I can’t be 100% positive. I imply, it was late in London final Wednesday, round 9.30pm, when MBW revealed that personal fairness agency, New Mountain Capital (NMC), was in superior talks to amass BMI (Broadcast Media Inc.).
However simply after that information broke – after which rumors began swirling that NMC may even be keen to pay $1.7 billion for the PRO – I may have sworn I heard the faint sound of laughter.
It clearly emanated, this guffaw – so hearty it traveled over land, sea, and continent – from someplace over the Atlantic.
One may need recommended, logically talking, that it got here from SESAC‘s John Josephson. However, no; it had this refined, tell-tale, Illinois twang.
It needed to be. Irving Azoff. Laughing his head clear off.
What’s BMI turning into?
When Azoff launched his US-based for-profit efficiency assortment society, World Music Rights, with Randy Grimmett in 2013, there have been two clear targets of their crosshairs: BMI and ASCAP.
The dominant duo of US assortment societies cut up a market share of round 95% between them, reviews recommended on the time – and Azoff believed they have been ripe for disruption.
Like John Josephson and SESAC earlier than him, Azoff was satisfied that, engaged on behalf of a slender clutch of famous person songwriters, GMR may negotiate higher royalty charges from the radio {industry} than both BMI or ASCAP.
Azoff believed this as a result of, to skim barely over the granular element, each ASCAP and BMI are – to barely totally different extents – hamstrung within the US by Consent Decrees overseen by the Division of Justice and established over 80 years in the past.
These Decrees severely restrict each orgs’ energy to barter higher charges for songwriters from US broadcasters. Listed below are simply two key limitations they every face:
- Neither ASCAP or BMI can threaten to tug particular music compensations (‘partial withdrawal’) from radio stations that they’ve licensed. Because of a so-called ‘blanket license’ construction, BMI has to license its total repertoire of 20.6 million songs to a broadcast/digital companion, or nothing in any respect;
- Each time there is a dispute over royalty charges between ASCAP/BMI and the radio {industry} (each terrestrial and digital) it needs to be hammered out in designated US ‘fee courts’, moderately than behind closed doorways.
(We’ll put aside, for now, the moreover complicating issue that BMI is – as of this second, anyway – really owned by a few of US radio’s greatest gamers.)
Irving Azoff deduced that as a non-public, for-profit, firm, GMR may acquire extra leverage in looking for higher radio charges, as a result of:
- GMR may threaten to tug the music of particular superstars (together with Drake and the Eagles) from radio if it wasn’t proud of its fee of pay; and
- It was unencumbered by fee courts and Consent Decrees totally.
In order that’s precisely what GMR did: The New York Instances reported in 2014 that after launching GMR, Azoff, Grimmett and co. set about telling songwriters that they may safe royalty charges “as a lot as 30% increased from radio stations and on-line shops than they’ll get by means of ASCAP or BMI“.
‘GMR has been in a position to set up market charges which are increased than the charges achieved by BMI’
5 years later, in September 2018, BMI flat-out admitted that GMR was getting higher charges for its songwriters than BMI was in a position to obtain.
This revelation got here by way of a subpoena issued by BMI, which demanded GMR declare to its rival the exact royalty charges it had agreed with the US radio {industry}.
“As a non-regulated Performing Rights Group, GMR has been in a position to set up market charges which are increased than the charges achieved by BMI within the shadow of the Charge Courtroom,” confirmed BMI’s legal professional Scott A. Edelman at Milbank, Tweed, Hadley, and McCloy LLP.
The subpoena added: “In distinction to BMI, which operates as a not-for-profit company, GMR has an financial motivation to keep away from consideration of its license agreements on this continuing and thereby search to suppress the charges that BMI is ready to cost to customers.”
Or to place that in plainer English: GMR has higher royalty charges than us, we don’t know what these charges are, and if it continues to have higher charges than us, it’s going to competitively screw BMI. We need to know the charges GMR’s getting from the radio {industry}, as a result of we will then use that as a precedent to up our personal charges.
“GMR has been in a position to set up market charges which are increased than the charges achieved by BMI within the shadow of the Charge Courtroom… GMR’s technique is working.”
