Monday, April 13, 2020

ASCAP warns of C-19 impact on distributions; BMI says effects will be felt in 2021

By Emmanuel Legrand

ASCAP, one of the two largest authors' societies in the United States with BMI, announced to its 700,000 members that royalty payments scheduled for April 6 would take place on April 24, and that the company would probably review the spreading of payments during the year 2020.

  In an email to members, ASCAP President and Chairman Paul Williams and CEO Elizabeth Matthews explained that the change in dates for the payment of fees in the first quarter of 2020 was linked to the delay in the payment of royalties by a number of licensees.

  Williams explained in the mail that the coronavirus crisis has resulted in the closure of many music establishments, directly affecting the company's cash flow. Williams says the pandemic "will have a material and negative impact financially on almost every category of licensing, so it is important to ensure that we are prepared for a decline in both revenues and distributions, which is why we took the step weeks ago to freeze numerous operational expenses."

More disruption expected

  He added: "As Covid-19 has continued to escalate and more and more of our licensee businesses have shut down, we have had to carefully review our cash forecasts and plan for more disruption to our revenue collections and member distributions."

  Matthews explained in a separate mail that ASCAP quarterly payments to members are made in real time with the royalties collected during a quarter distributed in the same quarter, minus the operating costs, unlike other rights societies which pay the fees two or three quarters after they have collected them.

  She wrote: "[I]t is important to understand that ASCAP distributions are made on a 'cash basis' (the money we collect in a quarter is paid out that same quarter, less the costs of operation) as opposed to an 'accrual basis' (money collected would be held and paid out two or three quarters later). In other words, we calculate distributions based on current revenues, not past revenues. In normal times, this is a great benefit to ASCAP members as you receive your money faster. During this crisis, as we see more and more of our licensees who pay us start to feel the impact of the economic downturn, this translates into less revenue for ASCAP and less money available for distributions for our members."

Challenges ahead

  Matthews added that ASCAP has "already been contacted by many licensees who are trying to pay less, pay late or not pay at all," but that this will not affect the April 24 distribution. However, going forward, there will be challenges, said Matthews, as many licensee are facing hard times.

  "While you will receive your distributions from ASCAP during this health and financial crisis, we can no longer provide you with a date certain in advance of each distribution," she wrote. "The reason for this is that our licensing revenue will become increasingly variable as businesses remain closed, and the advertising market which drives revenues from television, radio and cable continues to be negatively impacted."

  Matthews warned that "every category of ASCAP collections will be negatively impacted, including television, cable, radio, airlines, hotels, bars, grills and restaurants. While everyone is streaming music and movies at home, not everyone in this country will be able to afford a subscription to entertainment services and that shift will impact revenue."

Prepare for the future

  Matthews added that since 25% of the society's revenues come from the exploitation of the American repertoire abroad, and that many countries are also affected by the Covid-19 crisis, international revenues will also suffer.

  She concluded: "I know that much of this is not good news, and you have already been bombarded with bad news every day for weeks, but I think it is important that we are all prepared for the future and we try to limit the number of surprises."

  BMI CEO Mike O'Neill also sent an email to the members of the society to inform them of the status of BMI collections and distributions, assuring them “that we can deliver your royalty payments efficiently, accurately, and on time, as always" and that while BMI expects to feel the effects of the C-19 crisis "our goal is to minimise its financial impact on you."

Mitigate the situation

  For O'Neill, the effect of the pandemic on BMI's accounts will be felt mainly from January 2021, when collections for the second half of 2020 will be taken into account, reflecting the state of the American economy and of the rest of the world. O'Neill told members that BMI has been "taking a number of steps to mitigate the situation."

  First, BMI expects retroactive payments following a recent settlement with the radio sector. "We will be working with radio stations over the coming months to help them spread out their settlement fees owed to BMI," wrote O'Neill. "Not only will this help lessen the impact of Covid-19 on their business, but it also allows us to spread those payments out and deliver them to you beginning in early 2021."

