Should BMI's Good Old Boys' Network Make Rules for the Digital Age?

NEW YORK (TheStreet) -- Broadcast Music, Inc., better known as BMI makes it difficult to find a list of its current Board of Directors. In fact, I'm not sure an actual Webpage exists. You know, the standard "Board of Directors" link off of an "About Us" tab or some sort.

I called a couple BMI offices, asking for the link. The folks who answered the phone weren't even sure one existed. They put me through voicemail hell. The 2012 annual report I discovered doesn't even make mention of a Board. Finally, I had to resort to an October 2012 press release, announcing the reelection of a board member, to secure a complete rundown.

(Yes, I could access an IRS form, but, why should I have to and how many people would think of that?).

Of course, it's probably just an innocent oversight. These cats are rockers, musicians, technologists, digital media types -- since when do they follow protocol?

Or maybe they're not.

A review of BMI's board membership helps add necessary, but omitted color and context to the lawsuit it recently filed against Pandora ( P).

But first, speaking of that lawsuit, I have to thank BMI for the shout out in the official complaint. You can access a copy here. In all seriousness, I'm beyond flattered that a paralegal or maybe even the general counsel or somebody considered my work important enough for a citation on Page 9:

I did find it odd, though, that whoever wrote that part felt the need to provide a citation for something so well-known -- Apple's ( AAPL) overly publicized entry into Internet radio. At the same time, loads of quantitative data -- Pandora streamed 14.01 billion hours of music in the year-ending Jan. 31, 2013 and such -- floats without citation. Just my curiosity as a writer getting the best of me I guess.

That aside, it should come as no surprise that really, really, really old school broadcast radio/TV executives comprise almost all of the BMI board.

Let's consider some representative examples.

One BMI board member, Jack Sander, now serves as a "Senior Advisor" to the Belo Corp., the owner of a couple dozen or so television properties. According to Broadcasting & Cable, "Sander's first post-college job, paying $85 a week, was with WLWC Columbus in 1965." I can't find his birthdate anywhere, but I feel comfortable saying he's pushing 70.

It should come as no surprise that Gannett ( GCI) recently agreed to buy Belo.

Gotta love good old boys' clubs.

Former Gannett Chairman, President and CEO Craig Dubow, also sits on BMI's board. He will turn 59 this year. Dubow retired for health reasons in 2011 and, according to The Atlantic, received a massive golden parachute package after overseeing Gannett as its stock price dropped from $72 to $10 per share. Of course, he "led" the company as it was getting its ass handed to it by digital media.

From a 2010 Inside Radio article, here's the story of another BMI board member, Amador Bustos of Bustos Media Holdings:
Privately-held Bustos Media is technically in default with its lenders. It has missed some payments and has broken loan covenant agreements ...
Bustos continues, "This is a problem that's endemic to the industry."  Bustos Media's 28-station portfolio was assembled between 2004 and 2007 to target Hispanics in mid-sized markets.  But as its last deals were closing, radio revenues began a multi-year free-fall. Bustos concedes, "We happened to buy at the high point and made estimates that didn't prove to be accurate."  As advertising dried-up, there simply wasn't enough to service the debt. It's a story familiar across radio Bustos notes, with dozens of companies in negotiations with their lenders.  A few have even filed Chapter 11.

Another story of visionless abject failure in broadcast radio.

Bustos's BMI board term doesn't expire until 2016.

Retired for more than a decade, the 74-year old former president and CEO of the now-defunct Pulitzer Broadcasting, Kenneth J. Elkins, joined the BMI board in August 2000, where he remains to this day.

I could go on, but, the BMI board is, primarily, an assemblage of broadcast radio and television good old boys. To be fair, it also hosts a few other print publishers as well as several provincially prominent females and the president of The CW Network. But good old boys and girls' club just doesn't sound right.

By and large, we're talking about an organization overseen by people who work (or haven't worked for years) in yesterday's industries. While some work for successful and respectable medium-size market operators, others were the very people asleep at the wheel as the world made the not-so-abrupt shift from broadcast to digital delivery.

