Report on Royalty Payments & Programmes

10 March 2015

BACKGROUND (SAMRO’s role in the Music Industry)

PERFORMING RIGHTS ROYALTY DISTRIBUTIONS

NEEDLETIME RIGHTS ROYALTY DISTRIBUTIONS

SAMRO FOUNDATION

SAMRO RETIREMENT ANNUITY FUND

SAMRO MEMBER FUNERAL BENEFIT SCHEME

SAMRO’s role in the Music Industry

RECORD LABELRECORD LABEL

PUBLISHERSPUBLISHERS

BROADCASTERSMUSIC

CONSUMERS

BROADCASTERSMUSIC

CONSUMERS

CONCERT & EVENT PROMOTERS

BOOKING AGENTS & MANAGERS

CONCERT & EVENT PROMOTERS

BOOKING AGENTS & MANAGERS

COLLECTIVE MANAGEMENT

ORGANISATIONS

COLLECTIVE MANAGEMENT

ORGANISATIONS

MUSIC INDUSTRY VALUE CHAIN

COMPOSERS

ARTISTS

PRODUCERS

MUSICIANS

SAMRO

CAPCO

AIRCO

POSA

DALRO

SAMPRA

COLLECTIVE MANAGEMENT ORGANISATIONS 

IN SA

DALRO SAMRO FOUNDATION POSA

SAMRO GROUP

SAMRO’S ROLE• Collect and distribute income for public performance of music

• Represent Composers & publishers

• Recipricol representation of international Collective Management Organisations 

PERFORMING RIGHTS ROYALTY DISTRIBUTIONS

Royalty Payments 

SAMRO sets royalty distribution plans on an annual basis. Our primary distributionsare:

– Radio and General (March) ,– TV (April)– Cinema (November)– Foreign (December/January)– GORP (December)

• Supplementary distributions take place throughout the year with distribution beingpaid out on an almost monthly basis.

 ‐

 50

 100

 150

 200

 250

 300

 350

 400

1963 1971 1981 1991 2001 2011 2012

R m

illio

ns

GROSS COMPANY INCOME 1963 ‐ 2012

DISTRIBUTION SUMMARY 2002 ‐ 2014

 ‐

 50 000 000

 100 000 000

 150 000 000

 200 000 000

 250 000 000

 300 000 000

 350 000 000

AMOUNT FOR DISTRIBUTION        Royalty distribution        NRR distribution

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Income• Licence income grew by 6.1% in 2014• Average annual licence income growth since 2009 was 7.2% p.a.• Total growth in licence income over the same period was 41.7%• Total income grew by 8.7% in 2014• Average  annual total income growth since 2009 was 7.4% p.a.

250

300

350

400

450

500

2009 2010 2011 2012 2013 2014

Total income Rm

Licence income Rm

Expenses• Expenses growth very small – only 2% in 2014• Since 2009, expenses have increased on average only by some 2.6% each year as opposed to income growth of  7.4% each year

80

90

100

110

120

130

2009 2010 2011 2012 2013 2014

Expenses Rm

Cost To Income Ratio• Despite a number of difficult years as a result of the struggling economy, we have managed  to reduce the cost ratio again

• The cost ratio has reduced over the year from 24.81% to 24.22%

20.0%

22.0%

24.0%

26.0%

28.0%

30.0%

32.0%

2009 2010 2011 2012 2013 2014

Cost ratio

Distributions• Royalty distributions grew by 8.3% in 2014 while the average annual increase over last five years was 6%

• GORP grew 20% following a very profitable year on the market • After several difficult following the 2008 global crash, we are back on the growth track

