BMI Sold to New Mountain Capital

[Y2kTheNewOldies]

BMI Sold to New Mountain Capital

BMI’s transition to a for-profit model moved forward Tuesday as a New Mountain Capital-led group acquired a majority investment in the organization.

variety.com

Here is the group that handles music royalties go to a new investment group.

BMI’s transition to a for-profit model took the next logical step forward Tuesday as a New Mountain Capital-led shareholder group announced a majority growth investment in the organization. Along with ASCAP, which remains not-for-profit, BMI is one of the two largest performing rights organizations in the U.S.; the deal is expected to close by the end of the first quarter of 2024.

Mike O’Neill, BMI’s president & CEO, will continue to lead the company, along with his leadership team, following the closing, according to the announcement. New Mountain will acquire the company from the shareholders who own currently own it; those shareholders must approve the sale.




Terms of the deal were not disclosed, but New Mountain announced that BMI’s current shareholders will allocate $100 million of the sale’s proceeds to songwriters and publishers affiliates “in recognition of [their] creativity.” The payout will follow to BMI’s distribution model: “The allocation of those funds, while not a distribution of royalties, will be in keeping with the company’s distribution methodologies, which are based on performance levels over a set period of time. BMI will work to finalize an equitable payout plan for this allocation in the coming months,” the announcement reads.

 

[Oldie919]

Will this company retain the BMI logo....or will it be known as New Mountain Capital??

 

[inari]

Will this company retain the BMI logo....or will it be known as New Mountain Capital??

The BMI name has been around for almost a century and has worth and meaning. I doubt they would throw that away.

 

[davideduardo]

Will this company retain the BMI logo....or will it be known as New Mountain Capital??

Investment organizations buy running companies but they don't change their name unless the investment is to expand an already owned company.

The best example is Warren Buffet's investment company, Berkshire-Hathaway. They own Fruit of the Loom, Benjamin Moore, American Express, Ben Bridge Jewelers, See's Candies, Dairy Queen, and full or partial ownership in dozens more. They don't change the name... they try to improve operations and profits.

 

[CTListener]

Does BMI still stand for Broadcast Music Inc., or is it like ESPN or CBS, which no longer stand for Entertainment and Sports Programming Network or Columbia Broadcasting System, but rather exist just as initials?

 

[davideduardo]

Does BMI still stand for Broadcast Music Inc., or is it like ESPN or CBS, which no longer stand for Entertainment and Sports Programming Network or Columbia Broadcasting System, but rather exist just as initials?

Their own site says "BMI and even in the short paragraph about its history, it refers only to BMI.

I don't know the date, but at some point they decided they needed to remove "broadcast" from the name since they collect rights for live performances, music in stores and commercial locations, etc. which are not "broadcast" uses.

 

[Markxxx]

I assume they will run BMI as a non-profit still?

 

[davideduardo]

I assume they will run BMI as a non-profit still?

Nope. It will be a for-profit company. Look at the link in the original post which speaks of a "move to a for profit model".

 

[TheBigA]

It's a long story, but BMI was founded in part by the National Association of Broadcasters in 1939. In that year, the only music rights organization, ASCAP, decided to raise its rates. The broadcasters felt ASCAP needed some competition. So they started to sign writers and license music. ASCAP had a lot of the best-known writers, but they'd overlooked a lot of genres, such as country, blues, and jazz. Writers who had been unable to get represented by ASCAP found a willing home at BMI. The fact that radio stations and networks played their music gave it a lot of visibility. While broadcasters were part of the founding, they weren't involved at all in operations. This is likely a further step away from the original intent of BMI.

Keep in mind that in the 1930s and 40s, the two main radio networks were owned by companies that owned the two biggest record labels. There was a close association between radio and records. That relationship began to break in the 1980s. RCA was sold to GE, and GE sold RCA Records to a German company BMG. CBS sold Columbia Records to Sony. Around that time, ABC Records merged with MCA that ultimately became Universal, owned by French company Vivendi. So things have really changed in the last 30 years.

 

[Kelly A]

If recent history is any indicator of private equity owners, expect significant expense cuts at BMI followed by the sell off of the most valuable assets and shut-down of less valuable divisions, until the company is no more.
R.I.P.

 

[TheBigA]

If recent history is any indicator of private equity owners, expect significant expense cuts at BMI

I do some business with BMI. The songwriters had to vote on this for it to happen. BMI doesn't exist without them.

My sense is that music users will be paying more for BMI songs at the next negotiation. But sure, I expect expense cuts, particularly with the human monitors they use to calculate song plays. Mediabase already has the technology to do that work electronically. BMI has been a bit behind in technology, so some investment there may lead to staff cuts.

