Music programmes and royalty payments: SA Music Rights Organisation briefing
Arts and Culture
10 March 2015
Chairperson: Ms X Tom (ANC)
The South African Music Rights Organisation (SAMRO), briefed the Committee on the mission and vision of the organisation, and stressed that although it was not an entity of the Department of Arts and Culture, which was frequently misunderstood, it worked closely with several stakeholders in the sector. It was initially formed as a private company in 1961, and belonged to and contributed to the international federation of composers and authors CISAC, and facilitated signature and management of reciprocal agreements for royalties for performing, and followed its guidelines on operating costs (actually managing to limit its costs even lower), sharing of revenue and best practice. The relationships between artists and record labels, publishers, lyricists, broadcasters and consumers, and event promoters was explained and it was clarified that SAMRO would usually licence the broadcasters to use music on their platforms. There were six collective management organisations. It was stressed several times that SAMRO represented composers and publishers for performing rights. Other organisations covered mechanical rights. One subsidiary of SAMRO, POSA, represented performers for needletime rights, DALRO licensed universities and educational facilities to perform plays and make copies of educational material, and the SAMRO Foundation was the vehicle by which all did their corporate and social responsibility. SAMRO was responsible for administration of performing rights and while it held rights it would issue blanket licences to music users in return for a fee (used for administration then other revenue streams) Any amounts remaining unpaid and untraced after three years (having been invested in the meantime) would be distributed as non-royalty revenue distribution. The developments planned for better matching were explained. Figures and graphs showed its growth, and compared its performance in curtailing costs and achieving collection and distribution, also against foreign competitors, all of whom experienced drops in the financial crisis.
The concept of needletime rights was explained, and POSA's involvement and how money was divided. POSA had 8 600 performer members and SAMRO had 13 000 composer members. A previous impasse with SAMPRA had been resolved, a new board was being formed with separate but equal chambers and moneys were being paid to SAMRO for onward payment, without fees being deducted. Its work in the arts and creative arts, including commissioning of works, scores, grants, international collaborations, were all described. The Retirement Annuity Fund was briefly outlined, along with suggestions made to government for the ability to join forces, while attempts to find medical aid and funeral funding were addressed in the discussion session later. SAMRO supported the initiative of the Department of Arts and Culture in establishing the Cultural and Creative Industries Federation of South Africa (CCIFSA), which should allow for better structure and functioning. Constraints and challenges included failure of licensees - many being government departments, to comply with licence requirements, radio airplay quotas, which meant that larger stations played non-local content, and more money had to be paid outside the country, and South African music was not being promoted enough internally nor being exported. It was suggested that the French model of regulation and practice offered substantial benefits and could be adopted. Failure to implement recommendations from the Copyright Review Commission were another concern, including the communication to the public right, which meant that presently mobile phone companies and internet service providers did not have pay any copyright fees or face restrictions.
Members asked for an indication of the structure, the current rules for works of deceased artists or composers, how licences were issued and rules for local content. Many Members commented that several musicians and composers were desperately poor, wondered if they were covered by a funeral scheme or medical aid and what SAMRO did to help them to invest wisely and to promote their content overseas. They asked if record labels were the culprits and what government had to do to ease the situation, what SAMRO did to raise awareness and whether the three-year tracing period was sufficient. Members were equally concerned at government not complying and suggested that SAMRO must take a more proactive stance. They also asked about membership, whether the data systems were adequate, how it contributed to empowerment, where the contact centres were and the relationship with government. The advantages and disadvantages of social media were discussed, as well as its visibility, systems, amounts paid out, the hits on the website. Members suggested that a more "snappy" vision statement was needed, and suggested the need to interact with other portfolio committees in relation, firstly, to lack of compliance, and secondly to discuss common problems in the sectors, and asked for clarity on some aspects of the financial statements. They asked about the provincial presence. They wondered if SAMRO thought the current split in earning sufficient or fair, and debated whether more legislation was needed.
Chairperson's introductory remarks
In welcoming the presenters from the South African Music Rights Organisation (SAMRO), the Chairperson noted that one of the mandates of this Committee was to ensure the development and empowerment of artists. She noted that SAMRO was not an entity of the Department of Arts and Culture (DAC or the Department) but was working with one of the stakeholders. Members wished to hear more about what SAMRO was doing, what it had achieved and the challenges faced. She stressed that this Committee had an oversight function, and thus would oversee what departments and institutions were doing, but also wanted to support and ensure that institutions were able to discharge their mandate for the benefit of the stakeholders - in this case, the artists. She also added that Members of this Committee were from different provinces and would return to and brief their constituencies and take questions about the work they had been doing. SAMRO should arm them with information that would assist them in answering queries from their constituencies, which they supported as part of their service to the people. She added that Members would be asking questions, and making comments, perhaps even outside the context of the presentation and that these would be directed not at the presenters personally, but in the interests of development.
