Selling Stock in the Man Who Sold the World

Would you buy a used career from this man?

David Bowie asked that question recently, and the answer came back a solid yes--to the tune of $55 million. That was the take for “Bowie Bonds”-- privately held securities bought by institutional investors, with Bowie’s music catalog as collateral.

That’s a lot of Ziggy $tardust.

“It’s very creative investment and he’s dealing with very sophisticated investors who have decided it’s worth the risk,” says Don Engel, a prominent music business attorney who has not yet seen full details of the deal. “I would think there are other artists in his position who might be interested in doing the same thing.”

So what next--Stones Securities? Elton E Bonds? McCartney Mutuals? If Bowie’s catalog, which sells about 1 million albums annually worldwide, can raise that much, how much could those bigger-selling artists be worth?

Don’t call your broker just yet.

“It’s not as easy a transaction as it reads,” says Bill Zysblat, Bowie’s business manager and the primary architect of the arrangement. “There aren’t that many artists who own their own copyrights and master tapes, though I’m sure a lot of other people are looking at this now.”

Ownership of master recordings is generally retained by the record company that releases an act’s recordings. The fact that Bowie does own his masters outright provided the impetus for the bonds sale as his current distribution deals with Rykodisc in the U.S. and EMI Music in the rest of the world were coming to a close. While negotiations were underway for a new global deal with EMI, which takes effect in June, Zysblat proposed the bonds offering as a way to get all the value in hand up front, rather than have much of it come in over the term of the contract.

“Having more front money gives more opportunity to earn more money from investments,” he says.

What the buyers get is a relatively risk-free investment earning 7.9% interest. The Bowie catalog is expected to hold its value for some time and his royalties assets are being put in trust to protect them from death or divorce.

Cliff Burnstein, co-manager of Metallica--whose catalog sells much more than Bowie’s but is not owned by the band--says he is studying the deal, but at this point is dubious.

“What would you invest [the raised money] in that will get you better than what you have to pay back?” Burnstein wonders. “A tour or a movie are not risk-free at all. No matter what you do, you’re rolling the dice.”