2OO7REPORT ANNUAL - ppluk.com reviews/Annual Review 2007.pdfmakes me wonder maroon 5 a & m/octone (universal) leave me alone (i’m lonely) p!nk laface (sony bmg) how to save a life

ANNUAL REPORT 2OO7

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CONTENTS

O1 OVERVIEWO2 CHAIRMAN AND CEO’S STATEMENTO6 THE YEAR’S HIGHLIGHTS14 A FEW FACTS16 THE UK’S FAVOURITES

18 BUSINESS REVIEW2O LICENCE FEE INCOME26 DISTRIBUTABLE REVENUE31 PPL AND THE GOVERNMENT32 TECHNOLOGY

34 OUR CULTURE36 CORPORATE SOCIAL RESPONSIBILITY38 OUR PEOPLE40 OUT AND ABOUT42 EXECUTIVE MANAGEMENT TEAM

AND BOARD OF DIRECTORS

44 FINANCIAL STATEMENTS

AT PPL WE RELISH THE CHALLENGES THAT COME WITH THEINCREASED RESPONSIBILITY FOR DEVELOPING THE REVENUESOF PERFORMERS AND RECORD COMPANIES IN A RAPIDLYCHANGING ENVIRONMENT, AS WELL AS HELPING TO GROWTHE VARIED BUSINESSES OF OUR MANY LICENSEES IN THEPROCESS. MUSIC IS INDEED A PRECIOUS COMMODITY.STANDING UP FOR MUSIC RIGHTS WAS THE REASON FOR THE COMPANY’S CREATION SEVENTY-FOUR YEARS AGO AND IT PREVAILS MORE SO THAN EVER TODAY.WE REMAIN PASSIONATE ABOUT THE MUSIC OUR MEMBERSENTRUST TO US. THE POWER OF MUSIC SPEAKS OUTWHENEVER AND WHEREVER IT IS PLAYED AND WE HOPE THAT THIS WIDE-RANGING REVIEW OF OUR BUSINESS IN 2007 DEMONSTRATES OUR COMMITMENT ON A GLOBAL BASIS TO CAPTURING THE VALUE OF THAT EXTENSIVEREPERTOIRE NOW AND INTO THE FUTURE.


CHAIRMAN AND CEO’S STATEMENT O2|O3

THE SHEER VALUE OF MUSIC AND ITS EXTRAORDINARY EFFECT ON HUMAN BEHAVIOUR, THE ESSENCE OF MUSICALPERFORMANCE AND ITS RECORDING, THE CREATIVITY BEHINDTHOSE PROCESSES TOGETHER WITH THE EVER-INCREASINGIMPORTANCE TO OUR MEMBERS OF COPYRIGHT, ITSPROTECTION AND MONETISATION, MAKE PPL A UNIQUEPLACE TO BE. IN 2007 PPL AGAIN WAS SUCCESSFUL IN ITS PRIMEFUNCTION OF PROTECTING AND ENFORCING THE RIGHTS OF ITS CONSTITUENTS, MAXIMISING THEIR INCOME ANDKEEPING COSTS LOW.

115.0M +17%LICENCE FEE INCOME £

‘THERE IS NO JUSTIFICATION WHYPERFORMERS AND RECORD COMPANIES IN THE UK AND AROUND THE WORLDSHOULD REMAIN SECOND CLASS CITIZENSCOMPARED WITH THEIR COUNTERPARTS IN THE ARTS ELSEWHERE.’


PPL recognises its similar duties andobligations closer to home where wefinancially support and work closelywith a range of music related charitableorganisations and other entities all ofwhich are described in detail elsewhere in this Annual Report. We have alsoinitiated a wide ranging programme of corporate social responsibility which has been warmly embraced and supportedby all PPL staff.

All of this means that with each passingyear, PPL delivers more to all of itsconstituents, both in terms of substantiallyincreasing income streams and manyother benefits.

I am acutely aware of the simple fact thatnone of this would be possible to achievewithout a high calibre management teamand the right degree of external support.

Accordingly, an enormous thank you mustgo to every single member of PPL staff fortheir hard work, loyalty and commitment. A big collective thank you is owed to themain PPL Board, the Performer Board andthe various committees whose involvement,support and guidance is so important.

I would also like to thank all our membercompanies, the whole performer community,other music industry organisations as wellas our licensees and friends and supporterseverywhere for their goodwill andencouragement, which to us is absolutelyinvaluable. We shall continue makingevery effort to justify the trust and confidenceplaced in us.

Onwards and upwards!

FRAN NEVRKLACHAIRMAN AND CHIEF EXECUTIVE OFFICER

Broadcast revenues grew by 20%, publicperformance and dubbing income by 11%and international income grew by 52%.These substantially increased collectionsenabled us to grow the DistributableRevenues (i.e. the money actually availablefor payment to the record companies andindividual performers) to an impressive£99.5 million. This represents an 18%increase on the prior year. Cost-to-incomeratio remained low at 14.6%.

This magnificent set of results has alsoenabled PPL to consolidate its positionfurther as the biggest and best performingorganisation of its kind anywhere in theworld amongst the collecting societiesrepresenting performers and recordcompanies. We work very closely withseveral of our overseas counterpartson an extensive programme designed to create a network of simple and inter-operable systems and proceduresbeneficial to all.

Whilst 2006 brought the merger of AURAand PAMRA into PPL, 2007 saw us host thefirst ever Annual Performer Meeting underthe PPL umbrella. The Performer Board, too,started playing an increasingly active andpositive role in the PPL environment.

Throughout 2007 PPL became even moreactively involved in political lobbying for a better and more robust copyrightinfrastructure. These efforts were focusedespecially on the industry’s fight to securean extension of the term of copyrightprotection for sound recordings so thatfinally performers and record companiescan benefit from rights more equal to thosealready enjoyed by other creators.Similarly, PPL has played a key role in a fresh political initiative in America to introduce an exclusive broadcastperformance right for sound recordingsinto US legislation. Once again, there is no justification why performers andrecord labels should remain second classcitizens compared with their counterparts in the arts elsewhere. The immediate andoverwhelming support visibly demonstratedby PPL performers for both of these keycopyright issues is an early illustration of thevalue of unity created round the PPL table.

PPL will continue to make its powerfulvoice heard both at home and abroadin all situations where the rights of itsconstituents and their crucial future incomestreams are at stake. Our recent membershipof the US Copyright Alliance is a furtherexpression of our increasingly globalagenda. Given PPL’s continuing success,expanding remit and vital role at the heartof the music industry, it is only right andproper that the organisation should offer its experience, expertise and assistance to others for the benefit of all.

In close collaboration with the Musicians’Union and the International Federation of Musicians, PPL is co-sponsoring andfunding an international programmedesigned to assist emerging collectionsocieties and performer organisations in Africa, Asia and other parts of the world.Our collective aim is to help in creatinglocal infrastructures which in turn willbecome instrumental in developing andnurturing talent and therefore a healthyand profitable indigenous music industryin these countries.

CHAIRMAN AND CEO’S STATEMENT


CENTRESTAGE.

THERE WAS STANDING ROOM ONLY WHEN OUR FIRST ANNUALPERFORMER MEETING WAS HELD AT THE ICA IN LONDON INNOVEMBER 2007, HERALDING A NEW ERA FOR PPL.

A CONSTRUCTIVE AND LIVELYMEETING, CHAIRED BY GERALDNEWSON, ROUNDED OFF A YEAROF MUCH PROGRESS WITHIN THEREALM OF PERFORMERS’ RIGHTSAND AFFAIRS.

MORE ON PAGE 29.

O6|O7


UK BROADCASTERS ARE TRANSFORMINGTHE WAY RADIO AND TELEVISION ISCONSUMED WITH INNOVATIVE DELIVERYPLATFORMS SUCH AS THE BBC’S iPLAYER.

PPL HAS RESPONDED BY PROVIDING A ONE-STOP LICENSING SOLUTIONCOVERING THE BASKET OF ONLINE RIGHTSSOUGHT BY TODAY’S BROADCAST MEDIA.

MORE ON PAGE 22.

O8|O9

BREAKING NEW GROUND.


FOREIGNCURRENCY.

THE DEAL WITH THE FRENCHSOCIETY ADAMI WAS ONE OFMANY CONCLUDED THROUGHOUT2007, BRINGING THE NUMBER OFPPL’S INTERNATIONAL BILATERALAGREEMENTS TO 41.

THEIR FIRST PAYMENT FOLLOWEDSHORTLY AFTER, HELPING TO GROWINTERNATIONAL REVENUES FORPERFORMERS AND PRODUCERSACROSS THE YEAR BY MORE THAN52% TO £9.1M.

MORE ON PAGE 25.

1O|11


DO THERIGHT THING.

THE PAYMENT HOLIDAY ENJOYEDBY US RADIO STATIONS AT THE EXPENSE OF PERFORMERS ANDRECORD COMPANIES MUST END SOON.

