The business of being Bowie


David Bowie was that rare kind of rock star: You didn’t have to like his music to admire him. Bowie was a business visionary like the ones who shaped Silicon Valley who just didn’t see the point of building companies: He was his own greatest product.

Bowie, born David Jones, died Sunday at 69, a bohemian who had amassed a vast fortune thanks in part to his many instinctive firsts. Cataloging them would probably be a futile exercise, but some are worth recalling in the same spirit as his fans now play his songs to remember him.

Bowie’s decision to get into rock music was the result of a conscious search for a way to blend business and creativity. Here’s how he described it in a BBC interview:

“I wanted to be thought of as someone who was very much a trendy person, rather than a trend. I didn’t want to be a trend, I wanted to be the instigator of new ideas. I wanted to turn people on to new ideas and new perspectives. And so I had to govern everything around that. So I pulled myself in, and decided to use the easiest medium to start off with — which was rock and roll — and to add bits and pieces to it over the years, so that by the end of it, I was my own medium.”

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That explains Bowie’s constant invention of new stage personae, but not his ability always to stay a little ahead of the curve.

In 1973, he killed off Ziggy Stardust, perhaps the most elaborate of his stage images; 29 years later, just as the rock- n-roll memorabilia boom was about to take off, he auctioned off the so-called “Woodland Creature” costume, also known as the Rabbit Suit — a Kansai Yamamoto hand-painted leather leotard he’d worn onstage during the Stardust tour. It ended up in the hands of Kate Moss, and it actually fit her: She wore it to receive an award on Bowie’s behalf in 2014.

The entity that arranged the auction was Bowienet, which Bowie started through his company, Ultrastar, in 1998 to “create an environment where not just my fans, but all music fans could be part of a single environment where vast archives of music and information could be accessed, views stated and ideas exchanged,” he said. For $19.99 a month, the site would become the Internet service provider for subscribers, providing 20 megabytes to build their own home pages, a “” e-mail address, as well as exclusive music and interviews. A cheaper $5.95 option was available to those who didn’t want to change their existing ISP.

The ISP angle was typical for the era but, in essence, Bowie was offering his fans a proto-social network four years before Friendster and five years before MySpace. That wasn’t the first tech innovation Bowie the trendsetter may have foreseen. He may well have had the idea for a universal all-you-can-eat music service — a so-called celestial jukebox — years before Napster, Spotify or Pandora got started.

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Paul Goldstein, currently the Lillick Professor of Law at Stanford University, popularized the term in his 1994 book “Copyright’s Highway: From Gutenburg to the Celestial Jukebox.” But he first heard the term in the late 1980s when he was a consultant for the Recording Industry Association of America. Bowie is one person credited with possible authorship of the concept (although back then it depended on a low-orbiting satellite rather than computer servers) along with Warner Music Group chief Edgar Bronfman Jr. But Goldstein, according to a 2011 profile of Spotify founder Daniel Ek, can’t remember who first told him about the idea.

Even if Bowie didn’t come up with the the Celestial Jukebox idea, he certainly knew well ahead of time that the music business was in for traumatic but ultimately liberating change. He told The New York Times in 2002 — a year when $12 billion worth of CDs was sold in the U.S. (that number was down to $1.9 billion in 2014 thanks to the digital revolution):

“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 by 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, 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.”

Now, of course, many musicians don’t see the point of working with big record labels. An increasing amount of music is self-produced and self-distributed or released by small niche firms that are more social clubs than revenue machines. Their lifestyle is often modeled on Bowie’s Berlin period; in 1976, long before hipster culture even emerged, he moved to an anonymous area of Schoeneberg, lived on the cheap and made atmospheric, low-energy music heavy on electronics.

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Around the same time, Bowie moved his tax residence to Switzerland. The Rolling Stones had beaten him to tax exile in 1972, but Bowie went on to develop a forward-looking financial savvy few in his chosen field could match. In 1997, when securitization was limited to relatively standard assets such as mortgages and car loans, “rock-n-roll banker” David Pullman persuaded the singer to securitize future revenues from his catalog.

Bowie needed the deal to buy back rights to his songs from a former manager who had taken advantage of him while the rock star was more interested in cocaine than finance. The securitized royalties came to be known as Bowie bonds (Pullman even registered that as a trademark, hoping to build a line of business in such instruments). In effect, Bowie sold his future revenues from 287 songs to Prudential Insurance, offering 7.9 percent interest (1.53 percentage points higher than 10-year U.S. Treasurys paid at the time) on the $55 million he received.

Although other artists including James Brown and the Isley Brothers also sold music-backed bonds, Pullman’s “Bowie bond” business never took off because the music business tanked. Future royalties are being sold even now, but none of the offerings are as expensive as Bowie’s catalog was. So Bowie’s deal with Pullman presaged both the disintegration of the traditional music industry (“take advantage of these last few years”) and the exotic securitization boom that helped bring about the global financial crisis (1997 was the year the first synthetic collateralized debt obligation was issued).

The “Bowie bonds” were downgraded by Moody’s to one notch above junk as industry revenues plummeted, but Prudential held on to them to redemption, and Bowie didn’t lose the rights to any of his songs, so the insurance company was likely paid in full from the revenues of the special purpose company that held the rights to the catalog for 10 years. Both Bowie and his investor did well out of the deal.

That wasn’t the case with all his ventures: For example, a cooperation with a U.S. bank on an online bank project, billed as “the Internet’s first private label bank,” didn’t work out. Even, though, was ahead of its time in 1999, when it was launched. The fintec boom would begin almost a decade later.

Bowie’s fans love him for other reasons, of course, but the near-supernatural business insights were products of the same brain that produced “Space Oddity” and “Heroes.” It’s no accident that Bowie, who rejected the vast majority of movie parts that were offered to him, agreed to play Nikola Tesla, the great innovator whose heritage was fully appreciated only after his death, in the 2006 movie “The Prestige.” He could see the future more clearly than most people.

Bowie once said he couldn’t imagine being remembered in 1,000 years. It’s hard to say if he was right about that, but it’s the kind of long-term thinking few others are capable of.

_ Leonid Bershidsky, a Bloomberg View contributor, is a Berlin-based writer. Mark Gilbert, a Bloomberg View columnist, is a member of the Bloomberg View editorial board.