John Josephson

John Josephson, chairman and CEO of SESAC.

Courtesy SESAC

"SESAC has big plans," says the organization's new chairman and CEO.

SESAC, which has been under majority ownership by private equity firm Rizvi Traverse since December 2012, is ready to grow. That's the word coming out of the organization, which just picked John Josephson, a board member since 1992, to lead the company.

Josephson, formerly managing director at Allen & Co., has been named chairman and CEO of SESAC. Pat Collins, the president and chief operating officer responsible for running day-to-day operations, has been promoted to president and CEO of the subsidiary SESAC Performance Rights. In addition, the company has brought in Kelli Turner, previously a managing general partner at private equity firm RSL Ventures, as its executive VP of corporate development and CFO. As part of that move, Mike Hidalgo will continue as a key member of the senior management team in the role of deputy CFO.

With this new leadership in place, the company will pursue a broader business model within music licensing. "SESAC has big plans that go beyond the scope of what [its] business has been for the past 22 years," Josephson tells Billboard. "Those years were a huge success, as our growth shows."

Since 1992, when the company came under the ownership of entrepreneur Stephen Swid and other investors including Allen & Co., SESAC's annual revenue grew from $9 million per year to an estimated $167 million in in 2013. At the end of 2012, Rizvi Traverse paid $591 million for a 75% stake in the company, with the remaining 25% staying in the hands of Swid and the investment group he headed.

Now, with rights managements at the center of digital distribution, SESAC sees an opportunity to expand beyond performance rights, into neighboring rights, synchronization and (possibly) mechanical licensing, which means growing beyond the role of a performance rights organization (PRO).

"What motivates me to take this position is I see a lot of change coming and SESAC is in a great position to benefit no matter what direction the industry's evolution takes," Josephson says. While Josephson looks to expand, Collins will continue to oversee the SESAC's traditional PRO operations, while providing insight into possible expansion opportunities.

"We are now face-to-face with tremendous opportunities in the marketplace, driven by the digital distribution of music," Collins notes. "These are very interesting times to be in the rights licensing business. It's time to move to the next phase of growth."

On the appointment of Josephson, Collins points out that the 22-year board veteran is intimately familiar with SESAC. "He comes in knowing the company and knowing the growth strategy," Collins tells us. "He is the right guy at the right time."

Besides the emergence of rights management into a prominent position within the music industry, the whole publishing sector could be undergoing radical change if the Dept. of Justice doesn't amend the consent decrees of competing PROs, ASCAP and BMI. Sony/ATV and Universal Music Publishing Group are threatening to withdraw from the two PROs and do direct deals with music users like Spotify and Pandora. In order to do that, however, they would need to duplicate the PROs' capabilities, which could mean having to build analogue organizations from the ground up, or outsourcing those capabilities to companies like SESAC, Music Reports Inc., and Harry Fox Agency.

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But talk about changing the consent decree also comes with potential liabilities for the two PROs, ASCAP and BMI (and possibly SESAC). At a hearing in Washington on music licensing, participants from the broadcasting and digital music service sectors were said to be arguing in favor of putting SESAC under a consent decree too. SESAC is already fighting two anti-trust lawsuits from the Radio Music Licensing Committee and the Television Music Licensing Committee.

After spending a year getting its arms around the SESAC operation, in December 2013, Rizvi Traverse backed SESAC's acquisition of a majority stake in Rumblefish, a micro-licensing platform. Of that acquisition, Josephson says, "Rumblefish has a scaleable platform and it opens up the way to broaden the base of rights we can manage."

Rumblefish founder Paul Anthony Troiano will continue to serve as president and CEO of that company and, like Collins and Turner, will report to Josephson. Sources suggest that SESAC, backed by Rizvi Traverse, paid about $15 million for its majority stake in Troiano's company.

Sources also confirm that SESAC put in a letter of interest towards Harry Fox Agency, offering about $35 million. That potential acquisition would bring SESAC into the mechanical rights area and make it unique in the U.S. -- the ASCAP consent decree doesn't allow for a PRO to engage with mechanical rights. (There is some debate as to whether the BMI consent decree prohibits that PRO from handling mechanical rights.) In any event, talks with the DOJ on the consent decrees also include an ask for approval to move into mechanical rights as a way to bundle rights for interactive streaming, which requires both performing and mechanical licensing.

Collins points out that SESAC's core competency -- managing performance rights -- is analogous to what is required in handling synch and neighboring rights. Moreover, thanks to SESAC's investment in systems and the efficiencies the PRO achieves, Collins says he feels the company can "move into those areas profitably, while contributing to the relevancy that SESAC brings to the music ecosystem."

Beyond moving into managing other rights, its well-known that SESAC has a coveted position in the international market (it has an office in London, for example). But, while Josephson says the company wants to add international capabilities, SESAC is still formulating a strategy for global markets and any move it may make in that direction is some time away. "We have given some thought to expanding globally, but we still have some more thinking on how to do it," Josephson says. "Should we do it alone, or collaboratively with others?"

Collins notes, "There plenty of opportunities here in the U.S. to grow the business, so that is our priority -- but expansion beyond the U.S. is not off our radar."

While the company is looking to expand its business, one strategy that likely will remain in place is its focus on signing premium copyrights. Unlike ASCAP and BMI, songwriters have to be invited to join SESAC, and the organization is selective about who it extends invitations to.

Finally, Josephson says, "We will look to extend our business model organically, but we could also make some strategic acquisitions if the right opportunities come along."