merch (t-shrits, etc.) really is the ONLY way to make money in music today. the people who actully buy music are mostly collectors and hardcore fans. No so hardcore and casual fans, meh, not so much. Ever wonder why shows and merch are so much more expensive than it used to be? Especially in the case of merch sales. That money goes straight into the artists pocket, its how a lot them eat and pay the rent without having to have a real job.

  4. Music itself is going to become like running water or electricity.

    I don’t know, would music be any worse if it was treated like a utility? Plus the feds could keep out all those cheap Canadian imports.

    1. Leave Devin Townsend out of this!

    2. Utility means monopoly. Monopoly means the death of creativity.

      Instead of predicting the end of music as we know it, did he predict the end of music worth listening to?

      1. I find more music worth listening to than ever – could be that it’s easier to find these days. I also think most of the artists I listen to probably have day jobs.

        1. No, it is much easier to find these days. think about it, Thanks to technology a band can record and put some music out for pennies on the dollar compared to the old days when the big labels ran everything and you ABSOLUTELY had to have someone’s ear at the record company if you were ever going to get a shot at making some music.

        2. I have a few modern favorites. A lot of bluegrass, although I’m no expert on the genre. I just let Spotify do its thing. OK Go is my go-to gym music. But podcasts have mostly replaced music in my library, and in part it’s because music doesn’t really engage me anymore. I don’t know if that’s a function of getting older or music sucking, or maybe it’s just picking up an interest in boring political discussions like a bad habit.

    3. Have you heard modern music? It’s exactly what one would expect of a public utility – overpriced, bottom-of-the-barrel quality, near impossible to find anything that doesn’t make one’s ears scream for an ice pick.

      The Celebration of Mediocrity was born July 4, 1986 – by 1991, the inversion was complete – mainstream music was now as mediocre as the crap that nobody in the 1970s and early 80s would listen to. Because it was crap.

  5. Speaking of being passed by on popular music, there isn’t a single act at this year’s Houston rodeo I would pay money to go see. That’s not quite true. I’d pay to be able to stand close enough to pelt The Band Perry and Florida-Georgia Line with beer bottles.

    1. I just looked up the lineup. I agree with your statement, there are none I would see, even if I did want to, getting tickets is almost impossible.

      AC/DC is coming to town – sold out in 15 minutes – I checked and cheapest was $75 for upper level (bad view). Now, those sames tickets are $200+ from the ticket brokers. Free enterprise.

      Anyway, too expensive for a concert for my blood.

      1. Not music, but Mrs. Dean checked prices on tickets for the Green Bay – Arizona game.

        No tickets for seats worth a damn for under $800. Mrs. Dean haz a sad.

    2. That lineup is awful. They used to have at least ONE act I could stand to go see.

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  7. the Isley Brothers and the state of Marvin Gaye

    Scotch distillers and some unknown nation founded by Marvin Gaye?!

    1. Marvin Gaye ain’t so much a place as a way of being.

  8. I’m impressed at Bowie’s foresight.

    For some other rock stars, financial planning is about how many kilograms of cocaine to buy to make sure he has enough for that night’s party.

    1. The Bowie Bonds showed real intelligence on his part. Very smart.

      1. An early form of “crowdfunding.”

        1. A novel method of shorting your own interests.

  9. Anyone else watch David Bowie: Five Years on Showtime? It was excellent.

    What caught my eye was Bowie’s business sense. After he established himself as an alt rock legend, he called up producers and said “I want to make some hits”. Let’s Dance made him rich.

    1. It’s unfortunate that once he got business sense his music turned to shit. Let’s Dance is a bore except for Stevie Ray Vaughan’s guitar playing. Heathen turned out OK, maybe up to the level of Pin Ups.

      Ah well, at least he got better output out of Ian Hunter and Mick Ralphs.

  10. Bowie wasn’t always so business savvy. By the mid-70’s, he’d done all these high production shows and he was about broke. He’d worked/drugged himself nearly to death and he had about a farthing left to show for it. It was then that he got smart, figured out how to do a show and make a profit, and he’s applied that going forward so that he was wealthy. No accusations of gouging or trying to sue ex-managers or anything. Just figured out how to provide what a consumer wants and earn a profit. Everyone was happy. Now if there was only a way to apply that to every aspect of an economy and we might be on to something. Call it the Free Something-or-other…

    1. And then he met Brian Eno, moved to Berlin, and basically invented U2.

      1. Had to ruin it, didn’t you?

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  12. Ashes to ashes, funk to funky
    We know Reason is a junkie.

  13. I wondered how Bowie became one of the richest musicians in the world. Now I know.

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