APRA AMCOS

Year in Review

2013 - 2014

We're here for the music

We help music creators get paid for their work and give music users easy ways to legally play and copy what they like. Royalties keep the music coming and ensure the industry's future. And that's what we all want to hear.

A message from

CEO Brett Cottle AM

Brettpic

The past year has been one of significant transition for the music industry, as the second wave of digital change hit and yet another period of adjustment was required of those who provide the industry’s lifeblood – songwriters and music publishers.

In the first phase of industry transformation, consumers moved from physical ownership of music to digital ownership. In the second phase, digital ownership is being supplanted by digital access to music. The rise of streaming services means for the first time that the right of communication to the public, established by international convention and granted to writers under the Copyright Act, is fast becoming the right of principal economic importance for copyright owners. This phenomenon is in turn having a profound effect on the relationship between  

songwriters, music publishers and collecting societies around the world.

The transition occurring in industry business models and the relative importance of rights is reflected in an even closer working relationship between APRA and AMCOS. All of our public communications now refer to the two societies jointly and our new website shows the high level of integration that is occurring at a practical level.

Of greater significance is the fact that the two societies have now jointly commenced a project to build a fully integrated computer system to handle all of the licensing and distribution functions that underpin each society’s operations. This project – called CLEF (Copyright Licensing Enterprise Facility) – is the largest project ever undertaken by either society and, as we go to print, is well advanced in its planning phase. The system is scheduled to go live at the end of 2015 and will deeply impact on every key area of each society’s relationships with clients – from streamlining the invoicing of licensees to increasing the speed and frequency of distributions to members and providing them with 

 

much richer and more comprehensive accompanying data.

The building of the new system will entail a root and branch review of every business process and rule underpinning our royalty allocations to members – a process that is well underway through Board review and member consultation. The Board and Management are determined that APRA AMCOS will emerge as an integrated, full service collecting society able to take its place at the forefront of international best practice.

The investment we are making in new systems is, of course, both a statement about the future and a reflection of our current financial position. Which brings me to the year in review.

For APRA the year brought another strong financial performance. Gross revenue – excluding the management fee paid by AMCOS to APRA to manage the former’s operations – grew by $13.4m, or 6.7% over the previous year – to $213.74m, aided by an outstanding year in foreign revenue, which grew by 24% to a record figure of $27.1m. 

 

The latter figure reflects an unprecedented level of international success being enjoyed by Australian and New Zealand writers and artists – from Lorde and Joel Little, to Sia, to Gotye, to Vance Joy, 5SOS, to Courtney Barnett – it is no exaggeration to say that our songwriters are enjoying chart success and media attention in a way that has simply not happened before. In a reflection of the internationalisation of our business and creative talent, APRA AMCOS appointed representatives in both LA and Nashville during the year, to join our London-based representative in providing support to overseas-based members.

Domestically, licence fees collected from broadcasters (including digital and online) in Australia and New Zealand grew by $7.3m, or 6.5%, to $118.7m, following new industry agreements in Australia with both free-to-air and pay television. Revenue from public performance licensing grew, but by a much lower rate than in recent years, reflecting difficult trading conditions being experienced by many of our clients. Overall, public performance licensing revenue grew by just $1m, or 1.5%.

Several major initiatives were undertaken or completed during the year in the public performance area, most notably the establishment of OneMusic, our joint licensing initiative with the NZ recording industry.  In a major international development, we have established OneMusic to facilitate the one-stop licensing of public performance rights in both works and recordings in New Zealand to virtually all business users of music. As part of the process, all licence schemes have been simplified and streamlined and a single, unified licensing team undertakes all general licensing communications in New Zealand. 

On current projections we will, by the end of calendar 14, have re-licensed nearly 90% of all businesses which previously had held a licence either from APRA or from Phonographic Performances NZ.  A strong platform for revenue growth in New Zealand has been achieved through the establishment of OneMusic.