A PERFORMANCE RIGHTS BILL WAS TABLED IN WASHINGTON IN DECEMBER 2007, THANKS TO STRONG LOBBYING BY musicFIRST IN THE US AND THE ACTIVE SUPPORT OF OVER 6,000 PPL PERFORMERS.

MORE ON PAGE 31.

12|13


6,O69

56,6O3INTERNATIONAL DEALSTHIS REPRESENTS A TWOFOLD INCREASE ON 2005, AND ISHELPING TO DRIVE SIGNIFICANT REVENUE INCREASES. SEE P.25TO UNDERSTAND THIS ASPECT OF OUR WORK IN MORE DETAIL.

PETITION SIGNATURESOUR CAMPAIGN TO END THE PAYMENT HOLIDAY ENJOYED BY COMMERCIAL RADIO IN THE US CLEARLY STRUCK A CHORD WITH OUR PERFORMER MEMBERS,WHO RESPONDED IN FORCE TO OUR PETITION TO US CONGRESS.

MILES TRAVELLEDBY OUR FIELD TEAM IN THEIR TIRELESS SEARCH FOR UNLICENSEDPREMISES UP AND DOWN THE COUNTRY.

PPL REPERTOIRE DATABASE TRACKSTO REFLECT ITS INCREASINGLY INTERNATIONAL NATURE AND USAGE, CATCO WILL NOW BECOMEKNOWN AS THE PPL REPERTOIRE DATABASE. BY THE END OF MARCH 2008, TOTAL TRACKS STOOD AT 9.7M, GROWING AT THE RATE OF 70,000 TRACKS PER MONTH, IT WILL HIT 10M LATER THIS YEAR.

41

TELEPHONE ENQUIRIESEVERY MONTH OUR PERFORMER SERVICES TEAM HANDLES AT LEAST 2,688 PHONECALLS, ALONG WITH SOME 1,500 EMAILS. WE ARE CURRENTLY REDEVELOPING OURWEBSITE TO HELP ANSWER THE MOST FREQUENTLY ASKED QUESTIONS ONLINE.

2,688INTERNET RADIO STATIONS THE LAST TWO YEARS HAVE SEEN A DRAMATIC RISE IN LICENCES ISSUED IN THIS SECTOR – A TREND WHICH IS EXPECTED TO CONTINUE.

23O

9,7OO,OOO

A FEW FACTS.14|15


THE UK’SFAVOURITES.

THIS UNIQUE CHART COMBINES PPL’S PUBLIC PERFORMANCE DATAWITH UK AIRPLAY IN ORDER TO DETERMINE WHICH TRACKS WEREPLAYED THE MOST IN 2007. THE TWENTY SONGS LISTED HERE CANTRULY CLAIM, THEREFORE, TO BE THE UK’S FAVOURITES.

UMBRELLARIHANNADEF JAM (UNIVERSAL )

SHINETAKE THATPOLYDOR (UNIVERSAL)

PATIENCETAKE THATPOLYDOR (UNIVERSAL )

STARZ IN THEIR EYESJUST JACKMERCURY (UNIVERSAL)

BIG GIRLS DON’T CRYFERGIEA & M (UNIVERSAL)

SHE’S MY MANSCISSOR SISTERSPOLYDOR (UNIVERSAL)

THE SWEET ESCAPEGWEN STEFANIINTERSCOPE (UNIVERSAL)

BOOGIE 2NITEBOOTY LUVHED KANDI/MINISTRY OF SOUND

DO YOU KNOW? (THE PING PONGSONG)ENRIQUE IGLESIASINTERSCOPE (UNIVERSAL)

CHASING CARSSNOW PATROLFICTION (UNIVERSAL)

SAY IT RIGHTNELLY FURTADOGEFFEN (UNIVERSAL)

REAL GIRLMUTYA BUENA4TH & BROADWAY/ISLAND (UNIVERSAL)

MAKES MEWONDERMAROON 5A & M/OCTONE (UNIVERSAL)

LEAVE ME ALONE(I’M LONELY)P!NKLAFACE (SONY BMG)

HOW TO SAVE A LIFETHE FRAYEPIC (SONY BMG)

1 2 3 4 5I DON’T FEEL LIKE DANCIN’SCISSOR SISTERSPOLYDOR (UNIVERSAL)

GRACE KELLYMIKACASABLANCA/ISLAND(UNIVERSAL)

BEAUTIFUL LIARBEYONCÉ KNOWLES& SHAKIRACOLUMBIA (SONY BMG)

RUBYKAISER CHIEFSB-UNIQUE/POLYDOR(UNIVERSAL)

WHAT GOESAROUND...COMES AROUNDJUSTIN TIMBERLAKEJIVE (SONY BMG)

6 7 8 9 1O

11 12 13 14 15 16 17 18 19 20


BUSINESSREVIEW.

18|19


LICENCE FEE INCOME

LICENCE FEE INCOME £

‘O7 115.0

‘O6 97.9

‘O5 86.5

‘O4 82.7

‘O3 80.9

115.0M +17%

LICENSING IS THE BEDROCK OF OUR BUSINESS AND THELIVELIHOOD OF PERFORMERS AND RECORD COMPANIES ALIKE, AND 2007 WAS ANOTHER STRONG YEAR OF GROWTH.OUR GROUND-BREAKING DEAL WITH THE BBC WAS A SIGNIFICANT FACTOR HERE, COMPLEMENTED BY INCREASESIN REVENUES FROM COMMERCIAL TELEVISION, INTERNET RADIO AND PUBLIC PERFORMANCE, TO NAME THREE AREAS OF SUBSTANTIAL GROWTH.THE GROWTH OF ONLINE AND MOBILE MEDIA CONTINUES TO INSPIRE AND CHALLENGE US, RESULTING IN THE CREATIONOF NUMEROUS NEW LICENCES AND AN INCREASINGCOMMITMENT TO ARRIVE AT INNOVATIVE SOLUTIONS,ESPECIALLY IN THE INTERNATIONAL ARENA.


ONLINE AND MOBILE

2007 was thus another year for redrawingthe boundaries of collective licensing, andseeking appropriate new licensing structuresto meet the expectations of both rightsowners and music users in a rapidlychanging media environment.

PPL continued to license internet radiothroughout 2007 and now licenses over200 such stations. The introduction of theSmall Webcaster Licence in June 2007facilitated this process by simplifying theadministrative and reporting requirementsfor small internet radio stations.

During 2007 PPL also commenced thelicensing of interactive internet radio andnow licenses services such as Last.fm.Negotiations were protracted as theycoincided with arbitration proceedingstaking place in both the US (determiningthe price of record company and performerrights for internet radio) and in the UK(determining the price of the songwriter,composers and publisher rights for internet radio).

A further interesting development in theradio market was the launch of a radioservice by 3 to serve its mobile telephonycustomer base. PPL was delighted to beable to license this innovative service.

PPL has extended the licensing of itstraditional broadcasting customers in bothtelevision and radio so as to allow them to supply their programmes as on-demandstreams or on-demand DRM controlleddownloads. Broadcasters now want to deliver their programmes in a variety of ways. PPL has been able to respond to the requirements of its broadcastcustomers by agreeing licences with themto cover such uses of sound recordings.

Both the BBC and commercial radio havealso taken licences for podcasts of radioprogrammes including up to thirty seconds of the music tracks in these programmes.

The extension of PPL’s online rights leadsinevitably to the challenge of providing an international licensing solution for manylicensees. Under reciprocal arrangementswith similar licensing bodies around theworld, PPL currently licenses the streaming of internet radio and television services into39 other countries. Providing such a facilityfor a wider range of services into additionalterritories is high on PPL’s agenda.

LICENCE FEE INCOME

BROADCASTING

The renewal of the licences between PPLand the BBC, covering the BBC’s usage of sound recordings to the end of 2011,was the most significant development in 2007. With the BBC a UK marketleader in both radio and television, PPL’sprincipal focus was to maintain a levellicensing playing field between the BBCand its commercial competitors,notwithstanding the differences in theirrespective business models.

The focus for the BBC was an ambitiousagenda to deliver its public services whenand where the consumer required them,through a range of new on-demandservices such as the iPlayer, which requiredthe exercise of rights not previously licensedby PPL. The result was that rare combinationwhere both parties were able to achievetheir goals – the BBC obtained the rights it required in a ‘one-stop’ package, whilstPPL obtained a substantial increase in thelicence fees paid by the BBC.

Commercial television revenues alsoincreased significantly in 2007, driven by the major broadcasters taking newlicences for the on-demand delivery of their programming, together with an overall increase in the number of televisionchannels using music.

It was another difficult year for commercialradio, however, with pressure on advertisingrevenues continuing and further corporaterestructuring overhanging the market. Since PPL’s licence fees are based on a percentage of commercial radio stationrevenues, results for the sector were flatyear-on-year, although figures for the finalquarter indicate that the market may finallybe returning to growth.

+20%56.8MBROADCAST REVENUE £

‘BROADCASTERS NOW WANT TO DELIVER THEIRPROGRAMMES IN A VARIETY OF WAYS.’


