The immediate future of US rights society BMI, one of the five largest performance rights organisation in the world, is generating intense speculation and frustration, in equal measure, among the natural “affiliates” of the New York-based society — songwriter and music publishers.

Two main issues are debated: 1) the recent switch from “not-for-profit” to “for profit” of the organisation, and its consequences on the way the company will operate; and 2) the potential sale of BMI to a private investor, believed to be New Mountain Capital (BMC), for an undisclosed sum, rumoured to be in the region of $1.7 billion, although sources suggest that the price has gone down to $1.1bn.

In an October 13 letter to “BMI affiliates and industry partners” to present the company’s 2023 Annual Report, BMI CEO Mike O’Neill confirmed that the rights society has been “engaging in discussions with a potential new partner.”

Wide-ranging ripple effects

“[W]hile our conversations are ongoing and have been very productive, no deal has been signed at this time,” said O’Neill. BMI’s shareholders are media groups that have been associated with BMI since 1939, when the society was created by broadcasters in reaction to the perceived monopoly of ASCAP.

For Michael Eames, President of Studio City, CA-based PEN Music Group, given the size and importance of BMI in the overall CMO ecosystem, the society’s change to “for profit” and the potential sale are “tectonic shifts, the ripple effects of which could be wide-ranging.” Eames told Creative Industries News: “Creators and publishers have every right to be concerned and deserve answers.”

“The big question is who benefits from this, and the clearer answer is broadcasters and the executive leadership at BMI who will get paid [if there is a transaction], but the question is open for songwriters and publishers,” said an executive who represents songwriters. “They are the only people who stand to benefit from this transaction.”

Answer songwriters’ concern

Rell Lafargue, President and COO at NASDAQ-listed Reservoir Media, one of the largest independent music publishers, the situation with BMI is “frustrating.” The frustration, said Lafargue as well as other people interviewed by Creative Industries News, comes from what is perceived as “a lack of transparency” from BMI.

“Songwriters are concerned, they call us and ask what this means. But we don’t have the answers,” he said. As a global publisher, Lafargue said Reservoir would push PRS for Music writers to sign to BMI in the US rather than ASCAP but this is now put into question.

“We felt the reporting was better, the data was better and we would see our income [from BMI] grow more than ASCAP’s. We had a great relationship and they are very engaged with songwriters. But we have to rethink all of that now,” said Lafargue.

Grow BMI’s overall distributions

In his letter to affiliates, O’Neill addressed issues linked to BMI’s new business model as a “for profit” PRO. “There have also been a lot of questions recently about BMI and our business model transition, and I appreciate that our affiliates have a right to understand how they may be impacted by these decisions,” wrote O’Neill. “As I have shared, we changed our business model last year to invest in our company and position BMI for continued success in our rapidly evolving industry.”

O’Neill claimed that BMI’s mission “remains the same, to serve our songwriters, composers and publishers and continue to grow our overall distributions as BMI has done each year that I have been CEO.” This requires BMI to ” think more commercially, explore new sources of revenue and invest in our platforms to improve the quality of service” provide to affiliates.

“Understandably,” noted O’Neill, “much of the recent discussion has centered around the level of profit that BMI will take under this new model, and I have heard your feedback around the need to clarify this issue. So let me do just that.”

A modest profit margin

He continued: “Importantly, the strategy outlined below will hold true for BMI whether or not we move forward with a sale. As we look at the next three years of our business, our goal is to distribute 85% of licensing revenue to our songwriters, composers and publishers and retain approximately 15% to cover our expenses/overhead (which have historically run around 10%) and a modest profit margin.”

O’Neill also said that if BMI decides to “seek outside capital or borrow money to invest in new services and opportunities, any repayments will come out of our retained profits and not distributions.”

This paragraph from O’Neill’s letter is the one that caught people’s attention, in that it outlined precisely how much BMI was going to charge for its services and its margin. Basically, BMI said it would keep 15 cents on every dollar collected, but the 15% rate raised more than a few eyebrows as it would put BMI into the category of the mid-tier of rights societies, in between the very efficient ones, with admin costs around 10%, and the more expensive ones, around and above 20%. O’Neill said the 15% rate is “well below the margins taken by comparable for-profit businesses in our industry.”

A lack of clarity

Creative Industries News reached out to two of the United States main organisations representing music publishers — the National Music Publishers’ Association (NMPA) and the Association of Independent Music Publishers (AIMP) — to ask them to comment on the new situation created by BMI’s changes and its proposed 15% admin fee. The NMPA did not respond; AIMP declined to comment.

For Reservoir’s Lafargue, “there is not a lot of clarity about what it really means. We don’t know how this is going to affect revenue. We have to wait and see and hopefully they will collect more and pay us more quarter to quarter.”

Some also question the use of the term “goal” regarding the 15% rate. What if the goal is exceeded? And will BMI at some point hike the admin fee to cover costs and ensure enough margin to pay off shareholder? asked many publishers.

Communication is key

Eames said that BMI’s systems “have long needed an overhaul and if the ‘for profit’ status can help improve that and it results in more income being extracted for affiliates, then it remains to be seen whether the additional 5% being extracted for profit will be a positive or negative in the long run. It could well be a positive. But only time will tell and in the interim, communication is key. “

Like many other publishers, PEN’s Eames is annoyed by BMI’s lack of transparency, and concerned that the 2023 annual report refers multiple times to ‘industry-leading transparency” yet full-year collections for 2023 and results “are not broken out as they have been in the past.”

