By Emmanuel Legrand
British neighbouring rights society PPL had to face in 2020 the impact of the Covid pandemic on some of its main sources of revenues, but still managed to hand out £260 million to members in 2020, a slightly lower amount than in previous year (£271.8m).
PPL CEO Peter Leathem takes pride in the distribution of £260m to members in 2020, with more than 130,000 recording rights holders and performers receiving at least one payment during the year. At the end of March 2021, PPL distributed £61.3m (€72.17m) to more than 25,000 performers and recording rights holders for the first quarterly payment of the year.
The society also made changes to its distribution agenda to pump more money to its members and earlier than scheduled "to help money reach our members at a critical time when other income sources had reduced or ceased," says Leathem (pictured, below).
Leathem paints a nuanced picture when it comes to the impact of Covid on PPL's streams of revenues, with areas performing well and others less well. "Due to lockdown and the forced closure of bars, nightclubs, shops, offices and other premises where recorded music is played in public, there was a significant impact on our public performance licensing revenue," admits Leathem.
Signs of recovery
He adds that there was "less of an impact on broadcast revenues thanks to the long-term licenses PPL has in place, with TV income in particular proving resilient as linear TV audiences held up well reflecting the UK population spending more time at home."
However, revenues collected for commercial radio, which is based on a percentage of advertising revenues, went down in the second and third quarters of 2002, "but then showed signs of recovery in the latter part of the year."
International collections "remained strong" in 2020, as much of the revenue we collected in 2020 related to collections made in other territories in 2019 or earlier, notes Leathem. "Globally the situation is variable and is dependent on the nature of rights available to our members and the extent of lockdown in each country," he explains.
Looking at the near future, Leathem expresses some cautious optimism. "Once Covid-19 restrictions ease in the UK, we expect our revenues to begin to recover and to exceed our 2020 collections, without yet returning to pre-2020 levels," he reveals. "Conversely, we expect international collections to decline in 2021 to some extent due to the impact that Covid-19 will have had on collections around the world in 2020."
Leathem says the long-term key parameters of the neighbouring rights market seem to be pointing at continuous growth, with a Covid hiccup. He notes that between 2009 and 2019 PPL’s revenue has "more than doubled," from £129.6m to £271.8m. "For the first time in many years the Covid-19 pandemic has meant that PPL’s collections will have declined in 2020, compared to 2019, and will be in a position to formally report those numbers shortly," he says.
"We continue to be impacted by the pandemic in 2021 and, so again, this year our collections will be adversely impacted while bars, nightclubs, shops, offices, etc have been closed for many months."
Growth of international revenues
However, for Leathem, the pandemic will have "short term impact" on PPL and he remains "very positive about the opportunities for revenue growth."
PPL will continue to increase its revenues from international collections, says Leathem. In 2019 international collections were £86.7m. "We collect royalties from around the world thanks to more than 100 agreements with CMOs across Africa, Asia, Australia, Europe, and North and South America
These agreements allow our members to benefit from not just established music markets but also growing markets in Africa, Asia and Latin America, which are predicted to contribute significantly to the future revenue of the music industry," says Leathem.
A competitive service
The market for international collections has become extremely competitive, with a wide range of players, both at major companies and from the independent sector fighting for a slice of the business. The most recent significant change in the field has been the creation of peermusic Neighbouring Rights, through the acquisition of three NR collection companies.
Leathem says PPL has been setting the pace when it comes to international collections. "As a leader in worldwide royalty payments, PPL’s highly competitive international service has helped drive down costs and improve efficiency for the whole industry," he claims.
Leathem say PPL international service, which manage the rights of the society's internationally mandated performers and recording rights holders, is packed with a team of neighbouring rights experts who use their "in-depth knowledge of the global neighbouring rights landscape to actively drive revenues from the market, rather than act as a passive collector."
Benefits for PPL's members
Artists and labels using PPL's Member Services to maximise their revenues includes ABBA’s Björn Ulvaeus, Chrysalis Records, Emily Sandé (pictured, below), George Ezra, Jade Bird, Rita Ora, and Sigala, among others.
"Our scale of operations also allows us to achieve very competitive currency exchange rates due to the volume of currency being converted, all of which benefit our mandating members, as well as being able to minimise the impact of withholding tax," says Leathem, who adds that PPL will continue to invest "in our people, our technology, our data, our relationships with members and their advisors and, our international CMO relationships. All of which we believe will continue to maintain us as the world’s leading international neighbouring rights collector."