INTERNATIONAL

New contracts for the collection ofperformers’ revenues were put in place in a number of established Europeanmarkets. This included ADAMI, the Frenchfeatured artists’ society, as well as therelevant societies in Spain, Italy andSwitzerland. All of these agreementsgenerated immediate returns for PPLperformers. Some of the returns receivedwent back decades, ensuring comparativelylarge payments for performers who hadsignificant airplay hits in the 1990s.

Agreements in Eastern Europe, such as the one with the Estonian Society EFU,delivered revenue for the first time in 2007.PPL’s roster of collection agreements hasbeen further expanded into the dynamicEastern European marketplace through the conclusion of agreements with societiesin Russia, Ukraine and Bulgaria.

Although these territories will not bereturning large amounts of revenue to PPLimmediately, they all have double digitgrowth figures (they are working from a low base in often hostile businessenvironments). A partnership with PPL helpsstabilise the operating environment for thesesocieties, ensuring that they are able torepresent our significant repertoire in legaland tribunal cases, further legitimising themin the eyes of hostile users.

Existing record company agreements wererevisited during 2007 ensuring that allavailable rights were covered and that theywere delivering at the appropriate level to PPL members. This led to the extension of the agreement in Sweden to coverprivate copying and cable rights, whichhelped increase receipts to more than twice that collected since the agreementhas been in place.

SENA, in the Netherlands, continues to provide a high level of regular incomefor PPL members. Not only are Dutchconsumers heavy users of our repertoire,but SENA have been successful inmonetising our rights and quickly returningrevenue to PPL.

PPL now has 41 international contracts,ensuring that when record company or performer members’ tracks are usedin other countries, the revenue is returnedto PPL.

Due to this growing number of agreements,the returns to PPL from overseas societiescontinue to be made up of a significantamount of back-dated revenue for all PPLmembers. This pattern is likely to carry on through 2008 and 2009 as we strikefurther deals, clear out held revenue, and acquire more repertoire to theinternational service.

LICENCE FEE INCOME

PUBLIC PERFORMANCE AND DUBBING

Launching a new system of this scale is disruptive to any business in the shortterm. Inevitably there are teething problemsaround the migration of data, going liveand the re-training of staff. However,notwithstanding the impact of these factors,public performance and dubbing revenuescame in on budget at £49.0 million, which represents 11% growth over 2006.This means that in 2008 PPL is very well-placed to drive forward its publicperformance licensing by using all thecapabilities provided by the new system.

PPL still has three of its public performancetariffs – pubs, bars, restaurants, hotels;shops and stores; and offices and factories– subject to review by the CopyrightTribunal. These matters have beenoutstanding since they were referred by theSecretary of State for Trade and Industry to the Copyright Tribunal on 1 December2004, and while there were somedevelopments in proceedings during 2007,we are still some way off having mattersfinally resolved.

It has been clear from this process thatthere is a need for a better funded andstructured Copyright Tribunal. SinceCopyright Tribunal proceedings determinetariff rates, they are enormously importantto performers and record companies alike,determining how much money is to be paidfor the usage of their recordings. The slowrate of the current process and the limitedresources that the Copyright Tribunal candedicate to resolving such matters is fairneither to PPL nor to the copyright users.

Accordingly, PPL has been a leadingcontributor to the Intellectual Property Officereview of the Copyright Tribunal and theParliamentary Select Committee on theCopyright Tribunal, both of which haverecommended substantial changes.

2007 saw continued growth in PPL’sdubbing revenues from the providers of music services for public performance. As in the broadcasting sector, PPL hasextended the scope of its licences tofacilitate the delivery of such servicesonline, enabling a broader and morecurrent range of repertoire to bemade available.

+11%49.0MPUBLIC PERFORMANCE AND DUBBING £

+52%9.1MINTERNATIONAL REVENUE £


DISTRIBUTABLE REVENUE

DISTRIBUTABLE REVENUE £DISTRIBUTABLE REVENUE TO COMPANY AND PERFORMERMEMBERS GREW TO A RECORD TOTAL OF £99.5 MILLION IN 2007, AN INCREASE OF 18% ON THE 2006 TOTAL. THIS WILL BE DISTRIBUTED ON THE BASIS OF OVER 23 MILLION USES OF TRACKS BEING MATCHED BY PPL’S SYSTEMS, AN INCREASE OF 4 MILLION ON THE USES MATCHED FOR 2006.

‘O7 99.5

‘O6 84.4

‘O5 75.4

‘O4 71.5

‘O3 68.7

+18%99.5M


PERFORMER MEMBERS

This was highlighted by the fact that in 2007 PPL made the largest ever pay-out to performers in a single year with 23,000performers receiving a royalty payment.This was the result of teamwork, anincreased knowledge of the marketplace,and the development of our systems.

Particular effort has been put into improvingthe accuracy of data and hence theresulting increase in pay-outs to performers.Innovative teamwork enabled us to developand introduce an in-house ‘versioning tool’which allows us to copy complete line-upsacross all versions of a track, adding over25,000 performances to tracks in a threemonth period.

Track data was also taken for the first timeon a consistent basis from the Musicians’Union, which has proved invaluable inhelping to complete performer line-ups.Following a concerted focus on heldorchestral money, a specialist team was set up to complete performer line ups onclassical repertoire, resulting in a numberof orchestral players receiving PPL revenuefor the very first time.

PPL’s efficiency in locating performers who are owed money has additionallyimproved with the introduction of newtechniques such as web-tracingprogrammes and social network profiling.A concentrated effort has also been made to increase the uptake of the performers’international mandate, enabling manymore performers to receive overseas airplayincome. As our international reach grows,we are working hard to make PPL thenatural first port of call for the collection of international income for all performers.

Our drive towards first class service alsoinvolved a redevelopment of myPPL, ouronline accounting and statement facility,making it a much more user-friendlyexperience. The number of performersusing myPPL continues to increase, allowingmore performers access to detailedinformation about their payments.

In November 2007 we published our firstAnnual Performer Report to coincide withthe inaugural PPL Annual Performer Meetingheld at the ICA in London (see page 40).This extremely well-attended event enabledperformers and their representatives todiscuss a wide range of issues unique tothe performer community and, for the firsttime, to have a voice in the nominationsand elections of directors to the PerformerBoard. The result was a clear vote ofsupport for the chairman, Gerald Newson,and all the performer directors.

Two issues of particular concern to the Performer Board are the extension of copyright and the US terrestrialperformance right. Excellent progress hasbeen made on both fronts, in part becauseso many UK performers took the time to lend their support and add their names to these campaigns.

PPL’s educational programme, created in conjunction with the InternationalFederation of Musicians (FIM), started its work in Africa and the Caribbean in developing an indigenous infrastructure so that local musicians can earn therevenues they deserve for their work. Along with members of FIM, Keith Harris,PPL’s Director of Performer Affairs, attendedPPL sponsored seminars in Uganda,Jamaica and Ghana (see page 40),talking to local musicians, organisers andgovernment representatives about theimportance of enforcing the laws to makesure that performers get paid for the publicuse of their work.


RECORD COMPANY MEMBERS

During the year, work was stepped up to assist record company members improvethe input of data to the repertoire databaseand to clean up the existing information.This label copy is also critical in enablingPPL to discharge the record companies’obligation to distribute to the performers. To assist in this process, a personalisedapproach has been adopted to theinterface with record companies. All companies now have a personalaccount coordinator with whom they canbuild a one-to-one working relationshipwhich will cover all PPL related issues. With the ongoing changes in the musicindustry and the growing importance andsignificance of PPL income, this tailoredaccount management approach enables us to address the specific requirements of each company.

The range of PPL services available to record company members continuesto expand. Overseas collection serviceshave been extended to cover additionalterritories, whilst the scope of the newmedia services which PPL may license hasbeen substantially increased by the launchof five “New Service Categories” in whichrecord company members may participate.

These categories are:

– non-interactive streaming of radiostations and television channels

– interactive streaming of radio stations

– on-demand streaming of clips of soundrecordings

– on-demand streaming of radio andtelevision programmes

– DRM-controlled temporary downloads of radio and television programmes

The offer to license these new media rightshas been welcomed by members, with thevast majority signing the new mediamandate. These New Service Categoriesnow allow PPL to license a host of onlineservices from catchup TV and radio to interactive services such as Last.fm.

Whilst rights issues become ever morecomplex, PPL has sought to keep its systemsand processes as simple and member-friendly as possible. The process for joiningPPL has been streamlined by theintroduction of a new application processwhich will continue to be fine tuned in response to member feedback. The procedure for handling track disputesbetween members has also been simplifiedand, together with improved track datainformation, this should ensure faster moreaccurate distribution going forward. The quality of customer service is nevereasy to measure, but with a reduction of 85% in outstanding member queriesduring 2007, progress is being achieved at PPL.

‘PARTICULAR EFFORT HASBEEN PUT INTO IMPROVINGTHE ACCURACY OF DATAAND HENCE THE RESULTINGPAY-OUT TO PERFORMERS.’

