Consolidation is key to growing rights revenue generated by U.K. collecting societies PRS For Music (PRS) and the Mechanical Copyright Protection Society (MCPS).
That was the central message from Robert Ashcroft, PRS CEO and executive director, MCPS, at the Music Publishers Association (MPA) annual general meeting (AGM), in London.
Outlining his vision of a "broad northern alliance" of European collecting societies, Ashcroft unveiled details of a new strategic plan, which he said, "seeks to address the future of MCPS, the future of the alliance and the future of the PRS in this newly competitive Europe." MCPS, the subsidiary company of the MPA, is part of the PRS for Music collecting society brand.
According to Ashcroft, the newly outlined business strategy had been given the "full support of both the alliance and joint boards" and forms part of a "new mid-range plan" that will see PRS "competing for CLA's [central licensing agreements]."
Ashcroft said that an "initially flexible" partnership had already been reached with NCB - the collection society for the Nordic countries. The 'northern alliance' would later be extended to other European collecting societies, he went on to say, identifying German performing and mechanical rights collection society GEMA as one that he hoped would soon join the informal alliance.
"This northern alliance is going to be founded on back office consolidation, which will drive much more efficiency in the whole process," continued Ashcroft.
At present, a large number of separate collection societies handle rights payments and licensing for all 27 EU member countries - a situation that PRS wants to resolve via a pan-European alliance.
ICE, a PRS joint venture with Swedish collecting society STIM, was launched in early 2007 to create a joint copyright database/service center to improve administrative capabilities for collecting societies in Europe.
"I firmly believe we have the opportunity to lift our heads and grow the business back into profitability, despite the declining market because it's a completely classical response to decline that the leader should consolidate," Ashcroft told the audience during his keynote address, which, although referencing the "parlous and precarious state of finances" in the music industry was cautiously optimistic in tone.
£1 Million MCPS Loss
Prior to Ashcroft's keynote speech, MPA chairman Nigel Elderton presented consolidated group accounts for the MPA Group, incorporating MCPS, MCPS' share of the MCPS-PRS Alliance Ltd and other entities in which it has an interest, for the 2009 calendar year.
The group loss for the year after taxation amounted to £498,000 ($740,000) - a sizable increase on the 2008 group loss of £287,000 ($427,000). That figure was, however, dwarfed by the massive losses posted by MCPS in 2009.
Although there was no mention of it during the AGM, according to a directors' report published in the MPA Report and Accounts 2009 document, MCPS posted a £1 million ($1.48 million) loss, after taxation, for 2009.
In 2008 the company made a £46,000 profit, said the document, which blamed falling interest rates in 2009, which in turn lowered the interest income, as the direct cause of last year's mammoth loss.
Royalties distributed by MCPS to publishers for 2009 was £187.7 million ($279.6 million), an increase of just over £3 million ($4.5 million) on 2008's figure, according to the report.
Physical Decline Slows
Ashcroft did, however, say that the MCPS-PRS alliance had made good ground in 2009 - signing "12 new multi-territory agreements with large European online and mobile providers in the past year," as well as investing in administration systems, which accelerated the distribution of royalties.
Ashcroft also presented evidence that, while physical unit sales in the U.K. continued to decrease throughout 2009, the decline was beginning to slow in pace and remained below the industry average.
According to the PRS CEO, CD and DVD sales in the United Kingdom resulted in MCPS revenues of £128.5 million ($191.8 million) in 2009 - a decline of 7.8% on the previous calendar year.
Joint online revenue grew 72% in 2009, said Ashcroft, who called the growth in digital sales combined with the drop off in physical declines a "very hopeful sign".
Changes In Commission Rates
Ashcroft also outlined several changes to commission rates for society members as part of an ongoing "comprehensive cost and process review."
From Jan. 1 2011, commission rates for pro dub, limited manufacture, specialist music products, digital memory devices, novelties, individual synch licensing and karaoke increases from its present rate of 12.5% to 20%, Ashcroft said, calling the rise a regrettable but necessary measure to reflect the administration costs that these licenses require.
"We will be constantly looking at commission rates and it is my fervent hope that we will be able to bring things back down and reduce them wherever we can in the future and the key to that is to continue to grow our scale and be successful as a collecting society," said Ashcroft.
New MCPS Chairman
Nigel Elderton and Stephen Navin were re-elected as MPA chairman and chief executive respectively. Elderton also becomes MCPS chairman, taking over from Tom Bradley who is retiring.
The election of the pop publishers to the board, meanwhile, resulted in the following five gaining a place: Peter Cornish (Fairwood Music U.K.), Mark Anders (Bug Music), Andrew King (Mute Songs) David Kassner (Kassner Associated Publishers) and Guy Morris (Cathage Music). Morris was newly elected, the others were re-elected.
The three classical publishers were all re-elected: Leslie East (ABRSM), Sally Groves (Schott Music) and Nicholas Riddle (Peters Edition).
Addressing the audience, Elderton called 2009 a "tumultuous year, not just for our industry but for national and international economies."
Referencing the U.K.'s recent emergency Budget, Elderton said warned the audience that, "belt tightening alone is not enough to see us through tough times and it is more important than ever that we as a country continues to create."
Navin also spoke at the well-attended event, entertaining audience members with a highly verbose speech that made reference to the World Cup, Greek god Apollo, disgraced British Royal Sarah Ferguson, and the Deepwater Horizon oil spill, which he compared to millions of digital files illegally escaping through internet piracy.
"How do we cap them?" he asked the laughing audience.