The 2020 budget was adopted by the Supervisory Board in December 2019 based in part on our latest expectations for the financial year 2019: copyright royalties collected and distributions above budget, lower operational expenses and investment results well above the standard return. After the audit, the realisation for 2019 will be published in the annual reports in the run-up to the General Members’ Meeting on 27 May 2020. The expectations for 2020 are now presented in relation to the initial budget for 2019 and the realisation for 2018 is included for comparison purposes. Compared to the 2019 budget, Buma/Stemra expects to collect €9.7 million more copyright royalties in 2020 and to distribute €11.1 million more to rights owners.* These expected increases come mainly from the growing Online market.
In 2019 Buma/Stemra initiated a strategic reorientation process. One of the key objectives is to achieve more added value for rights owners; they expect an optimal e-commerce experience. This is what the Buma/Stemra organisation, with all its systems, processes and procedures, must be set up for. The go-live of MijnBumaStemra represents an important step in that direction. Reactions are generally positive, but much remains to be done; new functionalities are currently being developed. Buma/Stemra will differentiate its services more so that they better meet the specific wishes and needs of the various groups of rights owners. The aim is to represent repertoire as widely as possible, by means of an optimal customer experience for all rights owners. We also want to present ourselves better and more distinctly to licensees as a proactive service provider, a party that provides added value. Each specific target group will receive targeted communications and will be guided through processes in a user-friendly manner; a customer journey through Buma/Stemra.
Several initiatives for improvement and change have been developed to flesh out the strategy implementation. Some initiatives already started in 2019, others are planned for 2020. In order to get initiatives off the ground successfully while safeguarding continuity, it is expected that more capacity is needed and/or that specific expertise is needed that is currently lacking. The budget assumes an increase in the total staff complement by 10 FTEs; the related cost increase is largely offset by the reduction in the costs of external hiring and consultancy fees.
In the budget for 2020, the aggregate operational expenses of Buma/Stemra, expressed as a percentage of the copyright royalties collected and as a percentage of the distributions, come to 13%. This meets the set standard of 15%. Buma and Stemra also remain within these standards in the separate budgets. The third standard, which concerns a maximum cost increase equal to CPI development, may be exceeded in 2020; however, this cannot be determined and, if necessary, explained until the actual CPI change is known at the beginning of 2021. The 2020 budget includes 3.5% higher operational expenses compared to the 2019 budget; the operational expenses realised in 2019 are expected to be below this budget at the lowest level in years. As soon as initiatives for improvement and change result in more efficient processes, further automation and digitisation of our services and an increase in the volume of copyright royalties collected – as a result of a growing member base and represented repertoire – we will be able to reduce cost percentages further.
It should be noted that this budget for 2020 does not include the necessary replacement of the entire Buma/Stemra’s IT infrastructure. The project approach is currently being worked out, including the scope of the programme, the phasing and budgeting and the objectives to be achieved in terms of transparency, speed and systematic cost reduction. The impact of this project on operational expenses is still expected to be marginal in 2020; development expenditure will be capitalised and only be depreciated upon commissioning.
We look forward to making 2020 a successful year!
Bernard Kobes, CEO
Siebe van Elsloo, acting CFO
* realisation may deviate from expectations, for example because assumed events do not occur as expected and the influence this has may be significant