Producers bear the brunt as SABC awaits a bail-out
The broadcaster struggles to meet month-to-month payments, but its royalty system means musicians have not yet been affected, writes Bekezela Phakathi
THE SABC can breathe a small sigh of relief, with various societies representing musicians expressing their satisfaction with the public broadcaster’s handling of royalty payments, largely because such payments are made only once a year.
However, the situation seems dire for television producers, who expect to receive monthly payments. The Independent Producers Organisation, which represents more than 100 independent television producers in the country, has expressed concern about the broke public broadcaster’s failure to settle invoices in full.
The SABC is facing its worst financial crisis to date and is drawing on the last of its reserves to stay afloat. It hopes to receive a government guarantee of about R1bn soon, which will alleviate the situation. The Department of Communications, in concert with the Treasury, is still finalising the rescue package.
The public broadcaster expects to make a loss of about R1.1bn for the 2016-17 financial year and its advertising revenue, which makes up the bulk of its turnover, continues to dwindle. This has been blamed on axed former chief operating officer Hlaudi Motsoeneng’s 90% policy, which has since been reversed by the interim board.
Making matters worse is the fact that most citizens, unhappy with the mess at the SABC, are reluctant to pay licence fees, which contribute about 12% to the broadcaster’s revenue.
Consequently, the SABC has been struggling to pay service providers, many of whom deliver crucial content for its television and radio platforms. The situation threatens to bring the corporation to its knees.
The public broadcaster recently told Parliament’s standing committee on public accounts that it was "behind with royalty payments" and owed artists at least R75.4m.
It disclosed that it owes the Southern African Music Rights Organisation (Samro) R14.5m, the South African Music Performance Rights Association R52.7m, the Association of Independent Record Companies R2.8m, the Composers Authors and Publishers Association, R3m and the Recording Industry of SA, R2.4m.
Spokesman Kaizer Kganyago says the SABC is "managing the situation" and is engaging continuously with content producers and associations representing musicians.
"When we negotiate with producers, we are negotiating month-to-month payments.
"With royalties [for musicians] we are negotiating for payments once or twice a year," says Kganyago. "It is no secret that we are facing a serious financial crisis."
This is of huge concern because the last payment is often the most important as it is what sustains producers or … producers use it as guarantee with the big suppliers
The immediate effects are more likely to fall on television producers, on whom it relies heavily for its prime content.
Naomi Mokhele, of the Independent Producers Organisation, says producers have been engaging with the SABC on the nonpayment issue.
The SABC has met some of its obligations, she says.
"However, there is still concern that some of the producer members, especially the larger production companies, are still not getting paid their full invoices or the last payment after final delivery," says Mokhele.
"This is of huge concern because the last payment is often the most important as it is what sustains producers or … producers use it as guarantee with the big suppliers."
Samro publisher service consultant Victor Mampane says: "The money that the SABC is talking about now is money that should be paid this year for 2018-19."
Samro is a collecting administration business representing more than 12,000 music creators in the country.
Mampane says that because fees are paid a year in advance, the crisis at the SABC has not yet directly affected musicians and music producers.
The deputy chairman of the Association of Independent Record Companies, Stanley Khoza, says: "The reality is there has not been much of an impact … we are engaging with the SABC and they have made it clear that they will pay the outstanding monies."
Recording Industry of SA acting CEO Nhlanhla Sibisi says negotiations are continuing and it is not all "doom and gloom".
Sibisi says: "We are in talks with the SABC. From our perspective there is no crisis … we understand that they are facing serious financial problems."
The Recording Industry of SA is a trade association that represents the collective interests of producers of music sound recordings in SA.
The association has about 3,000 members, among them the big three record labels: Sony Music, Universal Music and Warner Music.
The SABC spends between 3% and 4% of its annual turnover on local music content. Turnover was just more than R7bn in 2016.
But local artists have raised concerns about the effective monitoring and reporting of music needle time (the time allocated by a radio station or platform to the broadcasting of music). The lack of monitoring can reduce what is paid out to musicians.
Most local production houses and artists depend on the SABC for royalty payments (more than 50%). The rest of the payments are derived from private broadcasters such as MultiChoice and others, including online platforms.
A MultiChoice representative says the company has invested about R7.5bn in local content since 2013.
"Our investment in local stories and programmes has reinvigorated the film and television industry, resulting in a proliferation of exceptional original local productions.
"We have also seen a new breed of local production companies emerging."
The representative cites Ferguson Films, which is owned by Connie and Shona Ferguson and is popular for Igazi, The Queen and Rockville.
There is also Idols producer Sic Entertainment, which is co-owned by Proverb. Parental Advisory Productions is owned by Lungile Radu, Thomas Gumede, Siyabonga Ngwekazi and Simphiwe Mhlongo.
"These companies produce a variety of shows for M-Net, which means they get ongoing work making their businesses sustainable ... we agree payment terms with them as part of the contracts, which are usually one calendar month providing all deliverables have been met," the MultiChoice representative says.