 175

 200

 225

 250

 275

 300

 325

 350

2009

2010

2011

2012

2013

2014

Total Rm

Licence Rm

Distributions 2013 vs. 2014

295 000 000.00

300 000 000.00

305 000 000.00

310 000 000.00

315 000 000.00

320 000 000.00

325 000 000.00

330 000 000.00

       Royalty distribution

2013 2014

Cost to Income Ratio

23.4

23.6

23.8

24

24.2

24.4

24.6

24.8

25

2013 2014

Detail of Royalties Paid Period:  2008 ‐ 2012Sum of Total PeriodDistribution 2008 2009 2010 2011 2012Cinema Film 4,498,755.43 4,209,327.25 7,141,581.18 7,098,187.89 5,254,243.49 Foreign 3,409,414.17 4,196,573.43 3,740,471.44 4,289,530.92 4,257,450.31 Foreign Suspense 1,441,286.53 2,608,178.73 GRPNon Royalty Revenue (NRR) 59,759,701.43 56,827,972.48 39,577,788.32 39,740,283.14 35,073,662.57 Performance Adjustment - 675,172.00 61,704.99 1,431,300.32 1,001,205.14 Radio & General 63,841,973.24 78,494,433.65 92,947,640.38 107,386,826.07 89,831,692.39 Rights Holder Correction - 1,184,312.15 1,318,923.30 1,323,552.29 Royalty Adjustment 10,178.77 -10,060.87 -20,333.81 -80,893.67 -45,077.97 Special SABC Africa DistSundry Mechanical 117.72 Supplementary NS 2,685,333.37 6,911,023.73 2,846,057.72 1,331,421.87 2,845,224.02 Supplementary Undoc 16,021,604.05 27,962,093.56 31,259,901.70 12,130,479.03 24,768,708.65 Supplementary Warsaw 2,112,690.26 2,839,511.87 2,421,709.56 3,361,742.05 2,120,086.41 Television 28,451,402.46 31,578,894.12 35,889,787.72 44,088,918.27 36,175,509.02 Grand Total R180,791,053.18 R213,684,941.22 R217,050,621.35 R223,538,123.44 R205,214,435.05

Detail of Royalties Paid Period:  2013 ‐ 2015Sum of TotalDistribution 2013 2014 N/A 2015 Grand TotalCinema Film 6,262,781.32 9,797,875.22 9,051,685.26 53,314,437.04 Foreign 4,067,081.76 2,212,884.41 11,245,011.37 37,418,417.81 Foreign Suspense 577,710.85 4,627,176.11 GRP 44,291,719.42 55,295,881.57 99,587,600.99 Non Royalty Revenue (NRR) 37,379,331.41 268,358,739.35 Performance Adjustment 5,259,501.32 3,874,228.85 12,303,112.62 Radio & General 93,821,778.32 96,057,312.69 99,761,921.05 722,143,577.79 Rights Holder Correction 1,178,192.92 5,004,980.66 Royalty Adjustment -817.88 -147,005.43 Special SABC Africa Dist 512,491.88 512,491.88 Sundry Mechanical 117.72 Supplementary NS 2,912,383.73 784,157.27 20,315,601.71 Supplementary Undoc 21,923,565.18 30,078,410.82 12,937,332.03 177,082,095.02 Supplementary Warsaw 12,855,740.15 Television 31,797,154.45 33,214,336.63 241,196,002.67 Grand Total R197,006,778.33 R223,824,424.24 R512,491.88 R192,950,217.40 R1,654,573,086.09

NOTE: 2015 figures only represent partial payments allocated to date.

Summary of split of royalties paid to members vs. foreign societiesPeriod: 2009 – FY 2014 

Total Royalties paid July 2009 to June 2014Note: This is not the total amount paid in 2014. Only up to June 2014

Paid to: 2009 2010 2011 2012 2013 FY2014 Grand Total

Members 134,781,111.90 133,738,795.43 136,911,631.40 133,420,952.85 121,233,454.88 138,726,456.32 798,812,402.78

Societies 78,903,829.32 83,311,825.92 86,626,492.04 71,793,482.20 72,644,450.87 76,517,486.20 469,797,566.55

Total 213,684,941.22 217,050,621.35 223,538,123.44 205,214,435.05 193,877,905.75 215,243,942.52 R 1,268,609,969.33 Total reflected only includes partial earnings for 2014 and non for 2015

Total undoc paid July 2009 to June 2014

Paid to: 2009 2010 2011 2012 2013 FY2014 Grand Total

Members 17,503,367.80 21,739,550.13 7,870,762.77 18,509,648.11 14,767,343.86 16,735,148.83 97,125,821.50

