GEMA News / 23 December 2016

GEMA Supervisory Board: Report on the meeting of 7/8 December 2016

One agenda item dominated the last meeting of the GEMA Supervisory Board in 2016: The decision by the Higher Regional Court Berlin dated 14 November 2016 according to which GEMA is not entitled to pay music publishers their due publishing shares of the distributions for exploitation rights and statutory remuneration entitlements in accordance with GEMA's distribution plan. Supervisory Board, Managing Committee and their legal advisors held intensive and detailed discussions on the judgement and the reasons for it.  There are no signs to suggest that this will have any consequences for GEMA's structure and its curia system; the immediate impact of the judgement on GEMA’s pay-out practice to its members, however, is immense. While a publisher participation continues to be possible within GEMA, it requires a modified foundation for the time being in light of the judgement. As a consequence, a concept for a solution was developed and resolved which will enable a legally compliant continuation of the publisher participation. This necessitates the existence of specific prerequisites, particularly the requirement where publishers should secure a signed confirmation declaration from their authors stating that it is the will of both parties that the publisher should participate in the pay-outs for exploitation rights and statutory remuneration claims for the past and the future. GEMA shall subsequently individually establish the publisher participation for the pay-outs since July 2012 as well as for the future in the course of an electronic confirmation process, subject to the necessary documentation being submitted. As a result, the scheduled pay-out per 01 January 2017 can only be made to authors and international collective management organisations that are not affected by the judgement; publishers may, however, receive a percentage of the amount due to them in the form of payments on account. The Supervisory Board decreed further that the pay-outs scheduled for 01 April and for 01 July 2017 will be postponed by two months as a consequence of the implementation of the confirmation process and the ensuing personal and technical effort, affecting all rights holders. In the course of the pay-out per 01 July 2017 the cancelled settlement of 01 January 2017 for publishers shall take place on the basis of the results from the electronic confirmation process. The authors’ representatives on the Supervisory Board have agreed to this – while expressing and raising their concerns - subject to the prerequisite only that authors, as well as publishers, may receive payments on account upon application provided they would suffer from cases of economic hardships caused by these postponements.  Whether there will be any further postponements of pay-out dates will have to be decided by the Supervisory Board in time. The General Assembly will have to decide on a possible reversal of the pay-outs to publishers since 2012 once the judgement has become legally binding and once the authorisation procedure has been closed, as well as on any necessary changes to the distribution plan. All members of the Supervisory Board, especially the authors’ representatives, have not taken the decisions which have consequences for each individual member, lightly. They are, however, unanimous in their decision that the legal uncertainty caused by the judgement concerning the joint participation of authors and publishers should be tackled together. Apart from the measures undertaken by GEMA, which will be communicated to members individually, the Supervisory Board considered it as an urgent need that the publisher participation be regulated by law in the short-term - which has happened in the meantime - so that there is legal certainty for the future from this point of view. Any activities which become necessary based on the steps previously outlined, cannot leave other projects and therefore the GEMA budget for the coming year unaffected. As a consequence, the Supervisory Board only received a provisional plan unlike during its usual December meetings. By the meetings in spring of the coming year, the cost and time plan will be adapted to the changed circumstances. By then, the final figures on the current business year 2016 will be known. What can be established at this stage is that it can be assumed that GEMA has collected significantly higher revenues than projected and that it could thus surpass the one-billion Euro mark for the first time. This is, on the one hand, due to the fact that the ZPÜ, a coalition of German collective management organisations decided to pay a part of its revenues to its member organisations, i.e. including GEMA, this year, which it had received as a levy for the copying ontosmartphones, tables and PCs retroactively since 2012.  