June 15, 2004

An Important Message for BMI Publishers

Please read the letter below from BMI President and CEO Frances Preston regarding your public performance royalties from ringtones:

Many songwriters and music publishers have recently asked us about direct licensing offers they have received from ringtone providers for their performing rights. Specifically, they've inquired about how these offers compare with BMI's royalty payments in this category. While the business decision to direct license is yours to make and includes a number of factors to evaluate, I am writing to clarify some key facts which will hopefully assist you in making an informed decision.

BMI has licensed more than 175 ringtone providers reaching more than 90% of U.S. cell phone subscribers. Our current licenses run through 2006. The negotiations for these agreements established a license fee, and a value for the public performance of your copyrights which is greater than the direct license proposals which have been shared with us. Our licensees include industry leaders such as Sprint, Ztango, Faith West, Zingy and emerging players like Virgin Mobile, Cellus and Kanematsu.

COMPARISON: BMI LICENSE VERSUS CERTAIN DIRECT LICENSE OFFERS

  • The direct license offers which certain music publishers have shared with us call for a royalty of 2% of gross revenue or 2 cents per ringtone sold, whichever is greater.
  • Based on an industry average of $1.25 per ringtone sold, the direct license offer results in a payment of 2.5 cents per ringtone sold. This payment covers both the songwriter and publisher shares (1.25 cents publisher / 1.25 cents writer assuming 100% publisher share and 100% writer share).
  • BMI's license agreements have resulted in an average payout of 5 cents per ringtone sold over the last 4 quarters - covering both writer and publisher shares (2.5 cents publisher and 2.5 cents writer assuming 100% publisher share and 100% writer share).
  • BMI pays its affiliates twice the royalties as compared to royalty payments of the direct license offers that we were advised of.

Next quarter we will mark BMI's second year of payments for mobile entertainment. We continue to distribute royalties every quarter using census data received from our licensees. Last year we tracked more than 51 million individual ringtone transmissions in the US...and the market continues to grow every quarter.

We hope this information is helpful to you as you make decisions about licensing your copyrights. Should you decide to license the public performing right directly to a ringtone provider, you are required to notify BMI pursuant to your affiliation agreement. Additionally, it will be your responsibility to track and pay to the writers their shares directly from the income you receive from the ringtone provider as BMI will not make corresponding payments for writers' shares of direct licensed works.

We look forward to continuing to work with you in this exciting new market. We are already licensing new services that will roll out this year and 2005 such as ringbacks, streaming music services, wireless music stores and video entertainment. If you have any questions please email ringtones@bmi.com.

Sincerely,
Frances W. Preston
BMI President and CEO