South Africa was one of the early implementors of Needletime rights, but in 1964 these rights were withdrawn and were not re-established until 2002, after a battle that began in the early 1990s. It took more than another decade before rates were agreed with broadcasters and to this day record labels and musicians have been paid a small percentage of what is owed to them historically.
This deferment of payment has had a devastating impact on the music industry. Not only are artists and their families not being paid what they are due, but record labels and in particular independent labels have been denied revenue that would have been reinvested.
In the UK Neighbouring rights are collected be PPL and VPL and in the USA by AARC and Sound Exchange.In South Africa these rights are administered by four collection societies. SAMPRA and IMPRA collect license fees from radio stations for broadcast and from retailers, gyms etc for recorded music played in public. RAV and AIRCO collects mainly from TV stations for the use of music videos.
There is a collection society that collects for the majors and some independents and one that collects for independents in all cases.The vast majority of revenue they collect are paid to overseas rights holders – primarily the three multi-nationals: Universal, Sony and Warner. The South African offices of these companies would retain the money that was earned on their local content only and the rest would be collected abroad. In addition, more than 50% of South African music content is owned by foreign companies.
The accuracy of the distributions is also under dispute. The SABC playlists are duplicate across the databases of the two collection societies. There is a call for unified monitoring and databases.
AIRCO was established in 2005 through funding from two large independent labels at the time, Coolspot and Bula Records. Later funding and support came from the Department of Arts and Culture (DAC). AIRCO became affiliated tothe Worldwide International Network (WIN).
Many members believed that a single CMO should be established for the entire country.The reason for this is that the resultant duplication of effort comes at a cost to the record labels and their artists and that the possibility of fraud and double payments has increased. There is no transparency and no definitive database of rightsholders.
This lack of transparency has led to some of the independent labels being denied their royalties and have had to resort to litigation.
Airco were receiving at least R4.8 million rand per year by the SABC due to a 2011 agreement structured and brokered by current CEO at RiSA Nhlanhla Sibisi in his capacity then as an independent consultant. He earned a reduced commission of 8% on a monthly agreement with no fixed term of R400 000 for the licence of music videos.
Sibisi explained, “When the agreement was done in 2011, I was no longer working for SABC. When SABC became one of my clients, I disclosed to SABC in writing that AIRCO was one of my clients. I terminated the contract between Airco and my company effective 20 February 2015 and I joined RiSA on the 15th September 2015.”
“The money started to be paid to Airco. We received one payment in the course of four years, but previously we were being paid annually.” Harvey Roberts.
Independents take action against AIRCO
Even though Airco claim they have distributed 71% of all collections for the years 2010-2013, these payments are strongly disputed by a collection of the top independent record labels. In 2015, the biggest copyright holder of South African music, Gallo together with founding members of Airco including Cool Spot, Ghetto Ruff, Bula Records, David Gresham and Soul Candi are leading the fight to uncover these distributions. They initially consulted Jeff Boulton, Gallo legal council. The file was then handed over to Ross Munro and in 2016 media lawyer David Dison was mandated to resolve the matter.
They approached the SABC in an attempt to have the money paid into escrow or trust until the issues had been resolved and the proper flow of royalties to the proper rights holders had resumed. SABC payments on the contract were stopped in April 2017. “Airco still has to provide the SABC with specific documentation as required by Treasury Regulations necessary to continue payment in terms of the 2011 Agreement,” explained SABC spokesperson Kaizer Kganyago.
Dison made a submission to the Companies and Intellectual Property Commission (CIPC). The submission stated: “AIRCO is a mismanaged entity, that is failing to conduct its business in compliance with the Companies Act, lacks transparency and accountability, has failed to account to its members, failed to pay royalties due to its members, does not uphold its own constitution and policies and has generally mismanaged the funds that it holds in a fiduciary capacity on behalf of the copyright owners.”
