Ashcroft addressed the MPA AGM last week in London via MCPS chair Nigel Elderton, who read out a prepared speech. Ashcroft was unable to attend the event.
The PRS exec noted that £1m in IT-related cost-saving measures were on the cards for 2012 - and noted that German society GEMA will shortly announce an intention to buy into copyright database ICE.
However, he also admitted the finances of MCPS - which posted a 13.2% decline in recorded music media licensing revenues in 2011 - was "not good and getting worse".
You can read Ashcroft's speech (read out by Elderton) in full below:
I will touch on the financial position of MCPS, your collecting society, and the plans in place to address the challenges it faces. I will also update on the strategic direction of the organisation and the progress made in our plans to work with other societies, creating a back-office processing hub.
Firstly the financial position. I do not need to tell you that our revenue is on a downward path as CD sales continue to decline. Royalty income collected from recorded media licensing in 2011 was £101.7m down 13.2%. Mechanical royalties distributed only declined by 2% in part because of the growth we have witnessed in broadcast and online. The financial health of MCPS is not good however and in fact it is getting worse. In 2011 the company made a loss of £2.5m; we need to be open and honest about this fact and work together to address this. Robert wrote to members earlier this year outlining the problems faced and the short-term measures that the PRS board had agreed to while the situation is addressed.
As Robert mentioned: "Though we strive to keep costs as low as possible we are not able to reduce either total costs or those allocated to MCPS in the same proportion as MCPS' royalty income is decreasing; without some changes, MCPS would face significant financial losses in 2012".
I'd like to thank all of the board members, the team at PRS for Music and those who helped from the Music Publishers Association to develop this interim solution. PRS have agreed to take a greater share of the costs of running the Alliance, known as PRS for Music, while the quest for a longer-term solution continues. It is always a difficult decision to raise commission/administration rates but it is necessary and members of both societies have broadly accepted the news, realising the clear benefits of maintaining the alliance and the continued processing of mechanical royalties.
So what are we doing to address this situation?
A task force has been established comprising members of both the PRS and MCPS boards chaired by the Chief Financial Officer Craig Nunn and with the assistance of outside consultants. This task force is helping Robert and his management team to analyse all costs within the society and as broad as possible an array of potential solutions. Let me assure you that nothing is off the table. All possibilities will be examined and we appreciate that tough decisions will need to be made. Mechanical royalties from physical sales will only continue to decline and although royalties from broadcast and online services are expected to continue to increase over the next few years, overall revenues will not return to growth for a number of years. During this time it will still cost money to collect, process and distribute these royalties to the high standards that you, our publisher members, expect, so we must look to all means available to us to reduce our overall costs.
The task force is due to report to the boards by the end of the year and we will keep you all updated on progress. I want to assure you that the directors and management of MCPS, and PRS for Music, understand this complex problem and are working hard to address it. The partnership of PRS and MCPS is a strong one, and both societies derive great benefits by sharing costs and working together. It is in all our interests to ensure its continued success.
So to the future. Consolidation is essential. MCPS is not alone in experiencing financial pressure; other mechanical copyright collecting societies worldwide are suffering from the effect of declining CD sales. I am pleased to inform you that our joint venture with the Nordisk Copyright Bureau is now operational, allowing us to evaluate the possibility of decommissioning our old systems, potentially saving over £1m a year in IT costs. This is just part of the potential benefits wider consolidation can bring.
The team are also in active discussions with other mechanical rights organisations across Europe who may wish to share processing capability and join the new venture, formed through the alliance with NCB. MCPS is now successfully processing the central licensing agreement for EMI Records, which has boosted the society's revenue. This win demonstrates that despite cost pressures, MCPS is still capable of delivering a high level of service, which is vital if it is to win the new business needed to make a positive contribution to the financial position.
Robert has introduced a clear strategy at PRS for Music, which outlines the work to be completed over the next five years. A comprehensive organisation review has been undertaken - the first in the history of The Alliance - leading to a more effective organisation, with clear lines of accountability and responsibility, making it easier to deliver the mission, vision and strategy.
The work of PRS for Music will be guided by five core priorities:
o Promoting and protecting the value of copyright
o Growing our revenue
o Running our business more efficiently
o Offering improved services to members
o Partnering with other societies to consolidate both front and back offices to deliver better service at a lower cost
This strategy will bring considerable change and improvement to the organisation and maintain its position at the forefront of collective management, both here in the UK and in Europe.
Creating licensing and processing hubs and a functioning Global Repertoire Database are core to this plan. You'll all be aware that ICE, the copyright database developed by PRS for Music and STIM, was chosen to provide the technology on which the future GRD is based, while our German counterparts, GEMA, are expected to announce shortly their intention to become a shareholder in ICE.
Both these developments represent significant votes of confidence in a venture that has had its challenges, we all realise that, but which is now proving to be an essential component of the future of copyright management.
The GRD itself is a project of enormous significance that will enable much more efficient processing of the use of your music, both at home and abroad, while at the same time reducing error, duplication and waste across the society network.
It has taken over two years for agreement to be reached as to how to build this vital piece of infrastructure, but I am pleased to say that the project is now close to become a reality.
PRS for Music has been one of its strongest advocates from the outset and subject to a few issues yet to be agreed, the loans required to build it have now been committed - including, for our share, by our own Joint Boards. These will be repaid through usage fees over the years to come and I am confident will provide a sound return on your investment.
At the same time, and as outlined, we are planning to make substantial savings in operating costs by modernising and consolidating our systems, making better use of our property assets and by increasing our operating efficiency.
Consolidation in the back offices of European societies is an essential investment and in a world of split copyright licensing is vital to protecting the value of copyright itself in the current European political and legal landscape.
I want to reassure you all that while the problems MCPS faces are considerable, we have a plan to address these and progress is being made. Costs will be reduced; the tough decisions we need to make will made and new revenue sources will be sought.
In designing the future we will not be bound by the legacies of the past. Consolidation and shared processing will benefit rightsholders and customers, reducing both cost and complexity while preserving our ability to collect and distribute mechanical royalties.
Our short and medium term outlook is tough but in the long term I believe we have the right team in place to continue delivering your royalties and representing your rights.
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