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David Pullman invented a new form of financing. He turned rock stars into
companies. Interview by Jamie Doward
Sunday June 3, 2001
The Observer

David Pullman wants to make Roger Daltrey an offer. David Pullman wants to
make Pete Townsend an offer. But then David Pullman pretty much wants to
make every established rock star on the planet an offer. Even Madonna, it is
rumoured, once took a call from Pullman's plush office in New York's Avenue
of the Americas.
Madge's interest in hearing what Pullman had to say should perhaps be no
surprise, given that the banking whizz kid is offering the world's biggest
superstars the chance to have tomorrow's riches today. Townsend and Daltry
may want to rethink their wish to die before they get old.

So how does Pullman's alchemy work? Put simply, he treats stars like
companies. Pullman secures financing from a range of investors, who pay
artists for the right to 'own' their back catalogues for a set number of
years. In return, Pullman, who takes a commission, issues the investors with
bonds that pay interest - usually around 8 per cent a year - from the
royalties generated by the back catalogue. And, because the artists receive
the money upfront, and effectively as a loan, they get the sum tax-free
while retaining copyright.

Pullman, 39, who has swum at the more esoteric end of the bond market ever
since he graduated from the Wall Street nursery, admits such deals are an
exotic form of financing, but he believes they represent the future for
songwriters and stars. David Bowie was the first star to be won over by
Pullman's slick sales talk.

'He's someone who's very savvy and picks up on new ideas. He got it
instantaneously and he wasn't someone who was afraid to fail,' Pullman says,
sitting back in a padded chair in the lounge of a Kensington hotel. A
cross-country running nut, he comes to London a lot these days to attend
music awards and to network. He saw Daltrey and Townsend at a recent
ceremony and his mind is racing with possibilities involving the Who two .

Pullman secured a $55 million securitisation deal for Bowie and it is clear
the artist holds a special place in his wallet. 'Bowie had different phases
and different albums. He's almost like Picasso, who went through four
phases. Bowie had 30 hits in the US and 40 in Europe. Not many people have
done such a thing.'

The Bowie deal was front-page news when it broke in 1997. Many were
incredulous. There was a distinctly sniffy air on Wall Street as the more
sober heads in the New York banking community attempted to comprehend that
Ziggy Stardust's opus was effectively a form of intellectual property that
could be exploited like any other commodity.

'When the deal broke in the Wall Street Journal, I was trying to keep it
back. The paper quoted this bond investor who said "are you kidding me?" But
by 10 that morning we had 50 investors on the phone wanting in.'

Euromoney named it deal of the year. Wall Street took notice. 'At first they
thought we were crazy. Then three months later they thought it was a pretty
good idea. Six months later it was everybody else's idea. If I had failed it
would have just been my idea.'

Following the Bowie deal, Pullman went on to arrange a $30m securitisation
deal for Holland, Dozier and Holland, the Motown songwriting trio
responsible for more than 70 hits including 'Stop in the Name of Love' and
'Ain't Too Proud to Beg'. A few months later the Pullman Group secured an
eight-figure deal for Ashford & Simpson, who wrote hits such as 'Ain't No
Mountain High Enough' and 'Solid'.

Then came a $30m deal with James Brown, the godfather of soul, closely
followed by a deal with the Isley Brothers. Last year Marvin Gaye's back
catalogue received similar treatment. Another deal will be signed -
involving 'a well known group of artists' - at the end of the summer. The
sceptics have so far had to eat their words. 'Our bonds are monitored every
month by the ratings agencies and they're at the 'single A' level, which is
the highest. The fact that we've been able to maintain those ratings is
great. They've actually overachieved what we expected on a cashflow basis.'

Several other banking firms have tried to copy Pullman's success. Nomura
Capital Entertainment has structured a $15m deal for Rod Stewart. There is
also an unseemly legal squabble with Prudential Securities, which Pullman
alleged tried to steal his ideas. Nevertheless few have become serious
rivals. 'Every one and their brother's tried to copy us. But they've all
tried and passed. People haven't been able to pull it off.'

This is partly because securitisation is extremely complex, especially when
it involves trying to work out just how many times the world will want to
listen to the likes of 'Lets Get It On' or 'Sexual Healing' over the next 15
years. And such deals take months to negotiate. It sounds an exhaustive
process. 'We break the back catalogue down song by song. Then we break it
down by domestic versus foreign sales. Then we work out whether the earnings
streams come from radio or TV and cable commercials or from film record
sales or from compilation discs. It sounds easy, but it takes months to do.'

But what if the royalties generated by, say, Bowie's back catalogue aren't
enough to pay bond holders sufficient interest? After all, musical tastes
change. 'That's all every ratings agency ever says,' says Pullman
dismissively. 'But it's counter-intuitive. A song like James Brown's "I Feel
Good" earns more today than it did when it was a hit in 1966.'

But Pullman doesn't just want to concentrate on older artistes. 'The older
the better, but as we get into more current music like the Spice Girls or
Alanis Morrissette, that takes a lot more astuteness on our part to
recognise what the value might be.'

Another problem is that websites like Napster, which offer music downloads
for free, undermine the value of back catalogues. Pullman believes the music
industry will find a way to combat the threat from the web, but others are
not so sanguine.

Not that Pullman bonds are confined just to musicians. 'We've done it for
literary estates like that of John Steinbeck and for cartoon characters,
like Casper the Friendly Ghost. Then there's sources from hi-tech or
bio-tech streams. It could be from a gene or a medical device.'

Sports stars, too, may find themselves talking to Pullman. 'Within the next
five years there'll be over 100 $100m contracts in the sports world. Those
would be the ones we'd get involved in.'

Pullman seems to think even journalists could one day be his clients.
'Journalists are going to own their stories one day as publishing goes to
the web. You'll own your story: every time it's used you'll get paid.'

Pullman, a staunch patron of the New York art scene, says this is all about
'putting the creators first'. The more prosaic might say it's about making a
lot of money. When asked whether the songs of Marvin Gaye or James Brown
could be as valuable as the finest works of classical art, Pullman admitted
as much: 'More so,' he replied. 'They have cashflow attached to them.'

Profile

Name David Pullman

Age 39

Title Founder and chief executive, the Pullman Group

Other directorships Sits on the junior committees of the Museum of Modern
Art, the Guggenheim Circle and the Whitney Contemporaries

Hobbies Cross-country running, music, the arts

Career history Graduated from University of Pennsylvania and then studied at
Wharton Graduate School of Finance. Went on to work for Prudential Bache,
Cantor Fitzgerald and Gruntal.

Favourite artists Marvin Gaye, Sting, Annie Lennox

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