Leonid Bershidsky and Mark Gilbert
David Bowie was that rare kind of rock star, but his business acumen was also rare.
While the Rolling Stones had beaten him to tax exile in 1972, Bowie went on to develop a forward-looking financial savvy few in his chosen field could match. In 1997, when securitization was limited to relatively standard assets such as mortgages and car loans, "rock-n-roll banker" David Pullman persuaded the singer to securitize future revenues from his catalog.
Bowie needed the deal to buy back rights to his songs from a former manager who had taken advantage of him while the rock star was more interested in cocaine than finance. The securitized royalties came to be known as Bowie bonds (Pullman even registered that as a trademark, hoping to build a line of business in such instruments). In effect, Bowie sold his future revenues from 287 songs to Prudential Insurance, offering 7.9 percent interest (1.53 percentage points higher than 10-year U.S. Treasurys paid at the time) on the $55 million he received.
Although other artists including James Brown and the Isley Brothers also sold music-backed bonds, Pullman's "Bowie bond" business never took off because the music business tanked. Future royalties are being sold even now, but none of the offerings are as expensive as Bowie's catalog was. So Bowie's deal with Pullman presaged both the disintegration of the traditional music industry ("take advantage of these last few years") and the exotic securitization boom that helped bring about the global financial crisis (1997 was the year the first synthetic collateralized debt obligation was issued).
The "Bowie bonds" were downgraded by Moody's to one notch above junk as industry revenues plummeted, but Prudential held on to them to redemption, and Bowie didn't lose the rights to any of his songs, so the insurance company was likely paid in full from the revenues of the special purpose company that held the rights to the catalog for 10 years. Both Bowie and his investor did well out of the deal.
That wasn't the case with all his ventures: For example, a cooperation with a U.S. bank on an online bank project, billed as "the Internet's first private label bank," didn't work out. Even Bowiebanc.com, though, was ahead of its time in 1999, when it was launched. The fintec boom would begin almost a decade later.
Bowie's fans love him for other reasons, of course, but the near-supernatural business insights were products of the same brain that produced "Space Oddity" and "Heroes." It's no accident that Bowie, who rejected the vast majority of movie parts that were offered to him, agreed to play Nikola Tesla, the great innovator whose heritage was only fully appreciated after his death, in the 2006 movie "The Prestige." He could see the future more clearly than most people.
Bowie once said he couldn't imagine being remembered in 1,000 years. It's hard to say if he was right about that, but it's the kind of long-term thinking few others are capable of.
