Broadcast Music Inc. History

Company Perspectives:

BMI operates as a not-for-profit-making, tax-paying organization with the sole mission of bringing together the people who create music with the people who play music, as economically and efficiently as possible.

Company History:

Broadcast Music Inc. (BMI), a performance rights organization, makes sure that the people who write, compose, and publish music receive payment whenever a piece is performed publicly. Copyrighted music cannot be performed in public without the permission of the copyright holder, so BMI contractually acquires performing rights from copyright holders, signs agreements with and collects fees from music users, and distributes license fees to the copyright holders. More than 200,000 music artists have contracts with BMI, protecting over three million musical works in all genres. The second largest such organization in the United States, BMI controls 45 percent of the performance rights copyright market and has offices in New York, Nashville, London, Puerto Rico, Atlanta, and Miami. Its artists include 70 percent of Academy Award-winning songwriters and 75 percent of Rock & Roll Hall of Fame inductees.

Some Industry Background

The copyright laws of the United States recognize that all creative works, including musical compositions, have a property right known as a copyright, and that the makers of those works are entitled to receive payment when their works are used in public. Generally, when a musical composition is written, copyright vests either in the writer, who licenses it to a music publishing company, or in the publishing company. Similarly, when a recording is made, copyright vests in the artist and is licensed to a recording company, or in the record company itself.

A piece of music can generate five types of income: 1) performance royalties for public or live performance; 2) print royalties for the sale of printed music; 3) mechanical income for the right to make sound recordings (CDs, tapes); 4) commercial royalties for using the piece in background music; and 5) synchronization fees for use in movies, television programs, commercials, or videos.

In the field of music, it was impossible for individuals to keep track of the when and where their music was played, so in 1941 the American Society of Composers, Authors and Publishers (ASCAP) was founded to license radio stations, clubs, restaurants, and others in their use of copyrighted musical works. The users paid fees (primarily performance and print royalties) to ASCAP, and ASCAP made payments to its affiliated copyright holders. Music publishing companies were expected to share a portion of the fees with the songwriters and composers. To belong to ASCAP, a songwriter had to have five published hit songs. There were similar standards for music publishers, with the result that, by the late 1930s, according to BMI's organizational history, about 15 well-known publishers controlled 90 percent of the most-played songs on network radio.

Three radio networks--National Broadcasting Company (NBC), Columbia Broadcasting System (CBS), and Mutual Broadcasting System--dominated the airwaves, and the music publishing business was increasingly controlled by movie studios, which needed music for their films. During the 1930s radio stations paid licensing fees based on a percentage of advertising time. This meant that ASCAP was collecting fees for any music being played but only paid those artists with whom it had agreements. The men and women who wrote or performed blues, ragtime, or jazz, and who did not belong to ASCAP, received no royalties even when their work was performed. In 1933 the broadcasters began pushing for a system that would pay copyright holders on a per-program basis and allow non-ASCAP songwriters and composers to supply royalty-free music for radio. By 1939 radio stations paid $4.3 million in licensing payments, based on advertising sales.

1939-50: The Early Years

In the fall of 1939, with the most recent ASCAP licensing agreement about to expire, leaders in the radio industry met in Chicago to discuss establishing a new licensing body for their music as a less expensive alternative to ASCAP.

BMI was chartered as a nonprofit organization in October 1939 and began operating in New York City the following February. Under the charter, radio organizations paid for the new entity's operating and capital expenses, pledging amounts equal to half their 1937 payments to ASCAP. When ASCAP proposed increasing radio's fees 100 percent, many broadcasters quickly shifted to BMI. By the end of 1940, some 650 had signed licensing agreements with BMI. In addition to broadcasters, several of the major music publishers signed with BMI.

From the very beginning BMI operated an open-door policy for musical artists, particularly those without a track record of hits. Now, people who were writing blues, country, and rhythm and blues (R&B) would get their music played more often and more widely on the radio and get paid when it was performed. To provide more opportunities for writers and composers, BMI created its own publishing company, sending thousands of arrangements to radio stations that used live music, and also provided advances and guarantees to aspiring publishers to enable them to start their own companies. Among those taking advantage of BMI's support were band leaders Jimmie Lunceford (New Era Music) and Lionel Hampton (Swing and Tempo Music).

