Episode 11: How David Bowie Became a Financial Product

Tracy Alloway (0:03)

I feel like our intro music is ill-suited for this episode. Can we play something else?

That's better, okay, welcome to Odd Lots. It's Tuesday, January 19th. I'm Tracy Alloway, executive editor at Bloomberg Markets.

Joe Weisenthal (0:24)

And I'm Joe Weisenthal, managing editor of Bloomberg Markets.

Tracy Alloway (0:27)

So the world lost a musical great last week. I am talking, of course, about David Bowie, who died of cancer at the age of 69

This makes us all very, very sad. But instead of being sad on this episode, we are going to use it to celebrate Bowie's creative genius.

Joe Weisenthal (0:44)

So we're just going to play Bowie music for the next half an hour?

Tracy Alloway (0:48)

As much as you might like that, no. We are actually going to talk about his financial genius. And what I mean by that is, of course, we are going to talk about Bowie bonds.

Joe Weisenthal (0:56)

Oh, yeah, Bowie bonds. So I've heard them a lot, but what are they exactly?

Tracy Alloway (1:01)

So they're a type of bond, to be specific, a securitization that bundles up future cash flows from the royalties from music rights. And David Bowie was the first to do them.

Joe Weisenthal (1:12)

So a pioneer in ways beyond just music and style.

Tracy Alloway (1:16)

Oh, most definitely.

So joining us today from Los Angeles to tell the story of Bowie bonds is David Pullman. He's the banker who helped create these in the late 1990s. And in fact, Bowie bonds are sometimes known as Pullman bonds.

Joe Weisenthal (1:29)

I'm somehow not surprised that the media prefers to call them Bowie bonds.

I'm really excited about that. I think it should be a great conversation. One quick note, we're not just going to talk about Bowie bonds. Later in the episode, we're going to be talking about the aptly named Beige Book. Seen as one of the most boring economic releases in the world, but it actually has a fascinating back history. And just like we'll be talking to the father of Bowie bonds, we'll also be talking to the father of the Beige Book.

Tracy Alloway (1:59)

Right, Bowie bonds and the Beige Book. Let's start.

Joe Weisenthal (2:01)

Let's do it.

Tracy Alloway (2:02)

Let's do it.

David Pullman (2:04)

Thank you.

Tracy Alloway (2:12)

David Pullman, welcome to the show. Let's maybe start at the beginning. Can you tell us how you met Bowie and how these bonds kind of came about?

David Pullman (2:21)

Sure. Initially, Bowie had a very large catalog of songs that he had fought to, with his manager at the time, to revert.

Tracy Alloway (2:30)

Revert means he was gonna sell them or?

David Pullman (2:33)

No. What happened was, David, as a teenager, and as a manager, realized the importance of his work, so he negotiated very hard with the record companies to make sure they got recapture and or reversion of their record masters that he created on his original songs that he started in the 60s.

And then, continuing that going forward, which is extremely rare for artists to own their record masters, and he negotiated so hard for these, he had confidence in himself, in terms of his most artists, that if they'll fail, they give up their rights to the record masters, which is not at all atypical. Probably 99.9% of all artists don't have the record masters. And he owned his publishing and his writers' share, and they said, well, probably in the back of their minds, like, this kid is a teenager, he'll be nothing in five years, or whenever it would be going forward. So big deal if he gives back his record masters. And obviously, it was David Bowie and his manager, at the time, were betting that that would not happen, that he had confidence in himself that he was gonna be successful, and he took less upfront to be able to get that, which was a big statement about, as a teenager, to show how savvy and sophisticated he was. I mean, not many teenagers can know the word recapture or aversion.

Tracy Alloway (3:52)

So in the 1990s, he still has these master rights to his music, right? And he's trying to decide what to do with them.

David Pullman (3:58)

Correct. So we fast forward to that, and he's deciding what to do with them. And at the time, everyone was coming back to him, and it was also an opportunity for David to get, not only back his record masters, but he also had a publishing administration for his publishing and his writer's share. All the rights were coming back to him that he would have 100% control over.