Music programmes and royalty payments: South African Music Rights Organisation briefing
Mr Sipho Dlamini, Chief Executive Officer, SAMRO, noted that this organisation was formed in 1961. It was formed as a private company initially with some funding assistance from a UK body. SAMRO operated within the realm of collective management organisations, under the supervision and the guidance of the International Confederation of Societies of Authors and Composers (CISAC). He explained that CISAC was an international federation of composers and authors, headquartered in Paris. It would facilitate signature, by collective management organisations globally, of reciprocal agreements, so that they could represent each others' repertoires in foreign territories.
Mr Dlamini gave the example that SAMRO represents the use of all music in South Africa for performing rights, through the reciprocal agreements. The American repertoire was controlled by ASCAP and BMI, SAMRO represents locally, but the French repertoire was controlled by SACENC, and equally these respective organisations would also represent South African repertoire that would was played or performed in their countries. Every time a South Africa composer's works were performed in the other countries where there were CISAC members, the CISAC members would collect and distribute royalties to SAMRO, who in turn would distribute to local composer members and local publisher entities. That was really the basis that SAMRO was able to operate internationally and to interact with the various countries where South African music might be consumed.
Mr Dlamini also noted that CISAC set guidelines and rules that determined how SAMRO was to interact with other societies. For example, one rule related to the cost of operating which must be limited to a maximum of 30% of revenue collected. One of the figures that Members would see in the presentation was the cost to income ratio. Obviously the aim was not to stay as close to 30% but rather to keep the cost as low down as possible. In the last year, SAMRO had operated at a cost to income ratio of 26.4% and that had come down to 26%, so it was managing its costs downwards at the same time as growing income.
Mr Dlamini explained SAMRO's role in the music industry value chain, saying that there was often the misconception that because SAMRO was one of the most stable and one of the largest organisations in the music industry, people tended to think of it as the custodian of the music industry. However it had a very defined role within the music industry. Other players had differing roles. Firstly, there were record labels who signed on artists for recording contracts, often exclusive contracts, that the record label would record and release albums for their artists for a set period, usually between three to five years. In that time, the artist may not record with any other label or individual without the record label's written permission. In addition, during the contract term, the record label would exclusively retain the right to manage and represent and to exploit images of that artist, recordings and videos. Secondly, there were the publishers who then signed those artists or composers on publishing agreements, which set the exclusive arrangement between a composer and performer. He explained that the writer of the lyrics was often not the artist who was signing with the record label. If they were the same, the contracts would reflect this but most often there were two separate contracts. Thirdly, there were relationships with broadcasters and music consumers. Broadcasters largely were radio stations and TV stations who broadcast recordings of these artists, in video or audio format. Fourthly, there were concert and event promoters, or music users. It was usually to the music users that SAMRO would grant licences giving them permission to use music on their platforms.
The final relationship was with the Collective Management Organisations. There were currently six. SAMRO represented composers and publishers on what was called "performing rights". CAPASO (formerly CAPCO), was the mechanical rights collective management organisation, representing the owners of the recording when duplicates were made - for instance, if a cellular company sold a song for download via their devices. AIRCO represents independent record labels. The major record labels in South Africa currently were Universal Records, Sony Music, EMI records, Warner Music and Gallo, with the rest of the record labels being referred to as independent record labels, with AIRCO being mandated to collect video royalties from broadcasters. POSA was a subsidiary of SAMRO, which was established in 2009 to represent performers for needle-time rights. Also In the needletime space was SAMPRA, who was accredited to represent record labels or the owners of the recording, whilst POSA was accredited to represent performers (singers or instrumentalists). DALRO, the Dramatic and Literary Writers Organisation, was another subsidiary of SAMRO, and it largely licensed universities and educational facilities to reproduce and make copies of educational material, but also licensed theatres to produce work written by other individuals. The last subsidiary of SAMRO was the SAMRO Foundation, through which the three did their corporate and social responsibility work.
SAMRO's role was to collect and distribute income for public performance of music. It represented composers and publishers only. Therefore, if artists who were not composers were signing on to record labels, they would not interact with SAMRO at all, because their contracts with the record labels were not guided, managed or influenced by SAMRO at all. He reminded Members that SAMRO operated under the mandate of reciprocal agreements which enabled it to represent foreign distribution societies locally, who equally represent their interests and the interest of POSA members in their territories.
Administration of Performing Rights was SAMRO’s core business function. He illustrated this with a diagram of business operations (see slide 9). He summarised that music users included TV radio, live venues and concert promoters using music in the commercial environment, including hotels with live entertainmnet, and they required a licence. Composers would assign their rights in the composition to SAMRO, for the period of their membership only. When they wanted to terminate their membership, the rights ceded back to them. However, whilst SAMRO held those rights, it would issue blanket licences to music users, who would pay a fee, against which SAMRO would offset its administrative costs (currently 26.4%). The remaining funding would then be allocated to different revenue streams. The radio station, for instance, would have to generate monthly reports for SAMRO which would enable SAMRO to determine, at the end of the year, who to pay.
Mr Dlamini said SAMRO was often asked why it paid so much to foreign societies. If radio stations played more local music, they would pay more local performers, but unfortunately when they played more foreign music, then SAMRO had to pay more foreign performers.