Societies 10,458,725.76 9,520,351.57 4,259,716.26 6,259,060.54 7,156,221.32 9,089,826.70 46,743,902.15

Total 27,962,093.56 31,259,901.70 12,130,479.03 24,768,708.65 21,923,565.18 25,824,975.53 R143,869,723.65

Summary of royalties paid for undocumented works

Society performance internationally

‐25.0% ‐20.0% ‐15.0% ‐10.0% ‐5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

AKKA ‐ LatviaMCSN ‐ NigeriaSIAE ‐ Italy (0.8%)LATGAA ‐ Lithuania (5.7%)IMRO ‐ Ireland (‐4.0%)AEPI ‐ GreeceHDS ‐ CroatiaJASRAC ‐ Japan (‐0.6%)BUMA ‐ Netherlands (3.6%)MCSC ‐ ChinaASCAP ‐ USA (‐4.1%)SACEM ‐ France (‐2.1%)AKM ‐ Austria (4.9%)MCSK ‐ Kenya (20.2%) "off low base $2.3m USD"SUISA ‐ Switzerland (‐3.3%)SABAM ‐ Belgium (3.6%)SAMRO ‐ South Africa (10.0%)GEMA ‐ Germany (0%)SCD ‐ Chile (10.3%)TONO ‐ Norway (5.2%)BMI ‐ USA (‐2.5%)EAU ‐ Estonia (‐7.1%)SACM ‐ Mexico (5.2%)TEOSTO ‐ Finland (3.5%)STIM ‐ Sweden (4.6%)KODA ‐ Denmark (6.6%)APRA ‐ Australia (1.7%)PRS ‐ UK (6.3%)SOCAN ‐ Canada (‐5.5%)ZAIKS ‐ Poland (‐1%)SPA ‐ Portugal (‐13.1%)

Licence Revenue growth (prior year growth)

Society performance internationally over 2 years

‐5.0% 0.0% 5.0% 10.0% 15.0%

SIAE ‐ ItalyIMRO ‐ IrelandASCAP ‐ USAJASRAC ‐ JapanEAU ‐ EstoniaSACEM ‐ FranceSUISA ‐ SwitzerlandLATGAA ‐ LithuaniaSOCAN ‐ CanadaBUMA ‐ NetherlandsBMI ‐ USAGEMA ‐ GermanySABAM ‐ BelgiumAKM ‐ AustriaSPA ‐ PortugalAPRA ‐ AustraliaTEOSTO ‐ FinlandSTIM ‐ SwedenTONO ‐ NorwaySACM ‐ MexicoSAMRO ‐ South AfricaPRS ‐ UKKODA ‐ DenmarkZAIKS ‐ PolandSCD ‐ ChileAKKA ‐ Latvia off low base $4.7mMCSK ‐ Kenya off low base  $3.2m

2 year average Licence Revenue growth

NEEDLETIME ROYALTY DISTRIBUTIONS

SAMRO’S ROLE• SAMRO accredited 1st April 08: Section Needletime 3(1)(b) of the regulations of the Establishment of Collectingsociety in the music Industry (“the regulations”), 2006

• Represent Performers

• Establishment of POSA in 2009 to administer Needletime Royalties for performers

Structure of Needletime Splits 

• Follows PPL model from the Uk

• 65% for Featured performer/s

• 35% shared equally amongst the Non‐Featured performers

• SAMPRA has collected revenue for General Licensing for Periods: 2009 ‐ 2013

• SAMPRA paid royalties for 2009 – 2012 to POSA on the 23rd of December to 

R0.00

R200 000.00

R400 000.00

R600 000.00

R800 000.00

R1 000 000.00

R1 200 000.00

R1 400 000.00

2009 (1) 2009 (2) 2010 2011 2012

Needletime Royalties Received

72.00%

74.00%

76.00%

78.00%

80.00%

82.00%

84.00%

86.00%

88.00%

90.00%

92.00%

2009 (1) 2009 (2) 2010 2011 2012

Percentage of Royalties Paid]

Summary of Needletime DistributionsRoyalties Received By POSA in Dec 2014: • 2009(1) R  322 555.91;• 2009(2) R  490 263.36;• 2010  R1 230 059.20;• 2011 R   972 466.98; and• 2012 R1 171 075.44.