‘DISTRIBUTABLE REVENUE TO RECORD COMPANY ANDPERFORMER MEMBERS GREWTO A RECORD TOTAL OF£99.5 MILLION IN 2007,AN INCREASE OF 18%ON THE 2006 TOTAL’.



INTERNATIONAL

PPL now receives airplay royalties from 15 overseas territories for performers andfrom 18 territories for record companies.Overseas collection costs are capped at 10%.

The speed with which PPL service teamscan turn around revenue from overseasorganisations depends upon the quality of data we receive from them. In 2007,particular emphasis was placed onensuring that all international classicalrevenue was accurately distributed toindividual performers, as in many instanceswe received revenue on behalf of an entireorchestra or ensemble.

A great deal of translation work is involvedin this process. Track data is supplied in a variety of languages, and must betranslated and matched to UK tracks to ensure that it is properly paid out.

As more international agreements aresigned, PPL’s international operations team has been scaled up to deal with the increasing level of track information.Processing and matching large volumes of data is a particular skill of ours which in turn gives us the level of detail thatenables us to ensure accurate distribution of revenue to our members.

During 2007, our team matched airplayrevenue on almost 415,000 recordings on behalf of the members who havemandated PPL to collect their overseasrevenue. Nearly 25% of these recordingshave never received airplay in the UK,demonstrating the diversity of the repertoirePPL represents as well as the quality of ourrecording meta-data.

To assist these processes in the future,PPL took an active and leading role in a number of international initiativesdesigned to improve data exchangeand royalty flow.

PPL also distributes considerable sums of UK licensing income to record companiesand performers overseas. In the course of 2007, we distributed some £3.5 million – more than double the amount paid in2006. This meant that PPL released revenueto an increasingly diverse range ofperformers and tracks, from the seductivetones of Salif Keita to Finnish classical music.

2007 also saw the first distributionanywhere in the world of revenue collectedunder the IFPI Simulcasting and WebcastingAgreement. This enables PPL to licenseinternet streams which are received in territories where the equivalent localorganisations are also signatories of theagreement, on the basis that PPL releasesthe relevant revenues to them.

In 2008 this principle will be extended to other digital services, so we continue to develop new systems and distributionmethodologies to enable us to honour the ‘money out’ side of these complex licensing agreements.

7.9MINTERNATIONAL PAYMENTS £

PPL AND THE GOVERNMENT

A UK government review of the CopyrightTribunal published in May 2007recommended significant changes whichshould improve its ability to take a moreinformed and better balanced approach to adjudicating on disputes between musicusers and collecting societies including PPL.

Over in Washington, a Performance RightsBill was tabled in December 2007 to endthe free ride of those US radio stationswhich have built a $16bn industry whilepaying nothing to the creators and investorsin music who fill most of their programming.

In Brussels, Commissioner Charlie McCreevyannounced in February 2008 proposals to end musicians’ status as the ‘poorcousins’ of the music business by extendingthe copyright term for both performers and producers.

Finally, the UK government’s CreativeEconomy Strategy, launched in February2008, was the strongest statement yet thatit recognises the value of creators. Similarly,in the 2008 budget speech, Chancellor Alistair Darling flagged the creativeindustries as one of the key drivers of Britain’s growth and competitiveness in the future.

These breakthroughs were the result of years of painstaking work with politicians,civil servants and opinion-formers, inconjunction with others in the music industryand beyond. Day-to-day activities includegiving evidence to parliamentarycommittees, making detailed submissions to consultations, briefing politicians on keyissues and producing campaign materials.

The Copyright Gap CD proved aparticularly useful tool here, as it clearlyhighlighted the differential in copyrightbetween performers and composers oneach track. Our thanks go to the performersand writers, from 1957 to the present day,who made this campaigning compilationpossible. As a powerful and graphic wayof showing the discrepancy between thetwo copyrights, it has formed a critical partof PPL’s recent lobbying efforts.

As well as supporting pan-industry moves to get ISPs to take more responsibility forthe illegal activities of their customers, PPL has worked closely with the CBI, theBroadband Stakeholder Group, the IPOffice, UK Trade and Investment, andEuropean Forums. Leading the charge,however, were the 6,000 PPL performerswho signed petitions calling for an end to the copyright gap and an end to the US radio stations’ payment holiday.

The copyright term signatories were sent to Commissioner McCreevy and played a key role in persuading the Commission to propose legislation. The US broadcastpetitions were similarly submitted to thelegal committees in Washington tocontribute to the debate on the PerformanceRights Bill, the outcome of which we eagerly await.

Considering the vast majority of musiciansin the UK earn less than £15,000 a year,there is some urgency now in persuadinggovernments to update the legislativeframework for the digital age. With a concerted effort across the industry, PPL will continue to work towards makingthe new creative economy a reality andensure that the real drivers of that wealth,the creators and their investors, areproperly rewarded.

‘THESE BREAKTHROUGHSWERE THE RESULT OF YEARS OF PAINSTAKING WORK.’

‘PPL NOW RECEIVES AIRPLAYROYALTIES FROM 15 OVERSEASTERRITORIES FOR PERFORMERSAND FROM 18 TERRITORIESFOR RECORD COMPANIES.’


TECHNOLOGY

Amongst these was the Marketing modulewithin e-Business Suite which went live inJune 2007, thereby allowing PPL to growrevenues and increase market penetrationeven further. The ability to closely measurethe benefits associated with each marketingcampaign will ensure budgets can belinked into a marketing plan that focuses on areas offering the quickest growth.

Looking further ahead, additional modulesand technologies are being road mappedso that PPL can gain maximum benefit andcontinue moving the business forward. We anticipate this will lead to additionalsystems being implemented in other areasof PPL, providing a holistic solution forprocessing the majority of our businesstransactions, and therefore maintaining the highest level of service to all of PPL’slicensee customers.

PPL REPERTOIRE DATABASE

CatCo is morphing into the PPL RepertoireDatabase as its role and remit expand. The PPL Repertoire Database has long beenat the centre of data exchange in the UK, a role that is now being extended as themusic market develops both digitally andglobally. The database holds in excess of 9.7 million tracks, and 2007 saw an acceleration in the rate of repertoireregistration as record companies movedtowards single-track configurations. Stepshave been taken to ensure this growth canbe comfortably managed through boostingthe capacity and power of the PPLRepertoire Database hardware.

The implementation of new services has continued in several areas as therequirements of PPL’s customers havechanged. Functionality has beendeveloped that allows the management of new media rights and significantenhancement of the code that producesinternational claims has driven the growthof international revenue. The globalisationof the industry continues to offeropportunities to PPL Repertoire Database.

Data quality has been another key focus in 2007, with changes being implementedto improve transparency to the RecordCompany Service team and increase thevolume of tracks that are available to PPL.In addition, the database was updated to reflect ownership transfers, merges andother changes within the music industry.As we handle more international repertoire,data exchange and matching processeshave had to be improved to maintain a full service to all PPL’s data customers. PPL Repertoire Database has also continued its fundamental role in the compilation of the UK charts. The strength of the systemwas central to the change in the charteligibility rules of January 2007 thatallowed unlimited versions of digitaldownloads to contribute to the singles chart.Over the course of 2007 PPL succeeded in operating to 100% of its service levelagreement with the UK charts.

Following the first delivery in September2006 of Oracle Financial Applications, the second phase of PPL’s move to thisworld leading ERP (Enterprise ResourcePlanning) technology was delivered in June 2007 when key modules from their e-Business Suite were used to replace the existing public performancelicensing system. The considerable benefitsderived from this integrated solutionbecame apparent very quickly and we look to build on these achievements through 2008.

As an indication of how innovative PPL’slicensing solution is recognised to havebecome, the company was invited tospeak at Oracle OpenWorld 2007, heldannually in San Francisco, California andattended by some 40,000 delegates.PPL’s presentation was eagerly anticipatedwith many other organisations wanting tohear how PPL had developed applicationsto grow the business. In addition, it alsoprovided PPL with the opportunity to gainboth knowledge and experience fromother system users, including many keybusiness leaders from multi-billiondollar organisations.

Other systemic developments that wereimplemented during the year resulted in the company being able to capturecustomer information more rapidly andefficiently than ever before – and with theability to calculate fees accurately for theappropriate usage of our members’ music.This ‘quoting process’ is now bothtransparent and standardised,and no longerreliant on years of business knowledge thatcan often be hard to access. In turn, atrenewal, repeat customer business can bemore efficiently processed through theautomatic ‘licence renewal’ capability PPL has developed internally.

In 2007 operational resources becamebetter equipped by implementing animproved, workflow-driven mannerof managing outstanding licensing tasks,which meant they could be more effectivelyprioritised and managed in a coherent anduniform way. Significantly, this means thatthey are no longer restricted by the need to respond personally by e-mail or phone to every individual request.

By removing many of the historicaltechnology constraints, by standardising a number of disparate systems andby employing a robust, scalable solution, we are now able to focus on supportingthe anticipated growth in PPL andat the same time provide a bettercustomer experience.