Mr Dlamini continued to explain how the system worked. Whilst SAMRO was waiting for the reports in order to match the data against its global database of composers, it would invest the money. Any interest earned was used to make a special distribution at the end of the year - the Grant of Rights (GOR) Distribution (previously known as Non-Royalty Revenue Distribution). in the last two years, SAMRO had weighted this in favour of local composers, and was able to do so because it was non-royalty revenue. Every December it would distribute money into:
- primary distribution: radio and general, television, film / cinema
- foreign distribution
- GOR distribution
Mr Dlamini went on to explain that the right hand corner of Slide 9 showed the parallel process with performance returns, which was the usage data, which helped SAMRO to determine who to pay. A major challenge was that TV broadcasters' reporting on usage was very bad, and often the broadcasters would play programmes without getting the cue sheets from the people delivering them the content. SAMRO would then sit with money but not know who to pay, and this was a particular complaint from the industry. To try to counteract the problem, SAMRO now interacted with a UK company, SANMUS, a cloud-based cue sheet solution that allowed the producers of the content to interact with the broadcasters, submitting cue sheets electronically for easier forwarding to SAMRO .
Mr Dlamini indicated that radio and general was the largest distribution. In the case when SAMRO might have struggled to match revenue to owner, it could run a supplementary distribution he highlighted the figures for gross income between 1963 and the present. In 1963, it was over R251 000, in 1971, over R1.09 million, in 1981, R6 million, in 1991, R45.9 million (a seven-fold growth), in 2001 R126.2 million, in 2011 R354.5 million and 2012 R375.4 million. The distribution to SAMRO members had tripled from over R100 million in 2004 to over R300 million in 2014. The non-royalty revenue distributed to members grew from approximately R25 million in 2004 to over R50 million in 2014.
He then explained slide 13, where the red line represented licence growth, which was steady. The blue line represented non-royalty revenue, with really good performance in the last year. Slide 14 showed costs well-contained. From a base of R101.5 million in 2009, costs had only increased by 2014 to R13.2 million, an average annual increase of 2.6% - well below inflation of around 5.8% over the same period, and significantly below the compound annual increase in total income of 7.4%. If expenses had increased at the same rate as inflation, then costs would have been around R133 million, although they were around R20 million lower.
Mr Dlamini again touched on the cost to income ratio, and stressed that SAMRO had made a large effort to contain costs. In 2012, there was a significantly reduced cost ratio at 24.63%, and although it rose marginally in the following year, by 2014 the costs continued to fall, down to 24.22%. This increase in revenue available for distribution to members was also due to SAMRO’s continued efforts to reduce costs and become a high performance organisation. At the same time as dropping the costs, the achievements grew; in particular, SAMRO achieved a documentation rate of 94% for TV in 2014, the highest for 52 years.
In 2014/15, the quality of captured data had increased to 90%, up from a low 30% in the 2013 financial year. The operations team processed over 4 million lines of usage data in preparing for distributions.
Mr Dlamini showed another slide summarising the total distribution between 2008, at R180 million, to 2011, when it was R223 million. There was then a drop down to R205 million in the following year, and again to R197 million in 2013. However, the industry then started its recovery from the global economic crisis, and in 2014 SAMRO distributed just under R223 million. So far, in the 2014/15 year, it had allocated R192 million for distribution. In total SAMRO had distributed just over R1.6 billion in the past eight years.
Mr Dlamini then illustrated the split between SAMRO members and Foreign Societies, in slide 21. Undocumented royalties were summarised annually, and any money that SAMRO was unable to distribute in the current year was held in the reserve account for a period of three years, during which the SAMRO tracing team would try to track down the rightful recipients. After that, if unsuccessful, the money would be added back to the distribution pool. This was in line with CISAC guidelines.
Mr Dlamini the showed a graph representing the last reported performance of societies around the world, with percentage growth on the horizontal axis, names of societies on the vertical and a line in the middle showing 0%. Anything to the right of that reflected positive growth in licence revenue, and he highlighted that Portugal, for instance, had come top with revenue growth of 22.8%, following the previous year's decline of 13%, followed by Poland, Canada and Denmark. All had shown weaker performance in the previous year. Other major societies below that included the American societies and some of the major European ones also. He showed this to compare and illustrate that SAMRO had done quite well in these years of difficult global economics against other international societies.
Mr Dlamini then recapped that SAMRO was a collecting society accredited to administer needletime rights on behalf of performers, having been accredited to do this on 01 April 2008, in terms of section 3(1)(b) of the Regulations on the Establishment of Collecting Societies in the Music Industry, 2006. In order to ensure the proper administration of needletime rights, and to distinguish needletime from SAMRO’s core business in Performing Rights, SAMRO had established the Performers’ Organisation of South Africa Trust (POSA) in 2009. POSA administered needletime rights on behalf of performers who had assigned their Needletime Rights to SAMRO. It followed a best practice model from the UK, and 65% of the royalty would go to the featured performer with 35% shared equally amongst the non-featured performers (session performers, instrument players and the like). Needletime recognised the copyright owner, the record label and the performer, and would assume an equal share of revenue between the record label and the performer, unless there was a contract to the contrary. Therefore, the 65:35 split would apply to the performer's share, not the whole royalty.