Scott A. Edelman, legal professional for BMI, 2018
In what amounted to a not-too-shabby advertising slogan for GMR, BMI’s attorneys even confirmed: “GMR’s technique is working.”
Apparently, BMI’s 2018 subpoena contained two kinda sniffy (and now moderately prescient) feedback about GMR’s standing as a for-profit entity.
First, BMI’s attorneys asserted: “Not like BMI, as a for-profit entity, GMR’s traders can extract a part of [its] elevated charges to pay themselves, moderately than songwriters.”
Reiterating the purpose, they added: “GMR can both… cross on increased quantities to its affiliate songwriters, or… hold the extra quantities for its personal traders.”
And it’s the luxurious irony of those two traces which will have given Mr. Azoff pause for good humor final week
As a result of BMI is now additionally a for-profit entity, similar to GMR. Not solely that, however we stand on the precipice of profit-hungry non-public fairness taking possession of BMI – the world’s greatest PRO by income.
“BMI is required to supply a house to any author who needs to hitch. Can BMI affirm that they won’t search to drive writers away from BMI or discourage writers from becoming a member of BMI?”
Query posed by songwriters’ letter to BMI’s Mike O’Neill earlier this month
Songwriters have been left questioning if, when BMI generates extra income in future, it’ll certainly “cross on increased quantities to its affiliate songwriters” or as an alternative “hold the extra quantities for its personal traders”.
Nowhere was this concern higher articulated than in a letter penned by a number of songwriter rights teams (specifically: Black Music Motion Coalition, Music Artists Coalition, Songwriters of North America, SAG-AFTRA, and
the Artist Rights Alliance) earlier this month.
That letter, addressed to BMI CEO, Mike O’Neill, requested various robust questions of the BMI boss on the subject of the PRO’s future.
To paraphrase, these questions included: (i) How a lot of BMI’s future income might be going to songwriters, and the way a lot might be going to its potential new non-public fairness homeowners?; and (ii) If and when BMI sells, will its present radio-industry homeowners get all the cash?
However there was one different query throughout the letter that basically received me considering this previous week. It’s this one:
- BMI is required to supply a house to any author who needs to hitch. Can BMI affirm that they won’t search to drive writers away from BMI or discourage writers from becoming a member of BMI?
The extra I’ve thought-about this query, the extra I’ve questioned if it factors to a dramatic change sooner or later construction of BMI below profit-fattening, non-public fairness possession.
Right here’s why.
Will there be a BMI exodus?
At this time, there’s a intentionally low barrier to entry to hitch BMI for songwriters.
To cite the org’s personal web site: “You probably have written not less than one musical composition, both by your self or with others, and the composition is presently being carried out or is prone to be carried out quickly, it’s best to be a part of BMI.”
Right here, as soon as once more, these Consent Decrees rear their head: It’s really a situation of ASCAP and BMI’s Consent Decrees that they every “settle for as members any songwriter, artist, or writer who meets sure necessities”.
It’ll value any songwriter on the market simply $75 each year to grow to be a BMI member, which they’ll do on-line in minutes.
This, says BMI, is all a part of the “groundbreaking open-door coverage” that it’s operated since 1939, whereby artists of all genres and ranges of success are welcomed into the group.
However the music enterprise of 2023 is a very totally different beast from the music enterprise of 1939.
And BMI’s shift to a for-profit operation – putatively below the longer term possession of personal fairness – is certain to throw this distinction below stark illumination.
At this time, gazillions of songs and artists function in a world the place the creation and digital distribution of music have been commoditized in each market across the globe.
Right here’s a fast reminder of some key numbers, courtesy of Spotify:
- In February this yr, Spotify confirmed that it now has music from roughly 9 million musical artists on its platform;
- Spotify additionally confirmed that simply 57,000 of those artists – round 0.6% of its complete artist base – generated greater than USD $50,000 on the platform yearly;
- Spotify recommended that there are solely 200,000 acts – round 2% of its complete artist base – that it thought-about “skilled or professionally aspiring”. These 200k artists, stated Spotify, generated 95% of royalties on its platform.
So, think about you’re BMI, along with your ‘open door coverage’. yYu’re presently getting simply USD $75 per head, each year from any DIY artist/songwriter who has a observe with not less than one play on streaming companies – or which has been “carried out” stay.
