Cost analysis for collective management organisations

A cost analysis has been carried out among the collective management organisations on behalf of the IPI. The figures reflect how diverse and different the business of issuing licences and distributing royalties to rights holders actually is. At SUISA, cost awareness is already established due to the cooperative members exercising self-control and the right to participate in the decision making process; additional supervision by third parties is therefore not necessary. Text by Andreas Wegelin

Cost analysis for collective management organisations

The results from the cost analysis will help to save further costs where necessary. SUISA’s cost control is, just like at any other private association mainly the duty of its members. (Photo: Lenetsnikolai / Fotolia.com)

Since early summer this year, financial experts have been busy with an analysis of the five collective management organisations’ costs: SUISA, Suissimage, Swissperform, ProLitteris and SSA. Under the guidance of experts from the Fernfachhochschule Schweiz (distance learning technical college), the ZHAW (University of Applied Sciences in Zurich) and the consultancy firm SERVUS, they are tasked with presenting a report to our supervisory authority, the Swiss Federal Institute of Intellectual Property (IPI) before the end of this year. The report focusses on the use of the collected remuneration which are intended to be first and foremost paid to authors and publishers, performing artists and producers.

The purpose of this exercise is to provide a more thorough insight into the cost arising for our activities as a collective management organisation. Together with the cost analysis, a report on how useful these expenses are, where there might be areas with saving potential and why certain areas cost significantly more than others.

Diverse and different licensing business

SUISA welcomes this cost analysis, especially the comparison with the other four Swiss collective management organisations and CMOs abroad. Furthermore, while collating the numbers, it has become obvious to us how diverse and different the business of issuing licences and distributing royalties to rightsholders actually is.

SUISA, for example, has about 30 different tariffs as it holds rights on the music in nearly all usage areas. The collected monies are – where possible – distributed on a work basis, i.e. per performed work, to many domestic and foreign authors and publishers.

In comparison to this, the activities of Suissimage are mainly based on the five tariffs related to cable (re)transmission, internal use at schools / for educational purposes or time-shift TV. The umbrella organisations for communication networks supports our sister society for authors’ rights on audiovisual works with its collection activities. The outsourcing of parts of the tariff process and collection activities to such associations reduces the entire effort in some cases, and the administration costs of the collective management organisation acting as the collection centre.

Inflexible rules governing administration costs make no sense

It is therefore clear that the costs Suissimage incurs in terms of collecting for these tariffs are disproportionately lower than the expenses SUISA incurs when issuing licences to approx. 50 importers based on 4 different sub-tariffs for blank media levies. It is thus quite clear that collecting levies for photocopying from all companies in Switzerland requires even more effort for ProLitteris.

Those differences continue when it comes to distributing the collected money. The costs are higher if – as is the case at SUISA – all distributions are split down to work-level and if payouts are not just made to own members but also worldwide to about 100 sister societies.

The cost analysis is going to show such differences and therefore also provide good reasons, just like the AGUR12, the copyright review working group, had already determined: It doesn’t make any sense to impose inflexible rules relating to the levels of their administration costs. The societies just differ too much from one another in their activities.

Cost control is a matter of the cooperative members

SUISA’s cost control is, just like at any other private association mainly the duty of its members. The General Assembly elects a Board among the members which directs the business and is responsible for adhering to the budget and the accounts. Members also run the financial matters of their cooperative by approving the annual accounts. They decide, for example, whether SUISA should offer its members gratuitous legal advice or whether they wish to finance pension scheme or a cultural foundation.

There are signs that political forces intend to change this. They wish to introduce an increased supervision over the collective management organisations. There is no need for that: The cost analysis is going to show that, in most cases, the organisations are handling the authors’ and publishers’ money carefully.

Regrettably, there has been one unfortunate single case where executives of a collective management organisation had been paid high amounts for their own pension with the approval of the relevant committees of that CMO. Such an individual case does, however, not justify to intensify the supervision to such a degree that the autonomy of our cooperative society, in other words, the ability of each individual member to contribute to the decision on the business and fate of SUISA, should be restricted.

Fair payment for the use of music

It seems that some politicians have little idea that the usage of music actually incurs a cost. They consider licence fees raised by SUISA to be a pain and forget that these fees are the basis for a fair payment to thousands of creators, musicians and lyricists, in Switzerland, too.

In order to be able to defend themselves against such a self-service mentality, authors have created their collective management organisations in the form of cooperative societies. Through these cooperative societies they are willing to provide the necessary means for their rights to be managed effectively. This is really not the place for a political intervention.

The results from the cost analysis will help to save further costs where necessary. In that sense, it is a welcome instrument for analysis for business activities. The plan that all costs incurred by collective management organisations should be controlled by the supervisory body, however, has to be clearly rejected. Members wish to and can control their own private cooperative society. They are the first to be interested in a well-functioning and cost effective society. After all, everything that would be expended senselessly would be lost to their own personal income. SUISA members neither want to lose the remuneration they are due nor their personal right to decide on their own, private collective management organisation.

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