POSA currently represented 8 600 performer members. SAMRO represented 13 000 composer members, who were not necessarily also performers. SAMPRA would collect the money in the market. A former impasse between SAMRO and SAMPRA had been resolved, and in future SAMPRA would become a joint collecting society for record labels and performers, with each represented by a separate chamber in that organisation, with equal rights. A new board was being formed at SAMPRA, with 50% of the seats being held by former members and 50% from record label owners, to ensure fair representation. Its first distribution was paid in December 2014.
Mr Dlamini explained that the amounts shown in slide 28 represented the amounts received by POSA from SAMPRA, for the people that POSA represented. It was thus not the total distribution to all performers in South Africa but only to those who had chosen to be SAMPRA members. He stressed that the SAMRO and POSA boards agreed not to deduct any costs of the money received from SAMPRA, because they felt that it was unfair for performers to wait to receive their revenue and then still have costs taken off. Slide 29 showed the percentage of royalties paid, and Mr Dlamini said that currently, R62 749.68 belonging to non-members had not yet been distributed. POSA would continue to trace relevant beneficiaries and ensure that they got their royalties.
The work of SAMRO was highlighted in slides 32 - 40. The SAMRO Foundation represented the work that SAMRO did to invest in the arts and the creative arts sector. Since 1962 it had had 64 scholarship winners, had awarded 1 756 bursaries since 1981, supported 36 music schools since 1980 and supported 12 university programmes since 1996. SAMRO had commissioned 420 works since 1962 and 88 000 musical scores. It had done a joint venture with the British Council Mobility Fund, where 66 entrants applied for funds to tour locally and internationally, with 14 awards granted since 2013. It had collaborated with the Spanish Embassy for the Spanish / SA Battle of the Bands, with 89 entrants, of whom two winners were selected to tour in Spain since 2013. It collaborated with Norway on Concerts SA, which sought to revitalise a live touring circuit in South Africa and this had supported three cities, 12 venues and eight schools since 2013. Since 1995 SAMRO had invested R70 million in the arts.
Mr Dlamini then moved on to the SAMRO Retirement Annuity Fund (SRAF), for SAMRO composer members only, not for the music industry at large, in recognition of the fact that most musicians struggle to put a consistent amount away for their retirement, because their earnings were erratic. This also meant that many were unable to get regular financing, not being regarded as "formally employed" and were asked to produce tax clearances, audited financial statements, balance sheets and income statements. He also noted that although the record labels would sign on their artists for a fixed period they would not offer any medical aid package or funeral contribution, unlike most employers who were required by law to contribute to medical aid schemes and to provide some kind of funeral benefit. The SAMRO Retirement Annuity Fund was initiated from1961-1969, and was a non-contributory fund for its members. CISAC allowed a 10% deduction of total royalties collected, to be invested for social and cultural purposes, and SAMRO used 40% of that amount to invest in retirement funds for all its members, with the balance used for the Funeral Benefit Scheme and the SAMRO Foundation. R850 was the minimum payment to each member earning royalties in that period. Administrative details were shown in slides 43 and 44. Members qualified to retire at 55, and slide 46 showed the retirement annuity statistics, whilst slide 47 showed fund values. The Funeral Benefit Scheme would pay out a cash sum towards the funeral costs of SAMRO members, within three days, and although the amount was only around R10 000 to R12 000, it must be remembered that SAMRO members received this without having contributed. SAMRO hoped that various organisations representing musicians would also make a similar contribution, to allow this amount to rise.
Mr Dlamini highlighted that SAMRO supported the initiative of the Department of Arts and Culture in establishing the Cultural and Creative Industries Federation of South Africa (CCIFSA). SAMRO believed it would bring about much required organisational development and a focused voice for the creative and cultural sectors in South Africa, similar to what SASCOC had done for the sporting fraternity. It would allow for an organised and structured interaction with government and the correct level of oversight and understanding of the various sectors. Funding could be channelled properly with adequate information, understanding and oversight into the various sectors, to achieve a better balance.
He noted some of the constraints and challenges. Some of the most difficult licensees, who failed to comply with licensing conditions, were government departments. Government was one of the biggest users of music, whether at municipality venues used for different purposes, events that government hosted, music played in correctional centres, military bases and the like. For the most part, government institutions were not licensed and not compliant. SAMRO urged the Committee to encourage government to take up their licenses and to be compliant.