Among the catalogs of music BMI offered broadcasters were those of E. B. Marks and Peer International, with thousands of tunes from Latin America. The company's connection with music from Central and South America continued and strengthened during the following decades and provided a foundation for relationships with musicians in other countries.

In late 1940 BMI began negotiating with the American Composers Alliance (ACA) and its publisher arm, Arrow Press, for licensing rights to serious or symphonic music. That agreement, and one for broadcast rights to the music of leading European serious-music houses, increased BMI's repertory and helped its reputation as an organization for all types of music. In 1941 BMI formed BMI Canada as a subsidiary. That organization quickly developed a catalog of 5,000 works, one-third of which had French lyrics.

While it was important, of course, for the new entity to sign contracts with writers and publishers and licensing agreements with broadcasters, the key to its operations was establishing a system of licensing fees. Where ASCAP had based their fees on advertising sales, BMI focused on paying for what actually was performed. To do this, BMI had Paul Lazerfield of the Office of Radio Research at Columbia University design a process that enabled BMI to document the air play of a scientific sample of non-network programs as well as of network broadcasts from New York, Chicago, and other major cities. The system, known as "logging," incorporated a daily census, i.e., a program log, from the radio networks and from a sampling of local radio stations. The sample was then multiplied to reflect the national picture.

According to BMI the process involved examining 60,000 hours of logs a year, and while most of the music was broadcast live at the beginning, using sheet music, the process also identified performances of recorded music. That ability became very important when the radio networks later shifted to recordings. In 1942 the basic payment for local-station performances was four cents, and six cents per station for network performances.

The record industry grew significantly during the 1940s, with record sales reaching $224 million in 1947. Added to the pent-up demand following World War II were better equipment such as high fidelity and then stereo, and better products--the 45 rpm disc and the long-playing 33 rpm disc--which caused sales to keep growing.

The types of music being recorded expanded as well. In 1942 Billboard began tracking releases of "folk" records. By 1949 that label had been changed to "country and western." BMI helped new publishing companies get going, including Acuff-Rose Publications and Range Songs, both leaders in country music. Between 1944 and 1954, 77 percent of all the songs on the Top 10 of Billboard's country charts were licensed by BMI, including "Tennessee Waltz" and "Your Cheatin' Heart."

The postwar period also saw the rise of black musicians and rhythm and blues music, and new independent record labels, including Atlantic Records, Specialty Records, and Chess Records, to record R&B artists. BMI licensed more than 90 percent of R&B radio hits on a weekly basis.

On the management side of the organization, Carl Haverlin became BMI's first full-time, paid president in 1947. Haverlin pushed BMI to become more active in the publishing side of the business, and concluded negotiations which gave the organization all publishing and performing rights for a group of 15 European music houses.

The major radio networks agreed to extend their contracts with BMI until 1959, and over 1,000 independent broadcasters soon agreed to the same time period. This made it possible for BMI to enter contracts with publishers and songwriters for longer than 24 months, the limit under the existing licensing agreements. However, the radio networks used little of BMI's music, and the organization's income was only one-third of that taken in by ASCAP.

Other important actions taken by Haverlin were the development of a songwriter payment plan, which BMI put into effect in 1949, and payment for recorded performances. This brought in unaffiliated publishers and record companies, whose records were generally played on independent radio stations. For the first time since the organization was founded, BMI-licensed music was prominent on all the charts.

1950-60: Shifts in the Industry

The 1950s were a period of great change in the music industry. Not only did records displace most sheet music, television was a growing medium, and the public's view of "popular" music shifted dramatically, with the development of rock and roll.

BMI was deeply involved in the growing popularity of country, rhythm and blues, and rock and roll, but it also supported "serious" music. In 1951 BMI president Carl Haverlin instituted the Student Composer Awards for promising young composers. In 1954 the organization created a new Concert Music Department and began sponsoring such events as the ten-concert festival on Music Mountain in the Connecticut Berkshire foothills.

