The New York Times reports that Broadcast Music, Inc (BMI), a major music licensing agency representing artists like Kanye West, Shakira, Taylor Swift and Kendrick Lamar, has agreed to sell itself to the private equity firm New Mountain Capital.
The deal, subject to approval, is expected to close in Q1 2024. The terms remain undisclosed. Alphabet-affiliated company CapitalG is also acquiring a minority stake in BMI.
The music licensing company BMI protects the rights of more than 1.4 million artists and 22.4 million musical works including several Jamaican artists and songs. The international music rights management company collects royalties on behalf of composers and music publishers from businesses that license their songs.
BMI, traditionally a nonprofit, shifted to a for-profit model, sparking concerns among songwriters. In its 2022 fiscal year, BMI collected $1.57 billion and distributed $1.47 billion, a record amount. The President CEO, Michael O’Neill, emphasized the move’s aim to explore new revenue sources and invest in platforms.
O’Neill outlined a distribution plan in a release where 85% of income would go to affiliates, retaining 15% to cover costs and a modest profit margin, an increase from the historical 10% for overhead.
“Today marks an exciting new chapter for BMI that puts us in the best possible position to stay ahead of the evolving industry and ensure the long-term success of our music creators,” said Mike O’Neill.
“New Mountain is an ideal partner because they believe in our mission and understand that the key to success for our company lies in delivering value to our affiliates. We are excited about the many ways New Mountain will accelerate our growth plan, bringing new vision, technological expertise and an outstanding track record of strengthening businesses, all of which will help us build an even stronger future for BMI and our songwriters, composers and publishers.”
He added, “I would also like to thank the BMI Board of Directors and BMI’s shareholders for their excellent stewardship and unwavering support of our creative community since the company’s founding in 1939.”
Notably, a portion of the $100 million proceeds from the sale will be allocated to BMI affiliates. The specific details of this distribution, while expected to align with the company’s existing methodologies, are yet to be finalized.
One aspect that New Mountain Capital will need to navigate is the intricate regulatory structure governing BMI’s operations. Consent decrees with the US Justice Department, in place for over 80 years, impose limitations on the services BMI can provide and the rates they can charge licensees.
New Mountain Capital which has interests in financial advisory firm Citrin Cooperman, a company which owned played a big part in the valuation of music in the recent multi-continent rush in catalog deals — told The NY Times on Tuesday that “it was eager to expand BMI’s business and help modernize” how it works.
“While the music industry has undergone a technology-driven transformation over the past two decades, music infrastructure, including the performing rights ecosystem has been slower to transform,” said Mike Oshinsky, Director at New Mountain. “There is tremendous opportunity to modernize this critical part of music infrastructure and ensure that long term royalty collections for songwriters, composers and publishers continue to grow. With our support, BMI is ideally positioned to drive this transformation as the only PRO in the world to combine an open-door policy to all music creators with the innovation and commercial drive of a for-profit business.”
Goldman Sachs & Co. LLC served as financial advisor to BMI and Fried, Frank, Harris, Shriver & Jacobson LLP served as its legal advisor. Moelis & Company served as financial advisor to New Mountain, and Simpson Thacher & Bartlett, LLP served as its legal advisor. As part of New Mountain’s investment, CapitalG will also invest a passive minority stake in BMI.
