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Bowie’s financial adventures

When I woke up on a Monday morning a couple of weeks ago only to hear that David Bowie had just passed away, confusion was the feeling that overshadowed me. It was an odd thing to hear, because despite not being my idol, I’m enough of a music enthusiast to know that he had released his latest album, Blackstar, just a few days earlier. As it turns out, it would prove to be not only his latest album, but also his last — his parting gift to the world, as spectacular as it was surprising. Indeed, much like the man himself.

Not only a musical innovator

Bowie’s influence reached far beyond the impact of his music, which remained on the cutting edge throughout his 40-plus-year career. Believe it or not, he was also a financial innovator. In 1997, he introduced an unusual marriage between the rock scene and Wall Street, when he issued bonds backed by the future revenue of the 25 albums he had recorded before 1990, paying a generous 7.9% interest rate over their 10-year life. This essentially allowed him to borrow more money upfront, made possible by the fact that Bowie — unlike many other artists at the time — owned the rights to most of his songs. The bond issue earned him 55 million dollars, which he reportedly used to buy back songs from his own catalogue, owned by his former manager. The bonds were tied to future royalties from hits, including ‘Changes’, ‘Space Oddity’, and ‘Ziggy Stardust’. These royalties would generate the cash flow that secured the bonds’ interest payments — at least, that was the idea.

It sounded like a good idea on paper, since securities backed by royalties allow artists to raise money without selling the rights to their work or waiting for years for payments to trickle in, but the value of the bonds began to decline as online file sharing and streaming services grew in popularity, thus decreasing album sales. This prompted a downgrade from A3 (the seventh-highest investment grade rank) to Baa3 (just one notch above ‘junk’ status). After 10 years, the bonds were paid off, the ratings were withdrawn, and the rights returned to Bowie. However, despite its limited success, it did actually kick-start the market for securitising intellectual property, which now includes film rights, pharmaceutical patents, and even restaurant franchises. Bowie Bonds represented one of the first instances of a bond that used intellectual property as the underlying collateral, and other artists soon followed Bowie’s lead, so it’s fair to say that he was a true innovator — not only in his music.

Far ahead of his time

You might argue that the timing of these bonds couldn’t possibly have been worse, since the 1990s saw the advent of the great age of the internet, but Bowie — being far ahead of his time — had already seen the bad weather coming. “I don’t even know why I would want to be on a label in a few years, because I don’t think it’s going to work by labels and distribution systems in the same way. 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’ time, 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 whether you think it’s exciting or not; it’s what’s going to happen.” If you take out the bit about copyright no longer existing today, he was right on the spot.

Other adventures

Bowie’s financial adventures didn’t end with his bonds. In 1998, he launched his own internet service provider, called BowieNet. This was conceived as a proto-social network, giving you a grand total of 5 MB of web space to share songs and creations with. To illustrate: that’s not even one song in today’s standards! Users ‘even’ got access to the concert streaming service Rolling Stone Network. Then, in the year 2000, he launched his own online bank: BowieBanc. This came with a year’s worth of BowieNet service, so that fans who banked their money with Bowie were rewarded with checks and bank cards displaying his face. Some serious marketing right there, but this was nothing less than revolutionary! After all, the service was launched at a time when only 11 million people used online banking at all. Robert Goodale, his business partner at the time, was excited about the project, saying that it opened the door for future ventures. “We wouldn’t rule out ‘Bowie’s Trading Desk’ if someone came to us with a good proposal,” he said. This never materialised, and the BowieBanc was short-lived, but they remain emblematic of Bowie’s desire to experiment with technology and push the limits of the music industry. Finally, Bowie also explored technology in ways that seem more familiar today. In 1999, he became one of the first major artists to release a new album for download over the internet, giving way to a whole new industry. The rest is history…

A work of art

Bowie was last seen in public in December at the premiere of his musical Lazarus, which bears the name of the song in which he supposedly besings his impending death. Given the many different musical styles that he explored throughout his career, Bowie was often called a chameleon, adapting to his surroundings at will. However, I think it’s even more accurate to say that he didn’t just adapt to his surroundings; he sometimes changed the very surroundings himself. His adventures in the financial world, despite not always being successful, are yet another proof of that. As Tony Visconti (his producer and long-time friend) so rightfully pointed out recently: “His death was no different from his life — a work of art.” Ain’t that the truth. David Bowie, 1947-2016. May he rest in peace.


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