Mechanical rights arise from the mechanical process of copying a musical and or literary work onto a sound recording.
Mechanical rights in South Africa were established under South African Recording Rights Association Limited (SARRAL) in 1963 by George Hardy, a colleague of SAMRO founder Gideon Roos. Their gentlemen’s agreement was put into contract in 1966, wherein SAMRO agreed not to enter into mechanical rights and SARRAL not to enter into performance rights. SAMRO and SARRAL were both members of The International Confederation of Societies of Authors and Composers (CISAC).
This was an international model. Performing Right Society (PRS), UK’s leading Collective Management Organisation (CMO), administers public performance rights, and Mechanical Copyright Protection Society (MCPS) administers composers’ mechanical rights. SAMRO have had an agreement with PRS since 1962.
In 1970 National Organisation of Reproduction Rights (NORM) was formed as a publishers association, primarily representing the interests of the multi-national and foreign publishers. Hardy was NORM Chairperson until 1992.
At the turn of the millennium, SARRAL was defrauded by six composers who had rigged a system whereby they took 63% of all the SABC income. It was licenced as commercial music paid at five times the rate. Together they took R32 Million over a period of six years, which is an unheard of amount for mechanical royalties. Usually approximately R3 billion in sales would account for such high revenues. The biggest creditor was Board Member and Audit Committee Chair, Colin Shapiro. He had received R10.3 million from SARRAL in 5 years. SARRAL won a R4.7 M claim against him, however this was not recovered.
In 2002 NORM began to compete for SARRALs market and successfully petitioned the SABC, MNET and E TV to license directly with them and within a year SARRAL had lost 50% of its income.
Also in 2002, the SAMRO board approved their entrance into mechanical collection. SAMRO solicited SARRAL’s key staff at double the salary and began calling in the mechanical rights deeds that had been forced on composers since the 1990s.
Nichals Motastse CEO in 2006 explained at the time, “The conclusion of a number of bi-lateral agreements for reciprocal representation on Mechanical Rights with major societies around the world. That was an important catalyst in ensuring SAMRO’s entry into the administration of Mechanical Rights”
SAMRO went on a membership drive to canvass members from SARRAL and NORM, asking them to “cross the floor and join SAMRO” as was explained by their key committee report of 2007.
In 2009 SAMRO made an offer to take-over SARRAL under the condition that SARRAL remain in the mechanical sector. In response SARRAL decided to enter the performance rights market and compete with SAMRO. SAMRO was more than ten times the size of SARRAL and made the decision to destroy the organisation outright.
Internationally SAMRO used its powerful relations with CISAC and the international organisation representing mechanical rights (BIEM) to request affiliates to terminate reciprocal rights with SARRAL.
SARRAL appealed for urgent intervention by the Competition Commission on the grounds of restrictive horizontal and vertical practices, price discrimination and abuse of dominance, however without success. The organisation was battered by one legal attack after another and by 2005 had been reduced from a R25 million annual turnover to only R4 million.
In 2009, after a series of claims and counterclaims, Shapiro’s representative, deceased criminal attorney Owen Bloomberg was instructed to complete the liquidation which was concluded in 2010. SARRAL was granted leave to appeal to the Supreme Court of Appeal (SCA) and was refused the costs of R80 000 by the liquidators.
The SAMRO board took the unanimous decision in November 2012 for SAMRO to get out of the mechanical sector. SAMRO had spent in excess of R10 million on the failed attempt to enter mechanical rights administration.
SARRAL is mentioned 58 times in the Copyright Review Commission (CRC) Report including the recommendation that SAMRO mechanicals and NORM merge. NORM and SAMRO had not worked together up until that point.
Multi Jurisdictional Copyright lawyer Graeme Gilfillan wrote in his response to Minister Davies’s satisfaction with the CRC report, “There emerged the allegations, during the last SAMRO strike in 2013 that made the rounds that all member(s) on the Copyright Review Commission were retained and paid by SAMRO as consultants or in some or other capacity. Whilst this has been raised with SAMRO since 2014, with the knowledge of DTI, there has never been a rebuttal put forward by either of SAMRO or the DTI.”
SAMRO and NORM boards began to negotiate in earnest to merge their mechanical rights operations and form a new single entity separate from both existing organisations.
Nothando Migogo ex CEO of SAMRO and CAPASSO said, “It is widely spoken of in the industry, that SARRAL used a hybrid of assignment and agent in its accounting which ultimately led material financial flaws and difficulties.”
Currently CAPASSO has no CEO. At the helm of the organization is Business Affairs Manager Wiseman Ngubo. He said, “The CRC was particularly scathing on the CMOs at the time with specific reference to SARRAL. Since SAMRO and NORM handle a portion of the mechanical royalties, these two organisations represent two different constituencies, in the sense that SAMRO had a strong composer side and NORM was almost completely just publishers. CAPASSO became a completely new organisation that represented both composers and publishers with a board representing both and an outlook to try and change.”
CAPASSO is an NPO, owned by its 3000 direct members and registered at the CIPC, but not yet accredited nor regulated. Last year CAPASSO collected R79 million and distributed 73% in royalties.
CAPASSO operates out of the SAMRO offices in Braamfontein. In 2010 Board members were Nick Matzukis (board of SAMPRA), Louise Bulley, David Alexander (Sheer Publishing), Yoel Kenan, Migogo, Abe Sibiya (former SAMRO chairman).