Music licensing giant BMI sold to private equity firm

Music licensing giant BMI sold to private equity firm

BMI, the giant music licensing agency that represents hundreds of thousands of songwriters including Taylor Swift, Dolly Parton, Kendrick Lamar and Lady Gaga, has agreed to sell itself to New Mountain Capital, a private equity firm, the organization said Tuesday. declare.

BMI, along with its rival ASCAP, is one of the major performing rights organizations in the United States. They act as a clearinghouse for the legal rights that allow songs to be played on the radio, streamed online or piped into retail stores – and distribute billions of dollars in royalties to songwriters and music publishers.

Terms of the deal between BMI and New Mountain were not disclosed. In its announcement, BMI, whose full name is Broadcast Music Inc., said the sale is subject to approval by its shareholders and “customary” regulatory review, and it expects the deal to close in the first quarter of 2024.

According to the announcement, capitalismA fund affiliated with Google’s parent company Alphabet is also acquiring a minority stake in BMI.

Normally a quiet financial engine of the music industry, BMI has recently been the subject of some heated debate among songwriters and publishers, as the organization changed its financial model and news reports emerged that it was looking for a buyer. doing.

Founded in 1939, BMI has long been controlled by radio and broadcasting companies, but, like ASCAP – which has been around since 1914 – it operates on a not-for-profit basis, collecting license fees and, in turn, covering overhead costs. After getting paid, it distributes the rest to its affiliated songwriters. And publisher. These performing rights organizations do not own copyrights – the asset that has inspired the recent gold rush in music deals – but usually have deals to represent songwriters for this part of their business.

For its 2022 fiscal year, BMI collected $1.57 billion and distributed $1.47 billion, the most it has ever paid out in a single year. On Tuesday, BMI said it represents more than 1.4 million songwriters and music publishers, and has about 22 million compositions in its catalogue.

But last year, after considering a sale for the first time, BMI said it would switch to a for-profit model. He Concern expressed by lyricist groupsJoe was concerned that BMI’s profits for any new owner would come at the expense of authors’ royalties.

one in last month’s statement Released as part of BMI’s annual report, BMI chief executive Michael O’Neill said the company has switched to a for-profit model to “explore new sources of revenue and invest in our platforms” and that BMI It receives 85 percent of the income, and keeps 15 percent to cover costs “and a modest profit margin.” Historically, BMI only set aside about 10 percent for overhead, O’Neill said.

Any investment will come from retained profits, not royalties, O’Neill said.

In a statement on Tuesday, O’Neill – who will remain chief executive – said: “We are excited by the many ways in which New Mountain will accelerate our growth plan, an excellent combination of new vision, technical expertise and strengthening of the businesses Will bring track record.” All of this will help us build an even stronger future for BMI and our songwriters, composers and publishers.

In its announcement, BMI said the $100 million in proceeds from the sale would be allocated to its affiliates, though it said how that money would be paid had not been finalized “while taking into account the company’s distribution practices.” was given.

One reality for BMI’s new owners will be the complex regulatory structure that governs how BMI – and ASCAP – can operate. Pursuant to antitrust agreements with the Department of Justice, called a consent decree, that both organizations have had in place for more than 80 years, BMI and ASCAP are limited in what services they can provide and the rates they can charge. Can be taken from licensees like radio stations or online. Music Services.

Those agreements have been reviewed from time to time by the federal government, but no significant changes have been made to them in many years.

New Mountain Capital – whose other investments include Citrin Cooperman, a financial advisory firm played a big role in the recent rush into catalog deals — said Tuesday he was eager to help expand BMI’s business and “modernize” the way it works.

“Although the music industry has undergone technology-driven change over the past two decades, change in the music infrastructure, including the performance rights ecosystem, has been slow,” said Mike Oshinsky, director of New Mountain.

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