Successful Allocation of Royalties to Performers:• 2009(1) 91.01%;• 2009(2) 78.90%;• 2010 87.73%• 2011 83.35%; and• 2012 84.90%.Average % of processed royalties is 85.17%

SAMRO FOUNDATION

Winners in Spain – Touchwood and BCUC

REISA Donation ‐ Jo Le Roux, Nick Motsatse, Annette Emdon and Nardus Van Der Walt

SAMRO RETIREMENT ANNUITY FUND(SRAF)

A Retirement Fund for SAMRO Composer Members

SAMRO Retirement Annuity Fund

• Fund was initiated in between the period 1961 ‐ 1969

• CISAC allows a 10% deduction of total royalties collected

• 40% of the social and cultural fund is used to feed the retirement annuity fund 

• Initial contribution to fund was R100 – increased to R850 in 2014 (minimum per member with earnings in current period)

SRAF Continued…

• Fund was administered internally until 2007 

• Fund investment managers are Symmetry – part of Old Mutual 

• Administered by Robson Savage (Pty) Ltd

• Principal officer of the fund: Morne Oliver of Seshego Benefit Consultants (Pty) Ltd

SRAF Board of Trustees

• Board of Trustees  consists of:

– 5 member trustees voted in by SAMRO members at the AGM

– 3 ex‐officio trustees appointed by SAMRO

– One independent trustee appointed by the trustees

j4

Slide 44

j4 These are the latest figures available.jschu, 2014/07/01

RETIREMENT ANNUITY STATS 

MembershipTotal members as at 30 Nov 2014: * 8 741

In 2014:* 111 Retirements processed* 17 Death claims processed

Fund ValuesTotal value of fund assets as at 30 Nov 2014: • R257 702 729

SAMRO Contributions (5yr View)• 2010: R5 345 009• 2011: R6 478 282• 2012: R6 017 812• 2013: R6 956 671• 2014: R8 296 669

SAMRO MEMBER FUNERAL BENEFITSCHEME

A Funeral benefit that pays out a cash sum towards funeral costs of SAMRO Members

FUNERAL BENEFITS PAID

Other Matters

• Support for CCIFSA: Cultural & Creative Industries Federation of SA

• Lack of Compliance from Government with SAMRO 

Licensing

• Radio Airplay Quota’s

• Copy Right Review Commission Recommendations j5

Slide 51

j5 These are the latest figures available.jschu, 2014/07/01

Communication to the Public Right 

Recommendation:

The Copyright Act should be amended to adopt the Communication to thePublic Right and the Right to make available copies of musical works.

SAMRO Recommended Action:

SAMRO offers to provide the Government with a proposal containing a draft of thewording for the amendment to the Copyright Act in this regard. The amendment ofthe Copyright Act as per the recommendation is essential in order to lift the barrier tolicensing in the digital environment and ensure that digital music delivery isadequately licensed and royalties are duly collected and distributed to rights holders.

WIPO Internet Treaties 

Recommendation:

Ratification of the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT) by the South African Government.

SAMRO Recommended Action:

SAMRO welcomes this initiative which would play a key role in the successful licensingof the digital environment. SAMRO requires the assistance of Government in thisregard. Ratification of the treaties would lend strong support to the communication tothe public right and the inclusion thereof in the South African Law. Which will in turnensure that digital music delivery is adequately licensed and royalties are dulycollected and distributed to rights holders.

Barring of MNO’s and WASP’s

Recommendation:

Mobile Network Operators (MNOs) and Wireless Application Service Providers(WASPs) that fail or refuse to enter into the relevant licence agreements with collecting societies should be barred, by the Minister of Communications, from distributing content.

SAMRO Recommended Action:

SAMRO welcomes this initiative by the Minister of Communications which would playa key role in the successful licensing of MNO’s and WASP’s. SAMRO requires theassistance of Government in this regard.