We have also been able to make criticalimprovements in the area of reporting.Now all levels of the organisationhave access to key information from a single source of licensing data whichallows us to make better, data-baseddecisions which in turn mean that wecan respond quickly and efficiently to operational demands.

‘ALL OF THESE DEVELOPMENTSHAVE BEEN IMPLEMENTED WITHTHE FOCUS ON SUPPORTING THE ANTICIPATED GROWTH IN PPL AND AT THE SAME TIME PROVIDING A BETTERCUSTOMER EXPERIENCE.’


OURCULTURE.

34|35


CORPORATE SOCIAL RESPONSIBILITY

COMMUNITY

All PPL employees are encouraged tobecome involved in fundraising activities for charities and our community. Werespect the fact that our staff may havecertain charities and projects with whichthey would like to be personally involved,whilst also encouraging everyone to takepart in PPL community projects.

In 2007 we launched our officialpartnership with the charity KIDS, and a number of PPL employees spent a day in Hackney in December, redecorating theKIDS leisure centre, creating a music roomfor them and donating musical instrumentsand music equipment. During 2008, ouraim is the renovation of certain areas of thecentre both indoors and out.

We also launched our ‘Make a Donation’scheme in 2007 whereby PPL tops upfundraising donations to the charity of an employee’s choice.

Our aim will be to build on these andsimilar initiatives during 2008 and to growand develop the CSR team of employees,as well as the number of projects in whichwe get involved.

In lieu of sending Christmas cards, wemade a donation to Crisis (the nationalcharity that fights homelessness andempowers homeless people to transformtheir lives).

MUSIC INDUSTRY

Continuing its support of a wide numberof music industry charities such as Nordoff-Robbins, PPL sponsored several of theirevents, including their annual and highlypopular football extravaganza and theSilver Clef lunch. For the first time ever, PPLjoined forces with PRS to sponsor the MusicIndustry Trust’s Awards in Octoberhonouring Kylie Minogue – which becamethe most successful and well- attended in the event’s history (see page 40).

In addition to supporting the musicindustry’s many worthy causes, thecompany plays an active role in both theBRIT Trust and the BRIT School in Croydonwhich was much in the news in 2007,through the success of many of its formerstudents most notably, Amy Winehouse and the extraordinary sales levels of heralbum ‘Back To Black’.

We proudly continued our long-standingsupport of the Hospital BroadcastAssociation, and made donations to theBritish Association for Performing ArtsMedicine and the Young MusiciansSymphony Orchestra and announced ourinvolvement in the Young Person’s ConcertFoundation, a charity chaired by LadyMartin and in which Sir George Martin is also involved.

As part of our inaugural Annual PerformerMeeting (APM), PPL took the opportunity to support the anti-gun crime campaign“Don’t Trigger”, by financing a forty minutelive performance on the day the campaignlaunched their CD. This included a numberof UK artists from the urban musiccommunity, which featured a wide rangeof performers from newcomers to veteranslike Maxi Priest and Juliet Roberts (see page 40).

The company sponsors and supports other music-related causes such as the All Party Parliamentary Jazz AppreciationGroup (APPJAG). This group holds variousevents in Westminster, including theincreasingly important annual ParliamentaryJazz Awards which are co-chaired byMichael Connarty MP and Lord Colwyn,and hosted by broadcaster PaulGambaccini (see page 40).

With active involvement and participationof staff right across the company, there weretwo key areas we identified where we allbelieved we could make a contribution.They were environmental causes and localcommunity initiatives. In addition, wecontinued our historical support of musicindustry causes, in particular the BRIT Trust,the BRIT School, and Nordoff-Robbins.

Our employees became more involvedthan ever before and this saw the creationfor the first time of a team of CSR Stars fromevery area of the company (see page 40).These people volunteer their time, energyand ideas and are dedicated to promoting our staff, environment andcommunity-orientated CSR activities.

ENVIRONMENT

Since our CSR launch in 2006 we havecontinued to encourage staff, and workwith our cleaning suppliers, to recycle itemssuch as paper, cans and plastic through our‘binless office’ campaign. In addition, tonercartridges, computers and furniture arerecycled using specialist suppliers. Buildingefficiencies such as motion lighting sensorsand energy efficient light bulbs are just thestart of the process, with reviews of airconditioning and energy suppliers takingplace through 2008. We will also seek to work proactively with our supply chainand external partners to demonstrate ourcommitment to carbon emissions reduction.

To our member stakeholders, we arepromoting online facilities such as myPPLand PPL Repertoire Database, which haveeliminated the need to process vastvolumes of paper, both inbound andoutbound from PPL. We will look to offerfurther online functionality to our membersand licensees throughout 2008 to continueto reduce paper consumption. The new PPL website will also help to delivercommunications in a more efficient and effective way.

Some other small steps we took throughoutthe year were making Fairtrade purchaseswherever possible and facilitating a dedicated bicycle storage area toencourage employees to use this form of transport. We will look to expand ourcommitment in 2008 by offering the cycleto work scheme and support to NationalBike week.

At the end of the year, we made thedecision to conduct a full Carbon Audit in 2008. By taking a more detailed look at our carbon footprint and ways in whichwe can reduce our impact, benchmarkingourselves against similar sized companiesboth inside and outside the music industry.

We also made the decision to becomepart of the industry’s champions for climatechange, Julie’s Bicycle. We very muchlook forward to playing an increasing rolein this important new body through 2008and beyond.

‘WE MADE THE DECISION TO CONDUCT A FULLCARBON AUDIT IN 2008,AND, BECAME PART OF THEINDUSTRY’S CHAMPIONSFOR CLIMATE CHANGE,JULIE’S BICYCLE.’


OUR PEOPLE

COMMUNICATION

Critical to any company’s success is in thelevel of its communication. Through 2007we held:

– Two Employee Communication Sessionsattended by all employees wherethe company’s objectives and planswere outlined.

– A management awayday to furthercommunicate and engage our managersin the company strategy.

– Additional CSR activity which increasedthe number of cross departmental eventsand encouraged more team workingand communication between employeesacross departments.

REWARD AND RECOGNITION

We go to great lengths to ensure thatour people are fairly rewarded andrecompensed and are proud of the servicerecords many of them achieve. We notonly undertook a review of market ratesalaries on key roles within the organisationin 2007 but we also implemented anEmployee Referral Scheme for recruitment.

Another new initiative we introduced wasan Employee of the Month Scheme, whichrewards high performance and contributionto the organisation which feeds into ourEmployee of the Year Scheme. In 2007 the award went to Clinton Mitchell whoworks as a Co-ordinator in the NewBusiness Sector of PPO (Public PerformanceOperation). He was nominated not just forhis overall drive and determination but alsoin recognition of the exceptional levels ofrevenue he generated.

Chris Barrett (IT), Kelly Bradley (PPO),Panos Hadjinicolaou (IT), Daniel Swaine(PPO) and Ian Tosko (PPO) were allrecognised for reaching the ten yearservice milestone with the company whilstboth Rehana Ellahi (Membership &Distribution) and Hoosha Hobson (HR)reached fifteen years. Pam Evans (PPO),who joined the company on 12th October1987, became the very first recipient of ourtwenty year award.

During 2007 we focused on developingour reward and recognition strategy andour training and people development so that we all continue to pull together to achieve the best results for our recordcompany and performer members.

Results from our second Employee Survey,which we undertook in 2007, sawimprovements in:

– Understanding the company’s goals and individual objectives with a clearcommitment from employees to supportthis process.

– Managers giving more feedback to employees on performance outsideof annual appraisal and the appraisalprocess itself.

– Employees being given opportunityand support to develop their career,skills and experience.

– Improved communication channelswithin departments and acrossthe company.

TRAINING AND DEVELOPMENT

The growth and development of PPL rests in our people, and training and developmentare, therefore, high on our agenda. Some of the initiatives we undertook included:

– Review of our training plans andimplementing new programmes todevelop skills and experience. In 200743 training courses were attended by240 people.

– Implementation of a Development ReviewProcess for our key senior managers.

– Receipt of accreditation from the ILM(Institute of Leadership andManagement) which allows us to runcourses for which delegates can receivea national qualification. Our firstaccredited course was launched at theend of 2007 and is part of our StrategicManagement Development Programme,which is attended by some of our seniormanagers and will lead to a Level 5Award in Management (equivalent to a Diploma level).

‘20% OF ALL PPL EMPLOYEESARE ACTIVELY INVOLVED IN CREATING ANDRECORDING MUSIC.’

‘94% OF PPL STAFF FEELS THAT THEY HAVE A GOODUNDERSTANDING OF THECOMPANY’S OVERALLSTRATEGY AND OBJECTIVES.’


OUT AND ABOUT

1 2 3

1

Left to right: Colin Frechter, Pat Halling, Dave Richmond, Peter Oxer, Clem Cattini, Sue Carty, Fran Nevrkla, Derek Wadsworth, Dave Lawson, Ray Warleigh, Eric Allen.