Another challenge was radio airplay quotas. Mr Dlamini said he hated paying large amounts of money to overseas entities, composers and publishers, instead of to local composers and publishers, but the fact was that the payments were dependent on what the radio played. If radio quotas for local content were observed, in line with the Copyright Commission's recommendation , that radio quotas be increased to at least 80%, this would greatly increase the money paid to local musicians and that would help to develop the sector. This had been very successfully done in France. South African music was also not exported as much as it should be, because musicians struggled to get funding for development and struggled to export, with very few export initiatives for music, unlike film. France, incidentally, also had a quota for local films being screened in French cinemas and if South Africa were to follow this example, it would add a huge value to the South African economy. In France the creative and cultural industries contributed more to the GDP and the economy than did their motor vehicle industry. In Europe, the creative and cultural industries contributed seven times more jobs than their telecommunications industry. He urged that the same could be done for South Africa.
Some of the recommendations of the Copyright Review Commission Recommendations had not been implemented, and one was the communication to the public right. That meant that internet based public consumers and Internet Service Providers (including the mobile phone companies) were able to use music without being licensed and without paying. That was one space where local composers could benefit, because much of the music being sold was local, if they were properly licensed by the communication to the public right being implemented in law.
The Chairperson asked for a diagram of SAMRO's structure to establish how many people were involved in the work.
Mr Dlamini said that it would be sent to the Committee.
Mr M Rabotapi (DA) noted that many artists were very poor when they died, so that families had to ask for donations to bury them. He wondered if they were members of SAMRO's Funeral Scheme, and also asked if SAMRO could offer them medical aid.
Dr C Mulder (FF+) asked what the position was with composers who had died many years ago, or traditional folk songs where the composer was not known. He understood that the broadcaster would buy a license, but requested if a payment was needed per song, or per period, and how the broadcaster must report. He asked how people became members of SAMRO. He liked the suggestion to force local content like France had done, recognised that South Africans were competing in the global sphere but asked if South Africa did not prescribe local content in terms of the licences. He also agreed with the parallels being drawn for films.
Mr G Grootboom (DA) said that SAMRO seemed to cover the composers and the producers, but made the point that those suffering most were the performers. He asked about SAMRO's role in helping to promote the local content overseas.
Mr T Makondo (ANC) said the presentation had conveyed important information that some Members had not been aware of previously. In relation to contracts with performers and composers, he asked how adequate was SAMRO's database, to enable proper distribution of royalties. He agreed with the concerns about the music played every day in government institutions, but also pointed out that call-waiting services also played music, and he wondered if that was licensed; if so, then why were so many composers still struggling to make ends meet. Many died very poor. He wondered if the artists who were not making it were hampered by SAMRO or their record labels. Government needed to come up with a policy that talked to local music on all the platforms, because the music industry in South Africa had huge potential to contribute to the economy, but it remained unregulated in terms of the local content.
Ms V Mogotsi (ANC) said that this was the first time she had known about SAMRO and the issue of royalties. She wanted to touch on the issue of empowerment. She noted that many young freestyle composers would post their work on You Tube, to advertise or market themselves. However, she asked what SAMRO would do in this regard because they were not protected; some were not even being identified. The presentation did not talk to awareness-raising in communities.
Ms Mogotsi questioned whether the three years was sufficient time to trace, and what would happen to unclaimed funds after that. She pointed out that the family of the person may still need that money. Ms Mogotsi wondered if SAMRO should partner with government in relation to the retirement funds, where there was not that much growth. She applauded its efforts to provide funeral cover and dignity.
She was concerned about lack of compliance from government but suggested that SAMRO also needed to go proactively to the government and challenge it on the lack of compliance. She said that the Departments of Correctional Services, Health and local government did play a lot of music and she was shocked that they were not complying. She asked what its relationship was with government and urged it to make the Annual Report available.
Mr Dlamini responded firstly to the issue of artists who died as paupers, and said SAMRO could not exaggerate the impact that it had, because the problem with the music industry was much bigger than what SAMRO could achieve on its own. For example there was no development or education for musicians and unlike in the sports sector, where potential was recognised and developed as the athlete trained, and they were managed, a musician might achieve overnight success on releasing a song, but then also not be advised on investment, property, putting money aside or how to develop a career. Often an "overnight success" would spend the money faster than it was earned, perhaps also getting into drink and drugs and a downward spiral. There were many problems, and artists often died poor not because they had not received money but because they had mismanaged it. Others, however, may die poor because management in South Africa was poor, the artists' agents or managers may have received more benefit than the artist. SAMRO would pay over, but it could not force people to manage their money properly.
This was one of the reasons why Mr Dlamini welcomed CCIFFSA, because it meant that issues of development of a global size for the South African creative sector would be addressed. He stressed that problems were shared also with actors, other artists and those involved in crafts. All needed help. CCIFFSA might be the right body to look at transformation, education and development. SAMRO was trying to do what it could but they was limited to composers, with some performers. From 2009 -2012, SAMPRA, for all performers, collected R200 million. SAMRO distributed more than that in one year. The effect was only really being felt by composer members, but not the music industry as a whole, and that was a challenge.
