How are Music Royalties distributed? Part 2 of 5

How are Music Royalties distributed? Part 2 of 5

This continues our weekly series on Music Royalties, if you missed part 1 you can read it here.

Part 2: What is needed to process a distribution?
In the previous instalment, the various types of rights – Performing, Mechanical and Needletime – that SAMRO administers on behalf of its members were outlined. In order for SAMRO to process a royalty distribution for any of these rights, various elements must be present:
* Money – the money to do distributions derives from licence fees collected via the licensing of all persons or organisations that use musical works, e.g. radio and television stations, venues that facilitate live performances, clubs, hotels, restaurants and any other organisation that plays music in public.
* Usage returns – usage returns are submitted by licensees, e.g. broadcasters provide monthly returns of music played, cinema outlets provide information about films that have been screened, etc.
* Repertoire – this is provided via a database of works that is maintained by SAMRO. The information in this database is obtained from the three main groups of rights holders, namely:
1. members who notify their works as they are written,
2. publishers who enter into agreements with composers to publish their musical works and who also notify their shares in the musical works, and
3. various foreign societies who provide information about foreign musical works that are reproduced or performed in public.

We need to know who the owners of the musical works are and what their share splits in the works are, in order to calculate the royalties due to them.

Share splits are the portions of interest or percentage share that the persons notifying may have in the work. This often resembles the level of contribution in the creation of the work, in the case of composers and lyricists. In the case of publishers, their share is negotiated with the creator or author, based on the agreed level of contribution in exposing the work for usage.

* Rights holder information – personal information about rights holders is required, such as bank account details for the crediting of royalties and contact information for the distribution of royalty statements. Similarly, corporate information is required from publishers and affiliate societies.
Distributions are currently processed by SAMRO for both Performing and Mechanical Rights, although they are done separately. The data required for each right is different, as are the licence fees. In addition, the shares in musical works owned by rights holders are generally different for these different rights.

I will elaborate further on Performing Rights specifically, as these are the rights that SAMRO has administered since its inception and because they currently represent the majority of SAMRO’s earnings. Other rights will follow similar processes in “dividing up the cake” for distribution. Various distributions are performed during the year:

Primary distributions: these include Radio and General, Television, Film, and Non-royalty (interest earned on money invested until a distribution is declared),
Secondary distributions: this includes Foreign (royalties received for local members whose works were used in other countries), and
Supplementary distributions: these include various distributions to correct errors and omissions in the primary and secondary distributions. These distributions occur for various reasons, including:

• to distribute royalties for musical works which were not notified at the time of the original distribution,
• to distribute royalties for musical works which could not be correctly identified at the time of the original distribution,
• to distribute royalties for works for which usage was anticipated, but was only provided after the primary distribution had been made, and
• to correct the share splits which were previously incorrect, either being incorrectly notified or incorrectly captured.

In order to do a distribution, the various elements required must all be present, i.e. money, usage returns, repertoire and member information. An additional requirement for successful distributions is computing power (IT systems), given the number of rights holders, works and the units of seconds that have to be factored.

Coming up in the third instalment in our series: Tues 16 June: How royalty payments are calculated.