2

From Left to right: Keith Harris, Mr Amanzeba Nat Brew(musician, 2nd Vice-President of MUSIGA), Mr Alhaji SidikuBuari (Immediate past President of MUSIGA, President of COSGA, the Copyright Society and Vice-President of FIM) Mr Tackie (representative of the Minister of Justice), Mr JohnMensah Sarpong (Producer/ Manager, President of the GAPI,the producers’ association of Ghana).

3

4

5

6

Left to right: broadcaster Paul Gambaccini, Lord Tony Colwyn,John Ellis MBE, members of the Doncaster Youth Jazz Association(Reuben Fowler, Nick Breakspear, Ben Mallinder and MatthewRobinson), Fran Nevrkla, The Rt. Hon. Rosie Winterton MP,Joan Walley MP, The Rt. Hon. John Prescott MP, MichaelConnarty MP, star performer Dennis Rollins.

7

8

9

1O

Left to right: John Simson (Executive Director of SoundExchange), Eanna Casey, (Chief Executive Director of RAAP),Fran Nevrkla, (Chairman and CEO of PPL/VPL), Hans vanBerkel, (Managing Director of SENA), José Luis Sevillano,(Director General and MD of AIE).

11

12

Left to right: Atsushi Ueyama (EMI Music Japan), DominicMcGonigal, Yoshio Karibe (RIAJ) and Ryukatsu Son (WarnerMusic Japan).

4 5 6

7 8 9 1O 11 12

OUR COMMITMENT TO STRONG WORKING RELATIONSHIPS IS BUILT AROUND OUR ACTIVE INVOLVEMENT IN A WIDE RANGEOF EVENTS AND ACTIVITIES IN THE UK AND GLOBALLY.


EXECUTIVE MANAGEMENT TEAM 2007 BOARD OF DIRECTORS 2007

FRAN NEVRKLA JANICE DAVIES

FRAN NEVRKLA

GLEN BARNHAM

TED CARROLL

TONY CLARK

JULIAN FRENCH

PETER HARRIS†

GUY HOLMES

PETER LEATHEM

DOMINIC MCGONIGAL

MARTIN MILLS

GERALD NEWSON

NIGEL PARKER

JAMES RADICE

RT HON LORDSMITH OFFINSBURY

JOHN SMITH

MICHAEL SMITH

JOHN WATSON

ATTENDEES

GEOFF TAYLOR

ALISON WENHAM

EXTERNAL ADVISER

JOHN DEACON CBE

KEITH HARRISTONY CLARK

FRANK JASCHINSKI DOMINICMCGONIGAL

BEN LAMBERT JONATHANMORRISH

PETER LEATHEM

SUE CARTY


FINANCIALSTATEMENTS.


STATEMENT OF DIRECTORS’ RESPONSIBILITIESIN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

Company law requires the directors to prepare financial statements for eachfinancial year. Under that law the directorshave elected to prepare the financialstatements in accordance with UnitedKingdom Generally Accepted AccountingPractice (United Kingdom AccountingStandards and Applicable Law). Thefinancial statements are required by law to give a true and fair view of the state of affairs of the company and of the profitor loss of the company for that year.

In preparing those financial statements, the directors are required to:

– select suitable accounting policies and then apply them consistently

– make judgements and estimates that are reasonable and prudent

– state whether applicable UK Accountingstandards have been followed, subjectto any material departures disclosed and explained in the financial statements

– prepare the financial statements on the going concern basis unless it is inappropriate to presume that thecompany will continue in business, in which case there should besupporting assumptions or qualificationsas necessary.

The directors confirm that they havecomplied with the above requirements in preparing the financial statements.

The directors are responsible for keepingproper accounting records that disclosewith reasonable accuracy at any time the financial position of the company and enable them to ensure that thefinancial statements comply with theCompanies Act 1985. They are alsoresponsible for safeguarding the assets of the company and hence for takingreasonable steps for the prevention anddetection of fraud and other irregularities.

The directors are responsible for themaintenance and integrity of the company’swebsite. Legislation in the United Kingdomgoverning the preparation and disseminationof financial statements may differ fromlegislation in other jurisdictions.

The company’s principal activity is thecollection of licence fees for broadcastingand public performance of soundrecordings on behalf of its Members.

The total amount available for distribution is distributed to the company’s Membersand Performers, with the intention that thereare no retained reserves at any particularbalance sheet date. The introduction ofFRS17 in 2005 resulted in the recognitionof a deficit on the income, expenditure and distribution account and commentaryon the current position is set out below.

During the year the company increased its licence fee revenue from most sources in accordance with management objectives.It is expected that this trend will continue.

PPL considers its key performance indicatorsto be revenue, revenue growth and cost torevenue ratio. 2007 was a year when thecompany delivered a strong set of resultswith distributable revenue growing by17.9% to £99.5 million. Broadcastingincome grew by £9.3 million (19.5%),largely through a renegotiation with theBBC. In addition, public performancerevenue grew (10.5%). Internationalrevenue increased to £9.1 million (52.0%).Despite further investment in IT systems, andemployees, the cost to revenue ratio was14.6%, compared to 15.1% in 2006.

In tough market conditions for PPL’smembers the changes within the musicbusiness in recent times have beenimmense. Sales of physical music carrierscontinue to decline generally around theworld though the ‘use’ of music continues to grow as media expands and publicperformance and dubbing increases.

It is critical that the company plans carefullyfor the future. Investment in systems willcontinue to meet the demands of increasingmembership, evolving media, new tariffsand the developments that the companyhas started, and will continue to make in overseas collection for companies andperformers. In addition to investment in systems, the company will continue to place increasing emphasis on staff andemployee training. The company needs to maintain the high quality of service formembers against a backdrop of increasingmedia platforms and expanding numbers of territories.

A number of PPL’s new public performancetariffs remain subject to review by theCopyright Tribunal following a reference in 2006. The Tribunal has yet to reach a decision and PPL continues to licenseusers under its new tariffs pending such a decision.

REPORT OF THE DIRECTORSFOR THE YEAR ENDED 31 DECEMBER 2007


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PPLFOR THE YEAR ENDED 31 DECEMBER 2007

The directors’ responsibilities for preparingthe Annual Report and the financialstatements in accordance with applicablelaw and United Kingdom AccountingStandards (United Kingdom GenerallyAccepted Accounting Practice) are set out in the Statement of Directors’Responsibilities.

Our responsibility is to audit the financialstatements in accordance with relevantlegal and regulatory requirements andInternational Standards on Auditing (UKand Ireland). This report, including theopinion, has been prepared for and onlyfor the company’s members as a body in accordance with Section 235 of theCompanies Act 1985 and for no otherpurpose. We do not, in giving this opinion,accept or assume responsibility for anyother purpose or to any other person to whom this report is shown or into whose hands it may come save whereexpressly agreed by our prior consent in writing.

We report to you our opinion as to whetherthe financial statements give a true and fairview and are properly prepared inaccordance with the Companies Act1985. We also report to you whether in our opinion the information given in theReport of the Directors is consistent withthe financial statements.

In addition we report to you if, in ouropinion, the company has not kept properaccounting records, if we have not receivedall the information and explanations werequire for our audit, or if informationspecified by law regarding directors’remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report, and consider whether it is consistent with the audited financialstatements. This other information comprisesonly the Chairman and CEO’s Statement,The Year’s Highlights, A Few Facts, The UK’s Favourites, Licence Fee Income,Distributable Revenue, PPL and theGovernment,Technology, Corporate SocialResponsibility, Our People, Out and About,Executive Management Team and Board of Directors and the Report of the Directors.We consider the implications for our reportif we become aware of any apparentmisstatements or material inconsistencieswith the financial statements. Ourresponsibilities do not extend to any other information.

PricewaterhouseCoopers LLP are theauditors of Phonographic PerformanceLimited.

For each of the persons who were directorsat the time this report was prepared, thefollowing applies:

– so far as the directors are aware, thereis no relevant audit information of whichthe companies’ auditors are unaware;and

– the directors have taken all steps thatthey ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the companies’ auditorsare aware of that information.

A resolution to reappointPricewaterhouseCoopers LLP as auditors to the company will be proposed at theannual general meeting.

The following charitable donations were made during the year ended 31 December 2007:

Hospital Broadcasting Association£24,000

The Young Musicians Symphony Orchestra£4,000

Crisis UK (in lieu of Christmas cards)£2,000

The Directors of the company who servedthroughout the year from 1 January 2007to 31 December 2007, unless otherwisenoted, were as follows:

G Barnham

D Carroll

A Clark

J French

A George (resigned 24 April 2007)

P Harris

G Holmes (appointed 16 October 2007)

D McGonigal

M Mills

F Nevrkla

G Newson

P Leathem

N Parker

J Radice

Rt Hon. Lord Smith of Finsbury

M Smith (appointed 24 April 2007)

J Smith

T Smith (resigned 22 August 2007)

J Watson

None of the directors who held office at the end of the financial year had anydisclosable interest in the company.