Mr Dlamini said that SAMRO had been trying to find a model medical aid scheme that was affordable but all were currently too expensive. If SAMRO were to pay for all 12 000 members it would become bankrupt. Some members did have their own medical aid schemes, but this money could not be taken from some and used to fund others. SAMRO had met with some medical aid service providers to see if there was a way that they could arrange a partial contribution but the risk was that if a SAMRO member failed to pay his or her portion, the policy would lapse. If government were to create a scheme for the cultural and creative sectors and industry organisations (including individuals, SAMRO, SAMPRO, record labels and publishers) all contributed, it might be possible for government then to fund a medical aid, retirement and funeral scheme for the creative sector.
Mr Dlamini explained the rights of deceased people. If a SAMRO member died, the surviving spouse or beneficiary would take over their shoes, and would continue to get royalties for performances. In theory, he agreed that there was always a composer of every work, but there was a difficulty with traditional songs or hymns and similar, where it was not clear who wrote those songs, the arranger could be recognised.
Mr Dlamini explained the broadcast and licensing. Using M-Net as an example, SAMRO would look at how many TV stations it had, how many had music, and licensed, based on a percentage of advertising revenue, so M-Net could then play any music for that one year period. However, SAMRO needed to know what songs had been played so that it could distribute. It would "blanket license", so it did not need to know the songs individually, but for disbursements it did need to know the detailed data.
As to SAMRO membership, anybody was able to apply for membership and would be regarded merely as an applicant member until the song was performed, when this would be converted to membership.
There were recommendations around quotas but most radio stations were not adhering to those quotas, and those who made the most advertising revenue tended to be the ones that played the least local content. SAMRO had a preferential licensing programme for community radio stations, so that would not hinder the stations' business model and their promotion of local artists.
Mr Dlamini re-stated that SAMRO only catered for performers in terms of needletime rights, and then only performers who chose to be a POSA member. Membership with POSA was not mandatory. Some performers were represented by the record labels for their needletime royalties. SAMRO represented all composers but only represented a portion of performers.
Mr Dlamini explained what SAMRO did to promote local artists internationally. Two years ago it started the Wowela awards to recognise composers who had done well locally and internationally. It was an annual event in June, and a booklet would be compiled which listed that year's best composers for the different genres, then these people would be profiled, with details of their agents, and the magazine with those profiles distributed internationally, first to sister societies. If any composer members overseas wanted to work with South Africans they then had a list of different South Africans who had been recognised for outstanding work in that year. This magazine was also distributed to the embassies in different countries. SAMRO also supported initiatives like attendance to foreign music markets, participated with Department of Arts and culture, in a music conference in Congo -Brazzeville, and the Los Angeles Music and Film week.
Mr Dlamini said, in response to the question on data, that SAMRO had spent a significant amount of money upgrading its IT system. A very intensive process was followed of reviewing what systems were being used within collective management organisations, globally, identifying the top five systems, and visiting the societies to understand the systems and check what the benefits and the flaws would be for SAMRO, before selecting the right system to fit its market and budget. The new system went live in January 2013, and was one similar to the Danish societies. It had allowed for an increase in performance. - and he repeated the 91% match last year between broadcasts and distributions, showing far better accurate matches. SAMRO continued to upgrade and update the system. SAMRO took the issue of databases very seriously.
Mr Dlamini said that he could not comment whether artists that were not SAMRO members were suffering because of the relationships they had with record labels. The record labels took huge risks and invested in artists that maybe had no track record, with significant input of time and money to record, and all entities had an important role in the value chain, like publishers and other collecting societies. CCIFFSA would allow for contribution from the different organisations in the music industry that could then make a significant difference to musicians.
On the issue of empowerment, from an internal perspective SAMRO did have had the Employment Equity Committee (EEC), and also had a Social and Ethics committee. The EEC was made up of employees and union representatives and SAMRO members, who reported to Mr Dlamini. There was an EE tracking, with a succession programme in place, and skills identification and development programmes running internally. Inside SAMRO, transformation had been happening well and had been effective, not only in terms of race but also in terms of gender and disability. Externally, SAMRO actively monitored its BEE rating and its procurement policies to ensure that there was transformation and that there was a spread of wealth amongst qualified and reputable service providers. It would also encourage and try to identify areas where it could assist start-up people to offer services and products to SAMRO.
Mr Dlamini noted that historically SAMRO only had an office in Johannesburg, but now had contact centres in other provinces to ensure that people had access to SAMRO, even in rural areas. In Limpopo it had three different contact centres, spaced 250 km apart, most run in partnership with government, but in some it had used independent service providers to assist with the contact centre establishment. He said that SAMRO had a good, honest, working relationship with government, and if it did make mistakes government would caution but it would also talk about areas of improvement for artists and musicians. The centres would identify individuals from the arts sector in those areas and empower them by working with them on their development. There were also contact centres in Durban, would be opening one in Cape Town and one in Bloemfontein. They provided training and assistance.
Mr Dlamini said that there was a "tug of war" in relation to artists that posted their music on social media. On the one hand, social media had allowed many to be recognised, which would not have happened in the past as young people could be viewed and listened to before even being play-listed on video. Fortunately, SAMRO did get reports and revenues from youtube. He explained the way youtube revenues work; through monetising, when a percentage of the advertisement in front of the piece was played. There was a lot of data in streaming, but there was very little revenue. Youtube was compliant because in other countries the communication to public right was enforced by the governments. but he reiterated that mobile networks were not compliant and not paying. If they were, this would bring in more revenue to local composers than the youtube model would.
