We all know that David Bowie was a musical pioneer, but a little-known story reveals that he was also a financial pioneer. Back in the mid-1990s, Bowie, his financial manager Bill Zysblat, and banker David Pullman devised a groundbreaking scheme that would allow Bowie to make money from his back catalogue and buy back the rights to the music that was rightfully his.
25 years ago, in 1997, Bowie traded asset-backed securities, which became known as ‘Bowie bonds’, which awarded investors a share of his future royalties for ten years. The securities were bought by the US insurance behemoth Prudential Financial for $55m (£38m) on the proviso that Bowie repaid his new creditors out of the future income made, giving them a fixed annual return of 7.9%.
To be qualified to do this, Bowie’s team brokered a deal with EMI which allowed him to sell bonds on the royalties for his 25 albums released between 1969 and 1990, including iconic titles such as The Man Who Sold The World, Ziggy Stardust, Heroes and Let’s Dance, as the Financial Times reports.
This deal allowed Bowie to use part of the money he received from Prudential to buy out his former manager Tony Defries with whom he had an acrimonious split in 1975. The split gave Bowie only a portion of the rights to his music, as Defries and his company MainMan shared up to 50%.
Although the split from Defries is credited with allowing Bowie to flourish creatively, it is also said that it caused psychological trauma to the ‘Space Oddity’ singer. He’d worked hard to create his music, and to only be rewarded a fraction of what was rightfully his, caused him to increasingly resent the Defries’ end of the deal as the years wore on.
Because of this hostility, Pullman, who was the main driving force behind securing the deal, dealt with Bowie and Defries separately. Later, he reflected: “It’s like a marriage. The flipside is Tony is very savvy. I didn’t realize he’s an attorney, not just a manager. Tony didn’t have anything to say about David. They helped each other early on. Tony taught him some of the things he learned along the way about owning things.” It is claimed that Bowie eventually bought Defries out for over $27m, but it has never been disclosed.
Bowie’s success with the bonds then opened the door for a whole host of other iconic musicians to do the same, including James Brown, Iron Maiden, The Isley Brothers and Holland-Dozier-Holland, Motown’s revered songwriting team.
However, the use of bonds would quickly lose its potency thanks to the rapidly changing landscape of the music industry, owing to developments in technology and the way music is consumed. In a famous interview with the New York Times in 2002, Bowie predicted the decline of traditional music sales, claiming that music as a commodity would become “like running water or electricity”.
Bowie, like with pretty much everything he did, was right. In 2004, the rating company Moody’s Investors Services downgraded the ‘Bowie bonds’ to the level above ‘junk’, the lowest rating. This was attributed to the changes in the music industry.
All’s well, ends well, though. Bowie finally got what we had been owed for so long, as did many other musicians who followed suit. It was an ingenious piece of business and one that grabbed the last colossal wad of cash before the music business changed forever.
Listen to ‘Space Oddity’ below.