NASHVILLE — In a keynote interview on the final day of the Music Business Association's annual conference, SESAC CEO John Josephson easily sidestepped an early question about his opinion of the ostensibly hip-hop dispute that had recently developed between ASCAP and BMI over the latter's decision to shift to a for-profit model and its subsequent acquisition by a private equity firm. But he hasn't been shy about touting the advantages his company offers songwriters and publishers over competing US performing rights agencies.
When BMI announced that it was switching to a for-profit model and was acquired by New Mountain Capital, ASCAP reaffirmed its commitment to pay all the revenue it collects – minus overhead costs – and unlike BMI, take no profit.
“I have nothing to add to that conversation,” Josephson said in response to the interviewer's characterization of hostility, Advertising sign editor-in-chief Robert Levine.
Josephson admitted, however, that it will be interesting to watch how BMI's business model evolves, saying it may cause indigestion but he doesn't think it will have much of an impact. Beyond that, he said it will also be interesting to see “what happens with the beef between some of the big publishers and BMI.”
When Levine noted that some rights holders say it's hard to drop some US pros, Josephson responded, “The great thing about the US market is that people can choose” a PRO.
But when Levine pointed out that it's not always easy to let go of some PROs, Josephson agreed, pointing out that there has been friction in the transition from one PRO to another that has even led to arbitration. But at SESAC, “we don't think of our authors and publishers as captives,” he said. “If they want to leave, they are free to go. We win by providing better service and more money. If you do that, then you don't have to bother leaving.''
Focusing on SESAC's future, Josephson said the company has an infrastructure that serves as an intermediary between rights holders and businesses looking to exploit music, and was looking for ways to capitalize on that potential. “We think we can double or triple our market share,” Josephson said.
It has already grown significantly through acquisitions of 11 different companies, including the Harry Fox Agency, Audiam and Audio Network, over the past decade, he said. It also has a joint venture in Mint Digital Services with the Swiss collective management organization SUISA. Overall, its multifaceted approach has made SESAC a global company, he added.
Additionally, he added that SESAC currently has a “backlog of 7 or 8 companies” it is now in acquisition discussions with. If deals go through, Josephson said SESAC can help these companies “grow at a faster rate than they've already grown organically,” all of which will provide “compound growth.”
Beyond its PRO, SESAC divides its company into three divisions, Church Music Resources, Audiovisual Licensing, and Music Services for Publishers and Labels. Of the latter segment, which includes the aforementioned HFA, MINT and Audiam, he said. “We don't care about the long queue. We care about small publishers and small labels. Over time we want to expand the services we offer to these customer groups.”
Turning to church music resources, he said Christian Copyright Licensing International (CCLI) has been “a great business for us.” In fact, he said, it was the “first expansion of our business on a global scale,” with more than 50% of church licensing done outside the US. He acknowledged that licensing in this segment is not without its challenges, noting that churches tend to operate on a not-for-profit basis and can expect to pay lower rates, “even though these are multi-million dollar commercial businesses.”
As for SESAC's audiovisual sector, he said it's a much bigger business for the company than ASCAP or BMI.
For the past seven years, SESAC has been majority-owned by private equity giant Blackstone, which he says has been a great relationship and an amazing source of capital.
“They give us a lot of room to pursue our vision of where we want to take our business,” Josephson said. “It's not like we're being told what we can and can't do. They're thinking about what's best for the long-term business.”
When interviewer Levine noted that most private equity often invests with the goal of cashing out within five years, Josephson said that the Blackstone fund that invested in SESAC has an investment goal of holding onto a company for “10-15 years, so they're interested in sell them. They're not thinking about what can we do to increase profits this year,” and instead focus on the long term.
When Levine expanded on the overall impact that private equity has had on the music business in recent years, Josephson noted that in the past private equity has sometimes disappeared from the music industry equation. But going forward, “as long as interest rates don't rise any further dramatically … private equity involvement in the music industry may wax and wane, but I don't think it will go away.”
