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Where Does the Money Go From Music Licensing Fees?

Posted in News on August 3, 2004

When one ponders the mysteries of the universe, “Where does my music licensing fee go?” doesn’t even make the top ten. Ask the owners of businesses using copyrighted music, however, and the question may earn an honorable mention.

It’s a good question with a simple answer. After paying expenses, the remaining licensing revenue is distributed by BMI to affiliated songwriters and publishers. Currently, copyright owners receive approximately 85% of every revenue dollar collected. Songwriters pay nothing to join BMI.

“Many of our customers don’t realize BMI operates on a non-profit basis,” said Tom Annastas, Vice President, General Licensing. “We are firmly dedicated to giving the maximum amount of money possible to those whose rights we protect: the songwriters, composers and publishers. Our diligence in cost management has resulted in a substantial drop in the company’s overhead rate in recent years.

“Some of our business customers are surprised to hear that BMI never earns a profit,” said Annastas. “Since its founding in 1939, BMI has had a unique business model.”

Like any organization, BMI does have bills: salaries, rent, office supplies and other necessary operating expenses. By decreasing those expenses, BMI is able to increase income for songwriters while keeping costs reasonable for businesses using music.

Some expense is incurred while determining what share of the revenue should be distributed to each of BMI’s approximately 300,000 songwriters and publishers. To accomplish this, BMI monitors more than 500,000 hours of radio play lists in all styles and formats, including college radio. BMI also compiles music performance information from network, cable and local television. Music performances on commercial music services and during major concert tours also are reported to BMI.

Under U.S. Copyright Law, songwriters have the exclusive right to publicly play or authorize performances of their songs. Many songwriters from around the world give BMI permission to license performances of their works in the United States. BMI collects license fees on their behalf from businesses which use their music, making the licensing process easier. Without the services of BMI, each business using music is required under law to obtain permission from each songwriter for each song – an overwhelming task for everyone. BMI makes it simple for hundreds of thousands of American businesses to have lawful access to an enormous catalog of music (approximately 4.5 million songs) from 300,000 copyright owners from more than 60 countries.

The average restaurant or bar pays about $1.50 per day for BMI’s services. “It has taken this organization 65 years to reach our current level of expertise,” said Annastas. “What we do is not easy, but we try to make the process simple for our business customers as well as our affiliates.”

Songwriters who have composed hit songs for themselves or others are obvious beneficiaries of BMI’s work. Often, songwriting royalties help unknown composers survive long before they become known as recording artists. Barry Manilow said, “BMI got me through some very lean times when I was a struggling songwriter back in New York City. They supported and encouraged me back in the early days. They have been very important to me.”

Another BMI affiliate, rock legend Bo Diddley said, “The only people that ever did me right, in the 1950s and all the way up through now, is BMI,” he said. “I have no regrets in my 47 years with them; everything in the book was right.”