PPL controls a number of rights in the UK on behalf of its record company members, including the right to broadcast and play in public sound recordings (and the right to copy sound recordings for those purposes). PPL also controls a number of new media rights, such as internet radio rights and the use of sound recordings in web TV, on behalf of its members. These new media rights are licensed on a non-exclusive basis by PPL (and a member may choose not to permit PPL to license new media services on its behalf).
With the rights that it has been granted, PPL licenses a variety of music users. In return for permission to use PPL repertoire, licensees will pay licence fees to PPL. The nature of the fees depends on the type of licence. For example, public performance licence fees are set in accordance with particular tariffs; whereas broadcast licence fees may be a share of gross revenues. The fees for new media licences are often calculated using the number of times that sound recordings have been streamed to recipients.
PPL’s financial year runs from 1 January to 31 December and revenues relating to that year are distributed as soon as possible in the next financial year. (Click here to view the payment schedule).
Before collected revenues can be distributed, PPL deducts its administration costs. These deductions cover the running and development costs of PPL’s business.
As the costs of licensing, collecting and distributing revenues may vary depending on the rights that are being licensed, the costs deducted from certain revenue streams may vary. For example, the costs involved in licensing and collecting money from the hundreds of thousands of premises which publicly perform sound recordings will be higher than licensing a smaller number of TV and radio broadcasters. Therefore, the costs deducted from public performance revenues and broadcast revenues will be apportioned accordingly.
PPL aims to keep its administration costs as low as possible. In 2008 PPL’s overall cost to income ratio was 14.6%.
In addition to administration costs, PPL may deduct anti-piracy contributions from collected revenues. Anti-piracy activities are crucial to protect the value of recorded music and the revenues of record companies and performers. At each Annual General Meeting, PPL asks its members for approval to make anti-piracy contributions to the BPI and IFPI (who both undertake anti-piracy activities on behalf of record companies and performers) and the approval has always been granted. PPL may also make other industry contributions as are approved by the PPL Board or at an Annual General Meeting.
PPL aims to allocate revenues to individual sound recordings according to the actual usage of each sound recording, or where this is not available, comparable usage information.
Some licensees must report actual usage of PPL repertoire. For example, actual usage is required from various TV broadcasters and radio broadcasters . PPL aims to increase the number of licensees reporting in this way (particularly as digital technology makes reporting easier).
It is not practical to require all licensees to report actual usage. For example, PPL licenses hundreds of thousands of music users who publicly perform PPL repertoire at their premises (by playing the radio or CDs etc.), and it is not feasible for each licensee to report their actual usage.
Where PPL does not have actual usage information, PPL may use a variety of methods to ascertain usage. For example, for small radio stations, PPL may apply usage information received from larger stations that play similar genres of music. For public performance revenues, PPL will receive usage returns from specialist companies who supply ‘background music systems’ to thousands of premises. PPL also works with PRS for Music to send agents into bars and nightclubs to monitor usage (with some agents now using digital audio-finger printing technology). Further, comparable chart or broadcast data may be used.
After PPL’s administration costs are deducted and the relevant tax has been paid, the remaining revenues are available for distribution (known as Net Distributable Revenue). The Net Distributable Revenue is comprised of funds, each fund representing revenues received in respect of a particular type of licensing activity.
In order to allocate the funds to sound recordings in PPL’s repertoire, PPL applies usage information.
PPL matches usage information against the PPL Repertoire Database, which contains information on 9 million sound recordings, so that PPL’s systems can identify which have been used and how frequently. An important point is that in order for revenue to be allocated to a sound recording, that recording must be registered on the PPL Repertoire Database.
Each fund is divided in accordance with the relevant matched usage information, so that monies are allocated to individual sound recordings. For example, the matched usage information provided by radio broadcasters will be applied to funds received from those radio broadcasters.
PPL received 25 million instances of sound recording usage from licensees in 2008 and was able to allocate over 90% of distributable revenues to this information.
PPL matches usage reports against the PPL Repertoire Database using the following information; ISRC, main artistic name, track title, record company name, along with any catalogue numbers.
As many licensees provide usage returns in electronic form, most of PPL’s matching is performed automatically. Where PPL’s systems are unable to identify certain tracks (for example, the name of the particular artist or track has been misspelt) PPL will endeavour to manually match the sound recording.
Where a licensee has reported that it has used a particular sound recording that is not on the PPL Repertoire Database, PPL will not be able to match that sound recording. Therefore, record company members should always ensure that they have registered their repertoire on the PPL Repertoire Database as early as possible.