September 2007
Dear Songwriter, Composer and Publisher:
I am extremely pleased to report that BMI will have distributed more than $732 million in royalties to our songwriters, composers and music publishers for fiscal year 2006-2007, an eight percent increase over the prior fiscal year. BMI also posted record-setting revenues of more than $839 million, up seven percent from the prior year. These results represent the largest performing right income and royalty distribution of any copyright organization in the industry. I am particularly pleased to note that our ongoing focus on operational efficiency has further reduced our fiscal operating expense rate to 12.7 percent, the lowest in the company’s history, allowing us to deliver an ever-larger proportion of our licensing income to you, the songwriters, composers and publishers who have created an extraordinary catalog of the world’s most popular music.
I am also pleased to inform you that BMI has concluded negotiations with a number of cable television networks on finalized license fees through December 31, 2010, which included retroactive payments. We will be making a special distribution of retroactive royalties for certain networks in November 2007 with the balance being paid in 2008.
This distribution contains annual pay-per-view royalties for DirecTV, DirecTV Sports, Echostar Entertainment, Echostar Sports, In Demand 1, In Demand Sports, Lodgenet, NFL Sunday Ticket, On Command and TVN Action Pay Per View. Also included are retroactive royalties from 2006 for the ABC Television Network and XM and Sirius satellite radio, retroactive royalties from 2002-2005 for MTV Internet, and retroactive royalties from 2002-2004 for DART.
As you may be aware, in a recent decision, Judge Connor, the ASCAP Rate Court judge, denied ASCAP’s right to license the performing right in downloads. The uncertainty that this decision has cast on the market, coupled with the decision of many major players in the ringtone space to challenge the performing right in ringtones, has resulted in the cessation of ringtone providers paying license fees to BMI. Accordingly, as of January 2007 and until this dispute is finally resolved, we will not be making royalty distributions on ringtones. We take assaults on your income very seriously and are working on all fronts to address this and other challenges.
New TV Royalty Distribution Methodology
Over the last year, BMI has been working to revise and refine its royalty distribution methodology for the ABC, CBS, NBC, and Univision television networks. We are pleased to now announce the results of that work by introducing to you the new methodology, which will take effect beginning with performances on and after October 1, 2007, for which royalties will be distributed in June 2008.
By using state-of-the art technology combined with performance information from the TV Data Corporation and audience measurement data from Nielsen Media Research, BMI will now more closely align its royalty payments with the value that individual programs bring to the networks themselves. For any given performance, the larger the audience for a show, the larger the BMI royalty payment. Under the new rules, BMI will calculate a unique set of rates for each program, which is based largely on the program’s value relative to all programs airing on an individual network. Royalty rates will vary from quarter to quarter depending on the amount of license fees available for distribution and the overall number of BMI performances each quarter.
Under the new BMI TV network payment system, performances of music can be eligible for up to three distinct royalty payment components each quarter:
1. The Current Activity Payment
2. The Super Usage Payment
3. The Theme Music Bonus
The calculation methodology behind each of these payments is described below.
The Current Activity Payment
All music in the BMI repertoire that is performed on licensed television networks will be eligible for a Current Activity Payment. Each performance will earn a unique royalty rate based on the duration of the performance, the weighted royalty value for each usage type and television audience measurement data provided by Nielsen Media Research for each program aired on the network. The royalty values for all types of performances (theme, feature, background, underscore and logo) that were reported to BMI on network television program cue sheets are weighted by BMI with each type having a unique valuation. The substantial majority of the amount available for distribution each quarter will be used to make Current Activity Payments.
Super Usage Payment
Certain types of performances of an extended duration may qualify for a Super Usage Payment. Specifically, performances of songs (Background Vocal, Visual Instrumental and Visual Vocal usages) with a continuous duration of one minute or greater will be designated as Super Usages. The royalty rate for these performances will be higher than those with a duration of less than one minute.
Theme Music Bonus Payment
Due to the highly recognizable nature of network television theme music, performances of themes that meet certain performance levels will qualify for a Theme Music Bonus Payment. Under the new royalty rules, themes with at least 2,000 quarterly network performances will be eligible for the bonus payment. When a particular theme qualifies for the bonus payment, all other theme music associated with that program will automatically qualify for the bonus payment. BMI will allocate a portion of the amount available for distribution each quarter for each licensed television network to the Theme Music Bonus, with each eligible performance receiving a pro-rata portion of the Theme Music Bonus allocation according to the actual number of its quarterly performances. As a result, themes with higher current-quarter performance counts will earn larger Theme Music Bonus royalties than those themes with lower current-quarter performance counts.
The latest and most recent information on all BMI royalty payments is always available on BMI’s website, at http://www.bmi.com/royalty, where you will find the full text of “How We Pay Royalties,” the current BMI royalty information. BMI affiliates may also request a printed copy of “How We Pay Royalties” by calling 212-830-8346.
We believe the innovations incorporated into these revisions to our television network royalty payment system will give all BMI composers, writers and publishers the advantages of the most recent achievements in royalty distribution technology and audience measurement data. The new system also ensures that BMI will be able to continue to create the highest value for your music by offering our licensees a competitive source of music, and an unmatched repertoire to the American public.
Should you have questions about these enhancements or any of BMI’s royalty policies, please contact your BMI Writer/Publisher representative, or send your question via email to statement@bmi.com.
Our congratulations go to T.I., Ne-Yo, Mr. ColliPark, Pharrell Williams, Slim Thug, Sean Garrett, EMI Music Publishing and all those honored at our Urban Awards celebration, held earlier this month in Las Vegas. Special congratulations go to Joseph “Rev Run” Simmons of Run DMC, who is the latest addition to BMI’s stellar roster of Icon honorees.
With the fall season upon us, I hope that the rest and relaxation you enjoyed during the summer will be the source of renewed energy and creativity in the coming months.
Sincerely,
Del Bryant
President
Chief Executive Officer