BMI Sets New Benchmarks in Performing Right Income, Royalty Payments

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Annual Financial Review BMI Sets New Benchmarks In Performing Right Income, Royalty Payments

MI earned more than $901 mobile, social networking and website strength, a blurring of conventional million in revenues for its categories, and we now license more lines between genres and media out- 2008 fiscal year, marking the than 6,500 digital media properties, lets became increasingly evident: The first time any copyright orga- an increase of more than 50% over the most successful hits featured innovative nization has topped the $900 prior year. International revenues were blends of urban, Latin, country and pop Bmillion mark for music performance also a bright spot, accounting for $238 artists and styles, while veteran stars and revenues and a 7.2% percent increase million, or more than 26% of BMI’s “tween” idols relied more and more on from the previous fiscal year. BMI also revenues. Growth in revenues from a combination of radio, television and set a historic high in royalty distribu- film exposure. tions, and will disperse more than $786 Within the robust urban genre, million to our affiliates, an 8% percent BMI’s financial results BMI represents hip-hop and r&b roy- increase over the prior fiscal year. alty including T-Pain, Kanye West, These financial benchmarks are a direct Sean Garrett, Chris Brown, Rihanna, result of the creative efforts of our song- for fiscal 2008 mark the TI, Dallas Austin, Lil’ Wayne, Gnarls writers, composers and music publish- Barkley’s Cee-Lo Green and OutKast’s ers, who have helped build a catalog first time any copyright Big Boi, along with explosive song- of music whose depth, breadth and writer, producer and artist Polow Da popularity are unequaled anywhere in organization has topped Don, who illustrates the increasing the world. ability of writer/producers to move be- While traditional broadcast radio the $900 million mark tween urban and pop genres. In today’s and television accounted for an im- rapid-fire pop-culture climate, cross- pressive $340 million, or about 38% for music performance genre success is becoming increasingly of revenue, our leadership in licens- prevalent. Versatile BMI songwriter/ ing the explosive growth of music revenues. producers including will.i.am, J.R. in cable, satellite radio and satellite Rotem, Kara DioGuardi and Jeffrey television brought in revenues of Steele create crossover ready hits. more than $208 million, accounting the performance of music in retail BMI also represents stars leading the for more than 23% of our domestic and service establishments, including “tween” revolution, including pop licensing income. New Media rev- restaurants, bars and the hospitality culture phenomenon Miley Cyrus/ enues increased to a total of $15 mil- industry, also increased, totaling $97 Hannah Montana, Aly & AJ, the Jonas lion, due in large part to growth in the million. Brothers and the Naked Brothers Band. Our strategic use of technology, TOTAL REVENUE (millions) including the development of new and ROYALTY DISTRIBUTIONS (m illions)

$1,000 enhanced web-based tools for song- $800 $ 900 writers, composers, and publishers, $700 $ 800 allowed us to grow our business while $600 $ 700 lowering overhead to 11.7%, the low-

$ 600 est in company history. $500

$ 500 $400

$ 400 Repertoire $300 $ 300 The quality and depth of BMI’s roster $200 $ 200 and repertoire once again provided the

$ 100 impetus for unparalleled success in the $100

0 performing right arena during the past $ 0 2004 2005 2006 2007 2008 year. While each music format displayed 2004 2005 2006 2007 2008

3 32% 71.6% Website 17% Western Europe Music 10.2% Subscription Services Asia-Pacific

9.2% 10% Canada 37% Local Radio Mobile Streaming 4.3% Latin America 4% 4.1% Television Eastern Europe Streaming (including Turkey & Israel) .6% Annual Financial Review Africa

Artists with Luis Guerra, Wisin & Yandel and Los “tween” REVENUE SOURCES appeal Tigres del Norte topped charts around (percent by category) generated the world. enormous airplay In the surging rock genre, BMI’s roster numbers this includes Nickelback, 3 Doors Down, year, led by Miley Cyrus, Red Hot Chili Peppers, the Raconteurs, 26% International 7000 Aly & AJ, 21% Cable & Satellite the Jonas Maroon 5, Linkin Park, Kid Rock, Fall 6000 Brothers and Out Boy and more. Legends with staying the Naked 13% power embody BMI’s classic rock family: Broadcast 11% 5000 Brothers Band. Television General Licensing The Eagles, Pink Floyd, Alice Cooper, Eric 4000 Clapton, The Who, Elton John and numer- 25% Radio 2% 3000 ous others remain in high demand. New Media 2% BMI composers continue to dominate Other 2000

