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June/July 2013

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Industry: RIANZ and PPNZ make way for Recorded Music NZ

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Industry: RIANZ and PPNZ make way for Recorded Music NZ

 

The last time NZ Musician had cause for a formal meeting in the boardroom that PPNZ Music Licensing and RIANZ (Recording Industry Association of NZ) share, was back in 2009.

That was for an article (see NZM April/May ’09) discussing the commercial music radio royalty rate negotiations, which were then coming to a head and due to be resolved by a scheduled 20-day sitting of the Copyright Tribunal. It was all QCs at 20 paces, with the two major radio networks, represented by the RBA (Radio Broadcasters Association), vigorously fighting the 180% rate increase proposed by PPNZ.

The outcome was a 66% raise in the radio play royalty rate, backdated to the end of 2007. On an annual basis the increased royalty ‘take’ for PPNZ has been about $1.5M – new money that has become available for return to recording artists and record labels each year.

As it happens PPNZ and the television industry are currently locked in a similar battle – this one over the royalty rate the commercial television networks pay for the use of music – but that isn’t the reason for NZM’s invite to the glass-fronted PPNZ/RIANZ boardroom. The reason is that PPNZ and RIANZ are very soon no longer going to exist – in fact, by the time you read this they officially won’t. What will exist in their stead is a new (single) organisation called Recorded Music New Zealand Limited.

Why the change?

According to Chris Caddick, who has been the MD of RIANZ for the last two years, it stemmed simply enough from the growing realisation, shared by himself and Kristin Bowman (MD of PPNZ since 2008), that they could beneficially simplify operations, communications and goals by being one organisation, rather than two.

The boards of both not-for-profit entities were in agreement and after around two years of discussion it has, as of June 18, 2013 come to be. With the change agreed by members and shareholders at EGMs for both, RIANZ was officially wound up and absorbed into PPNZ, which in turn had its name changed to Recorded Music NZ. For PPNZ the process was slightly more complex – more on that later.

Staffing levels remain essentially the same (with the loss of one MD role), but the integration of the two already joint bodies means there will be just one board of directors rather than two, a significant streamlining in itself.

More valuably for the 15 people who are now employees of Recorded Music NZ, it should make it much easier to explain and focus on the combined organisation’s various roles, the most apparent of which are in collecting and distributing the performance royalties derived from licensing the broadcast and public performance of recorded music, and producing the annual NZ Music Awards.

Other less obvious functions Recorded Music NZ will provide include collating and publicising the weekly Top 40 charts and associated website, protecting copyright through legislation, waging the ongoing war against music piracy, improving consumer understanding through the Why Music Matters campaign, aiding the local industry to come to grips with the changing digital reality and facilitating the introduction of legal music services.

Caddick says that Recorded Music NZ will continue to deliver all the same services but in a simplified way that will provide efficiencies, clarity of message and purpose.

“It’s just a streamlining of our governance structures really, back into one truly representative board and with one CEO. Working together will be more efficient. Our whole raison d’etre is to maximise the returns of licensing revenues to our membership. Everything we can do to defray costs and increase revenues is good.”

The former boss of EMI NZ, would seem an obvious candidate to take charge of Recorded Music NZ, but has instead accepted the role of chairman of the new organisation’s board.

Heading up Recorded Music NZ is Damian Vaughan (at right in the picture). There ought really to be a drum roll with that because his appointment illustrates just how big is the mood for change at the top of our music industry. Apart from anything else it is only a few years since Vaughan was employed as the Business Development Officer of IMNZ, the coalition of independent labels and distributors that was, in some part, established to allow the indie minnows to take on the major labels, which have traditionally dominated RIANZ.

Vaughan has been on a fast track since returning from the UK in 2009 where he had the role of Broadcast & Online Development Manager for PRS for Music, the British equivalent of APRA. He was IMNZ’s only full time employee for just a year (establishing the Taite Music Prize in that time), before taking up the NZ Licensing Manager position at APRA/AMCOS. That role will also stand him in very good stead in his new position.

