Like the artist for whom they were named, it looks like “Bowie bonds” may undergo an image makeover with the changes in digital technology and embrace of legal song downloading. Bankers and financial analysts are once again looking at the bonds, which give investors a chunk of future earnings for intellectual property such as music, as a viable investment.
As recently as last year, Moody’s Investors Service lowered its rating on the Bowie bonds – which originally sold in 1997 and raised $55 million for
Moody’s cited lower than expected revenue streams for the securities “due to weakness in sales for recorded music,” according to the paper.
But that was before legal downloading – in particular Apple Computers’ iTunes store and the ubiquitous iPod – jump-started single-song sales.
Now, investors are beginning to whistle a different tune.
“Technology is bad for us in terms of illegal file sharing, but it’s positive in terms of 500 cable TV channels, iTunes and online ads,” David Pullman, head of the Pullman Group which created and launched the bonds, told the WSJ.
“Technology is disruptive for a short time, but the volume of sales is going to be so much greater.”
The Pullman Group is reportedly in talks with the heirs of reggae icon Bob Marley to create bonds based on his mega-selling song catalog. It also has acquired copyrights from several dozen other artists for songs dating to the 1940s in hopes of creating more bonds.
Other investor groups are doing deals lately in hopes of making the most of established artists’ catalogs. Most notably, hedge fund Fortress Investment Group famously bought out some $270 million in loans from Bank of America – a big chunk of which is backed by
New revenue streams from sources such as digital downloads, satellite radio and cell phone ringtones are relatively new but are growing fast, in terms of making up the recording industry’s recent lost revenues from illegal downloading.
Sales of ringtones alone are exploding; they are expected to rake in more than $700 million this year in the U.S., more than double last year’s figure.
“If more people figure out how to make money from music digitally, then you have a new, predictable revenue stream that you can securitize,” attorney Alan Dalinka told the WSJ.