the jazz field, as BMI represents the ma- 1000 jority of the 100 National Endowment 0 for the Arts Jazz Masters Fellowship re- by Steve Jablonsky. BMI television music 2004 2005 2006 2007 2008 cipients, the highest honors that our na- composers also maintained their competition bestows upon jazz musicians. In the tive edge, boasting theme or background contemporary classical music field, sev- music in 76% of last fall’s primetime net- en of the 10 most frequently performed work programs and in 17 of the top 20 of living American composers are affiliated those shows, while composers Katreese with BMI. BMI’s preeminence in musical Barnes, Jeff Beal, George Fenton and theatre was also reinforced this year, as William Ross each took home prime-time Passing Strange won a Tony Award for Emmy Awards. Best Book of a Musical and top honors for its creative hive at the 53rd Annual Operations Drama Desk Awards. BMI’s global leadership role among per- The trend of U.K. acts enjoying sub- forming right organizations32% is rooted in 71.6% Website 17% Western Europe our ability to reduce overheadMusic without stantial achievements stateside10.2% contin- Subscription Services ued this year. London’sAsia-Pacific Amy Winehouse diminishing the quality of service offered 9.2% 10% Canada capped off a staggeringly successful year to our affiliates, licensees37% and interna- Local Radio Mobile Streaming with five Grammys, the most ever4.3% in one tional partners. We continue to employ Latin America 4% year for a British woman, and numerous4.1% tools and strategies designed to improveTelevision Eastern Europe Streaming (including Turkey & Israel) U.K.-based artists, including.6% Corinne both operational efficiency and productiv- Africa Bailey Rae, KT Tunstall, Snow Patrol, ity, as the increase in new music licens- Natasha Bedingfield and James Blunt, ing sources and delivery platforms offers continue to populate the upper reaches of the charts. NEW MEDIA LICENSEES BMI’s dominance in the country format Music in film remains a key com-

is carried by an invigorating combina- ponent of our repertoire,26% as BMI com- 21% International 7000 tion of new faces and veterans: Toby posers Cablehave & musicSatellite in 82% of the 100 Keith, Tim McGraw, Faith Hill, Brooks top-grossing films of the past year. The 6000 13% Broadcast 11% 5000 & Dunn, Keith Urban, Martina McBride three highest-grossingTelevision filmsGeneral of last year, Licensing and Vince Gill remain at the forefront, which at last count had grossed nearly 4000 25% while Carrie Underwood, Taylor Swift, $1 billion domestically,Radio were scored2% by 3000 New Media 2% Miranda Lambert, Rodney Atkins and BMI composers: Spider-ManOther 3 by newly 2000

Josh Turner joined the genre’s top ranks. crowned Richard Kirk Award recipient 1000 Shrek The Third BMI’s Latin trendsetters remain interna- Christopher Young, by 0 2004 2005 2006 2007 2008 tional superstars: Shakira, Juanes, Juan Harry Gregson-Williams and Transformers

4 Annual Financial Review

performance data. Diligent implementa- INTERNATIONAL REVENUE tion of refined operating procedures also (percent by region) helped us deal with a 15.7% increase in music performance data from foreign performing right societies. In March 2008, we launched a new, automated 32% 71.6% Website 17% application dubbed SuperQ, which is Western Europe Music 10.2% Subscription Services designed to process electronic cue sheets. Asia-Pacific

