Buma/Stemra has drawn up the budget for 2022. This has been discussed with the Council of Rights Owners and approved by the Supervisory Board. We are pleased to share the key figures with our members and affiliates in this financial portal. Below we first outline the developments in 2021 on which the expectations for 2022 are based.
Developments in 2021
The great uncertainty regarding developments in 2021 prompted us last year to work out several possible scenarios in addition to the moderately optimistic budget, including a scenario in which there would be no recovery in 2021.
At the time of preparing the 2022 budget, it is clear that recovery in the live performances market segment has not yet taken place and that less was invoiced to work & sales spaces and restaurants and bars due to the forced lockdown in the first half of 2021. Due to COVID-19, collection of royalties from these market segments is by about € 18 million lower than budgeted. However, this impact is more than offset by positive developments in other market segments. Fees collected from online streaming and video on demand grew faster than expected, partly due to improved contract arrangements. In the RTV segment, the advertising market recovered faster than expected, resulting in positive final settlements for 2020 and higher advances in 2021. In addition, royalties from Audio-visual Commercials are higher than budgeted due to the large number of well watched (sports) events in 2022. In total, Buma/Stemra expects to collect more in 2021 than the budgeted € 193.8 million, which means that the decrease compared to 2020 will be smaller than previously expected.
The distribution in 2021 will be well over the budgeted € 172.8 million, partly due to the mentioned positive developments in collection, higher surcharges and payment of Stemra’s continuity reserve. Including the extra distribution of older Home Copy fees, the distribution in 2021 will exceed the level of 2020.
As a result of cost-cutting measures, management costs in 2021 will remain well below the budgeted € 31.2 million. In addition, based on the provisional realisation, the investment results are expected to be more positive than the budgeted standard return of € 2.8 million.
The actual 2021 figures could deviate from these expectations* and will be communicated after an audit, via the annual reports, in the runup to the General Members’ Meeting of May/June 2022.
Expectations and plans for 2022*
The increase in online royalties is expected to continue and Buma/Stemra is committed to strengthening its position in this market segment. The 2022 budget does not assume a long-term, full lockdown and forced closure of work & sales spaces and restaurants and bars. For live performances, it is estimated that in 2022 there will be a recovery to 70% of the pre-COVID-19 level. The latter represents the greatest uncertainty in the total budgeted royalties of € 223.1 million, which would surpass the record level of 2019.
The lower royalties in 2020 and 2021 will affect the amounts available for distribution in 2022. Regular distribution is unlikely to return to pre-COVID-19 levels before 2024. As in 2020 and 2021, Buma/Stemra is committed to keeping the total distribution as high as possible. For example, based on the amended distribution rules, in 2022 a larger proportion of previously non-distributable fees can be paid out. In addition, after the 2021 financial statements have been drawn up, an assessment will be made as to whether an additional amount can be made available from existing buffers for payment to rights owners.
The 2022 budget contains a number of management cost items that were already budgeted for in 2021, but which were temporarily postponed due to cost savings. Any longer postponement of change and improvement plans does not seem feasible without consequences for the achievement of strategic goals and staff well-being. Partly for this reason, the budgeted management costs for 2022 are higher than those for 2021. The 2022 management costs include € 2.1 million of incidental costs for the replacement of our obsolete IT system. The phased implementation of the new system is expected to yield the first cost savings by the end of 2022. From 2023 onwards, Buma/Stemra will increasingly benefit from this investment.
The cost percentages, including the ratio of management costs to collected royalties, are lower than in the 2021 budget. For Buma/Stemra the cost percentage for 2022 is expected to be a total of 14.8% of budgeted royalties. After 2022, once the incidental high costs of replacing the obsolete IT system normalise and the results of the implementation of the strategy become visible, the cost percentages are expected to decrease.
In 2022, the same fixed withholding rates for administration fees per section as in 2021 will be applied. The temporarily higher administrative expenses are not fully included in this, which results in a budgeted funding shortfall of € 1.8 million for Buma/Stemra jointly. An eventual deficit for 2022 will be covered by existing buffers. The deduction for social and cultural purposes has also been kept the same as the current practice in Budget 2022.
The Buma/Stemra team looks forward to taking up the envisaged improvements in 2022 and to creating momentum: To the Beat of the Drum!
Hoofddorp, December 2021
Bernard Kobes, CEO
Marleen Kloppers, CFO
* Realisation may deviate from expectations, for example because assumed events do not occur as expected and the influence this has may be significant.
Under this item, the management costs are related to the copyright royalties. The standard is 15%.
In the 2022 budget Buma/Stemra jointly will meet this standard with a 14.8% cost ratio. On the basis of the provisional cost allocation, Stemra is expected to arrive at a cost ratio of 15.9%.
A decline is expected once the incidental high costs of replacing the obsolete IT system normalise and the results of the strategy implementation become visible.
Under this item, the management costs are related to the distribution. The standard is 15%.