By Order of the Board

P LEATHEMSECRETARY

22 APRIL 2008

REPORT OF THE DIRECTORSFOR THE YEAR ENDED 31 DECEMBER 2007


We conducted our audit in accordancewith International Standards on Auditing(UK and Ireland) issued by the AuditingPractices Board. An audit includesexamination, on a test basis of evidencerelevant to the amounts and disclosures in the financial statements. It also includesan assessment of the significant estimatesand judgments made by the directors in the preparation of the financialstatements, and of whether the accountingpolicies are appropriate to the company’scircumstances, consistently applied andadequately disclosed.

We planned and performed our audit so as to obtain all the information andexplanations which we considerednecessary in order to provide us withsufficient evidence to give reasonableassurance that the financial statements are free from material misstatement,whether caused by fraud or otherirregularity or error. In forming our opinionwe also evaluated the overall adequacyof the presentation of information in thefinancial statements.

In our opinion:

– the financial statements give a true and fair view, in accordance withUnited Kingdom Generally AcceptedAccounting Practice, of the state of thecompany’s affairs as at 31 December2007 and of its result and cash flowsfor the year then ended;

– the financial statements have beenproperly prepared in accordance withthe Companies Act 1985; and

– the information given in the Report of the Directors is consistent with thefinancial statements.

PRICEWATERHOUSECOOPERS LLP

CHARTERED ACCOUNTANTS ANDREGISTERED AUDITORS

LONDON

22 APRIL 2008

Licence fee income 2 114,966 97,885

Cost of collection and distribution (16,834) (14,735)

Cost of servicing the defined benefit pension scheme (408) (391)

Total cost of collection and distribution (17,242) (15,126)

NET INCOME FROM OPERATING ACTIVITIES BEFORE INTEREST AND TAXATION 3 97,724 82,759

Interest receivable 4,060 3,323

Interest payable 5 (2,476) (1,823)

Other finance income 13 177 132

NET INCOME FROM OPERATING ACTIVITIES BEFORE TAXATION 99,485 84,391

Taxation 8 – 20

AMOUNT AVAILABLE FOR DISTRIBUTION 99,485 84,411

Anti-piracy/copyright protection contributions 4 (2,420) (2,183)

Amount to be distributed to Members and Performers (97,065) (82,228)

RETAINED RESERVES 14 Nil Nil

Cost to Income Ratio 14.6% 15.1%(excluding pension scheme costs)

The results above relate entirely to continuing operations.

INCOME, EXPENDITURE ANDDISTRIBUTION ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2007

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PPLFOR THE YEAR ENDED 31 DECEMBER 2007


BALANCE SHEETAS AT 31 DECEMBER 2007

FIXED ASSETS

Tangible assets 9 3,397 3,035

CURRENT ASSETS

Licence fees receivable 29,277 10,338

Other debtors 1,942 2,129

Prepayments and accrued income 2,477 1,496

Short term fixed deposits 55,000 57,000

Cash at bank and in hand 23,520 18,778

112,216 89,741

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 10 (114,933) (91,384)

NET CURRENT LIABILITIES (2,717) (1,643)

TOTAL ASSETS LESS CURRENT 680 1,392

PROVISIONS FOR LIABILITIES AND CHARGES 11 (1,310) (1,803)

NET PENSION LIABILITY 13 (1,694) (1,401)

NET LIABILITIES (2,324) (1,812)

RESERVES

Income, expenditure and distribution account 14 (2,324) (1,812)

The financial statements which comprise the income, expenditure and distribution account, the statement of total recognised gains and losses, the balance sheet, the cash flow statement and the related notes were approved by the board of directors on 22 April 2008 and are signed on its behalf by:

F NEVRKLA J RADICE DIRECTOR DIRECTOR

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 31 DECEMBER 2007

Retained reserves – –

Actuarial loss on pension scheme 14 (361) (774)

Movement in deferred tax on pension scheme 14 (151) 212

TOTAL RECOGNISED LOSSES FOR THE YEAR (512) (562)


CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2007

NET CASH INFLOW FROM OPERATING ACTIVITIES 15 80,668 84,729

RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

Interest received 3,528 4,390

Interest paid (2,612) (1,197)

Net cash inflow from returns on investments and servicing of finance 916 3,193

CAPITAL EXPENDITURE

Payment to acquire tangible fixed assets (1,268) (2,520)

Net cash outflow from capital expenditure (1,268) (2,520)

ACQUISITIONS

Net cash acquired from PAMRA and AURA – 1,475

Net cash inflow from acquisitions – 1,475

DISTRIBUTIONS

Payments to Members & Performers (75,612) (86,709)

Anti-piracy/copyright protection contributions paid (1,962) (2,022)

Net cash outflow from distributions (77,574) (88,731)

NET CASH INFLOW/(OUTFLOW) 2,742 (1,854)BEFORE USE OF LIQUID RESOURCES

MANAGEMENT OF LIQUID RESOURCES

Decrease in cash placed on fixed term deposits 2,000 8,000

INCREASE IN CASH 16 4,742 6,146

1. ACCOUNTING POLICIES

The financial statements have beenprepared in accordance with applicableAccounting Standards in the UnitedKingdom. A summary of the more importantaccounting policies, which have beenapplied consistently, is set out below.

The formats of the income, expenditure anddistribution account and the balance sheethave been adapted from that prescribed by Schedule 4 to the Companies Act1985 in order to better reflect the nature of the business

The financial statements have been preparedunder the historical cost convention.

During the year the company operated a contributory defined benefit pensionscheme covering its permanent employeesand those of Video Performance Limited.FRS17 “Retirement Benefits” requires the net pension asset or liability of a company’s pension scheme to berecognised in full on the balance sheet.Since Phonographic Performance Limitedmakes the majority of contributions to thepension scheme and is also makingadditional contributions in order to fund thedeficit, then it is Phonographic PerformanceLimited who bears the risks and rewards of the deficit or surplus in the scheme.Accordingly the full net pension liability has been recorded in the balance sheet of Phonographic Performance Limited andno liability has been recorded in VideoPerformance Limited.

The regular service cost of providingpension benefits to employees during theyear, together with the costs of any benefitsrelating to past service, is charged to costsof collection and distribution in the income,expenditure and distribution account in the year.

Interest on the pension scheme liabilities is charged to other finance costs in the income, expenditure anddistribution account.

The expected return on the assets of thepension scheme during the year is basedon the market value of the assets at the start of the financial year and is offsetwithin other finance costs in the income,expenditure and distribution account.

The difference between the actual andexpected return on the assets of the schemeis shown in the statement of total recognisedgains and losses for the year, along withany related movement in deferred tax.

The difference between the market value of the assets and the present value of thescheme liabilities is shown net of deferredtax in the balance sheet.

PPL have elected not to adopt theamendment to FRS17 “Retirement Benefits”early, which is required for accountingperiods beginning on or after 6 April 2007.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2007




2. LICENCE FEE INCOME

Licence fee income comprises the following:

Public performance income 48,976 44,309

Broadcasting income 56,849 47,564

International income 9,141 6,012

114,966 97,885

Analysis of turnover by territory of origin:

United Kingdom 105,825 91,873

Rest of Europe 7,241 5,608

Rest of World 1,900 404

114,966 97,885

3. NET INCOME FROM OPERATING ACTIVITIES BEFORE INTEREST AND TAXATION

Net income from operating activities before interest and taxation is stated after charging:

Fees payable to the company’s auditor for the audit of the company’s annual accounts 52 50

Fees payable to the company’s auditor and its associates for other services:

Taxation services 29 34

Other services 122 26

Depreciation 906 417

Loss on disposal of fixed assets – –

Operating lease rentals:

Land and buildings 840 784

Motor vehicles 26 21

1. ACCOUNTING POLICIES CONTINUED

Licence fee income, which excludes valueadded tax, represents the invoiced value,and is recognised evenly over the period of the licence term.

Licence fee income from overseas societiesis recognised when an agreement is inplace with the overseas society and on a cash received basis.

The cost of tangible fixed assets is theirpurchase cost, together with any incidentalcosts of acquisition.

Depreciation is provided at rates calculated to write off the cost of each asset over theexpected useful life or pre-determinedreplacement date:

Fixtures and fittings 3 years Office equipment 3 yearsComputer hardware 3 yearsComputer software (systems) 5 years Computer software (other) 3 years

Allocations to Members and Performersremaining unclaimed for more than sevenyears are reallocated in accordance with the Distribution Policy.

Interest is payable to Members andPerformers who do not receive advances at a rate based on the average depositrate earned by the company for the relevant periods.

Foreign currency assets and liabilities aretranslated at the rates of exchange ruling at the balance sheet date. Foreign currencytransactions during the year are translated at the rate ruling on the date of thetransaction. All foreign exchange differencesare taken to the income, expenditure anddistribution account in the year in whichthey arise.

Costs in respect of operating leases arecharged to the income, expenditure anddistribution account on a straight-line basisover the lease term.

Corporation tax is provided at amountsexpected to be paid (or recovered) using the tax rates and laws that have beenenacted or substantially enacted by the balance sheet date.

