The UK’s two collection societies, PRS For Music and PPL, have just done something people have been asking about for years.
The duo have officially announced that they plan to launch a new 50/50 company next year to jointly deal with public performance licensing.
This as-yet-unnamed JV would offer a single license for, broadly speaking, two types of performance copyright – both the recorded and the musical work (songwriter/publisher).
“It is in our members interests to ensure that our licensing is ever more efficient.”
Robert Ashcroft, PRS
“Creating a single point of contact for our UK public performance customers would allow us to significantly simplify music licensing for UK businesses,” said Robert Ashcroft, chief executive of PRS For Music (pictured).
“It is in our members’ and customers’ interests to ensure that our licensing is ever more accurate and efficient.”
Inevitably, questions are now being asked over what this increased ‘efficiency’ will mean for PRS and PPL’s existing workforces.
At present, public performance licensing brings in 41% of PPL’s total annual income (2014: £76.7m vs. £187.1m) and 25% of PRS’s total royalty income (2014: £168.3m vs. £664.3m).
As such, it’s a huge chunk of both societies’ current operations.
Any attempt at a joint venture will surely see the microscope put on that heart-dropping word, ‘efficiency,’ when elements of these vital departments are merged.
MBW has dug through pages and pages of Companies House filings from both businesses to get a handle on just how efficient each of them are right now – and what they’re spending on staff and directors.
Before we get into this comparison, some important caveats:
PRS is a much bigger operation of the two, with around 3.5 times the amount of royalty income pulled in per year than its recorded music counterpart and over double the staff headcount;
PRS (with MCPS) represents around 115,000 members – across songwriters and publishers – in total. PPL, on the other hand, made payments to 55,852 performers and 5,458 recording rightsholders (labels) last year;
Aside from public performance, both organisations collect from similar additional licensable areas: international, online and broadcast (TV/radio). However, PRS also counts mechanical collections from sales/streams of recorded media in its figures.
As such, what we discover below cannot be taken as a 100% like-for-like juxtaposition.
It’s also a comparison across the whole of both businesses – a more granular analysis of costs related to public performance alone is not possible from the financial documents we’ve seen.
But as a snapshot of what both companies are spending – and, crucially, how efficient they are for their members – we humbly hope it will be of use…
First, a very basic acid test of the PRO’s efficiency: a comparison of what it collects each year across all licensable sectors vs. what it ultimately pays out to members.
As well as the firm’s operating costs, this barometer also includes what it pays out in tax, pensions and charitable donations.
It is, in that respect, we hope it’s all-encompassing.
As you can see, PRS’s income-to-distribution ratio (10.7% in 2014) is pretty impressive, especially when you take into account the horror stories some publishers report from PROs in other areas of the world.
(This ratio, also known as cost-to-income, effectively shows the percentage of total collected money that was used up before the cash got to members.)
However, it is worth noting that this figure rose at PRS in 2014, as the amount of money paid out to members reduced.
Put another way, PRS spent slightly more in 2014 than it did in 2013, and yet distributed slightly less to members. Work to do.
PRS For Music: STAFF & DIRECTOR COSTS
PRS spent £34.6m on the gross cost of staff in 2015, covering wages plus social security costs, benefits and pension schemes.
This figure works out at 45.4% of PRS’s total operating costs of £76.2m.
In terms of the money PRS spent purely on wages and salaries of staff?
This figure hit £29.75m in 2014, up slightly on the £29.35m PRS spent the year before.
Across the 615 staff employed in 2014, this meant that the average wage per-head at PRS stood at £48,370 in the year.
The average gross cost per employee to the company was £56,260.
£996,000 was spent on the remuneration of Directors at PRS in the year.
The highest paid director, Robert Ashcroft, took home £765,000 in remuneration in 2014, a rise of £15,000 on 2013
Ashcroft was granted £19,000 in company contributions to a pension scheme.
He received a deferred bonus of £223,032, with the aggregate amount deferred for future payment hitting £433,236.
PPL: Overall efficiency
Just as we did for PRS, let’s look at this purely from a member’s perspective: how much money PPL collects vs. how much is paid out to labels, producers and artists at the end of the process.
Once again, the below chart includes operating costs, plus deductions in tax, pensions and charitable donations.
So this is interesting: PPL’s income-to-net-distribution ratio is clearly not quite as efficient as PRS’s equivalent.
There are various reasons for this, but one above any other stands out.
Focusing on 2014 alone, PPL took in £187.1m in licence fee income, but then paid out £26.6m in ‘total cost of collection and distribution’ – aka its operating costs.
Those numbers alone work out to a 14.2% cost-to-income ratio.
So how has MBW ended up with a less flattering 16.5% figure for 2014 above?
Well, unlike PRS, at PPL there’s another cost to come off the top before labels get their money.
In 2014, PPL paid out £4.8m in ‘anti-piracy/copyright protection’ costs – all of which went to trade bodies.
Of this money, £621,000 went to the IFPI. Another £65,000 went to IMPALA and £824,000 went to UK Music.
By far the lion’s share of this pot of cash, £3.32m, went to the BPI.
As you can see below, PPL members’ annual payments to the BPI more than doubled in the seven years between 2007-2014.
PPL: STAFF & DIRECTOR COSTS
PPL spent £14.4m on the gross cost of staff in 2014, covering wages plus social security costs, benefits and pension schemes.
Remember, before those anti-piracy payments, PPL spent £26.6m on the ‘total cost of collection and distribution’ – aka its operating costs – in the year.
As such, PPL’s gross 2014 staff costs work out at 54.13% of its total operating costs.
That’s a significantly higher percentage than PRS’s 45.4% equivalent.
In terms of the money spent purely on wages and salaries of staff, PPL spent £12.51m in 2014, up slightly on £12.22m the year before.
Across the 288 staff that PPL employed in 2014, this meant that the average annual wage at PPL stood at £43,474 – lower than PRS’s equivalent number.
The average gross cost per employee to PPL was £50,000, also slightly lower than PRS.
£853,000 was spent on the remuneration of Directors at PPL in 2014, a reduction on the £1.08m spent the prior year.
The highest paid director, CEO Peter Leathem, took home £590,453 in 2014 – an £82,000 pay rise on his emoluments in 2013.
Leathem received a defined pension scheme benefit of £12,000.
A further £262,685 was spent on PPL’s Chairman and non-exec directors in 2014.
