NASHVILLE — In a keynote interview on the last day of the Music Business Association annual conference, SESAC CEO John Josephson easily sidestepped an early question on what he thought about the seemingly hip-hop-like feud that had recently evolved between ASCAP and BMI, over the latter’s decision to switch to a for-profit model and its subsequent acquisition by a private equity firm. But he wasn’t shy in touting the advantages his company offers songwriters and publishers over the competing U.S. performance rights organizations.
When BMI announced it was switching to a for-profit model and was acquired by New Mountain Capital, ASCAP took to social media reaffirming its commitment to pay out out all revenue it collects — minus overhead — and unlike BMI, not taking any profit.
“I have nothing to add to that conversation,” Josephson said in response to the feud characterization put forth by interviewer, Billboard editor at large Robert Levine.
Josephson nevertheless acknowledged that it will be interesting to watch BMI’s evolution of its business model, saying it may cause indigestion but he doesn’t think it will have a big impact. Beyond that, he said it will also be notable to see “what will happen to the beef between some of the large publishers and BMI.”
When Levine observed that some rights holders say it is tricky to leave some U.S. PROs, Josephson responded, “The great thing about the U.S. market is people can choose” a PRO.
But when Levine pointed out that it isn’t always easy to leave some PROs, Josephson agreed, pointing that there has been friction in moving from one PRO to another that has even resulted in arbitration. However, at SESAC, “we don’t view our writers and publishers as captives,” he said. “If they want to leave, they are free to go. We win by delivering better service and more money. If you do that, then you don’t have to make it difficult to leave.”
In focusing on SESAC’s future, Josephson said that the company has an infrastructure that serves as an intermediary between rights holders and businesses that want to exploit music and it has been looking for ways to leverage that capability. “We think we can double or triple our market share,” Josephson said.
It has already grown considerably through the acquisitions of 11 different companies, including the Harry Fox Agency, Audiam and Audio Network, within the last decade, he said. It also has a joint venture in Mint Digital Services with the Swiss collective management organization SUISA. All in all, its multi-pronged approach has made SESAC a global company, he added.
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Furthermore, he added SESAC currently has a “backlog of 7 or 8 companies” it is talking to now about acquiring. If deals are made, Josephson said SESAC can help such companies “grow at a faster rate than they already have been organically growing,” all of which will deliver “compound growth.
Beyond its PRO, SESAC divides its company into three segments, church music resourses, audio-visual licensing and music services for publishers and labels. Of the latter segment, which includes the aforementioned HFA, MINT, and Audiam, he said. “We are not interested in the long tail. We are interested in small publishers and small labels. Over time we want to broaden services that we offer to those customer groups.”
In turning to church music resources, he said Christian Copyright Licensing International (CCLI) has been “a great business for us.” In fact, he said, it was the “first extension of our business to be global,” with more than 50% of the church licensing occurring outside the U.S. He conceded that licensing to that segment is not without challenges, noting that churches tend to operate on a non-profit business and may expect to pay lower rates, “even though they are multi-million dollar commercial enterprises.”
As for SESAC’s audio-visual segment, he said it is a much bigger” business for the company that it is for ASCAP or BMI.
For the last seven years, SESAC has been majority owned by the giant private equity firm Blackstone, which he says has been a great relationship and a phenomenal capital source.
“They give us a lot of latitude to pursue our vision of where we want to take our business,” Josephson said. “It’s’ not like they tell us what we can do and can’t do. They think about what’s best for the longterm business.”
When interviewer Levine observed that most private equity often invest with the goal of cashing out within five years, Josephson said that the Blackstone fund that invested in SESAC has an investment goal of holding a company for “10-15 years, which is why we were interested in selling to them. They don’t think about what we can do to goose earnings this year,” and instead focus on the long-term.
When Levine expanded to the overall impact that private equity has had on the music business in recent years, Josephson observed that in the past private equity had sometimes disappeared from the music industry equation. But going forward, “as long as interest rates don’t go up further dramatically…private equity’s involvement in the music industry may wax and wane but I don’t think it will disappear.”