 

[Theater of My Mind]

Can someone explain, in very simple terms, how this company has transitioned from a nonprofit to for-profit model?

The profit has to come from somewhere. Will they be holding back a fee from the songwriters? Coming up with ways to deny payments like health insurance companies do? Jacking up rates charged to radio and streaming companies while keeping payouts to their writers stagnant?

If it's not coming from the proceeds that would have been paid out to the writers under the nonprofit model, where else could it come from?

 

[davideduardo]

Can someone explain, in very simple terms, how this company has transitioned from a nonprofit to for-profit model?

The profit has to come from somewhere. Will they be holding back a fee from the songwriters? Coming up with ways to deny payments like health insurance companies do? Jacking up rates charged to radio and streaming companies while keeping payouts to their writers stagnant?

If it's not coming from the proceeds that would have been paid out to the writers under the nonprofit model, where else could it come from?

I have seen some comments that BMI has a need for capital to update its monitoring and compliance systems and that is not possible in the non-profit realm. The new owner will have to invest in new systems, and the expectation is that the long run result will be more revenue. But the non-profit model couldn't pay for it, particularly at the high interest rates of the last several years.

 

[TheBigA]

Can someone explain, in very simple terms, how this company has transitioned from a nonprofit to for-profit model?

I don't think they're there yet. But a lot of your questions are answered in the linked article.

If it's not coming from the proceeds that would have been paid out to the writers under the nonprofit model, where else could it come from?

The fees it charges users of music, such as radio and streaming.

They also own a lot of expensive real estate, and I could see that getting sold soon.

 

[Theater of My Mind]

I don't think they're there yet. But a lot of your questions are answered in the linked article.

No, they're not, actually. I just see some nebulous doublespeak about "an initial focus on improving general licensing royalty collections, international partnerships and new service offerings," and "New growth investments..." Nothing specific at all, though.

The previous article, linked from the one above, states, "Under a not-for-profit model, the PRO retains only operating costs and other expenses and distributes the bulk of the revenue to its members. However, a for-profit model enables the PRO to operate more like a traditional business..." Again, no disclosure on where that profit would come from other than the clear implication that the PRO would no longer retain only operating costs and other expenses and distribute the bulk of the revenue to its members.

The fees it charges users of music, such as radio and streaming.

Which would not result in profit unless the PRO retains more, and distributes less to its members.

They also own a lot of expensive real estate, and I could see that getting sold soon.

Sure, but a possible one-time cash infusion is not the kind of growth that the investment firm or shareholders would demand. Safe to say they would be looking for large, endlessly increasing profit.

 

[Markxxx]

I work for a non-profit and we have quite a few for profit businesses under our umbrella. I have also worked for profit making organizations that run non-profit subs on the side.

This often causes confusion as people think it has to be one or the other. That is why I don't quite take the article at face value unless I can find a source that says they are definitely abandoning the non-profit model. The linked article says what their goals are but you could still do that with a non-profit under a profit mother company.

Another thing people confuse is a non-profit isn't necessarily a charity it just provides tax breaks which is why a lot of profit making company use non-profit subsidiaries.

 

[TheBigA]

Nothing specific at all, though.

Of course not. Do you tell all your secrets in press releases?

Which would not result in profit unless the PRO retains more, and distributes less to its members.

They can't do that. They sign contracts with writers and publishers that stipulate exactly how much they get paid. What has happened is that GMR has come along and guaranteed MORE money to writers. BMI has to compete with GMR. So the writers will not get less under this. I expect the member writers will get a percentage of the profits above their guarantees.

 

[Theater of My Mind]

I have seen some comments that BMI has a need for capital to update its monitoring and compliance systems and that is not possible in the non-profit realm. The new owner will have to invest in new systems, and the expectation is that the long run result will be more revenue. But the non-profit model couldn't pay for it, particularly at the high interest rates of the last several years.

Point taken, but there are plenty of examples of nonprofits that bring in lots of revenue and then re-invest it in the business. (EMF comes to mind, for one). Under a for-profit model, a large cut of that revenue has to go to the private owner or shareholders, leaving less to re-invest, or pay its members.

 

[Kelly A]

They also own a lot of expensive real estate, and I could see that getting sold soon.

I agree. When it comes to private equity; real estate is the first thing to be sold for quick cash and office leases deemed to be expensive will be cancelled or not renewed.

 

[Larry]

Interesting, article states BMI’s existing shareholders need to vote and approve this but nonprofits don’t usually have shareholders.

Also, in many states conversion of a nonprofit into a profit company requires Orphans (or other court) approval and usually involves establishment of a nonprofit endowment/foundation with funds from the nonprofit to make up for years of nonprofit tax breaks.