Watchdog paints nuanced picture of Covid's impact on collective management organisations in France

By Emmanuel Legrand

France's Commission de contrôle des OGC de droits d’auteur et de droits voisins(Commission Controlling Copyright and Neighbouring Rights Management Organisations), has issued a report revealing that the economic impact of Covid on the country's Collective Management Organisations (CMOs) has been brutal, but has not hampered the organisation's ability to perform their primary tasks of collecting and distribution royalties.

  The report also shows that not all collective management organisations have not been affected in the same way by the crisis, with some notable variations according to their repertoire and their main streams of revenues.

  The watchdog forecasts that both 2021 and 2022 will be challenging for CMOs as the economy's recovery is slow and organisations will continue to feel the knock-on effect of 2020 on their businesses for at least a couple of years. "It is only in 2021 or even 2022 that the crisis will have produced its full effects. It is therefore only after the close of fiscal year 2022 that a more complete assessment of all the consequences of the epidemic can be drawn up," reads the report.

A strong reactivity from CMOs

  "The year 2021 promises to be tougher and its effects will last until 2022, or even beyond; CMOs have not suffered any major disasters; they have shown a strong reactivity allowing them, on the one hand, to continue to exercise their missions of collection and distribution of rights, on the other hand, to mobilise strongly to come in support of rights holders with numerous help schemes," wrote the Commission, in the summary of its yearly report to the nation's public accountability watchdog Court des comptes.

  The Commission notes that CMOs have been able to maintain their business operations and that Covid had not disrupted their functioning as they "maintained their activity and ensured the continuity of their basic missions." But the Commission added that "most [CMOs] expect a more difficult year 2021, marked by necessary savings in management costs."

  The Commission adds that the health crisis "will also have the effects of encourage certain CMOs to undertake an overview on their organisation, their structures and their staff. There is no doubt that the crisis will have served as an indicator and accelerator of certain reforms that CMOs had postponed or neglected for several years."

Impact on performance rights

  Overall, data collected by the Commission for the year 2020 shows that performance rights are those that have suffered the most, due to the administrative closures of venues and businesses, such as those collected by SACEM on behalf of the authors, composers and music publishers. Equally affected are the CMOs benefiting from the equitable remuneration collected by SPRE on behalf of performers and owners of recordings.

   For the Commission, the health crisis linked to Covid-19 has resulted in a notable reduction in collections from SPRE by around 20% compared to 2019. SPRE anticipates an impact of the health crisis on its collections at least until 2022.

Evolution of equitable remuneration
collections in 2019 and 2020 

  SACD, the society representing drama authors, revealed that significant drops in revenues from live performances of dramatic repertoire due to the closure of cheaters and festivals in 2020 (see table below).

Evolution of live performance revenues
from SACD in 2019 and 2020

  The Commission also noted that another type of rights, related to visual arts, had also been affected by the closure of businesses: the resale right, which allows authors of original graphic works to be associated with the sale of their creations on the art market. These rights are normally collected from the sale of works of art in auction houses and galleries. However, during lockdown, these businesses had to close, impacting the streams of revenues from the resale right. 

Good performances from private copying

  Collections from resale rights, which generally represent 25% of visual artists' society ADAGP collections, decreased by nearly 26% in 2020 compared to 2019, with a drop of €4.12 million. At the height of the crisis, ADAGP indicated that it has observed a drop of 65% in revenues, which can be explained by the closure of businesses, in particular galleries.

  On the other hand, private copying revenues as well as streaming rights "continued to grow without apparently being affected by the crisis." COPIE France, the umbrella organisation collecting the proceeds of the private copying levy, told the Commission that the impact of the crisis on its private copying collections has been largely absorbed. With collections of €273m in 2020, compared to €259m in 2019, the result for fiscal year 2020 is "close to the expectations."

  Online rights have continued to grow, driven by streaming (consumption of music or online audiovisual content). The report points out that while the lockdown favoured the in-house consumption of film and TV programmes, this pattern has benefited more to streaming platforms than traditional over-the-air and cable TV services, which are reliant on advertising revenues. 

Mechanicals boosted by streaming

  "The main beneficiaries of this increase in television and sound consumption have in fact been the online service platforms which are remunerated through subscription schemes," reads the report, adding that the effect of the crisis on advertising revenues in 2020 will have an impact in 2021.

  Mechanical reproduction rights have not been "very sensitive to the health crisis thanks to the development of streaming" according to the Commission. Mechanical rights society SDRM collections have been driven, for several years, by the strong dynamism of “online” rights. With collections of €398m in 2020, an increase of​ ​+ 5.8% compared to 2019, SDRM has confirmed in 2020 the trend in increasing collections despite the health and economic crisis.

  Other rights, such as reprography, cable transmission, foreign rights for books, have suffered "variable changes but without direct links to the effects of the health crisis."

A different impact 

  Overall, the crisis has affected the collections of the 27 collective management organisations operating in France in different ways: CMOs reliant of performance rights such as music rights societies SACEM, SPRE, SCPP, SPPF, ADAMI and SPEDIDAM were the most affected; those relying of consumption unrelated to the opening of in-person businesses, have had a better year, as shown in the table below.

French CMOs' collections 2019-2020
                     (in € million)            

  When it comes to distribution of royalties, the lines are more or less similar to the collection patterns. Writes the Commission: "With the exception of six CMOs, which distributed significantly less (SPEDIDAM, SPRE, SCPP, SCELF, SACD and SAI), and seven CMOs (COPIE France, ARP, PROCIREP, ANGOA, SAI, SAIF and SEAM), which were able to distribute a great deal more than in 2019, the sums distributed in 2020 were quite close to those of the previous year for the largest CMOs."

Concern for the following years

  It added: "Some CMOs have implemented advances on distributions for beneficiaries experiencing cash flow difficulties, i.e. by paying rights in advance (SCAM, SOFIA), either by granting exceptional advances (SACEM, SPPF, SEAM) or by implementing exceptional arrangements for annual supplement or payment of surpluses from previous years (ADAMI)."

French CMOs' distributions 2019-2020
                     (in € million) 

 

 The Commission welcomed the way CMOs have mobilised during the crisis, and contributed to the financial, material and moral support of their members. "Mobilising funds for artistic and cultural action, they set up aid mechanisms, maintained or even increased the appropriations provided for this purpose and participated in emergency funds initiated by the public authorities," reads the report. "This strong responsiveness deserves to be noted and will undoubtedly have to be continued in 2021."

  Finally, the Commission warned that "the time-shifting effect" between the moment performance rights take place and are collected and distributed should "call for caution for 2021 and be of more concern for the following years."