By now, you’ve heard the news that BMI is selling its interests to a shareholder group assembled by the private equity firm, New Mountain Capital. The sale has come with questions and consternation from songwriter advocacy groups — including the Music Artist Coalition, where I am a board member — and U.S. music attorneys. These songwriter advocates asked for (1) transparency about the sale and (2) a window of time after the sale that would allow unhappy songwriters to leave.
Most questions remain unanswered, and BMI has not opened a window for songwriters to leave. But the sale seems to be proceeding anyway, subject to “regulatory approval.” Given that, here’s what you should watch out for as a songwriter, a songwriter representative or someone who benefits from administration or co-ownership of a songwriter’s songs.
1. What Does This Mean?
In short, it means that BMI, which has been a not-for-profit organization since its founding in 1939, has turned into a for-profit organization and sold to a private equity company. Private equity companies acquire companies that they believe are undervalued in hopes of realizing a significant return on their investment in a relatively short period of time. This is called a “holding period.” While some private equity periods fall outside the average, in 2023 the average “holding period” for a private equity fund with a company it buys is just over seven years, which is the longest it has been in over two decades (in 2022 it was just under 6 years).
According to press reports citing sources, BMI in its first year as a for-profit entity has generated about $130 million in earnings before interest, taxes depreciation and amortization (EBITDA). In order for the shareholder group to be successful, it will need to continue to grow profits or EBITDA from where they are today. To do that, they have to increase revenue and/or decrease expenses. The concern underpinning the sale is that BMI has historically grown revenue in order to pass it on to songwriters and publishers. The only revenue BMI traditionally held back was to cover its overhead. Turning to a for-profit model with private equity owners means that BMI’s shareholders will expect to participate in the profits BMI generates (through distributions or leveraging BMI), which may mean that less of the revenue generated will be distributed to the writers and their publishers.
2. How Does This Compare With My Other Options?
That is one of the unanswered questions. BMI’s goal is that there will be no negative impact to writers and publishers. BMI says they have a “goal” (not a guarantee) not to withhold more than 15% of revenue for three years for profit and overhead, but this doesn’t apply to revenue from any new business lines the company now enters.
Without more specificity, it is hard to determine how this will be possible and whether songwriters will be negatively impacted. It would be great if BMI provided more details about how they will increase distributions and increase profits at the same time. Ideally, BMI would give their affiliates an audit right, so that songwriters and publishers can monitor whether BMI reaches its goal. Otherwise, it should continue to release its financials showing collections, distributions and EBITDA.
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3. How Will I Know?
Unfortunately, transparency is an issue. BMI’s latest public filing contains very little information on the state of the company and its revenue. In fact, they provide far less financial information than they did just a few years ago. Larger market players (like music publishers) may be able to compare and contrast the revenue they receive from one PRO vs. another and compare it with general growth trends of the music business and growth in the particular market segments that pay for performance (radio, film/TV, streaming, bars/restaurants, etc.).
We hope that songwriter advocacy organizations, in conjunction with music publishers, will be able to create and provide some level of transparency in the future for all songwriters. As a board member of the Music Artists Coalition, we have determined to make this a priority. Information is power, and songwriters who signed up for BMI under the premise of it being a non-profit should work to get as much information as possible. Ultimately, what matters is what you make as a songwriter – so watch your statements.
4. Do BMI Writers Share in the Sale Proceeds?
A little. In response to pressure from advocacy groups, BMI said that $100 million will be shared with its affiliates. BMI, in its sole discretion, will determine who gets it and how much, but it has agreed to use prior payment principles to do so. Affiliates includes both songwriters and publishers, and how much of the $100 million will be distributed to each of those two groups has not been disclosed.
The rest of the estimated $1 billion goes to BMI’s shareholders, which are broadcasters. For some broadcasters, this is a rebate of the performance royalties they have paid over the last few decades. This may seem particularly gruesome to songwriters who are also recording artists in the United States, which is one of the only countries in the world where broadcasters do not pay performance revenue on recordings.
5. What Do I Do Next?
If you’re a BMI member, stay informed. Ask questions, read your statements, follow the news and watch for reports on distributions starting after the second half of 2024. Talk to your co-writers at other PROs and compare payments. It takes four and a half months from the end of a quarter until you receive your accounting.
Check your agreements to understand when you can terminate membership, and when you can withdraw your songs. If you are unhappy with the results of the sale, you have the right to leave, but it can be tricky. BMI (like ASCAP) has one window during which you can resign as a writer (often every two years), but a separate, often completely different window (often every five years) during which you can terminate your publishing entity. You have to watch your windows and send your notice in advance, adhering to the timeframes allowed for resignations and terminations. And don’t forget that your songs stay with BMI while they are subject to “licenses in effect,” meaning that even when a songwriter leaves, their catalog stays behind for the term of existing licenses.
6. What Does Google Have To Do With All This?
We aren’t really sure, other than the fact that CapitalG (Alphabet’s independent growth fund) is listed at the end of the press release announcing the sale. Google owns YouTube, which has a history of underpaying songwriters — at least for its ad-supported tier. We will be watching this one closely.
Jordan Bromley leads Manatt Entertainment, a legal and consulting firm providing services to the entertainment industry for over 45 years. He sits on the Board of Directors for the Music Artists Coalition, an artist first advocacy coalition established in 2019.