New licensing agreements put into place in 2013 with the airline and fitness industries continued to provide growth in APRA’s general licensing

revenue, the former increasing by 36% to $1.2m and the latter by a further 5% to $5.6m. These increases were, however, offset by continuing declines in licensing revenue from cinemas – down by 7% to $4.5m – and nightclubs – down by 15% to $5.4m.

AMCOS’ gross revenue for the year declined marginally – by $1.25m or 1.7% - to $69m. Mechanical reproduction income has of course largely borne the brunt of consumer flight from ownership of music in favour of access to streaming.  

Hence, AMCOS’ revenue from sales of physical product declined further during the year – by 37% - to $6.6m, and revenue from digital downloads declined by 11% to $23.6m.

These two revenue lines therefore accounted for a reduction of approximately $7m, or 10%, in AMCOS revenue for the year.

These declines were, however, almost entirely offset by (a) a more than doubling of mechanical revenue from streaming services to $2.8m; (b) a 17% increase in business to business licensing revenue, to $4.5m; (c) a 16% increase in broadcast mechanical revenue, to $14.5m; and (d) a 4% increase in educational licence fees, to $8.3m.

Together APRA AMCOS revenue for the year totalled $283m. Total operating costs for the group were up 9% to $36.4m for the year, producing an overall operating ratio of cost to revenue of 12.86%.

Costs were heavily impacted by the first stage of our investment in new technology (accounting for approximately $1m in additional costs), the writing off of all remaining expenditure associated with the Global Repertoire Database (accounting for $370,000 in extraordinary costs) and costs associated with the establishment of OneMusic in New Zealand, including the assimilation of Recorded Music NZ’s licensing staff, (accounting for approximately $400,000 in additional costs).

APRA distributed a total of $190.4m to members and affiliated societies during the year under 

review – an increase of $13m, or 7.3%, on the previous year, while AMCOS’ distributions increased by $730,000 year on year to $65.8m, up 1.1%. Together APRA AMCOS distributed over a quarter of a billion dollars (including GST) in 2013/14.

As we go to press the Australian government has under contemplation a number of proposed changes to the Copyright Act intended to deal with the ongoing issue of consumer access to illegal online content. Australia will be late to the party in attempting to deal with the issue (the New Zealand government legislated more than three years ago), but is to be strongly supported for providing some leadership on the issue.  If legislation does pass, in or close to, the form in which it is proposed, the second wave of digital music business models – which provide consumers with an unprecedented choice of music at an almost derisory cost – may finally get a chance to restore some balance and fairness in the bargain between music creators and consumers.

BRETT SIGNATURE

 

 

Key Highlights

205,343

songwriters, composers and music publishers paid by APRA AMCOS representing

783,070

unique songs and compositions

124 000

businesses

across Australia are now licensed to use music

$252.8
million

in net

distributable

revenue

achieved by APRA AMCOS

81,773

Apra

members

13,971

AMCOS

members

8.9%

increase in Aboriginal &

Torres Strait Island membership

25%

increase in

overseas
royalties

collected for

Australia

& New Zealand

$914,875

allocated to

117

music industry projects

via APRA music Grants

37%

increase in

events held or hosted by

APRA AMCOS for the benefit of our members

and the wider music industry

“My first wedding dance…road trips…sitting on a plane staring out the window with your headphones on… it’s endless, it’s everywhere. There are so many beautiful moments made by music.”

Louis Schoorl
Songwriter/Producer

Defining what’s important to APRA AMCOS and our stakeholders

As part of our commitment to the Global Reporting Initiative for sustainability, we’ve identified our key values and commitments as an organisation: providing superior service, ensuring maximum returns to our rights holders, investing in community, looking after our people and developing our business. The key performance indicators under these values and commitments have been defined as our Material Aspects for the purpose of sustainability reporting. We believe that if these Material Aspects are managed well, we can maintain a successful and sustainable business.