The year 2020 brought extraordinary and challenging circumstances. The first nation-wide Covid-19 measures were announced on 12 March. Restaurants and bars, live performances and shops were closed for much of the year, and festivals and events were first postponed and then cancelled. Radio and television stations contended with shrinking advertising revenues.
This resulted in a decrease in copyright royalties from Buma’s market segments affected by the Covid-19 measures. This decrease was partly compensated by the strong growth in Online royalties. At Stemra, the decrease in collections from the traditional markets for mechanical rights, such as the sale of audio carriers, was more than compensated in 2020 by the growth from Online music use. In total, the copyright royalties of BumaStemra amounted to € 203.5 million in 2020. That is 7.4% below the level of record year 2019.
A record total of € 192.7 million was distributed in 2020. Of this, € 184.1 million was paid out in copyright royalties to rights owners in the Netherlands and abroad. The remainder of €8.6 million was added to the Fund for Social and Cultural Purposes. This represents an increase of 1.4%: the total in 2019 was € 190.0 million. This increase was partly achieved by accelerating the distribution of copyright royalties for the RTV and Live Performances segments. However, the income per music maker varies greatly.
BumaStemra also helped members and affiliates by contributing, in cooperation with the Buma Social Fund and Buma Culture, € 2.8 million to the Music Industry Emergency Fund (“Noodfonds Muziek”) in the first months of the crisis. An Investment Fund of € 2.5 million was also formed in cooperation with the Ministry of Education, Culture and Science. Whereas the Emergency Fund is aimed at relieving initial needs, this Investment Fund focuses on encouraging new initiatives in music creation.
The Covid-19 crisis has major consequences for music creators and publishers affiliated with BumaStemra, for music users and for BumaStemra itself. In 2021, as well, royalties are under pressure and lower collection volume results in less distribution. Although the future is still uncertain for the short term, BumaStemra is getting ready. In 2020 we launched our new strategy: To the Beat of the Drum. We did this during the pandemic, but in the knowledge that the impact of the virus would diminish in the foreseeable future and with the conviction that BumaStemra could do better. As part of this, a start was made on the necessary replacement of the outdated IT system. As a result of the increase in the IT maintenance costs and an increase in costs for outsourcing the processing of online music use, which increased in line with the growth in this market segment, the total management costs increased by € 1.1 million to € 27.3 million. Due to cost savings, including a recruitment freeze and reduction in external hiring, management costs remained € 1.5 million under the budget for 2020.
Despite lower collection volume, BumaStemra’s joint cost percentage came to 13.4% in 2020, meaning that we complied with the standard that as a rule, costs may not exceed 15% of the collection. With a joint cost percentage of 12.9%, BumaStemra also complied with the standard that costs may not exceed 15% of the amount in copyright royalties distributed. Management costs rose faster than the consumer price index in 2020: 4.3% versus 1.3%. For the period from 2015 to date, the management costs of BumaStemra did not increase faster than the consumer price index.
The stock market climate in 2020 was turbulent. After the outbreak of the Covid-19 pandemic, the investment portfolio lost 8% of its value in a very short period of time. Due to a strong recovery, however, 2020 ended with a positive return of almost 5%. The net investment result of € 8.7 million was higher than the predetermined notional return, so an amount of € 6.7 million was added to the appropriated reserve.
The appropriated reserves available mean that deductions for administration fees, which cover management costs, do not need to be increased in 2021. BumaStemra thus avoids any additional impact on the funds available for distribution.
We are looking forward to contributing in what remains of 2021 and subsequent years to ensuring that music continues to be the connecting factor in a society that needs this more than ever.
Hoofddorp, 2 June 2021
Bernard Kobes, CEO
Marleen Kloppers, CFO