performing rights organizations

BMI Ups Admin Fee for Songwriters

BMI Ups Admin Fee for Songwriters

Here's some news that's been percolating in the industry for longer than you might think. Exactly a year ago this month, BMI made the announcement that they are transitioning to a for-profit business model. Why is this a big deal? Well, for starters, the new model might cause administrative fees to go up. As it stands right now, BMI charges around 10% in fees for processing copyrights and keeping the lights on. For affiliates, (or 'members' to those of us who are less fancy), a 5% increase is a big deal, and could significantly cut into their already-paltry profits. It is worth noting that BMI is the world's largest performance rights organization (PRO) in terms of revenue.

BMI's CEO, Michael O'Neill, addresses some of affiliates' concerns. O'Neill states that BMI plans to increase the margin of annual collected revenue it retains, which refers to the funds allocated to operating costs or set aside as profit. According to O'Neill, the goal is to distribute 85% of licensing revenue to songwriters, composers, and publishers, while retaining approximately 15% to cover expenses, overhead and a modest profit margin.

O'Neill justifies the decision to raise BMI's retained margin from 10% to 15% by highlighting that the latter figure "is well below the margins taken by comparable for-profit businesses in our industry." He also addresses a previously raised concern within the songwriting community - the notion that BMI could borrow capital and subsequently withhold revenue that should be distributed to songwriters in order to repay the debt. O'Neill assures that this scenario will not come to pass. He clarifies that any repayments, in case BMI seeks outside capital or borrows money for new services and opportunities, will be sourced from retained profits rather than distributions.

These latest developments shed light on BMI's financial plans and aim to assure stakeholders that transparency and fair compensation remain priorities. However, there are still some potential snakes in the grass. Hidden within O'Neill's recent clarification is the underlying possibility of BMI being acquired by a private equity company, Blue Mountain Capital (BMC) for a potential sale. The estimated price for the BMC-BMI deal is a staggering $1.7 billion.

In the BMI report, O'Neill directly addresses the rumors surrounding BMC-BMI, stating that discussions with a potential new partner are underway. However, no deal has been finalized yet. He also emphasizes that BMI's plan to maintain a 15% margin in the future remains unchanged, regardless of whether a sale proceeds or not. It has been stated that the 15% figure is ultimately a goal, but that being said, there's not much stopping BMI from ultimately surpassing this percentage if they choose to. 

Despite the benefits, switching to a 15% margin could pose a significant risk for BMI and O'Neill. Songwriters and publisher clients may experience reduced earnings, leading some to leave BMI altogether. Clients might also make the choice to switch to lesser-known PROs like SESAC, who have expanded their market share in recent years by acquiring organiziations like The Harry Fox Agency and entering into JVs with foreign PROs, most notably, the Swiss PRO SUISA

BMI has presented its shift to a for-profit model as an exciting development, highlighting the potential for increased cash flow to invest in better services and acquisitions, ultimately benefiting songwriter revenues. A recent example of this strategy can be seen in BMI's partnership with Music Nation, a music rights organization in the UAE, with the aim of improving data accuracy and increasing royalties for BMI members.

The question remains: Can BMI secure more deals like this to significantly boost annual revenues without compromising songwriter and publisher trust?

So far, BMI seems to be heading in the right direction.



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