Deferred taxation has been recognised as a liability or an asset if transactions have occurred at the balance sheet datethat give rise to an obligation to pay moretaxation in the future, or a right to pay lesstaxation in the future. An asset is notrecognised to the extent that the transfer of economic benefits in the future isuncertain. Deferred tax assets and liabilitiesrecognised have not been discounted.

Provision is made for dilapidations where the lease requires the reinstatement of thepremises to its original state. The level ofprovision is based upon a damages reportand will be reviewed in 2008.

Provision is made for the estimated legalcosts where litigation is pending and anobligating event has occurred prior to thebalance sheet date.

Provisions for liabilities and charges are not discounted.



4. ANTI-PIRACY / COPYRIGHT PROTECTION CONTRIBUTIONS

The British Phonographic Industry Limited 1,443 1,185

The International Federation of the Phonographic Industry 927 948

Impala 50 50

2,420 2,183

5. INTEREST PAYABLE

Interest payable on Member and Performer balances 2,476 1,823

6. EMPLOYEES AND DIRECTORS

Wages and salaries 7,772 6,775

Social security costs 704 621

Other pension costs 183 489

8,659 7,885

Office and management 194 176

Total directors’ emoluments 1,532 914

Emoluments in repsect of the highest paid director amounted to:

Aggregate emoluments 740 460

Defined Benefit Pension Scheme - accrued pension at end of year 9 9

Number of directors to whom retirement benefits are accruing under the Defined Benefit Pension Scheme 4 4


7. TRANSACTIONS WITH DIRECTORS

There were no other transactions with directors during the year.

8. TAXATION

The charge for taxation for the year is calculated on disallowable items after the deduction of capital allowances.

UK corporation tax – –

Adjustment in respect of prior periods – (20)

Total current tax credit for the year – (20)

The tax assessed for the year differs from the standard rate applying in the UK (2007: 20%, 2006: 19%). The differences are explained below:

Net income from ordinary activities before taxation 99,485 84,391

Net income from ordinary activities at the UK tax rate 20% (2006:19%) 19,897 16,034

Effects of:

Permanent differences (19,875) (16,014)

Accelerated capital allowances / other timing differences (22) (20)

Adjustment in respect of prior periods – (20)

Current tax credit for the year – (20)

The company had an unrecognised deferred tax asset at 31 December 2007 as follows:

Depreciation in excess of capital allowances 128 69

Other timing differences 21 35

Net deferred tax asset - unprovided 149 104

No provision has been made for this deferred tax asset on the basis that given that the majority of the company’s net income is not taxable, the availability of suitable future taxable profits is not probable.



9. TANGIBLE ASSETS

Balance at start of year 631 8,962 9,593

Additions 149 1,119 1,268

Disposals (490) (230) (720)

Balance at end of year 290 9,851 10,141

Balance at start of year 619 5,939 6,558

Charge for the year 32 874 906

Disposals (490) (230) (720)

Balance at end of year 161 6,583 6,744

Net Book Value at end of year 129 3,268 3,397

Net Book Value at start of year 12 3,023 3,035


10. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Trade creditors 25 109

Other taxation and social security 4,017 4,169

Other creditors and accruals 9,039 7,521

Deferred income 30,849 15,543

Amounts due to Members and Performers 71,003 64,042

114,933 91,384

The distributions to Members and Performers cannot be separately identified until the usage returns in respect of that period have been received and matched against the repertoire database. This reflects the Distribution rules driven by the Council Directive No 92/100/EEC of 19 November 1992 (“The Rental Directive”) introduced in the UK with effect from 1 December 1996.

11. PROVISIONS FOR LIABILITIES AND CHARGES

Provision for dilapidations 855 – – 855

Provision for legal costs 777 (777) 455 455

Provision for refunds 171 (171) – –

1,803 (948) 455 1,310

The dilapidations provision represents the amount required to reinstate the premises to a state as required under the lease, which expires in 2012. The provision will be fully utilised in 2012.

Legal costs are provided as required for cases where litigation is pending. This provision is expected to be utilised in 2008.



12. CO MMITMENTS

At 31 December 2007 the company was committed to making the following payments during the next year in respect of operating leases:

Leases which expire after 2-5 years 870 –

Leases which expire after 5 years – 886

Leases which expire within 1 year 3 11

Leases which expire within 2 – 5 years 26 19


13. PENSION COSTS

The major assumptions used by the actuary were (in nominal terms):

Rate of increase in salaries 4.90% 4.40% 4.25% 4.30%

Rate of increase of pensions in payment 3.40% 2.90% 2.75% 2.80%

Rate of increase of pensions in deferment 3.40% 2.90% 2.75% 2.80%

Discount rate 5.80% 5.00% 5.00% 5.30%

Inflation assumption 3.40% 2.90% 2.75% 2.80%

The assets in the scheme and the expected rate of return were:

Equities 7.55% 9,702 7.75% 9,140 7.50% 7,846 6.80% 5,274

Bonds – – – – – – 3.80% 507

Gilts 4.55% 486 4.50% 127 4.50% 413 – –

Other (Cash) 5.50% 48 4.75% 34 4.50% 84 4.20% 461

Total market value of assets 10,236 9,301 8,343 6,242

Actuarial value of liability (12,380) (11,303) (9,640) (7,879)

Deficit in the scheme (2,144) (2,002) (1,297) (1,637)

Related deferred tax asset 450 601 389 491

Net pension liability (1,694) (1,401) (908) (1,146)

The company operates a defined benefit scheme in the UK. The basis on which the net pension liability is recognised in the financial statements is set out in note 1.

A full actuarial valuation using the projected unit method was carried out at 30 June 2006 and updated to 31 December 2007 by a qualified independent actuary.

The company is currently contributing to the Scheme at a rate of 15.3% of pensionable salaries and is making additional contributions of £150,000 per annum until 30 June 2010, reverting to 15.3% of pensionable salaries from 1 July 2010.



13. PENSION COSTS CONTINUED

Service cost 408 391

Expected return on pension scheme assets 733 626

Interest on pension liabilities (556) (494)

Other finance income 177 132

Actual return less expected return on assets (266) (88)

Experience (loss) / gain on liabilities (225) 2

Change in assumptions 130 (688)

Actuarial loss recognised in STRGL (361) (774)

Deficit in scheme at beginning of year (2,002) (1,297)

Movement in year:

Current service cost (408) (391)

Contributions 450 328

Other finance income 177 132

Actuarial loss (361) (774)

Deficit in scheme at end of year (2,144) (2,002)


13. PENSION COSTS CONTINUED

Difference between expected and actual return on scheme assets:

Amount (£’000) (266) (88) 1,066 89 401

Percentage of scheme assets 2% 1% 13% 1% 8%

Experience gains and losses on scheme liabilities:

Amount (£’000) (225) 2 3 2 2

Percentage of scheme liabilities 2% 0% 0% 0% 0%

Total amount recognised in statement of total recognised gains and losses:

Amount (£’000) (361) (774) 339 (150) (442)

Percentage of scheme liabilities 3% 7% –4% 2% 6%

14. RETAINED RESERVES – INCOME, EXPENDITURE AND DISTRIBUTION ACCOUNT

At start of year (1,812) (1,250)

Actuarial loss on the pension scheme (361) (774)

Movement in deferred tax on the pension scheme (151) 212

(2,324) (1,812)



NOTES

15. RECONCILIATION OF NET INCOME FROM OPERATING ACTIVITIES BEFOREINTEREST AND TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES

Net income from operating activities before interest and taxation 97,724 82,759

Depreciation 906 417

Difference between pension charge and cash contributions (42) 63

(Increase) / decrease in debtors (18,152) 546

Increase in creditors 725 865

(Decrease) / increase in provisions (493) 79

Net cash inflow from operating activities 80,668 84,729

16. RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET FUNDS

Increase in cash in the period 4,742 6,146

Decrease in cash placed on fixed term deposits (2,000) (8,000)

Changes in net funds resulting from cashflows 2,742 (1,854)

Net funds at 31 December 2006 75,778 77,632

Net funds at 31 December 2007 78,520 75,778

17. ANALYSIS OF CHANGES IN NET FUNDS

Cash at bank and in hand 18,778 4,742 23,520

Short-term investments 57,000 (2,000) 55,000

75,778 2,742 78,520


PHOTOGRAPHY

Photography by Alan F Cookwww.afcook.co.uk

Images by Getty ImagesCover and pages 10 –11

PPL supports Julie’s Bicycle and actively encourages the entire music community to do the same.

CREDITS

DESIGN AND PRINT

Designed by Rufus Leonardwww.rufusleonard.com

Printed by FulmarFSC certified and CarbonNeutral

The paper used in this report is environmentally friendly HannoArt Silk

© PPLThis report is available online at www.ppluk.com

THANKS TO

London Symphony Orchestra at The Barbican Pages 06–07

Derek Chai at Point BlankPages 12–13

Hayley Madden and John Marshall forOut and About photography


PPL1 UPPER JAMES STREETLONDON W1F 9DE

T +44 (0)20 7534 1000F +44 (0)20 7534 1111www.ppluk.com


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