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 announced Tuesday.
BMI, along with its archrival ASCAP, is one of the leading performing rights organizations in the United States. They act as clearinghouses for legal rights that allow songs to be played on the radio, streamed online or delivered to retail stores, and distribute billions of dollars in royalties to songwriters and music publishers.
Terms of the agreement 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 its shareholder approval and “customary” regulatory review, and that it expects the deal to close in the first quarter of 2024.
According to the announcement, CapitalGA fund affiliated with Alphabet, Google’s parent company, also takes a minority stake in BMI.
BMI, normally a quiet financial engine of the music industry, has been the subject of heated debate among songwriters and publishers recently, as the organization changed its financial model and news reports emerged that it was seeking a buyer.
Founded in 1939, BMI has long been controlled by radio and broadcasting companies, but, like ASCAP, which dates back to 1914, it has operated on a nonprofit basis, collecting licensing fees and, after paying overhead costs, distributing the rest to its affiliated composers. and editors. These performing rights organizations do not own copyrights (the asset that has fueled a gold rush in recent music deals), but they typically have agreements to represent songwriters in this part of their business.
For its 2022 fiscal year, BMI raised $1.57 billion and distributed $1.47 billion, the most it has 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 catalog.
But last year, after first considering a sale, BMI said it would shift to a for-profit model. That generated concerns from composer groupswho was concerned that BMI’s profits for the new owners would come at the expense of writers’ royalties.
in a statement last month Published as part of BMI’s annual report, Michael O’Neill, BMI’s chief executive, said the company was shifting to a for-profit model to “explore new revenue streams and invest in our platforms”, and that BMI had the intention to distribute to its affiliates. 85 percent of the income he receives and retains 15 percent to cover costs “and a modest profit margin.” Historically, O’Neill said, BMI had kept only about 10 percent for overhead.
Any investment, O’Neill added, would come from retained earnings, not royalties.
In a statement Tuesday, O’Neill, who will remain CEO, said: “We are excited about the many ways New Mountain will accelerate our growth plan, bringing new vision, technological expertise and an excellent track record of strengthening all of which will help us build an even stronger future for BMI and our songwriters and publishers.”
In its announcement, BMI said $100 million in proceeds from the sale would be allocated to its affiliates, although it said it had not been determined how that money would be paid, although “in accordance with the company’s distribution methodologies.”
One reality that BMI’s new owners will have to face will be the complex regulatory structure that governs how BMI (and ASCAP) can operate. Under antitrust agreements with the Department of Justice, called consent decrees, that have been in place at both organizations for more than 80 years, BMI and ASCAP are limited in the services they can provide and the fees they can charge licensees. licenses, such as radio or online stations. music services.
Those agreements have been periodically reviewed by the federal government, but have not undergone substantial changes in many years.
New Mountain Capital, whose other investments include Citrin Cooperman, a financial advisory firm that has played an important role in the recent spate of catalog deals, he said Tuesday he was eager to expand BMI’s business and help “modernize” its operation.
“While the music industry has undergone a technology-driven transformation over the past two decades,” said Mike Oshinsky, principal at New Mountain, “the music infrastructure, including the performance rights ecosystem, has been slower to transform.” ”.