During this period BMI arranged its first annual awards presentation specifically for writers and publishers of country music. When the Country Music Association was founded in 1958, BMI vice-president Bob Burton served on its first board of trustees, and that year, BMI opened a branch office in Nashville. The office was run out of the home of Frances Williams, who, as Frances Preston, became president of BMI in 1986. In the late 1950s BMI also opened an office in London to help negotiate reciprocal licenses with the major performing rights societies in Western Europe. The company went on to establish similar agreements with societies in Scandinavia, Japan, and Latin America.

BMI also helped establish publishing houses specializing in jazz. A large number of jazz composers who were also recording artists signed up with BMI, so that by the early 1960s the company's roster included such names as Dave Brubeck, Charles Mingus, Charlie Parker, and Miles Davis. BMI's vice-president of public relations, Russell Sanjek, helped promote jazz by organizing major jazz festivals and publishing a series of brochures, which were distributed around the world by the U.S. Information Agency.

The changes in the industry, particularly the development of rock and roll, were not popular with the people who wrote and composed "traditional" popular songs. In November 1953 a group of 33 composers claimed a conspiracy of broadcasters and producers was keeping "good music" from being recorded or aired. They brought a $150 million antitrust suit against BMI, the three national broadcast networks (who owned 20 percent of BMI), RCA Victor Records, Columbia Records, and 27 individuals. The composers, all members of ASCAP, included such well known songwriters as Alan Jay Lerner, Ira Gershwin, and Oscar Hammerstein. The suit was supported by other ASCAP members, who pledged five percent of their ASCAP royalties to help pay for the legal costs. As the case was brought, more than 9,000 writers were members of BMI, receiving royalties.

In 1956 the plaintiffs, who called themselves "The Songwriters of America," took their case to Congress, where hearings were held to look into the involvement of radio and television networks in music publishing and promotion. More hearings were held in 1958 in the Senate. While the networks and their recording business were the subject of the hearings, the music available through BMI also came under attack. Witnesses as diverse as the Governor of Tennessee and the head of Paramount Pictures testified against the charges and the proposed legislation, which died in committee. However, the networks did divest themselves of BMI stock. Congress continued to investigate BMI for unlawful practices, including "payola," paying disc jockeys to play certain records. Neither those investigations nor the suit proved successful, although The Songwriters of America fought for 15 years before the suit was dismissed with prejudice in 1968.

In the mid-1950s the Senate ratified the Universal Copyright Convention, making the United States a participant in an international copyright agreement for the first time. While U.S. copyright law exempted jukeboxes from any music licensing fee, owners of jukeboxes or other coin machines in most of the other nations had to pay a royalty on the music. Congress began proposing legislation to eliminate the jukebox exemption.

On the West Coast, BMI concentrated on the new medium of television, because most of the movie studios owned their own ASCAP publishing companies. Many TV producers used "canned music" in scoring their programs, and by the end of the decade BMI had signed 85 percent of the track libraries that provided the music. As television producers began wanting original theme and background music, the company aggressively sought and signed television composers, many of whom came from jazz and the big bands. By November 1963 viewers were hearing BMI music on 112 of the 163 regularly scheduled network shows.

While focusing on television, the company did not ignore music for films, with works such as "Song from Moulin Rouge," "Never on Sunday," (which won an Academy Award), and "More," the score from Mondo Cane, becoming popular hits. A large part of BMI's attraction to screen composers was that it made payments when films were shown in foreign countries.

Meanwhile, back in New York, BMI established a musical theater department in 1957, and in 1961, created the Musical Theatre Workshop to support composers interested in that genre. Eventually, BMI's Broadway repertoire ranged from Fiorello! to Cabaret to Little Shop of Horrors to Cats.

1960-90

Robert Burton became BMI's second paid president in 1963. Burton helped get licensing payments from new sources, most particularly, one percent of gross admissions at live and closed-circuit concerts. That policy went into effect at the Beatles' 1964 closed-circuit television show. The Beatles had released their first U.S. single, "I Want to Hold Your Hand," that year, and it topped Billboard's charts within three weeks. Dick James, the Fab Four's publisher in England, quickly sewed up all publishing rights for the Beatles in North America through his own BMI-affiliated company, Maclen Music.

