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BMI announces shift to for-profit business model
By Chris Cooke | Published on Thursday 13 October 2022
US song rights collecting society BMI has announced plans to shift from operating on a not-for-profit business model to a for-profit business model. Why? Because doing so will “open up new and important opportunities for us to invest in our business and ensure we can continue to deliver on our mission to support our affiliates and grow the value of their music”. Or that’s what CEO Mike O’Neill reckons.
Most of the music industry’s collecting societies around the world are not-for-profit organisations owned by their members, which are usually some combination of artists, songwriters, record labels and/or music publishers. BMI, somewhat unusually, is actually owned by a group of broadcasters, it being established by the US radio sector in the 1930s as a rival to the existing US society ASCAP. But it’s still a not-for-profit set-up.
However, there are some societies that are for-profit enterprises, including BMI and ASCAP’s smaller competitors in the US, ie SESAC and GMR. BMI has been reviewing how it operates for a while now, for a time as part of an investigation into whether or not there were any investors out there which might be interested in buying the organisation from its current owners.
In the end, plans for a sale were called off, but that process likely informed the new for-profit strategy. “After a comprehensive and careful assessment on how best to position BMI for the future, we will be changing our business model, moving from operating on a not-for-profit making basis to for-profit”, O’Neill wrote yesterday in a memo to the society’s members – or ‘affiliates’ if you prefer.
“This will open up new and important opportunities for us to invest in our business and ensure we can continue to deliver on our mission to support our affiliates and grow the value of their music”, he added. “And, most importantly, our goal is to continue to grow our distributions at an even greater rate than we have before”.
He then explained: “As you all know, we began a strategic review earlier this year to evaluate opportunities to grow our company and make the most of our evolving industry for our affiliates. The one thing we continually heard throughout that process reinforced what we have been thinking for some time: the need for us to invest in BMI and operate in a more commercial and forward-thinking way”.
“Growth requires investment”, he went on. “And in this new model, we can now structure, fund and operate new strategic opportunities, adopt new technologies and enhance and expand our services and products in a way that under our old model would have come at the expense of distributions”.
“I know this is a big change for us”, he then mused. “There is no question that the old model served BMI well. But it also held us back and limited our ability to invest in the future in a meaningful way. Our move to for-profit gives us more financial flexibility and makes us nimbler to do what we need to do”.
In terms of the kinds of projects that the new approach – and any new investment it allows BMI to secure – might enable, O’Neill’s memo talked about innovations and possible acquisitions that might provide better royalty tracking, or allow members to draw down advances on future royalties, or which would provide other useful business services to songwriters.
“In short”, he said, “this new model will enable us to approach our business in ways we were never able to do before to stay ahead of the industry and the needs of our affiliates. It unleashes so many more options”.
According to Billboard, any new investment secured via the new approach would come from external parties, not the society’s current broadcaster owners. Though those current owners won’t share in any future profits via dividend, or at least not in the short term, though they would profit from any future sale.
Meanwhile, when asked by Variety to what extent the now abandoned plans to sell the society had influenced this shift, O’Neill said: “Initially, we hired Goldman Sachs to help us view strategic opportunities, and there were discussions about how do we change the model”.
“But”, he went on, “we had already been looking at that, and at the end of the day, the board and BMI decided that it was in our best interest to control how we do this, and how we grow and how we can ultimately benefit our affiliates”.
