BMI Back On the Sellers Market?

Broadcast Music Inc (BMI), the music rights company representing top songwriters is once again exploring options including a sale after it ditched its non-profit model, people familiar with the matter said.

BMI has turned to Goldman Sachs Group (GS.N), the investment bank that also advised it on deal discussions last year, for guidance as it fields interest from potential acquirers, including private equity firms, the sources said, cautioning that the company may still decide not to sell itself.

The company also explored a sale last year when it was run as a non-profit and handed the vast majority of its profits to music artists and their publishers.

For interested parties who submitted offers last year, the fact that BMI did not keep more money for itself made it more difficult to justify the price tag of more than $2 billion that the company was seeking, the sources said.

BMI reported revenue of about $1.57 billion for the fiscal year that ended on June 30, 2022, and paid out about $1.47 billion to its songwriters, composers and publishers, according to its last annual report.

The company generates about $145 million in 12-month earnings before interest, taxes, depreciation and amortization, according to the sources.

The sources asked not to be identified because the matter is confidential. Spokespeople for BMI, which is controlled by several TV networks and radio broadcasters, and Goldman Sachs declined to comment.

In a memo to employees last year, BMI Chief Executive Mike O’Neill said it was important for the company to be more commercial going forward.

Since switching to a for-profit model, BMI has been investing the money it earns to accelerate growth in its business. For example, it has invested in upgrading technology, launching new offerings, while also setting aside money for partnerships and acquisitions.

Created in 1939, BMI represents the public performance rights in more than 20 million musical works created and owned by more than 1.3 million songwriters, composers, and music publishers. The songs are licensed to digital streaming services, radio and television stations and other music users.

Under an 82-year-old consent decree with the U.S. Justice Department, BMI is required to license to anyone upon request, with pricing disputes settled by a judge. The Justice Department undertook a review of its consent decree with BMI, as well as the American Society of Composers, Authors and Publishers (ASCAP), four years ago, but decided to leave the arrangements in place.

BMI and ASCAP jointly account for more than 90% of the music licensing market.

While the predictable royalties generated by these companies make them attractive to private equity firms, buyout negotiations for them have been fraught. Michigan’s retirement system explored a sale of its majority stake in Concord Music Royalties last year, but could not fetch the $6 billion valuation it was seeking. S: Reuters