BMI also instituted a new distribution policy for writers, which tripled their payments, and resulted in the buildup of BMI's collection of scores from movies and musical theater. That same year, BMI moved into its own office building in Nashville. By 1965 the organization claimed 9,000 songwriters and 7,000 publishing affiliates.

In 1965 a federal court ordered BMI to get out of the business of recording, printing, or distributing music, and limited its contracts to no more than five years. The same year, the Federal Communications Commission (FCC) prohibited stations from broadcasting the same AM programming on FM stations in markets of over 100,000 listeners. FM stations began programming album cuts, playing all sorts of music, from jazz and classical to blues, rock and roll, and folk. BMI began in-depth logging of FM stations, and the company's income from local radio alone grew from $3 million in 1963 to $15.5 million in 1971.

During the 1970s disco dancing was the rage, the quality of tape cassettes improved and their sales soared, superstar songbooks led to a jump in printed music, and the revised U.S. copyright law included the licensing of jukeboxes. BMI Canada became an independent, Canadian-owned and operated company, Performing Rights Organization-Canada (PRO-Canada). BMI began offering various insurance packages, including medial and life insurance, to its affiliates living in the United States. In 1977 BMI introduced a new payment plan, emphasizing performances. With material available from TV Guide, the organization was able to include local syndicated television shows in its sampling system.

In the 1980s new musical technologies began emerging: music videos and compact disks. Music video cable channels such as VH-1 and MTV found avid audiences, particularly among teenagers, for the sound (and sights) of heavy metal bands. BMI took the lead in licensing the new cable television industry. College radio stations were also becoming an increasingly important source of new music, as young bands such as REM and the B-52s made a name for themselves on college radio before moving to commercial stations. BMI was the first performing rights organization to comprehensively log college stations, adding more than 1,000 to its logging system in 1989.

In 1985 BMI Foundation Inc., a separate tax exempt, nonprofit organization, was established. Through endowed funds, it offered grants, scholarships, awards, and prizes to young composers. It also supported groups around the country involved in education about or performance of music.

The 1990s: New Technologies/New Challenges

As BMI celebrated its 50th anniversary, there were over 10,000 broadcasting stations (TV and radio) in the United States. The company estimated it analyzed over six million broadcast hours a year using its census and sampling system, 100 times the number of hours examined back in 1940.

The 1990s saw BMI's licensing departments expand their reach beyond bars and restaurants to new users of BMI music, including health clubs, banks, shopping malls, and amusement parks. The organization remained active on the legislative front, lobbying on various bills pertaining to copyrights and musical licensing. BMI also increased the services available to its affiliates, adding musical instrument coverage to its insurance offerings and expanding the types of options available for life, dental, and medical coverage.

Yet much of BMI's activity related to new technologies. In 1995 BMI negotiated the first agreement licensing music performed on the Internet, and in 1997, announced the creation of "MusicBot™"--a web robot that will comb the World Wide Web, tracking the use of BMI music. That same year, a new agreement with local television stations included language that enabled stations to use BMI music on world wide web promotional sites as well as on future high-definition TV signals.

Most far-reaching, perhaps, was BMI's involvement in the creation of an international, digital song registry, the "Works Information Database." Under the plan, each musical composition would have a digital identification number, and, with regional and national databases linked through the Internet, make it possible for a copyright organization to accurately identify the ownership of a musical piece, no matter if it shared a title with 30 other pieces. BMI President Frances Preston saw the registry as a logical continuation of BMI's goals. "We must, at the beginning of the next century, be able to identify the performance of a creative work by its digital identifier anywhere in the world, transmit the information rapidly and efficiently across linguistic, cultural and national borders, and compensate the creator and owner quickly and accurately."

Further Reading:

• BMI, "BMI 50th Anniversary History Book, The Explosion of American Music: 1940-1990," http://www.bmi.com/reading/archives/historyo1.html.
• Sanjek, Russell, and David Sanjek, American Popular Music Business in the 20th Century, New York: Oxford University Press, 1991.

Source: International Directory of Company Histories, Vol. 23. St. James Press, 1998.

Directory of Sample Business Plans Directory of Company Histories Contact Us Advertise