BMI’s Switch to For-Profit Business Model Explained – Billboard

After more than 80 years as a non-profit organization, BMI has decided to transform itself into a for-profit trading company. The move follows BMI — also known as Broadcast Music Inc. — hiring Goldman Sachs earlier this year to explore strategic opportunities.

While this exercise was wide-ranging and included the possibility that the radio stations that own the performing rights organization would sell the company, bidders either did not fetch the price the owners wanted or developed convoluted business plans for the future that did not appeal the BMI management, according to a Bloomberg report in August.

“We have learned a lot from the process, and the most important thing is to become more commercial in the future,” said BMI President and CEO Mike O’Neill told billboard. “It basically came back to the concept of how we can keep increasing the payouts to our partners [publishers and songwriters] in a changing environment.”

In a note to BMI employees, O’Neill said the business model change “will open up new and important opportunities for us to invest in our business and ensure we continue to fulfill our mission of supporting our subsidiaries and adding value know their music. And above all, our goal is to increase our distributions even more than before.”

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Or as he repeats billboard“Growth requires investment, not just maintenance… This new one [commercial] model will grow faster than BMI has grown in the past.”

Last year, BMI grew collections 15.6% to $1.573 billion and distributions increased 10.2% to $1.471 billion from last year’s totals of $1.361 billion and $1.335 billion, respectively. Dollar.

The business model change will not impact the Consent Decree with the US Department of Justice; The BMI’s Consent Decree, which provides more leeway for the BMI’s mandate than ASCAP’s Consent Decree, will remain in place, according to the organization.

To complete the transformation into a commercial enterprise, BMI will require investments to update technologies and introduce new ones; and improve and expand current services and products while adding new services and product features. Those efforts could mean collaborating with or buying other companies, O’Neill said. While there are costs associated with such moves, O’Neill says, “the beauty is that BMI has no debt, so we will be able to use the leverage to fund BMI’s planned growth initiatives.”

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To be clear, songwriters’ and publishers’ royalties are not used to fund new initiatives. Instead, proceeds from the new initiatives will be used to “reinvest in BMI,” says O’Neill billboard. He also noted that BMI’s current radio and television owners will not invest in BMI’s growth plans, but neither will they be paid dividends under the for-profit model that BMI will adopt.

On the other hand, if BMI, which is said to be worth more than $1 billion, had been sold as a result of Goldman Sachs’ earlier lawsuit — or if the PRO is eventually sold — broadcast owners would be the beneficiaries of that payment.

Regarding these new planned initiatives, O’Neill was vague other than to say that BMI would not move into mechanical licensing but could pursue growth opportunities outside of the United States. “There is potential for international expansion” under the new BMI business model. says O’Neill. For example, he cites unlicensed territories around the world as prime opportunities. While music licensing and collecting societies exist in many countries around the globe, there are still some areas in Africa and Asia that could use a licensing presence and/or a stronger presence.

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In the note to BMI staff referenced above, O’Neill added, “There is no question that the old model has served BMI well. But it has also held us back and limited our ability to invest wisely in the future. Our shift to profit gives us more financial flexibility and makes us more agile to do what we need to do.”

This shift will allow BMI to be at the center of industry change, says O’Neill, adding, “The way forward only works if it benefits our songwriters, composers and publishers. We absolutely understand that the growth of BMI will be the growth of our subsidiaries.”


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