Dire Straits riffs off Bowie with own bonds backed by music catalogue

Dire Straits riffs off Bowie with own bonds backed by music catalogue

British rock band Dire Straits, broken up for decades, has a multimillion-selling catalogue that’s about to be sliced up for investors.

The plan securitizes the royalties that are paid out every time a song from the “Money for Nothing” group is downloaded, streamed or played on the radio. It’s a similar investment to that introduced in the late-1990s with David Bowie’s own catalogue-supported “Bowie bonds.”

The backer this time around is U.S.-based Royalty Exchange, which says that Dire Straits’s catalogue earnings “are not only still growing, but are outperforming the growth of the broader music industry.” The ease of streaming clearly helps revive bands from the dusty archives, potentially luring new fans and allowing their original listeners to revisit the bands of their youth, music industry experts have said.

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But the Dire Straits buy-in may be out of the reach for the average fan. To be eligible, investors must have more than $1 million (£760,000) of investable assets aside from their home or an annual income of at least $200,000.

Small-stakes investors were also largely shut out when in 1997, David Bowie raised $55 million by selling part of the royalties, at a 7.9% rate of interest over the 10-year span of ownership, from 287 of his songs. They were all snapped up by the Prudential Insurance Company PRU, -0.19%  .

Royalty Exchange has said the Dire Straits back-catalogue earned $296,000 (£225,000) in the past 12 months. The music industry as a whole grew 14% from 2015 to 2017 but “the Dire Straits catalogue earnings grew 60% in that same timeframe,” it said. The projected 10-year annualized internal rate of return on the investment is 12%-15%, but is not guaranteed.

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The investment offer has come about because Dire Straits’ longtime former manager Ed Bicknell is selling off his share of royalties on the band’s catalogue, together with solo releases from members Mark Knopfler and John Illsley, the Guardian reported. That includes all six studio albums, including Brothers in Arms, the eighth best-selling album of all time in the U.K., plus U.S. hits such as “Sultans of Swing” and “Walk of Life,” along with music videos, live albums and best-of compilations.

Knopfler, the band’s lead singer and guitarist, is not involved in the investment, although “he is aware of it,” the company said.

The investment’s fortunes do hang on demand from new listeners, not just nostalgic replays. But that may be challenged if younger music fans think the songs are less “classic” and more just showing their age. For instance, “Money for Nothing,” which climbed to No. 1 in the U.S. in 1985, has bumped up against censorship in recent years. Lines in the song include “See the little faggot with the earring and the makeup … That little faggot got his own jet airplane.”

At the time, Knopfler, according to the Guardian, was quoted as saying: “The [point of view] in Money for Nothing is [from] a real ignoramus, hard hat mentality — somebody who sees everything in financial terms. I mean, this guy has a grudging respect for rock stars. He sees it in terms of, well, that’s not working and yet the guy’s rich: that’s a good scam.”

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