Mr Dlamini displayed slides on the awareness model programmes. The right holders service department served the composer members and the publisher members. SAMRO had 459 publishers to manage. 41 of them were key accounts. There were 4 184 queries opened in the 2014 year and it closed 3411. In terms of members, he estimated that on average 50 people would walk into the SAMRO office a day, and 80% were new applicants, so this illustrated its visibility. This was just based on Gauteng statistics at the moment. The web portal was an extension of the new system implemented and it allowed SAMRO members to access and administer all their information on the songs they had composed and written on most devices. In 2014 SAMRO opened 605 portal accounts and had a total 1 768 portal users, increasing regularly. In 2014 it cleared R30 million through active tracing. About R7 million was paid through updated banking details
Mr Dlamini said that on SAMRO's new interactive website it had 81 600 visitors in 2014 alone. Each person who visited the website stayed on it for at least five minutes per session, indicated that they were reading and ingesting information. On Face book, there were 20 971 Face book friends (more than the number of SAMRO members) which showed there were musicians interested in what SAMRO did, and who also engaged with it. On average it reached 50 000 people through its posts. SAMRO had 5 771 followers on Twitter. It also issued a monthly publication online, which was sent to almost 9000 members monthly, and also an online bulletin every two months to its licensees and a posted publication. Twice a year it would send updates to its members. SAMRO had hosted the 2nd Wowela awards last year. received over 200 entries, and had 221 guests. Those artist who attended received over R2m in PR value - television, print, media.
Mr Dlamini reiterated that SAMRO held unclaimed money for three years and whilst trying to trace it would invest with Nedbank and Investec. It published an integrated annual report and was audited by PWC. All information was conveyed to all its members at the annual AGM. It was the only entity in the music industry that produced an audited financial report annually.
Mr Dlamini said that SAMRO had held meetings with Department of Social Development on the issue of a pension fund, to show the Department how its programmes worked and to investigate whether it could integrate with government on either pension or medical aid, because it did believe that government did have more power, but they were prepared to contribute.
Mr Dlamini said that SAMRO thought the Mzanzi Golden Economy was a great initiative with tangible benefits to members. It had contributed by running workshops at conferences where the public were free to attend.
Mr J Mahlangu (ANC) thanked Mr Dlamini for his presentation and asked that information that was not circulated to the Committee initially be circulated later. He said it was important that SAMRO protect the artists and therefore must work with government and ensure that there was a proper legal framework to ensure that all broadcasters would pay what was due. He asked how much was unclaimed. He also noted that there were contact centres, and asked if these were all over the country, for those in Mpumalanga had traditionally needed to travel to Gauteng to register.
Mr Mahlangu wanted to know if the 50:50 split between artist and record label was fair, given that a record label may have numerous clients. He asked if SAMRO had any role or responsibility regarding artists against piracy? If a person was not registered with SAMRO as a member, the money that accrued would be paid to the record label and there was no guarantee that record labels were going to pass the money over to the artist. He cited the problems that the Road Accident Fund had run into, saying that the ultimate beneficiaries ended up with very little after all costs were deducted. He noted that percentage figures were quoted but wanted to know why this was so, and what was the average amount that people would be paid on retirement. He suggested the need for further meetings to clarify the issues.
The Chairperson said that she had always understood that a vision statement should be snappy, but SAMRO's was more of a story and asked it to summarise what it would like to see. She was concerned about the long interval between disbursements, especially needletime disbursements and wondered if it could not be shorter. Local content issues needed to be brought to the fore, so that all could have broader discussions, and she noted that because film was involved too, there was a need to have integrated joint discussions to deal with the issues, including the Portfolio Committee on Communications and SABC. She noted also that she needed specifics of those government departments not complying, as the Committee could deal with this through oversight but needed details. She stressed that there was a need to support those doing good work and transforming the lives of people.
Mr Dlamini replied that in the Annual Reports SAMRO would state the current total of undocumented revenue that it had, as well as what was put back into the distribution pool that year. After three years any unclaimed amount would be added to the distribution pool.
Mr Dlamini acknowledged that SAMRO had not been present in all provinces. It was very costly to have offices nationwide, which was why it had tried to find a model that was sustainable, and instead of renting and building, it had identified cultural centres in different provinces where it would then approach government and ask for space, paying rent. He noted the BAT Centre in KwaZulu Natal, staffed by two local employees who were connected to the Johannesburg database online. SAMRO was replicating that elsewhere. However, it was also trying to keep the costs down because the more costs it had the less money it could pay to composers; it was a tough balancing act.