Vaughan says that during his three years at APRA/AMCOS he worked closely with PPNZ on several joint licensing initiatives, including the proposed joint venture for all public performance licensing that is still in development. That joint venture will see the currently separate APRA and PPNZ public performance licenses combined into a “one-license solution to the marketplace” and is expected to become fact later this year.

While not yet set in concrete, it is another sign that the heads of these organisations have been taking a constructive approach to solving the challenges associated with the new digital reality of the music business.

PPNZ has seen significant revenue growth in recent years, with total licensing revenues almost doubling since 2005. As Caddick puts it, PPNZ has been accelerating.

“When Kristin was brought in to run PPNZ it was very definitely so PPNZ could focus on revenue growth from the marketplace. And that has been done, significantly. A key part of that was the radio rate case, the other key part has been the growth in public performance revenues – and a television review is currently underway.”

He has himself accelerated things at RIANZ, revamping the Top 40 chart presentation, encouraging legal [music] service and instigating action to fight music piracy. Close to 20 legal music download or cloud-based listening services have now been licensed for our wee market.

Caddick was previously head of EMI in NZ for eight years. Between his EMI and RIANZ appointments he authored the NZ On Air music funding revision report which subsequently bears his name. It led to very significant changes in NZ On Air’s funding model (withdrawal from international market programmes and album funding, and introduction of the single-focused Making Tracks scheme).

Since being at RIANZ he seems to have continued as an agent of change, though he is quick to dismiss that notion.

“No, I think the two are totally unconnected. With NZ On Air I presented a report based on the opinion of 100 key players in the industry. At RIANZ it just seemed like an obvious step to streamline things.”

Indeed he seems to have streamlined himself right out of a job, except that his management role has been replaced with a governance one.

“I only ever agreed to a fixed term contract, which is now up. I’m thrilled that Damian is stepping into the newly created role and I’m happy now to move into the role of chairman.”

In his brief time with RIANZ Caddick has been pro-active in facilitating the likes of Spotify, Deezer, Rara and Rdio to establish direct links to NZ, and sees the availability of legal services as a key tool in fighting online music theft.

“Far and away the biggest challenge to the NZ music industry in my opinion is digital piracy. Really we have just played the role of encouraging the businesses to come here a little earlier than they otherwise might have.”

With both the RIANZ and PPNZ boards agreeing to change a new constitution was drafted for the proposed new entity, then evaluated by experienced legal council and Henri Eliot, a governance expert who had been brought in during 2011 and became acting chair for the period of the final board deliberations.

The new company has two classes of shares and a board of six – three ‘threshold’ directors, two ‘independent’ directors and a chair elected by the board. To qualify for ‘Threshold Shareholder’ status a company must have received at least 6% of the last three years’ distributions made by PPNZ. In other words, be one of the three remaining major labels.

Being an ‘Independent Shareholder’ is easier, you just need a current signed Input Agreement with PPNZ (be a rights holder – that is, own or exclusively control the master rights in the sound recording) and elect to hold shares.

“In essence PPNZ’s constituency was much greater than RIANZ,” says Caddick. “Through the RAP fund we had 1600 artists and 900 individual rights holders, whereas RIANZ was still 57 labels. By putting them together you have dramatically expanded the business platform.”

A national roadshow of explanatory meetings was offered, but in the event most of the long distance discussions were undertaken by phone, with one meeting in Auckland.

Threshold Shareholders each get to appoint one director – and the MDs of the three major labels are all on the board.

The Independent Shareholders, in combination, get to elect two directors – each for three year terms. One is designated as the ‘Artist Representative’ director while the second is labeled ‘Independent’ director. Although the independent members didn’t overly embrace the process, voting for the latter role proved so tight a run-off was needed.

