Residuals from online collections – what’s that and how can I participate in them?

In mid-December, we pay our members the fourth settlement of their online revenues this year. But this time, we’ll put a cherry on top! This “cherry” comes from the so-called “residuals” about the distribution of which the SUISA Board had decided in autumn 2021. In this context, here’s the most important piece of advice: Register all works as soon as possible with SUISA! Text by Anke Link

Residuals from online collections – what’s that and how can I participate in them?

Due to an international agreement with online music platforms, SUISA amended its distribution rules in the online collections area. (Photo: MandriaPix / Shutterstock.com)

“Residuals” are amounts paid by online music platforms for works or parts of works which have not been claimed by any collective management organisation. The reason for this is often that the works or parts of works have not been registered by the authors or publishers with their collective management organisations. SUISA can only collect licence fees via the SUISA Digital Licensing AG (SUDL) from the platform for works that have been declared and completely documented. This is why it is important that you register the works as soon as possible! Best before they are published online (details on this also in the blog article “Online licensing activities require early work registrations” of 29 October 2020).

International rules on how to deal with “residuals”

In the summer of 2020, an international working group, consisting of CMOs (SUISA was also part of it), major publishers and the most important platforms agreed on binding rules regarding how to deal with “residuals”: The money attributable to unclaimed works or parts of works is divided among all licensors of a platform in proportion to their respective market share. SUISA thus receives a share for each territory for which it licenses a platform, according to the importance of its repertoire in relation to the other repertoires used in that country.

This is just one more reason why it is important that works are registered as soon as possible, as this increases SUISA’s repertoire share. What needs to be mentioned in this context is that the members undertake towards SUISA to register their works within a certain period anyway: in the case of authors, this is within a month after the work has been created and in the case of publishers within a month after the work has been published.

It will now also be possible via SUISA Digital Licensing to issue an invoice for this period even after the expiry of an already distributed usage period, and this up to a maximum of 18 months after the end of the usage period. For works which have been fully registered with SUISA within the period, SUDL will be able to request the respective licence fee from the platform.

Only when the period within which a retroactive invoice can be issued, has expired, “residuals” will be determined. This means: The contributions for works or part of works which have, by then, still not been claimed by a collective management organisation, will be paid by the online music platforms to all of its licensors in proportion to their repertoire share.

Changes to the SUISA distribution rules

Up to now, only iTunes had paid “residuals” to SUISA. With the agreement made in the summer of 2020, the large platforms are now following suit. This way, a binding provision became necessary in the distribution rules of SUISA, about which the SUISA Board of Directors decided in September 2021. It will be applied to the fourth online distribution 2021 for the first time.

SUISA distributes its share in the “residuals” as a blanket adjustmenton the current online distributions. In contrast to revenues for works that have not been documented or have been only partially documented, which are used offline (e.g. at concerts), the “residuals” will not be reserved for potential late or subsequent settlements at a later point in time.

The reason for this is, on the one hand the disproportionately high costs which such work-based adjustments would entail. On the other hand, our analyses have shown that the works which only get registered fully after the 18-month period has expired, only have little economic significance. Incidentally, even our sister organisations abroad do not reserve “residuals” from the distribution for longer periods.

Whether we are talking about online or offline uses: A fast work registration is an advantage in any case because it facilitates a quick payment of the licensing revenues. Late work registrations, however, always carry the risk of income losses for the respective rightsholders. Additional costs are also created for SUISA which is a disadvantage for all rightsholders.

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