New Post: BMI Is Selling: What This Means for Songwriters (Guest Column) - https://lnkd.in/gaPvPgYc -
By now, you’ve heard the news that BMI is selling its interests to a shareholder group assembled by the private equity firm, New Mountain Capital. The sale has come with questions and consternation from songwriter advocacy groups — including the Music Artist Coalition, where I am a board member — and U.S. music attorneys. These songwriter advocates asked for (1) transparency about the sale and (2) a window of time after the sale that would allow unhappy songwriters to leave.
Most questions remain unanswered, and BMI has not opened a window for songwriters to leave. But the sale seems to be proceeding anyway, subject to “regulatory approval.” Given that, here’s what you should watch out for as a songwriter, a songwriter representative or someone who benefits from administration or co-ownership of a songwriter’s songs.
Related
BMI Sells to New Mountain Capital
11/28/2023
1. What Does This Mean?
In short, it means that BMI, which has been a not-for-profit organization since its founding in 1939, has turned into a for-profit organization and sold to a private equity company. Private equity companies acquire companies that they believe are undervalued in hopes of realizing a significant return on their investment in a relatively short period of time. This is called a “holding period.” While some private equity periods fall outside the average, in 2023 the average “holding period” for a private equity fund with a company it buys is just over seven years, which is the longest it has been in over two decades (in 2022 it was just under 6 years).
According to press reports citing sources, BMI in its first year as a for-profit entity has generated about $130 million in earnings before interest, taxes depreciation and amortization (EBITDA). In order for the shareholder group to be successful, it will need to continue to grow profits or EBITDA from where they are today. To do that, they have to increase revenue and/or decrease expenses. The concern underpinning the sale is that BMI has historically grown revenue in order to pass it on to songwriters and publishers. The only revenue BMI traditionally held back was to cover its overhead. Turning to a for-profit model with private equity owners means that BMI’s shareholders will expect to participate in the profits BMI generates (through distributions or leveraging BMI), which may mean that less of the revenue generated will be distributed to the writers and their publishers.
2. How Does This Compare With My Other Options?
That is one of the unanswered questions. BMI’s goal is that there will b
Broker-Salesperson at RE/MAX Results
1moLoved this concept!