The Recorded Music NZ boardmembers are:

Chris Caddick – Chairman

Adam Holt – Universal Music NZ (Threshold)

Kim Boshier – Sony Music NZ (Threshold)

Phil Howling – Warner Music NZ (Threshold)

Jan Hellriegel – Native Tongue Publishing

(Artist Representative)

Peter Baker – Rhythmethod / DRM (Independent)

The two Independent Shareholder-elected directors are intended to provide a direct link to the board to their fellow indies and act as representatives of those interests.

Caddick says the make up of the board of directors and how they should be chosen was an important debate.

“Inclusion of the three remaining majors was a given, but in addition it was agreed there should be an independent director, plus an artist representative director. It was agreed that both of these positions should be nominated and elected by the independent shareholder pool only.

“We think and trust there has been sufficient engagement in this process of electing board members and becoming Independent Shareholders, but I imagine that by the time we get to the next voting in three years time there will be substantially more engagement. It has the intangible benefit of developing a community sense. We want them to engage with us more – that would be our hope.”

Many in the industry will be hoping that the new organisation brings with it greater transparency and engagement with the public. Caddick assures that we can expect Recorded Music NZ to take a higher profile than its predecessor organisations.

“Absolutely, and a much clearer message around the things we do at the moment. That is a key goal to connect much more with the individual artists and labels. It gives us a platform for how we promote and will allow us to bring in new ideas and marketing platforms. 

Things like the Music Awards are a big thing for us, but probably not many people think of it as presented by RIANZ.”

No, and from now on we should think of it as presented by Recorded Music NZ.

www.recordedmusic.co.nz

A pocket history

PPNZ: Established in 1957, Phonographic Performances Ltd (PPL), was originally ushered in as the commercial operation of the NZ Federation of the Phonographic Industries. IPI is the international umbrella organisation started in 1933, so we got the NZFPI. Later modified to Phonographic Performances (NZ) Ltd, the not-for-profit business was officially rebranded as PPNZ Music Licensing Ltd in 2011.

PPNZ’s core role has been to collect license fees from thousands of NZ retail businesses and venues, plus (most importantly) radio and television broadcasters and digital music service providers. By licensing the use of recorded music for such public performances, PPNZ secures copyright royalties for recording artists and record companies for public performances of their recorded works within NZ. That performance-based royalty revenue is then proportionally distributed to the registered copyright owners of those works.

In 1997 PPNZ established the NZ artist-specific RAP Recording Artists & Producers (RAP) Fund which in 2012 returned around $1.5M to local artists and labels. PPNZ has a signed up membership of big and small labels and NZ artists eligible for income from the Kiwi music-specific RAP Fund. PPNZ is a member of the International Federation of the Phonographic Industry (IFPI) and also a member of the Copyright Council of NZ.

In May 2013 PPNZ employed 10 people and was headed by Kristin Bowman.

www.ppnz.co.nz

RIANZ: The Recording Industry Association of NZ, also not for profit, was established in 1978 and subsequently incorporated in 1982, when the then Muldoon-led government was planning on added sales taxes which had the major label record companies freaking out. They needed a representative voice to pitch on behalf of the industry at government level and so established the new organisation.

RIANZ also took over running the nation’s music awards in 1978. Nowadays the NZ Music Awards, from 1965 to ’72 they were known as the Loxene Golden Disc Awards and from 1972 to ’78 as the RATA (Recording Arts Talent) Awards.

Principally still an advocate for the recording industry, with fighting copyright dilution and music piracy being key digital era roles, RIANZ also produces the weekly NZ Top 40 Albums/Singles etc. charts. Since 2010 RIANZ has locally supported the worldwide Why Music Matters campaign (www.whymusicmatters.org), which seeks to better educate consumers about enjoying and buying music online.

Aside from membership fees and sponsorship revenues (which successfully cover the costs of the annual Vodafone NZ Music Awards) RIANZ is reliant on PPNZ for income.

In May 2013 RIANZ employed five people and was headed by Chris Caddick.

www.rianz.org.nz