In addition to streamlining processing 9.2% 10% Canada 37% Local Radio procedures and organizing large amounts Mobile Streaming of information, the program provides en- 4.3% Latin America 4% hanced data protection. 4.1% Television Eastern Europe Streaming In the past year, BMI launched a (including Turkey & Israel) .6% major revision of the online affiliation Africa process, greatly reducing the complexity of joining BMI via the Internet. Over the traditional relationships in the midst of past 12 months alone, BMI added almost the digital revolution. On the legislative 30,000 new songwriters and composers front, BMI has been actively engaged to its rolls, with the vast majority joining in many issues put forward in the 110th online. The company also launched an Congress, specifically the Performance 26% enhanced version of Online Services for Rights21% Act and theInternational Orphan Works bill. 7000 Cable & Satellite major publishers, allowing them to regis- We have been monitoring the status 6000 ter new works and manage existing cata- of 13%Performance Right Act and assist- Broadcast 11% 5000 Television General log more efficiently. An increased em- ing Congress in draftingLicensing competent phasis on eCommerce has also led to the language for both bills in an effort to 4000 25% introduction of an internally developed ensure pre-existingRadio royalty streams2% for 3000 New Media system that allows for the electronic pro- songwriters, composers and2% music pub- BMI’s dominance in the contemporary rock Other 2000 sphere is reflected by the ongoing success cessing of licensee payments, reducing lishers remain strong and unimpeded. of such acts as 3 Doors Down, Hinder and BMI’s costs in licensing administration BMI is also notably involved in vital 1000 Maroon 5, among many others. significantly. copyright issues abroad, as new media 0 2004 2005 2006 2007 2008 unprecedented challenges and opportuni- are increasingly serving international ties. During the year, we processed more Public Policy audiences in a borderless economy. than 9 billion feature audio performances The changing infrastructure of the During the past year, the European from a wide range of reporting sources, entertainment industry has created Commission found certain provisions of with 97% of these performances coming a surge of activity on Capitol Hill as the agreements entered into between the from Internet and digital audio services, record companies, music publishers, European societies to be in violation of our fastest growing sources of audio artists and songwriters seek to redefine European competition law. The decision

Established hip-hop and r&b talent like Kanye West, Chris Brown, and Lil’ Wayne continued to top charts in multiple formats, illustrating the increasing ability of artists to move between genres.

5 Annual Financial Review

BMI’s subsidiary company, Landmark NEW WRITER AFFILIATIONS Digital Services™, LLC, provides ad- Online Versus Paper

vanced audio-recognition products and 30,000 400,000 services for content providers, copyright 350,000 owners and consumers of music and 25,000 digital entertainment. Since its launch in 300,000 20,000 2005, the company’s infrastructure and 250,000 data library have grown to encompass 15,000 200,000 more than 600 broadcast-monitoring 150,000 sites and almost 5,000,000 audio signa- 10,000 tures. Landmark’s unique BlueArrow™ 100,000 5,000 pattern-recognition technology 50,000 Trendsetters is designed to recognize music Juan Luis Guerra, 0 0 Sebastian Krys from any medium, and in al- 2005 2006 2007 2008 2005 2006 2007 2008 and Juanes are Online Paper Electronic Paper just three of most real-time. Essentially, the the many BMI broadcast monitoring and per- The vast majority of new writer affiliations now Latin stars who take place via the Internet, with 90 percent of saw heavy chart formance reporting Landmark the sign-ups taking place online in 2008. activity and award provides will ensure BMI’s posi- recognition. tion as the leader in performing accordance with generally accepted ac- right royalty distribution, even as new counting principles (GAAP). Reporting methods of digital delivery are adopted. in accordance with these principles Currently, Landmark is monitoring and enables us to accurately and objectively identifying for BMI hundreds of com- report our financial results. mercial radio stations within numerous Each year our financial statements formats, 24 hours a day, seven days a are subject to an audit by our inde- week, 365 days a year. By the end of pendent auditors, Deloitte & Touche. 2008, BMI will have fully integrated Annually, our auditors express an these stations within its royalty distribu- opinion on our financial statements tion process. based on the results of their audit. An unqualified opinion (the best opinion Financial Reporting Quality possible) was issued again this year, BMI’s commitment to quality and in- denoting that our financial statements prohibits such practices, bans exclusive tegrity is exemplified by the practice present fairly the financial position and rights to repertoire and permits songwrit- of preparing its financial statements in results of operations of BMI. ers and other rights holders to choose any copyright organization in the EU to represent their works for online, satellite and cable distribution, setting in motion a competitive structure among collecting societies. BMI’s repertoire is one of the primary assets licensed by the European copyright societies and the desire to eas- ily license this catalog is a driving factor with regard to decisions that are being made by the various parties. We are actively surveying these developments to protect the interests of our songwriters, composers and music publishers. BMI’s dominance in the consistently popular country format is carried by an invigorating cross- section of new faces and veterans: Artists like Brooks & Dunn and Tim McGraw remain at the Landmark genre’s forefront, while Carrie Underwood set new benchmarks for success.