Mr Dlamini agreed that he did also not think it fair that needletime gives 50% to record labels because the whole intention with the legislation was to try to bring about balance for performers and, rather than benefiting the labels who were already quite wealthy, to give financial relief and benefit to performers. He explained that SAMRO got involved in the space of needletime because SAMRA, an organ of Recording Industry of South Africa, which represented only record labels, was accredited to collect, which did not gel well with the concept that performers needed to benefit from the needletime, nor with the notion that SAMRA should distribute to the record labels and leave it up to them to on-distribute to performers however they liked. Currently, on a profit of R10, the record label would get R5 and performers R5, which they would still have to share with other musicians. This was not empowering the musician. That was the main reason why SAMRO decided not to offset its own costs against distribution.
Mr Dlamini confirmed that the slides did show the rand figures and percentages. Most of the money had been distributed with about R5 million remaining out of the R200 million since 2009. Needletime had failed to do what it was supposed to do, and SAMRO had started to engage with the Department of Trade and Industry (dti) from a policy perspective to question the model, which was imbalanced. The Copyright Review Commission had recommended that all distributing agencies be regulated. Mr Dlamini believed that government needed to have more involvement, oversight and better understanding of what collection societies were doing, but government should be careful about regulating a space if it did not fully understand, because regulation could lead to worse imbalance.
Mr Dlamini read out the vision statement of SAMRO, which was: "SAMRO is a high performance, global asset management organisation focused on protecting and growing the value of copyright, it develops its stakeholders and invests in innovative, highly skilled and committed staff who excel at service". He acknowledged that it was long and not catchy. However, he stressed that this sought to address the historical incorrect view of SAMRO as a government organisation. Internally, its productivity levels were below par, so this sought to emphasise that SAMRO can be a high performance business, and although it may be registered as a non-profit company, its intention was to realise as much profit as possible to distribute to composer members. This meant it had to be effective, efficient, dynamic, set targets and manage people to meet those targets, and deliver on the mandate. It had to change the internal and external perception that SAMRO was an "old car that uses a lot of gas to run". Once this had been achieved it could then work perhaps on getting a more catchy slogan.
Mr Dlamini noted that SAMRO was ranked in the top five collection societies in the world, partially because of the frequency of the distributions. Effectively it was distributing money almost every second month throughout the year and paying out supplementary distributions every month. The undocumented distributions were paid out immediately. The German collection society GAMA, one of the biggest and most profitable, ran only one distribution per year, and many others ran two, so SAMRO was way ahead in trying to get the money to its members more quickly. SAMRO was testing out a new actuarial model, which would enable it to distribute on a monthly basis. Currently, it must wait until year end for all the usage data, in order to pay out. Members of SAMRO had been asked if they wanted to receive money monthly, and most said no; they would rather let money accumulate into a larger sum. The new model could be used from July, if the members wanted to see it used.
Mr G Grootboom asked a follow up question on how much the composer would get for needletime .
Mr Dlamini repeated that the amount was split,with 50% to the record label and 50% to the performer, not the composer. He reminded Members that composers would not participate in needletime royalties, for those would go to performers only (and be split between main and supporting performers). POSA used the UK model, and would pay, from the 50% split, to the performer and the non-featured (supporting) performers, in the ratio 65:35.
Mr Dlamini said that as of December 2014, SAMRO had R132.9 million that was unallocated. It paid out every year.
Mr Dlamini was now able to present a slide on the SAMRO Group structure: showing rights management, then the subsidiaires. He noted the SAMRO Foundation under corporate social investment, and a number of entities under non-royalty commercial enterprises.
Mr Dlamini said that SAMRO owned the property it was occupying presently. It occupied three of the nine floors and rented out the others, with the revenue from rental going to non-royalty distribution cycle. It was a good investment for the business. The system it implemented was adjusted by it and owned by it, and it was trying to get the whole Continent to migrate to one system. He would forward full details later. There were around 250 employees, including those in the contact centres.
He expanded on the unlicensed government departments. Department of Defence was licensed only at 3%. Department of Health was licensed to 10%. Correctional Services were licensed to 2% and South African Police Service to 5%. The Department of Education was covered to 15% and Department of Arts and Culture to 65%. Most municipalities (as shown on the detailed breakdown that he would forward) were not paying.
The Chairperson said that Members would like the additional information to work through and decide how the Committee might assist and work with SAMRO. It would like to support whoever was doing good work for artists. Th Committee would be visiting SAMRO, unannounced, as part of oversight. However, this Committee, as she had suggested, would also work with other portfolio committees to interact on issues raised here. She reiterated the parlous state of many artists, and said the Committee Members needed to understand their conditions, support and advise all who played their part, to ensure South African artists' lives changed for the better. Exchange of ideas would be preferable to rushing headlong into legislation, and the Committee fully appreciated that many problems were deep-seated. More information would still be needed from other stakeholders also, to assist the Committee in looking at the whole value chain. She hoped the right processes had been followed when establishing CCIFFSA, which must be representative of all stakeholders.
The meeting was adjourned.
Tom, Ms XS
Bilankulu, Ms NK
Grootboom, Mr GA
Mahlangu, Mr JL
Makondo, Mr T
Mogotsi, Ms VP
Mulder, Dr PW
Rabotapi, Mr MW
Tsoleli, Ms SP
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