On the other hand, YouTube has paid GEMA remuneration of a respectable size upon signing a new licensing agreement a few weeks back, as the contract in question also covers the period since 2009. The Supervisory Board noted that the YouTube contract conclusion, following lengthy negotiations, and as ratified by Board in its October meeting after intensive discussions and copious consideration, had not only received an enormous response among members, but also among politicians, media and the public, and has enjoyed a predominantly positive feedback overall. In order to pay out the money collected from YouTube, a row of individual issues need addressing first. In line with the members’ expectation, it is planned to provide a continued flow of information on the state of the deliberations. For the next General Assembly a timetable will be prepared outlining the process regarding the distribution of said collections and, if necessary, proposals for any amendments to internal rules and regulations will be created. A number of proposed amendments for the distribution plan related to other issues were already covered in detail during the meeting; they will be presented by the Supervisory Board and the Managing Committee to the upcoming General Assembly. As reported previously, the Supervisory Board sees it as a fundamental task to carry out a distribution reform for “E-music” (serious music) events (category E), now that “U-music” (light music) has already been subject to a distribution reform in the live and radio categories (INKA). During this reform, the specific requirements of event practice in connection with serious music shall be taken into consideration. It is the aim of the reform to create a stronger relation to collections while keeping in line with the principle of cultural development at the same time. In a first step for a reform of the E-music distribution, a differentiation regarding performances of the blanket licensing agreement category and other performances of serious music is planned, accompanied by measures for cultural support. It is intended to put the vote for the relevant regulation proposal to the General Assembly; the new regulation could become effective from financial year 2018 onwards. Members are going to be informed about the details of the reform procedure up front, with the involvement of the relevant professional associations. The Supervisory Board also dealt with the information that is due to be published in “virtuos” in the run-up to the General Assembly and on the GEMA website on the issue of user behaviour in the online category. This ties in with the resolution of the General Assembly 2015 on the distribution rules for music use in the online category which was linked to the task to monitor user behaviour continuously. The focus shall specifically be on the increase of streaming compared to download revenues. In the course of the upcoming General Assembly extended information will be made available with reference to the financial year 2016 which will - by then - have been concluded, also considering opinions expressed by members on this subject. Furthermore, the Supervisory Board has adopted a report on the development on the broadcast distribution since financial year 2013, in line with the task it was given by the General Assembly 2014 in connection with the broadcast distribution reform. The report which is now going to be published on the GEMA website, shall also help with the preparation of the General Assembly 2017: In accordance with their resolution of 2014, members will have to vote on whether the distribution rules regarding the broadcast area will have to be reworked once more. The resolution on the reform of the broadcast distribution of 2014 includes a hardship compensation for rights holders who have suffered high losses due to the reform. Said compensation scheme was expected to be discontinued after its last application with the pay-out on 01/01/2017 for financial year 2015. Since an exact calculation of the hardship compensation is currently not possible in the light of the current issues linked to the publisher participation, without entailing elaborate back payments and supplementary payments at a later stage, the Supervisory Board has decided to pay said hardship compensation out a later point in time, yet as soon as possible. A series of amendment proposals in other parts of the GEMA internal rules and regulations - Statutes, Deed of Assignment, internal rules of procedure - which the Supervisory Board and the Managing Committee plan to present to the upcoming General Assembly, have also been adopted in the meeting of the Supervisory Board, prepared during the previous days in committees such as the Statutes Committee, the Distribution Plan Committee and several working groups. Among these are proposals which affect the creation of volunteer work with in GEMA, for example for reinforcing the quota of women in the committees and governing bodies, for introducing an age limit for committee members or calling on external experts for committee work. The discussion of these topics had been inspired by the results of a member survey carried out in 2014 on structural questions regarding voluntary work within GEMA. Despite the number and importance of the current topics, the Supervisory Board also addressed GEMA’s Compliance Management System, as the implementation and control of the functioning of such systems are part of the overall responsibility of the governing bodies of institutions. This also applies to GEMA despite all the particularities that distinguishes it from [traditional] businesses and other institutions. To understand and adhere to the legal requirements and internal rules reflecting GEMA's vision and values are a self-evident prerequisite for a responsible behaviour of its employees. The Supervisory Board is responsible for the control and duty of confirmation that compliance arrangements within GEMA are in place. As the Supervisory Board considers this to be an ongoing process, it will continue to regularly discuss this subject, possibly as early as at its next meeting in spring 2017. Apart from agenda items such as the annual financial statements 2016 which will be ready by then, and the updated budget plan for 2017, the main topic at the spring meeting will, however, be the continued preparation of the upcoming General Assembly from 22 to 24 May 2017 in Munich. Finally, the Supervisory Board will also have to proceed with its discussions on publisher participation.