  Second, revenues from subscription streaming services that broadcast movies, series and music now represent 30% of BMI's revenues and should be little affected by the conditions associated with Covid-19. These two sources of income should help compensate for the losses linked to the economic slowdown affecting public performance rights.

Cost-cutting measures

  "So, while we will see an impact to our revenue and your royalties, we hope it assures you to know that we anticipate BMI’s Fiscal Year 2021 will be similar to BMI’s revenues and distributions from 2019, which was a record-setting year for us at the time," wrote O'Neill. "We’re also taking steps to ensure that our expenses for FY 2021 are in keeping with 2019 levels. We’ve already put cost-cutting measures in place to get us to that number."

  BMI sent out its March royalty distribution e few days earlier this year, and the next distribution is scheduled for June 19. O'Neill said he anticipates that these royalties will be send out "slightly earlier." He concluded: "Please know that we do not expect any delays in your royalty distributions going forward."

  Both societies collected over $1 billion a year in royalties during the past two years.

Distributions from PRS for Music, SACEM and SoundExchange

> PRS for Music has announced historic April 2020 royalty distribution to members with £174 million ($217.5m) distributed to its 145,000 members, up 15% year-on-year on April 2019. The British rights society said the distribution reflected increased royalties collected through live, online, public performance and international plays. Reflecting the global appeal of UK's repertoire, PRS’ international collections reached £64.3m in April’s payment, up 19% y-o-y. 
  In support of members most immediately affected by the impact of the ongoing coronavirus pandemic, PRS said it had "prioritised live performance royalty processing, reducing average turnaround time to three months," leading to an increase in live monies distributed for the April distribution, totalling £18.3m. Combined live and public performance royalties were up 68% on 2019. 
  "In these unprecedented times, it is incredibly important that we are distributing accurate and timely royalties to all of our members, from every revenue stream, as quickly as possible," said PRS for Music CEO Andrea C. Martin. "We hope that this record April PRS distribution, alongside our recently announced PRS Emergency Relief Fund, will help ease the burden felt by music creators due to coronavirus. The entire PRS team is working hard to ensure that through this period of significant disruption – especially to live music and UK businesses – we do everything we can to minimise the risk to future distributions."

> French right society SACEM distributed on April 6 a total of €140.5 million ($153.2m) to its members. No specific details were given about the the source of revenues but the management of SACEM said it was the result of a business continuity plan initiated during the strikes of last December and January in France and deployed further as the coronavirus epidemic evolved.

  "SACEM is doing everything possible to ensure the operational continuity of its services and will continue to take concrete action to accompany its members despite the problems that businesses and organisations are confronting throughout the economy," said the society. 
  SACEM Chief Executive Officer Jean-Noël Tronc, commented: “Against the crisis we are facing, SACEM has mobilised to ensure maximum continuity of its operations, and in particular to be able to secure for our members the distribution of their royalties and to remain available by telephone and email, despite the closure of our offices. We are doing our utmost to ensure the continuity of our support for cultural players and have launched a program of emergency measures to provide the best possible support for our members in this period of crisis.”

> SoundExchange distributed a total of $224 million (€205.4) during the first quarter of 2020, bringing the US neighbouring rights society's total distribution tally since it started in 2003 to more than $7bn. 

  The Q1 2020 distribution was up 1.5% compared to the first quarter of 2019. The company, which distributes royalties from the use of sound recordings said the figures for the first quarter incorporate the month of March, despite early disruption from the coronavirus. 
  SoundExchange President and CEO Michael Huppe pledged in March to provide uninterrupted monthly royalty payments. "SoundExchange has always been a critical source of revenue for music creators, and especially now," said Huppe. "Our entire team is committed to providing reliable monthly payments, particularly at a time when the music community is confronting the challenges posed by Covid-19, and we are on track for our April distribution."

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