Why does this matter? After all, BMI is Broadcast Music. To that end, shouldn't it fill its board with broadcast executives? That's one way to look at it.

But if you read the entire BMI complaint, you witness its lawyers detail the emergence of Internet radio and mobile delivery alongside the reduced role of terrestrial radio and physical music sales. The suit refers to an entirely new playing field for music publishers, songwriters and composers, drawing distinction between "the pre-Internet era" and today's "New Media Transmissions," defined by BMI as "any performance transmitted via the Internet, wireless data networks, or any other similar transmission facilities, where a commercial relationship exists ..."

In short, BMI is saying things are different today. The old rules no longer apply. But, instead of doing what really needs to be done -- overhauling the entire antiquated system of royalty payments -- BMI, as is often the case within comfortable and un-innovative good old boys' networks, wants to penalize pioneers and visionaries such as Pandora while ignoring the reasons why the music industry finds itself in the mess it's in. The music industrial complex recognizes that we live in a different world, but is unwilling -- and, based on the credentials of its leadership, most likely unable -- to devise rules to operate effectively in it.

While Pandora and other technology companies were visioning the future we live in today, broadcast radio executives -- the same people who occupy seemingly open-ended spots on BMI's board -- stood still. The music and radio industry consortium failed to act, as it attempted to do nothing more than preserve the status quo. So, now, all of a sudden, after years of inaction, BMI and others in the cartel expect Pandora to pay reparations for industry incompetence? They can't be serious.

How in the world can an organization that collects royalty payments from myriad sources -- broadcast radio, television and Internet radio -- not have one person from Internet radio or from technology or from the most relevant and cutting edge companies in the digital space on its board? It's beyond absurd. You have a crew of out-of-touch individuals attempting to strong arm a set of rules for a period they neither saw coming or have even begun to understand. Any judge -- or, for that matter, singer, songwriter or composer with a conscience -- should laugh in their collective face.

But it's not just the bigger picture of BMI's structure and its argument against Pandora that lacks. The specifics it uses to support its case are also flawed. Consider this talking point:
Pandora does not play one song at a time, as do old-fashioned terrestrial radio stations. By 10 a.m. every morning, Pandora has already performed 200 million songs, as compared with the hundreds of songs played by an average radio station per day.

First, it sounds like the 74-year old Elkins wrote the first sentence. Second, where's the citation for the statistics? That wouldn't get past even a poor referee at an academic journal; the judge better at least ask for some form of validation.

But, nitpicks aside, the logic here boggles my mind.

Pandora -- and Internet radio as an industry -- provides more exposure for music, including songs by musicians BMI represents, than BMI and the cartel ever imagined or could have hoped for. Think about it, it's unprecedented. And it extends way outside the confines of Top 40 into local and independent music that never has, does not and never will receive anything resembling consistent airplay on broadcast radio, if it gets on the playlist at all.

All of this extra airplay and the only thing BMI can think about is that Pandora doesn't pay enough and it should not be able to pay the same rate as its peers pay for Internet delivery. I could book a night at The Laugh Factory -- and I wouldn't even have to "pay to play" -- with this sort of comedy. I have a wild imagination. The law fascinates me. I'm even studying for a 2014 sitting of the LSAT. But, even I could not come up with such convoluted, short-sighted, misguided and downright clueless logic.

When is somebody ... somebody big ... somebody doing interesting and meaningful things in music ... somebody with the vision to look ahead -- Jimmy Iovine, Irving Azoff, Neil Young, Bruce Springsteen, Steve Van Zandt -- somebody, anybody ... When will one of these people, or others like them, stand up and call B.S. on groups such as BMI? I'm not even saying they have to agree with Pandora -- I don't even always agree with Pandora. But, at the very least, point out the lunacy and injustice for what it is. And, most importantly, fight -- logically -- for a system that treats music as a dynamic industry of endless possibility, able to flourish in an age ruled by emerging technology and rich data, not long-forgotten 60- and 70-year old men.

-- Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.

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