You have got 1.3 million associates (songwriters plus publishers) – even if Spotify estimates that solely 213,000 artists on its platform have each launched ten or extra songs of their profession thus far, and have over 10,000 month-to-month listeners on its platform.
(See under, by way of Spotify’s Loud & Clear.)
Sure, an artist is just not essentially a songwriter. However these stats clearly point out a gulf between the million-plus quantity of creators presently being served by BMI, and the a lot smaller variety of creators producing vital income on streaming companies.
In different phrases, there have to be an absolute shedload of artist/songwriters on the market in the present day whose work is being administered by BMI, however which is incomes fractions of pennies – or nothing in any respect – in royalties.
But every of those low-earning artists/songwriters should be administered, and accounted to, by BMI. That type of service doesn’t come without cost.
To raised illustrate how this explosion in songwriter registrations weighs on BMI (and different ‘open door’ PROs) in the present day, look under – a chart displaying the variety of songwriters and publishers who’ve been members of BMI on the shut of June every year, in keeping with the org’s annual reviews.
Lo: BMI’s membership greater than doubled within the decade from 2012 (500k) to 2023 (1.3 million).
Hockey-stick progress in members has for the previous couple of many years been one in all BMI’s highest priorities.
The org’s former CEO, Del Bryant, boasted in an exit interview in 2014: “Once I joined BMI in 1972 the corporate had fewer than 25,000 songwriters, in the present day it has greater than 600,000 writers and publishers.”
However right here’s the factor: As a result of nearly all of new associates becoming a member of BMI every year inevitably aren’t incomes what the org’s largest purchasers are producing, the common quantity paid out to every BMI member is regularly being dragged down.
See under: In 2012, in keeping with MBW’s calculations based mostly on BMI knowledge, the typical BMI member/affiliate was paid roughly $1,499 a yr, or $125 monthly, in royalty distributions. By 2022, that quantity had fallen to $1,132 a yr, or $94 monthly.
To borrow the phrases of music biz economist, Will Web page, there are merely “extra mouths to feed” for non-profit PROs with an ‘open door’ coverage.
One wonders what non-public fairness will make of this case – and if it’s ripe for a shake-up.
BMI’s new non-public fairness homeowners (if, certainly, the deal will get finalized) are inevitably going to be searching for two issues particularly: efficiencies and, tied to that, profitability.
By means of this lens, BMI and its new homeowners might determine that one thing of a cull is so as – a dramatic discount within the variety of songwriters on BMI’s books who’re incomes lower than a sure royalty threshold per yr.
This may hit on the coronary heart of BMI’s restrictions below the Consent Decrees: These Decrees exist within the first place, in any case, as a verify towards the huge licensing energy of BMI and ASCAP.
If BMI voluntarily slashed its member base from 1.3 million ‘associates’ to, say, lower than half of that, may the DoJ view BMI in a different way – as an entity in want of much less stringent anti-trust curtailments?
Drastically slicing its quantity of members will surely convey BMI extra consistent with the mindset of GMR and SESAC, which each cherry choose solely high-revenue-generating rightsholders as members – so as to not waste assets on administering/accumulating for songwriters who value greater than they generate.
(SESAC in the present day, for instance, says it really works with round 30,000 songwriters and publishers – that’s round 2.5% of the scale of BMI’s currrent roster.)
A Decree of problem?
In the end, there’s a huge, over-arching query threaded by means of this text.
As talked about, each SESAC and GMR are in the present day in a position to function outdoors of the US Consent Decrees that stifle each BMI and ASCAP’s ambitions.
With BMI now for-profit, and probably quickly to be offered to PE, will it have the ability to shake off even a number of the shackles of those Decrees in future – enabling it related market negotiating freedom to the likes of SESAC and GMR?
Don’t wager on it: BMI instructed Billboard in December that its for-profit transfer didn’t, at that time anyway, have an effect on its Consent Decree restrictions.
If BMI can’t lower unfastened from the burden of those Decrees in future, it’ll doubtless give SESAC – to not point out Mr. Azoff – but extra cause to chuckle.Music Enterprise Worldwide