BMI Sold to New Mountain Capital

[Kelly A]

Interesting, article states BMI’s existing shareholders need to vote and approve this but nonprofits don’t usually have shareholders.

Also, in many states conversion of a nonprofit into a profit company requires Orphans (or other court) approval and usually involves establishment of a nonprofit endowment/foundation with funds from the nonprofit to make up for years of nonprofit tax breaks.

There's nothing stopping a PE firm from walking in with cash to buy a non-profit, then spin up the company as a for-profit. There's also nothing stopping the PE from owning a non-profit, as long as it's operated financially separate from the parent company. The problem with the second scenario, is it makes things harder when it comes to selling off parts of the non-profit when that income will be taken by the for-profit parent.

 

[DavidEduardo]

Interesting, article states BMI’s existing shareholders need to vote and approve this but nonprofits don’t usually have shareholders.

Maybe better to call them "stakeholders". Remember, the average journalist does not understand business or economics.

Also, in many states conversion of a nonprofit into a profit company requires Orphans (or other court) approval and usually involves establishment of a nonprofit endowment/foundation with funds from the nonprofit to make up for years of nonprofit tax breaks.

That only, if I read the rules right, applies to "reserves" which are funds saved and not spent. They become "profits" once the entity becomes a for-profit enterprise.

 

[DavidEduardo]

Point taken, but there are plenty of examples of nonprofits that bring in lots of revenue and then re-invest it in the business. (EMF comes to mind, for one). Under a for-profit model, a large cut of that revenue has to go to the private owner or shareholders, leaving less to re-invest, or pay its members.

A for-profit can opt to keep profits and reinvest in the business or to buy other businesses. They don't have to distribute profits.

Look how many profitable companies in growth industries go for years and years without paying dividends.

 

[TheBigA]

Here's more on this deal. Apparently Google/Alphabet is involved. That should be interesting.

BMI sells to New Mountain Capital-led group; Google/Alphabet fund to acquire minority stake in PRO; $100m handed to publishers and songwriters - Music Business Worldwide

BMI press release confirms impending deal, so long as PRO’s board approves transaction…

www.musicbusinessworldwide.com

 

[DavidEduardo]

Here's more on this deal. Apparently Google/Alphabet is involved. That should be interesting.

BMI sells to New Mountain Capital-led group; Google/Alphabet fund to acquire minority stake in PRO; $100m handed to publishers and songwriters - Music Business Worldwide

BMI press release confirms impending deal, so long as PRO’s board approves transaction…

www.musicbusinessworldwide.com

This is a short read and very informative. I recommend reading it, and let's thank BigA for posting it.

 

[Kelly A]

This is a short read and very informative. I recommend reading it, and let's thank BigA for posting it.

CapitalG is nothing more than a hedge fund. This amount of money to Alphabet/Google amounts to a rounding error.
I wouldn't read anything other than another hedge fund having a small stake in a private equity group's business dealings.

 

[secondchoice]

IMHO New Mountain and it's investors expect to recoup their investment. They can "cut overhead", raise prices, screw the writers (or a combination or all three). I doubt there is a "magic" source of money for music royalties in the future.

 

[TheBigA]

I doubt there is a "magic" source of money for music royalties in the future.

I think that's correct, but from what I see, they will use their unique position to attract "new business." This is something iHeart has been good at, and Audacy has been awful at doing.

From the OP:

To add new revenue streams driven by organic growth investments and M&A opportunities, with an initial focus on improving general licensing royalty collections, international partnerships and new service offerings. New growth investments will create additional opportunities for distribution income for its affiliates.

This may be the for-profit part, using their cashflow and artist relationships to attract new business.

 

[Kelly A]

IMHO New Mountain and it's investors expect to recoup their investment. They can "cut overhead", raise prices, screw the writers (or a combination or all three). I doubt there is a "magic" source of money for music royalties in the future.

I agree. That's what private equity does.

 

[TheBigA]

CapitalG is nothing more than a hedge fund. This amount of money to Alphabet/Google amounts to a rounding error.
I wouldn't read anything other than another hedge fund having a small stake in a private equity group's business dealings.

However, Google negotiates music royalties with BMI for YouTube.

 

[TheBigA]

More surprises today as we find out one of the "shareholders" of BMI is iHeartMedia! So they announced today that they expect to receive $100 million when BMI is sold to New Mountain:

iHeartMedia, Inc. Announces $100 Million In Proceeds Expected from New Mountain Capital’s Acquisition of Broadcast Music, Inc.

iHeartMedia, Inc. (“iHeart”) announced today that in connection with the previously announced acquisition of Broadcast Music, Inc. (“BMI”) to a shareholder group led by New Mountain Capital, LLC, it expects to receive approximately $100M of proceeds related to its equity interest in BMI, subject...

investors.iheartmedia.com

They say they will use the $100 million to retire debt. Last I checked they had about $9 billion left to pay off.

So this made me wonder how iHeart became a shareholder in BMI. The answer is in this article:

iHeartMedia to receive $100m from sale of BMI - Music Business Worldwide

US radio giant lined up $100m windfall from sale of BMI to a shareholder group led by New Mountain Capital…

www.musicbusinessworldwide.com

BMI is currently owned by a consortium of radio and TV broadcasters; that, in itself, makes for a complex dynamic, as BMI’s owners are often the very same broadcasters who pay the royalties collected by BMI.

So it's likely that iHeart isn't the only broadcaster who will receive a payday.

 

[Kelly A]

So it's likely that iHeart isn't the only broadcaster who will receive a payday.

Hey, maybe Audacy? Kidding. They wouldn't be that lucky.