The first half of 2021 was characterised by drastic lockdown measures. Relaxation of restrictions in our sector is still limited and the outlook for the events industry in particular is still very uncertain. The ongoing Covid-19 restrictions have major consequences for the composers, lyricists and music publishers affiliated with Buma/Stemra, and for Buma/Stemra itself.
Expectations were moderately optimistic when the 2021 budget was prepared; the second lockdown was declared shortly after it was drawn up. Because of the great uncertainty prevailing at that time, in addition to the 2021 budget we also drew up four scenarios, whereby the worst-case scenario assumed a 26% decrease compared to the collection in 2020. Although the realisation in the first half of 2021 was significantly lower than budgeted because of the lockdown, we expect – with the knowledge of today – that the realisation for 2021 as a whole will be close to the moderately optimistic budget. The annual budget and scenarios are explained at 2021 Budget.
We also expect to realise the budgeted distribution of €172.8 million (including €8.6 million allocated to the Fund for Social and Cultural Purposes). This distribution budget takes into account the impact of Covid-19 on collection in both 2020 and 2021. The budgeted distribution in 2021 is approximately 10% lower than the realisation in 2020.
In this 2021 half-yearly report*, we will provide further information about the current developments, measures and expectations.
Because of the lockdown in the first half of 2021, there was no recovery in our Live performances, Workspaces, shops and stores or Restaurants and bars market segments. As a result Buma/Stemra was able to make limited collections in these markets, specifically €13.7 million less than expected in the budget. The uncertain situation also prompted the decision to postpone the invoicing of annual licences, as a result of which approximately €16.1 million less was (advance) invoiced during the first half of 2021.
The above results in €29.8 million less collected in the first half of 2021 than budgeted for these markets. A few positive developments in other markets compensate for this to some extent, bringing the total realised collection to €24.8 lower than budgeted. Compared to the worst-case scenario, in which we took into account no recovery whatsoever, the collection realised in the first half of 2021 is €11.3 million higher.
The main positive developments are postponed collection from the RTV 2020 final settlements, faster recovery of the RTV market, higher-than-expected VOD growth, a smaller Covid-19 impact on collection by sister entities so far, above-average collection from audiovisual commercials and additional Online growth from completed contract negotiations.
If the Covid-19 impact on collection in the remaining months of 2021 is not significantly greater than budgeted, we expect total collection to be at the upper end of the budgeted range of €193.8 million to €153.6 million. This would be 5% to 7% lower than the realisation in 2020.
Distribution and initiatives
The distribution in the first half of 2021 was €0.6 million less than budgeted. This arrears has since been caught up and we expect to realise the annual budget. Partly due to the structural acceleration, the distribution realised in the first half of the year was more than 55% higher than the budget for the same period last year.
Buma/Stemra opened a second Music Investment Fund with a contribution from the Ministry of Education, Culture and Science. This fund has €2.3 million available for the development of new music and/or the new exploitation of existing music. The application period has now closed and the amounts granted will be paid out before the end of this year.
A study has been initiated into finding the most suitable methodology for a reserve policy, from the point of view of both Buma/Stemra as an organisation and that of the rights owners. The reserve policy will be put on the agenda for an extra General Members’ Meeting scheduled for 10 November of this year.
Management costs and investment result
The actual management costs in the first half of 2021 were €2.1 million less than budgeted. Measures were taken to save or defer costs. For 2021 as a whole, we expect to be well below budget and to achieve at least the targeted savings of €0.7 million. However, because of change and improvement initiatives which have been started up, including the IT replacement, the management costs are expected to be higher in 2021 than in 2020.
Mainly due to share prices rising to record highs, the investment result for the first half of 2021 was positive €4.9 million, well above the notional return budgeted. Investment results can fluctuate, however.
We expect to see an upward trend returning in the second half of this year and the following year. Especially now that the world seems to be opening back up little by little thanks to, among other things, vaccinations.
Hoofddorp, 31 August 2021
Bernard Kobes, CEO
Marleen Kloppers, CFO
* the half-yearly figures have not been audited by an external auditor