Could US-based collection society BMI – which pays out over $1.3 billion to songwriters and music publishers annually – end up being sold to a new owner?
It’s an outcome that’s been thrust into the realm of possibility following the revelation that the licensing org has drafted in Goldman Sachs to take a strategic poke around its business.
The news that BMI (Broadcast Music Inc.) has “hired outside advisors to help us explore strategic opportunities” was revealed within an internal note sent to employees by CEO Mike O’Neill on Friday (March 4) last week, and now obtained by MBW.
Industry sources have subsequently confirmed to us that those “outside advisors” will be hired from Goldman Sachs.
O’Neill’s short note can be read in full below:
I hope you all had a great week. I’m reaching out today with an important and exciting business update for BMI.
As you are all aware, our industry is changing and growing rapidly, and music has never been more valuable. You’ve all seen the news. There is so much happening in our space, and we are in an unprecedented time full of opportunity. It’s important that we evaluate what this could mean for BMI, both now and into the future.
In order to do that, we have hired outside advisors to help us explore strategic opportunities that could further grow the value of our affiliates’ music and our business.
Growth for our songwriters, composers and publishers has always been our top priority, and we’re excited to explore ways to continue that momentum. While it’s too early to speculate on what might happen, we’re looking at all our options as long as they advance this mission.
“While it’s too early to speculate on what might happen, we’re looking at all our options as long as they advance this mission.”
As a result of all your hard work, BMI has grown consistently over the last five years, including during the global pandemic. Last year was our most successful ever, and we’re pacing well ahead of that. As such, we are going through this process from a position of strength.
I will keep you posted on any further developments and, as always, want to thank you for your continued dedication and the amazing job each of you do every day, along with the collective team effort we put forward on behalf of our affiliates.
Naturally, the “strategic opportunities” under consideration by BMI won’t necessarily lead to a sale: it could result in BMI raising money, selling a stake in its business, making acquisitions of its own, merging with another PRO – or other possibilities.
There’s also the prospect that Goldman Sachs advises BMI to aggressively expand into new areas of commerce.
Or that BMI is simply exploring contingency plans for the future, should it ever face the unlikely scenario of its biggest members (here’s looking at you, major publishers) extracting themselves from their relationship with the org, which would dramatically alter its financial model.
Ultimately, judging by O’Neill’s note, the hiring of Goldman Sachs by BMI seems to be driven by the latter’s keenness to better capitalize on the fast-growing value of music publishing rights in the open marketplace. (Case in point: Sting striking a $300m+ deal for his song rights with Universal Music Group the other week).
BMI’s own payouts to songwriters have impressively ticked up in recent years: the company distributed some $1.335 billion to rightsholders in the 12 months to end of June 2021, up by over $100 million YoY.
Right now, BMI’s business is limited to collecting performance royalties for US songwriters and publishers from a variety of sources (including radio/broadcast, streaming, live performances of songs, and public plays of music in bars/clubs/restaurants).
In the past, the org – which is run as a non-profit entity but is a taxed corporation – has indicated it would like to expand its business beyond this core income stream.
The scope of BMI’s activities, however, are constrained by an active Consent Decree within the United States.
In a 2014 submission to the US Department of Justice indicating why it thought the limitations of this Consent Decree upon its business should be loosened, BMI gave a few interesting clues as to where its operation could head in the future.
One key quote from that submission suggested that BMI was keen to expand its licensing capabilities more into the world of sync, especially in the digital realm.
“Historically, BMI has licensed only performing rights and, to a very limited extent, those synchronization rights needed to facilitate broadcasts,” read the submission.
“BMI should be permitted (at the option of the publisher) to license other copyright rights in musical compositions to music users (at the option of the music user), either as part of a single offering bundled with the right of public performance or à la carte.”
BMI submission to DoJ, 2014
“But multiple rights — performing rights, mechanical rights, lyric display, distribution and reproduction rights, and synchronization rights — are often necessary in order to disseminate music on the Internet.
“BMI should therefore be permitted (at the option of the publisher) to license other copyright rights in musical compositions to music users (at the option of the music user), either as part of a single offering bundled with the right of public performance or à la carte.”
Additionally, the 2014 submission called for BMI to be permitted to enter “bundling of rights” in the blanket licenses it grants broadcasters and digital services.
In essence, this could mean BMI licensing both a performance right for songwriters/publishers, in addition to a mechanical/reproduction right to music, to digital services.
Said BMI in its submission: “By entering the market for reproduction rights licensing, BMI would be introducing additional competition and consumer choice into a market currently relying primarily on the Harry Fox Agency, which is already bundling rights, or in-house efforts by publishers themselves. This increased competition, in turn, would incentivize service and product innovation in digital music.”
The Harry Fox Agency (HFA) was subsequently acquired in 2015 by a rival performance licensing org to BMI, the for-profit SESAC, which is headquartered in Nashville.
The final really interesting piece of BMI’s 2014 submission was its slightly timid suggestion that the Consent Decree should allow it the flexibility to own music rights.
Could this be a strategic move that Goldman Sachs now takes into consideration?
“Although BMI has no present intention to act as a music publisher or record label, it should not be prohibited under the consent decree from doing so in the future,” read the 2014 submission.
“Although BMI has no present intention to act as a music publisher or record label, it should not be prohibited under the consent decree from doing so in the future.”
BMI submission to DoJ, 2014
It added: “Should BMI identify an efficiency to be achieved through expanding its business into these fields, the consent decree’s existing line-of-business restrictions would serve only anticompetitive purposes. The consent decree’s current bans on BMI’s right to act as a music publisher or record label were put into place in 1966, and are out-of-date remnants of the Government’s concerns in the 1960s to protect ASCAP and its publisher-members from the broadcaster-owned BMI. Those concerns have long since disappeared.
“The possibility of any substantial market foreclosure by BMI’s entry into music publishing or recording is unrealistic.”Music Business Worldwide