BMI is transitioning to a profitable business model, the company announced Wednesday morning in an internal email to employees.
The rights organization, like much of the rest of the world, has previously operated extensively as a non-profit foundation since its founding in 1939, like its main US competitor, ESCAP. With relatively new world music rights launched in the US, the limitations of that model began to limit BMI’s opportunities. BMI tried to sell it last year but couldn’t agree with potential buyers.
CEO Mike O’Neill told Variety: “We realized we needed to make some changes to the organization to be more competitive going forward. As you know, there are lists of companies that have waited too long to change. Because of that, you know, they’re not out anymore.
Rights organizations collect royalties due to songwriters and publishers for public performances of their works, from radio airplay to bars, restaurants, stadiums and more. The money collected by the companies – and whichever PRO they join is the songwriter or publisher – is then distributed to the rights holders. In a not-for-profit model, a PRO only covers operating costs and other expenses and distributes most of the revenue to its members. However, the for-profit model allows PRO to operate as a traditional business, although, like ASCAP, it remains under what is known as the Justice Department-led consent decree, which limits some of its business opportunities, particularly in royalty negotiations with publishers.
Asked if the fast-changing music business has kept PRO from working as a nonprofit, O’Neill said, “We found that the old model at BMI stifled us in terms of investing and investing. Forward, and we really couldn’t grow. For example, if we want to invest in an IT project, that means we cannot invest in other areas of the company, because it will affect the distribution for that year. But by changing the model, we can bring in financing, we can reinvest companies, we can make profits from these companies and we can use those investments to benefit BMI. We use this to allow BMI to do things that we are not allowed to do.
Asked if the company’s sales efforts influenced the decision, he said, “We initially hired Goldman-Sachs to help us look at strategic opportunities, and there were discussions about how to change the model.” But we were already looking at that and at the end of the day the board and BMI decided it was in our best interest to control how we do this and how we grow and ultimately how we benefit our partners. .
“Our goal is to champion songwriters and give them a strong organization to rely on to continue to innovate and transform. At the end of the day, our mission isn’t changing. It’s always been to serve songwriters, composers and publishers.”
O’Neill’s letter follows in its entirety below.
hello everyone.
Today I am writing about some exciting and transformative news about the future of our company.
After a comprehensive and careful evaluation of how to best position BMI for the future, we will be changing our business model from a non-profit to a for-profit. This opens up new and important opportunities to invest in our business and ensures that we can deliver on our mission to support our partners and increase the value of their music. And most importantly, our goal is to grow our distribution faster than ever before.
As you all know, we began a strategic review earlier this year to assess opportunities to grow our company and leverage our evolving industry for our partners. One thing we constantly heard throughout that process reinforced what we’ve been thinking about for some time: the need to invest in BMI and operate in a more commercial and forward-thinking way.
Growth requires investment. And with this new model, we can now structure new strategic opportunities, fund and operate, leverage new technologies, and grow and expand our services and products in the same way that our old model paid for distribution.
I know this is a big change for us. There is no doubt that the old model served BMI well. But it has held us back and limited our ability to invest meaningfully in the future. Our move to profitability gives us more financial flexibility and makes it harder for us to do what we need to do.
For example, we can make improvements to distribution technologies to help affiliates match their future digital revenue. We can invest in, partner with, or buy a company with emerging services for songwriters. Or partners can create a digital record royalty tracking tool – we’re interested in tracking them all.
To make these kinds of investments in our old model, we had to choose only one option and focus on everything else. An IT upgrade, for example, should wait to invest in other areas of the company to minimize the impact on that year’s distribution. Acquiring a company means that we must operate it on a non-profit basis and cannot return any profits from the new company to BMI or use those profits to fund other opportunities.
In short, this new model allows us to approach our work in a way we couldn’t before to stay ahead of the needs of the industry and our partners. It offers many more options.
We are excited about all the opportunities that lie ahead of us, especially since we are actively doing this from a position of strength rather than being forced to change in the coming years. We are the number one PRO and have reported our highest distribution ever and expect this move to help strengthen our leadership.
But this is a long-term plan and not everything will happen overnight. It will take time as we are committed to editing. We fully recognize that this new way forward will only be successful if our partners see the benefits. And we will continue to manage our costs and apply financial discipline to any investment decisions we make.
Our amazing team and your personal dedication and contributions make this all possible. Because of you, we are in control of our destiny and that’s a great place to be. Now we have to make the most of this opportunity, and I know we can.
We will communicate this move to our partners and share additional information to help them better understand this change and the resulting benefits. Growth for BMI means growth for our relationship. We pride ourselves on being a trusted leader and champion of the music industry for the past 80-plus years, and this new chapter reinforces that commitment as we look forward to the next 80.
Thanks for all you do.
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