The annual report is indeed devoid of any figures, unlike in previous years where at least BMI provided its global collections and distributions and some of the key generators of income. The only financial information disclosed by O’Neill is that BMI’s distributions for the full calendar year of 2023, all under the new model, are projected to be up 11% compared to the corresponding distributions under the old model in calendar year 2022.

Another quarterly record

He added: “Not only did each quarter increase year-over-year, but our upcoming November distribution is forecasted to be over $400 million, another record that would make BMI the first PRO to ever distribute this high an amount in a single quarter.”

This issue of transparency is also felt outside the US, in particular among the societies regrouped within the International Confederation of Societies of Authors and Composers (CISAC), of which BMI had been an influential Board member for many decades.

BMI is no longer sitting at the CISAC Board, and has acquired the status of Client Rights Management Entities (RME) which is the new category established in 2020 for rights management entities that don’t meet the terms for full CISAC membership. The new status allows BMI to access the tools designed by the confederation, such as the CIS Tools, but the society no longer has a say in its strategy and policy.

Specific questions from songwriters

As a side effect, BMI will stop reporting its annual figures that were usually compiled into CISAC’s Global Collections Report (the next one being released on October 26), leaving potentially a void of some $1.5 billion in collections in North America unaccounted for. CISAC declined to comment on the situation created by BMI.

Another issue that concerns affiliates is the allocation of money from the sale of the society. “If the rumored $1.7 billion sale comes to fruition, whether or not any of that money will be shared with BMI affiliates — without whom BMI would have no value — continues to feel like a topic that is being avoided and that does not feel transparent,” said Eames.

Two months ago, various organisations representing songwriters — Black Music Action Coalition, the Music Artists Coalition, Songwriters of North America, the Artist Rights Alliance and SAG-AFTRA — asked in a letter to BMI some clarification about the potential deal, and got no answer from BMI to their specific questions, not least if the sale will produce a windfall that will end in the pocket of BMI’s affiliates and not simply in the wallets of BMI’s shareholders.

Reshuffle the PRO market

Susan Genco, who sits on the Board of the Music Artists Coalition, told Creative Industries News that she regrets that there has not been more efforts from BMI to discuss the new status of BMI with songwriters and the effects of the sale and the “for profit” status on their livelihoods. “Given the change in status, it would be fair for songwriters who are at BMI if they had an audit right and the ability to leave easily if BMI doesn’t reach their goals,” she said.

Genco, who is Co-President of The Azoff Company, admitted that she was biased as she works closely with Irving Azoff, the artist manager (Eagles, Fleewood Mac, Steely Dan, among others) who is also the founder of Global Music Rights (GMR), a boutique PRO which is a competitor to BMI. But she also believes that the situation requires more transparency from BMI.

The general consensus is that BMI will make efforts to keep its top songwriters, but that not all of them will stay, which could reshuffle the PRO market in the US and benefit smaller societies like GMR and SESAC, which could pick up many dropouts from BMI.

The impact on writers

The real concern, expressed by Genco and many executives Creative Industries News spoke to, is what will happen to the middle and lower class of songwriters. “The BMI transaction will be good for GMR and SESAC and bad for middle-class and lower-class songwriters,” said a music executive. “Drake is always going to be fine and Taylor Swift too, but the big concern is what will happen to the mid-tier of writers as opposed to the one percent.”

The source added that SESAC and GMR are small societies compared to ASCAP and BMI and the artists and songwriters they attract are usually at a stage of their careers where they can protect themselves.

Until now, up-and coming and low income songwriters had two options, ASCAP and BMI, which were obliged, as per the consent decrees with the Department of Justice, to accept them, but what will happen, asked the executive, when BMI will change its membership policy? “Unless you are Drake or Adele, you only have ASCAP and BMI, so what will happen if BMI no longer welcomes you?” asked the executive.

Ensure royalties continue to flow

Many speculate that BMI will cut deals and share some of the upsides of the sale and the profits with top songwriters and publishers to ensure they will stay with the society. “They were already doing it when they were not for profit to secure catalogues, and they will probably continue to do the same,” surmised one publisher.

“The market will determine whether or not BMI is doing better by publishers or songwriters,” said Lafargue. “The only way this is going to be OK is if royalties are going to continue to flow. Time will tell.”

One publisher said it will all come down to the project put in place by the buyer. “If the feeling is that the buyer is not a friend to creators and publishers, they’re going to have a hard time with that damage control,” said the publisher. “They [BMI] haven’t handled well the concerns expressed thus far by songwriter groups. But in the end, it all comes down to what goes into the affiliates pockets. If their money doesn’t go down and potentially increases, then folks will stay.  We’ll see.” 

Give BMI a shot

Eames said that amid all the concern, he keeps an open mind about the situation. “Mike O’Neill and his leadership team have certainly delivered to their affiliates over the years,” said Eames, “and assuming that the BMI team remains unchanged — not only at the top but in the mid levels in which most of us interact with BMI on a day to day basis —, then I think we owe it to them to give them a shot at delivering on what is being promised.  But that needs to be balanced with transparent communication and the confidence that tough questions are being addressed and not avoided.”