The global sector keeps growing with both more countries adopting neighbouring rights legislation (except of course the US, but more on that later) and the creation of new societies to collect royalties for the use of recordings on behalf of performers and labels.
Over 100 reciprocal agreements
"We are working with these CMOs to help ensure local broadcast tariffs and public performance collections deliver appropriate levels of revenue," says Leathem, who points out that PPL is the NR society in the world that has the highest number of reciprocal deals with sister societies (more than 100 at the last count).
PPL has also started to collect for members of other CMOs for the first time. In January, it announced a partnership with JAMMS, the Jamaican recording rights holder CMO. Under the agreement, PPL will collect international revenues for JAMMS’ members via its network of more than 100 international agreements.
It also provides support to CMOs through its Business Services, which Leathem says is proving "very valuable, providing these CMOs the opportunity to improve their operations without significant investment in infrastructure." So far, seven CMOs in Estonia, Ireland, Lithuania, Malaysia, Nigeria, Portugal and Switzerland are already benefiting from PPL’s support, using its technology infrastructure, data and expertise. This enables them "to distribute money to their members more efficiently," he says.
More efficient collections
Leathem is also a proponent of collaboration between music licensing companies, supported by investment in technology, which he believes "has played a key part in driving this growth." The key benefit of these investments is that they contribute to "a continued focus on improving the quality and flow of data to feed these systems," as they have played "a further critical role in ensuring that this income flows more quickly and more accurately to recording rights holders."
Leathem references the IFPI and WIN-owned RDx service as a fruitful collaboration that PPL is "proud" to have played a part in helping build and operate. RDx, launched at the start of 2020, is the industry data portal for the supply and exchange of performance rights repertoire data between record companies and licensing companies. "Technology like RDx," says Leathem, "alongside an increasingly connected network of music licensing companies, is helping to make performance rights royalty collections and distributions more efficient, accurate and timely."
Adds Leathem: "Beyond our own operations, we work with the IFPI to create a best practice approach to sound recording rights management, codifying good practice and common standards for the collection and distribution of revenues from the broadcast and public performance of recordings. The CRM Directive in Europe has also helped establish more efficient processes by stating that CMOs must distribute collected monies within nine months of the end of the financial year they were collected. We now see faster distributions thanks to this."
A long way to go
Another partnership PPL is party to is PPL PRS Ltd, the public performance licensing joint venture between PPL and PRS for Music, set up two years ago. The idea is to provide a one stop shop for music licensees for both composition and recordings. "While we had seen significant revenue growth over those first two years we still believe that we have a long way to go in growing public performance licensing revenue," says Leathem.
He adds, "The MusicLicence offered by PPL PRS Ltd has made it easier for businesses to get their music licensing completed in one transaction with one company, rather than the two that it used to be."
Internationally, PPL has been paying attention to the recent European Court of Justice ruling that determined that neighbouring rights society could not discriminate performers based on their country of origin. This ruling has created havoc in Europe as most societies were not paying US performers on the grounds that the United States had not ratified the Convention of Rome which introduced the rights for public performance for recordings.
Increasing the value of recordings
Leathem says the ruling is unlikely to have an impact on PPL's collections in the UK, but could affect distribution if the British government decides to introduce equitable remuneration for rights holders from the US. Paying US performers and labels could also be forced upon the UK as the country is negotiating a new trade agreement with the US. Canada had to start paying equitable remuneration to US rights holders after the recent agreement between Canada, the US and Mexico. At the moment, the British government has not made public its intentions on this issue.
In the rest of Europe, Governments are currently assessing the impact of the decision. "The impact will vary by country, as in some it will impact collections and distributions, while in others it will only impact distributions with there being no increase in collections," says Leathem, who also sees an upside in the possibility to collect more on behalf of US performers if European societies start paying royalties to US rights holders.
"More broadly," says Leathem, "PPL aims to increase the value of recordings, for both performers and recording rights holders. This means collecting as much as we can for all who invest in creating recordings. The discussion around neighbouring rights income for US performers highlights the lack of terrestrial broadcast rights for sound recordings in the United States – as well as there being no public performance rights for sound recordings. If such a right were introduced, neighbouring rights revenue for performers and recording rights holders would increase significantly."