Monday, 11 January 2016

The Man Who Sold the World ... Bowie Bonds

News broke this morning of the sad demise of British-born rock star David Bowie, at the early age of 69 following a lengthy battle with cancer.  Many readers will recall a favourite track, album or video clip -- but within the intellectual property community the first thought of many will be about the performer's eponymous Bowie Bond.


The Man Who Sold the World
Properly called a Celebrity Bond, since this investment device was not intended to be confined to use by Bowie, the bond in question was a commercial debt security, issued by a celebrity holder of well-known intellectual property rights (typically copyrights).  Bowie did not invent this instrument; it was conceived and executed by investment banker David Pullman. Operationally the bond enabled the celebrity to receive money from investors in exchange for the right to receive future royalty income earned by the works covered by the bond.  In Bowie's case a series of bonds, issued in 1997, related to the income from some 287 songs which were spread across 25 successful albums.  The typical duration of each bond was 10 years, with an initial interest rate of 7.9%, and there were also tax advantages for Bowie as copyright holder.

Sadly for many investors, the bonds were not the sure-fire success they had anticipated.  The growth of new means of delivering recorded music, and the ease with which digital files could be copied and shared, saw royalty income plunge.  By 2004 Moody's had relegated the Bowie Bonds to just above junk status. 

What message does this have for IP analytics? A steady stream of copyright royalties can never be guaranteed in the face of changes in public taste and style, but there is a recurring pattern of super-stars retaining a large and loyally-committed following regardless of current trends: Frank Sinatra, Bob Marley, Elvis Presley, Marvin Gaye and Buddy Holly are just a few examples.  On this basis, a bond based on the continued goodwill in David Bowie must have looked a safe bet.  However, anyone looking at the means of delivering recorded music in the late 1990s might just have spotted that new technologies were looming on the horizon. 

It is true that 1997 was still four years ahead of Apple's game-changing iTunes service, launched in 2001, and it is quite possible that the risk that as-yet untried technologies would replace consumers' deeply-ingrained and generations-old habit of collecting discs or tapes was a risk worth taking.  Where income based on copyright royalties is contemplated it seems almost counter-intuitive to stop and look at patents and patent applications -- but in this case such an exercise might have been worth the effort.

3 comments:

  1. BBC Radio 4 has just said that DB wanted to go for celebrity bonds since he was aware that things were changing and that his royalty income was going to dip.

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  2. It's the BBC 6 pm news. I think it will be available here once the programme finishes: http://www.bbc.co.uk/programmes/b06vjbxp

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  3. More from the BBC website http://www.bbc.co.uk/news/business-35280945

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