In May 2017 the submission was received by Kadi Petje who is responsible for the regulation of the Collecting Societies. The submission was buried. Petje’s direct senior, Nomonde Maimela, Executive Manager at CIPC responded: “The Department of Arts and Culture may be better placed to assist. “
Mandla Maseko rose through the ranks of Airco to chairperson in June 2016 when Moses ‘Dodo’ Monamedi moved over to Chairman at Impra. Maseko’s video production company Black Eagle Media Group (BEMG) is allegedly a beneficiary of Airco’s funding from DAC. His produces music videos in the independent sector in what Roberts’ describes as “a serious conflict of interest to say the least.”
Maseko responded: “This is a narrative actuated by malice and for no purpose other than the desire to scandalize our organization and the noble work it’s doing to benefit its members.”
One of the pre-requisites of Airco membership is being a record company. The new Airco board includes Lucky Machethe, Tlaba Makoeba, Margaret Maserumule, Muriel Mokgathi, Leonard Movenda and Poobie Pillay. Roberts explained, “AIRCO does not have a credible membership. The near on 2000 record companies they claim to represent, there may be twenty or thirty that are legitimate. They have used that fictitious membership list to leverage funding from DAC and DTI and secure their contract with SABC. It will be interesting to know whether the members of AIRCO are also members of IMPRA. It that an automatic joining right?”
At the time, Roberts was confident that the time for change was ripe. He said, “The industry as a whole should be working together to address these issues and create proper transparent streams of reporting and accounting so this type of situation never occurs again.” WIN has suspended Airco’s membership and according to Dison, “is anxious to assist in finding a way forward. WIN is completely supportive of empowerment and transformation.”
Gallo met with WIN at the International Music Market (MIDEM) to address the crisis at Airco. According to Roberts, one solution would be the establishment of a “new bona fide organization under the auspices of WIN to represent the legitimate players in the independent sector”.
That was two years ago, Gallo didn't report back on their meeting at Midem, and the indies in South Africa are still isolated from the rest of the world. But there may be light at the end of the tunnel. AIRCO has agreed to look into concerns that some indies have over the distribution of video royalties.
Impra were buoyed in 2016 by SABC CEO, Hlaudi Motsoeneng (ex CEO) who upped the radio quota system to 90% local music as part of what was termed his “rage against White Monopoly Capital.” In 2017 SABC made the first ever needle-time payment of R16.5 million, calculated at a 75% share of R22 million. It included licencing fees across eighteen radio stations for the financial year 2014/5 only. There are possibly another fifteen years of overdue payments still on offer. SAMPRA received no payment as they have been contesting the proposed arbitrary SABCs splits proposed by Motsoeneng of 70/30 in favour of Independent Music Performance Rights Association (IMPRA), an organ of the Association of Independent Record Companies (AIRCO) with no known members at the time.
SAMPRA claims a 90 – 95% market share. The difference between these organisations goes beyond the major-indie split. SAMPRA has managed to licence their repertoire far more broadly than IMPRA who rely upon the SABC for almost all of their income. SAMPRA collects a significant portion of their revenue from an impressive range of public performance licenses which IMPRA does not have.
It is the collection of these non-broadcast royalties which best illustrates the commercial drawbacks having two collection organisations. From a practical point of view, independent labels must decide on one or the other. Again, because of the lack of transparency, it is not possible to predict which one will give you the most profitable outcome but if you register with neither, you will not get paid at all.
A meeting with the SABC on Friday, 8th May 2020 made it very clear that the SAMPRA-SABC dispute will be referred back to arbitration. In the interim, the SABC will make an advance payment of a very minimal amount to assist the two CMOs in mitigating against the effects of the lockdown.
After arbitration, the SABC will release amounts for the periods 2015/16 to 2019/20. The outcome of the arbitration will also resolve the long-standing dispute on the payment of the 2014/15 licence fees. Thereafter the settlement of pre-2014 licence fees will be discussed.
Hopefully, the outcome of the arbitration will deal with the underlying transparency deficiencies. After all, if the CMOs repertoire databases are clean and accurate and they are made available as required by the collection society rules, there would be no copyright ownership disputes which would be difficult to resolve.; and if these databases are compared to clean and accurate playlists from the SABC then there would fewer payment errors and distribution practices which are much fairer. This is how it is now done is most territories around the world. There is no reason why Africa should lag so far behind.