The Return Of “Bowie Bonds”
Some of you old time music aficionados may remember back to 1997 when David Bowie became the first artist to sell investment-grade bonds in return for a share of his future royalty earnings. Investors effectively bought a piece of Bowie up front, and received a 7.9% interest rate over 10 years until the bonds matured in 2007. Bowie used the continued royalties he was earning from performance and publishing rights to pay off the investment, and everyone in the deal made out pretty well.
Now Dire Straits is preparing to issue catalog bonds the same way David Bowie did. Dire Straits is working with a US-based securities packaging company called Royalty Exchange to issue the bonds later this year. (Insert the Money For Nothing guitar riff here.) My guess is we’ll start to see more older artists sell bonds against future earnings as a way to lock down payouts from their catalogs. When you consider that artists are still only making 12% of all the music industry’s revenue, you can’t blame them for looking for alternate ways to get paid.