Record labels fight to resolve royalty payment mess
The SABC recently settled its first needle-time payment for local music it had been playing for decades. It paid out R16.5m, calculated at a 75% share of R22m, which includes licensing fees for 18 radio stations for the 2014-5 financial year.
There are possibly another 15 years of overdue payments still to be made. Section 9 sound recording rights, or needle-time rights, were legislated in 2002.
The South African Music Performance Rights Association was established in 2002 and accredited in 2008. It has received no needle-time payments as it has been contesting the SABC’s formulae for payments.
The organisation claims it holds 93% of the needle-time rights on SABC playlists and has taken legal action against the public broadcaster.
The SABC money was paid to the Independent Music Performance Rights Association, an organ of the Association of Independent Record Companies (Airco), which has no known members. The organisations were buoyed in 2016 when then SABC chief operations officer Hlaudi Motsoeneng decided that the public broadcaster’s radio stations would play 90% local music.
Airco was established in 2005 with funding from the Department of Arts and Culture and Worldwide International Network as a Section 21 company, belonging to its members. About 30 independent record labels transferred their rights to Airco.
"We received one payment in four years, but previously we were being paid annually," says Airco founder member Harvey Roberts of Bula Records.
We received one payment in four years, but previously we were being paid annually.Harvey Roberts
Airco founder member
The organisation was receiving at least R4.8m a year from the SABC following a 2011 agreement structured and brokered by current Recording Industry of SA (RiSA) CEO Nhlanhla Sibisi in his capacity as an independent consultant.
Sibisi earned a commission of 8% on a monthly agreement with no fixed term of R400,000 for the licensing of music videos. "When the agreement was done in 2011, I was no longer working for the SABC," Sibisi explains.
"When the SABC became one of my clients, I disclosed to them in writing that Airco was one of my clients.
"I terminated the contract between Airco and my company effective February 2015 and I joined RiSA in September 2015."
Although Airco claims that they distributed 71% of all collections for 2010-2013, this is disputed by SA’s top independent record labels.
Gallo, the largest copyright holder of local music, together with Airco founding members including Cool Spot, Ghetto Ruff, David Gresham and Soul Candi, are leading the fight to uncover these distributions.
They have briefed media lawyer David Dison to resolve the matter.
They approached the SABC in an attempt to have the money paid into an escrow account until the issues had been resolved and the proper flow of royalties had resumed to the rights holders. The SABC’s payments on the Airco contract were stopped in April 2017.
"Airco still has to provide the SABC with specific documentation as required by Treasury regulations necessary to continue payment in terms of the 2011 agreement," says SABC spokesman Kaizer Kganyago.
Dison made a submission to the Companies and Intellectual Property Commission (CIPC) which read: "Airco is a mismanaged entity that is failing to conduct its business in compliance with the Companies Act; lacks transparency and accountability; has failed to account to its members; failed to pay royalties due to its members; does not uphold its own constitution and policies; and has generally mismanaged the funds that it holds in a fiduciary capacity on behalf of the copyright owners."
They have used that fictitious membership list to leverage funding from the Department of Arts and Culture and the Department of Trade and Industry to secure their contract with the SABC.Harvey Roberts
The submission was received by CIPC employee Kadi Petje, who is responsible for the regulation of collecting societies, but there was no response to the submission.
CIPC executive manager Nomonde Maimelahe says the Department of Arts and Culture "may be better placed to assist".
Mandla Maseko rose through the ranks of Airco to chairman in June 2016. His video production company Black Eagle Media Group is allegedly a beneficiary of Airco’s funding from the Department of Arts and Culture.
Maseko’s position is "a serious conflict of interest, to say the least", says Airco founder Roberts.
Maseko responds by saying that "this is a narrative actuated by malice and for no purpose other than the desire to scandalise our organisation and the noble work it is doing to benefit its members".
Roberts claims Airco does not have a credible membership. "Of the nearly 2,000 record companies they claim to represent, there may be 20 or 30 that are legitimate.
"They have used that fictitious membership list to leverage funding from the Department of Arts and Culture and the Department of Trade and Industry to secure their contract with the SABC.
"The industry should be working together to address these issues and create proper transparent streams of reporting and accounting so this type of situation never occurs again," Roberts says.
Worldwide International Network has suspended Airco’s membership and, according to Dison, "is anxious to assist in finding a way forward. The network is completely supportive of empowerment and transformation."
Roberts believes the solution would be the establishment of a "new bona fide organisation under the auspices of Worldwide International Network to represent the legitimate players in the independent sector".