Today, BMI President & CEO Mike O’Neill announced exciting and transformational news about the future of the company. Below is a note that was sent to BMI affiliates describing the company’s decision to change its business model from operating on a not-for-profit making basis to for-profit, and the benefits to our affiliates as a result.
I’m writing today with some exciting and transformational news about the future of BMI.
After a comprehensive and careful assessment on how best to position our company for the future, we will be changing our business model, moving from operating on a not-for-profit making basis to for-profit. This will open up new and important opportunities for us to invest in our business and ensure we can continue to deliver on BMI’s mission to support our songwriters, composers and publishers and grow the value of your music. Simply put, growth for BMI means growth for our affiliates. And most importantly, our goal is to continue to increase our royalty distributions at an even greater rate than we have before.
As you may know, BMI began a strategic review earlier this year to evaluate opportunities to grow our company and make the most of our evolving industry for our affiliates. The one thing we continually heard throughout that process reinforced what we have been thinking for some time: the need for us to invest in BMI and operate in a more commercial and forward-thinking way.
Growth requires investment. And in this new model, we can now structure, fund and operate new strategic opportunities, adopt new technologies and enhance and expand our services and products in a way that under our old model would have come at the expense of distributions.
We recognize that this is a big change. There is no question that the old model served BMI well. But it also held us back and limited our ability to invest in the future in a meaningful way. Our move to for-profit gives us more financial flexibility and makes us nimbler to do what we need to do.
For example, we can explore a needed upgrade to distribution technologies to potentially allow affiliates to draw against their upcoming digital earnings; we can invest in, partner with, or buy a company that has emerging services for songwriters; or we can create a tool that presents affiliates with a digital record that tracks royalties across the full spectrum of their earnings—all things we have an interest in pursuing.
To make these types of investments in our old model, we would have had to choose just one option and focus on that at the expense of anything else. An IT upgrade, for example, meant investing in other areas of the company would have to wait, in order to minimize impact on that year’s distribution. Purchasing a company meant we’d have to operate it on a not-for-profit making basis and couldn’t drive any of the profits of that new company either back into BMI or use those profits to fund other opportunities.
In short, this new model will enable us to approach our business in ways we were never able to do before to stay ahead of the industry and the needs of our affiliates. It unleashes so many more options.
We’re excited about all the opportunities ahead of us, especially because we’re proactively doing this now from a position of strength rather than risk being forced to change in years to come. We are the number one PRO and just reported our highest distributions ever and expect this move will help reinforce our leadership.
But this is a long-term plan and not everything will happen overnight. It will take time because we are committed to getting it right. We fully recognize that this new path forward is only successful if our affiliates see the benefits. And we will continue to manage our costs and apply financial discipline to any investment decisions we make.
We have prided ourselves on being a trusted guide and champion of the music creator for the past 80-plus years, and this new chapter will only strengthen that commitment as we look forward to the next 80.
As always, thank you for the privilege of representing your unparalleled music.
President & CEO
Additional information on this exciting change and its resulting benefits to our affiliates can be found in the FAQs, below.
1. Why is BMI making this change?
This is about positioning BMI for the future, and the best way to do that is to change our business model. Growth requires investment, and this decision gives us much more financial flexibility to reinvest back into the company in a way that under our old model would have come at the expense of distributions. And most importantly, our goal is to both invest in the company and grow our distributions at an even greater rate than before.
2. How will this benefit BMI affiliates?
We believe this change will significantly benefit our affiliates. By investing in and growing BMI, we’re positioning the company for the future. A stronger BMI is to everyone’s benefit. Growth for BMI means growth for our affiliates. We also fully recognize that this path forward is only successful if our affiliates see the benefits, and we’re committed to delivering on that and getting it right.
3. When is this change effective?
The first distribution under this new model will be in February 2023, and it is slated to be BMI’s largest distribution to date.
4. What types of investments is BMI exploring?
We’ll be exploring new technologies, services and products that help support our affiliates. For example, we can explore upgrades to our distribution technologies to potentially allow affiliates to draw against future digital earnings. We can invest in, partner with or buy a company with emerging services for songwriters; we can create a digital record that tracks royalties across the total spectrum of earnings. These are all things that we have an interest in pursuing. And we will continue to manage our costs and apply financial discipline to any investment decisions we make.
5. Why didn’t BMI pursue these types of investments before?
There’s no question that our old model served us well, but it also held us back in many ways. To make the types of investments described above, we’d have to choose just one at the expense of others in order to not impact that year’s distributions. We would not have been able to fund or operate a new business in a way where we could reinvest any profits from that new business back into BMI or use those profits to fund other opportunities. This new model allows us to approach our business in ways we couldn’t before, allowing us to both invest in the company and grow distributions at the same time.
6. How will BMI grow distributions at a faster rate with this model?
Our overall distributions have continually grown and under the new model we’re projecting to grow them at a higher level than before. And that is because of projected revenue growth, a continued focus on managing expenses, and the new investments and business enhancements that we will now be able to make.
7. How will this impact BMI’s overhead rate?
Our measure of success going forward will be competitive distributions and overall distribution growth, while continuing to focus on keeping our costs down, as we always have.
8. Was BMI investing in the company before this announcement?
We were investing in the company, but we were constrained by the limitations of our old business model. In today’s world, we need to be quicker, more opportunistic and expand our services at a rate that the old model didn’t allow us to do.
9. BMI has demonstrated revenue and distribution growth year after year. Wouldn’t BMI’s distributions continue to grow without making this change?
Yes, but not necessarily at the rate we believe they could grow under this new model. And in a rapidly changing industry, we believe our rate of growth would not necessarily be a given if we didn’t invest in the business.
10. Why does BMI feel strongly about the need to do this for the future?
This is about protecting and growing the value of our affiliates’ music. This industry has gone through tremendous change, which has impacted every sector of the business, including ours. Standing still isn’t an option for us. We’re making this change now from a position of strength, to ensure we continue to be an advocate and champion of the music creator for many years to come.
11. Can BMI change its business model under the consent decree?
Yes. Nothing in our consent decree prevents us from making this change.