In the 2022 budget Buma/Stemra jointly does not meet this standard with a 15.8% cost ratio. This is mainly due to the COVID-19 impact on Buma’s funds available for distribution and the incidental high costs for the replacement of the outdated IT system. Once these effects normalise and the results of the implementation of the strategy become visible, this cost ratio is expected to decrease. Stemra is, however, expected to satisfy this standard in 2022.
The standard focuses on the trend of the management cost level. The standard stipulates that the costs should not increase any more than the consumer index price of the year to which the annual report relates.
The budgeted cost increase in 2022 will turn out higher than the change in the consumer price index for the year. This is due to the catching up on improvement and change initiatives postponed from previous years, including the replacement of the IT system. The actual change in the consumer price index for 2022 will not be known until early 2023.
The deficit from ordinary activities for 2020 was taken from the appropriated reserve. The extraordinary expense for the payment into the Music Industry Emergency Fund was taken from the continuity reserve. This appropriation of the result is included in the financial statements.
Under this item, the management costs are related to the distribution. The standard is 15%.
In the 2021 budget, this standard is not satisfied. This is primarily because of Buma’s decreasing distribution in 2021, arising from the lower collection. Stemra is expected to satisfy this standard, however; distribution there is expected to increase, especially due to the catching up on private copy funds from previous years.
The standard focuses on the trend of the management costs level. The standard stipulates that the costs should not increase any more than the consumer index price of the year to which the annual report relates.
The budgeted cost increase in 2021 will turn out higher than the change in the consumer price index for the year. This is due to the catching up on improvement and change initiatives postponed from previous years, including the replacement of the IT system. The actual change in the consumer price index for 2021 will not be known until early 2022.
Over the series of several years, since the introduction of the standard, the development of the management costs has remained within the development in the consumer price index.
Under this item, the management costs are related to the copyright royalties. The standard is 15%.
In the 2021 budget, this standard is not satisfied, mainly because of the decrease in collection of royalties as a result of the coronavirus measures. The budgeted management costs are also increasing, especially in connection with the necessary replacement of the outdated IT system. Without the impact of the coronavirus, the expense ratio would have remained below the standard of 15.0%.
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The management costs increased by 4.3% compared to 2019, to € 4.6 million, mainly as a result of allocated costs for the IT system replacement programme started in 2020 and because of the increase in variable costs for outsourcing the processing of Online music use, which increased in line with the growth in this market segment.
Stemra’s management costs in 2020 consisted of personnel costs (€ 2.1 million), general costs (€ 2.4 million) and accommodation costs (€ 0.1 million).
The management costs increased by € 0.9 million to € 22.7 million compared to 2019. Of this, € 0.5 million related to the IT system replacement programme started in 2020. Cost control measures, including a recruitment freeze, ensured that Buma’s management costs remained € 1.3 million under the budget for 2020. As in 2019, an allocation key of 83/17 (Buma/Stemra) was used.
Buma’s management costs in 2020 consisted of personnel costs (€ 10.1 million), general costs (€ 10.0 million), depreciation costs (€ 1.8 million) and accommodation costs (€ 0.8 million).
The surplus of the operating statement for 2019 is added to the appropriated reserve. This appropriation of the result is included in the financial statements.
The difference between the realised investment result (€ 8.7 million) and the normative investment result that is used to partially cover the management costs (€ 2.0 million), i.e. €6.7 million, was added to the appropriated reserve. This appropriation of the result is included in the financial statements.
The difference between the realised investment result (€ 15.9 million) and the normative investment result that partially covers the management costs (€ 2.2 million), i.e. € 13.7 million, is added to the appropriated reserve. This appropriation of the result is included in the financial statements.
The standard focuses on the trend of the management costs level. The standard stipulates that the costs should not increase any more than the consumer index price of the year which the annual report relates to.
Potentially, the 2020 cost increase due to initiatives for improvement and change will be higher than the CPI change in that year. This cannot be determined – and if necessary explained – until the actual CPI change is known at the beginning of 2021.
Under this item, the management costs are linked to the distribution. The standard is 15%. This standard is met in Budget 2020.
Under this item, the management costs are linked to the copyright royalties. The standard is 15%. This standard is met in Budget 2020.
The CPI movement in 2020 was 1.3%. This standard was not met in 2020. This was due on the one hand to the strong increase in collected copyright royalties for Online music use and the related increase in costs for outsourcing of the processing. On the other hand, the costs of maintaining the outdated IT system and the IT transition that has been started have increased.
The management costs at Stemra have decreased by 21.5% compared to 2015, from € 5.9 million to € 4.6 million. The joint costs of the Buma/Stemra work organisation increased by 0.7% in the same period. The cumulative increase in the consumer price index since 2015 is 7.5%. Over the series of several years, Stemra and the joint Buma/Stemra work organisation met the standard that management costs should not increase more than the consumer price index.
Under this item, the management costs are related to the distribution. The standard is 15%. This standard was met in 2020.
Under this item, the management costs are related to the royalties. The standard is 15%. This standard was met in 2020.
