In theory it sounds great: a rights organisation that collects and distributes performance royalties to songwriters, composers and publishers for the usage of their works. However, BMI has been displaying signs of unpredictability for a while now. About one year ago, the company surprised its employees by revealing plans to reduce its workforce by almost 10%, leaving multiple positions unfilled.   

Earlier that year, the collecting organisation had enlisted Goldman Sachs to search for potential buyers that would be willing to acquire the company for somewhere between $1.5 billion and $3 billion. Although BMI received several offers, they opted to suspend their selling operations due to a market slowdown. In an announcement released in August 2022, the company stated that it would continue to explore ‘strategic operations’ to ‘support affiliates and grow the value of their music’. 

In line with this commitment, the following October, Mike O’Neill, BMI’s CEO, emailed all company staff to communicate an organisational shift to a for-profit approach. ‘We found that the old model stifled us in terms of investing in BMI, and investing for the future, and that we weren’t able to actually grow,’ he wrote. In practical terms, the old non-profit model restricted the retention and reinvestment of profits, forcing the organisation to distribute all revenues among its members after covering operational costs. 

In the new for-profit format, the company has greater freedom to pursue numerous business opportunities. An example of such an opportunity is the acquisition of another company that would offer significant benefits and possibilities for songwriters. As O’Neill puts it: ‘Purchasing a company [as a non-profit] meant we’d have to operate it on a not-for-profit making basis and couldn’t drive any of the profits of that new company either back into BMI or use those profits to fund other opportunities.’

The seemingly growth-obsessed administration is now under pressure as songwriters assess the situation around the one-year anniversary of all announcements and amidst a new wave of rumours of a potential sale. In a letter signed by various organisations representing songwriters, such as Songwriters of North America and Black Music Action Coalition, several questions and demands are directed towards BMI. This includes a strong statement that songwriters ‘have a right to understand these decisions and how it impacts us’.

There’s a general consensus that the organisational shift announced last year has heightened investors’ interest in buying a portion of the company. Now, private equity firm New Wave Capital is reportedly extending an offer to BMI for a complete acquisition at $1.7 billion. In the event of a sale, one can understand that songwriters are keen to find out the answer to one of the questions also posed in the previously mentioned letter: will writers and composers receive a share of the sale proceeds?

It’s worth contemplating the impact of this sale on the music industry, as BMI and its primary competitor (ASCAP) account for 90% of the US music licensing market. Music Business Worldwide spoke with Jody Gerson, CEO of Universal Publishing Group, who stated that the group would not accept changes that could result in their songwriters receiving anything ‘less than what they deserve’. 

As Music Business Worldwide points out, both BMI and ASCAP are bound to the Department of Justice by Consent Decrees and are subject to ‘Rate Courts’ in the US. This means these organisations are extremely limited in their ability to increase songwriters’ compensation due to the ‘blanket license’ structure. This structure prevents them from partially withdrawing music from licensed radio stations as a tactic to negotiate higher royalty rates. By contrast, for-profit and non-regulated organisations like Irving Azoff’s Global Music Rights (GMR) successfully used this strategy to secure improved rates for their signed songwriters, as BMI acknowledged in 2018. 

Additionally, if BMI manages to evade the Consent Decrees that have long constrained their corporate operations, will they also modify a fundamental principle outlined in these agreements: namely, that BMI must admit as a member any songwriter, artist, or publisher who has written at least one musical composition? Most of BMI’s affiliated songwriters are not generating huge amounts of streaming revenue. Nonetheless, the PRO is obliged to bear considerable administrative expenses to comply with its open-door policy. Will this change as the for-profit model progresses and BMI is acquired by revenue-hungry equity firms?

At the heart of this discourse is also the fact that BMI is owned mostly by broadcasting companies that pay licensing fees to play songs owned by its affiliated songwriters, composers and publishers. Thus, if BMI is sold, that money will be distributed among its owners – the broadcasting companies. Ultimately, they will be playing songs for free, as they will be receiving money effectively nulling fees they have paid in the past.

In the end, the question is: if the company is sold and a full transition to a for-profit model is successful, will songwriters be better off? On one side, greater company flexibility in this model could facilitate growth, as O’Neill so strongly defends, and could open the door for songwriters rates negotiation. On the other hand, the for-profit model also implies that a portion of the revenues, which were formerly exclusively allocated to songwriters, might now be redirected to reward investors – potentially a big equity firm. In other words, the outcome hinges on whether a smaller revenue share can be translated into a larger financial gain through the highly sought-after expansion.

All that can be said for now is that fairly distributing the company sale proceeds and persuading songwriters to get onboard with these and future transformations within the company will prove to be a challenging undertaking for BMI.