The CPI movement in 2020 was 1.3%. This standard was not met in 2020. This was due on the one hand to the strong increase in collected copyright royalties for Online music use and the related increase in costs for outsourcing of the processing. On the other hand, the costs of maintaining the outdated IT system and the IT transition that has been started have increased.
The management costs at Buma have risen by 6.9% compared to 2015, from € 21.2 million to € 22.7 million. The cumulative increase in the consumer price index since 2015 is 7.5%. Over the series of several years, Buma met the standard that management costs should not increase more than the consumer price index.
Under this item, the management costs are related to the distribution. The standard is 15%. This standard was met in 2020.
Under this item, the management costs are related to the royalties. The standard is 15%. This standard was met in 2020.
Total income from contributions and administration fees withheld from distribution decreased by 3.0% in 2020 despite higher distributions. The reason for this is that in 2020, a relatively large amount was distributed in sections where a low percentage is withheld (Audiovisual Commercials and Abroad). Distributions in the RTV section, on which the highest percentage is withheld, actually decreased compared to 2019.
The financial income and expenses in 2020 mainly concerned the net investment result (€ 8.7 million). In 2020, a return of 4.9% was achieved on the investment portfolio. In particular, investments in equities (+13%) and emerging markets (+8%) achieved good returns. It was a turbulent year, however, in which the value of our investments fell sharply following the outbreak of the Covid-19 pandemic in March. A normative result was used to partially cover management costs; the additional investment result was added to the appropriated reserve through the appropriation of the result.
Income in 2020 increased by 3.6%, mainly because a higher deduction of administration fees was needed to cover the management costs.
Because we increasingly license the international Online music use of the repertoire registered with us directly to large Digital Service Providers, the non-Online markets in particular increasingly have an influence on the royalties from the market segment Abroad (collection via sister organisations). Collection from abroad showed an increase in 2020 (€ 0.4 million). That was better than expected; for 2020 we had taken into account a carve-out effect of the Online royalties.
The revenues Stemra receives from the Private Copying Foundation (Stichting Thuiskopie) have fluctuated in recent years, particularly as a result of supplementary payments received under the out-of-court settlement of the dispute with the Dutch State. The decrease in 2020 was mainly due to the 20% reservation that the Private Copying Foundation retained because of the main distribution that has yet to be determined.
Online has been an important growth segment for a number of years. The increase in royalties in 2020 exceeded expectations. Online music use increased strongly, both in terms of streaming and video on demand. Stemra concluded new licence agreements with several large parties, which contributed to further growth. Additional royalties were also collected for usage in previous years. In 2020, 32% of Stemra’s total rights collection came from Online (2019: 23%) and the growth in this category compensated for the decline in the traditional Stemra markets.
The income from the Radio & TV market has been under pressure for several years now. The decline in watching TV linearly affects the size of the market for TV commercials. The outbreak of the Covid-19 pandemic caused advertising revenues to fall sharply. For TV, this recovered to more normal levels in the course of 2020, the recovery was more limited for Radio. The revenues in 2020 were higher than in 2019 due to the growing on-demand income of TV channels, which results in a larger share in rights revenues for Stemra. In addition, due to a new regulation, the Radio & TV rights revenues in the previous year 2019 were incidentally under pressure as the result of a refund of rights revenues for 2018 to local and regional broadcasters.
The royalties from Productions In Own Management (PIEB) rose in 2020 due to a large one-off gain of € 1.8 million from an audiovisual commercial during the Super Bowl (American football) in the United States.
The royalties from BIEM contracts for mechanical music carriers, a traditional Stemra market segment, dropped even further in 2020 due to the contracting market for mechanical rights, particularly for CDs.
Because we increasingly license the international Online music use of the repertoire registered with us directly to large Digital Service Providers, the non-Online markets in particular increasingly have an influence on the royalties from the market segment Abroad (collection via sister organisations). The decrease in 2020 was less than expected; we had taken into account a larger carve-out effect of the Online royalties.
Online has been an important growth segment for a number of years. The increase in royalties in 2020 exceeded expectations. Online music use increased strongly, both in terms of streaming and video on demand. Buma concluded new licence agreements with several large parties, which contributed to further growth. Additional royalties were also collected for usage in previous years.
The royalties from public use in Restaurants and bars decreased by 40% in 2020 due to the compensation for the periods when this sector was forced to close.
The income from public use in Workspaces, shops and stores decreased by 4% in 2020 due to the compensation for the periods when sales areas were forced to close.
In 2020, the royalties from the Live performances market fell by 54% as Covid-19 caused the cancellation of virtually all performances and events from March onwards. The number of licensed performances and events fell by 65% from over 101,500 in 2019 to over 36,000 in 2020.
The income from the Radio & TV market has been under pressure for several years now. The decline in watching TV linearly affects the size of the market for TV commercials. The outbreak of the Covid-19 pandemic caused advertising revenues to fall sharply. For TV, this recovered to more normal levels in the course of 2020, the recovery was more limited for Radio.