TONO's billing model is being modernized to meet the requirements of the new collective management act, as well as other requirements and expectations from the outside world that TONO must meet.
/ 28/05/2024 / Kristian DugstadThe new settlement model is simpler and easier to understand. It also provides a more direct relationship between TONO remuneration collected and paid to licensees.
TONO's board of directors adopted a new settlement model at its board meeting on May 7. The decision was made subject to approval of the overall principles of the model at TONO's annual meeting on June 11.
The framework conditions for TONO's activities have changed significantly in recent years. The Act on Collective Management of Copyright came into force in July 2021. It sets strict requirements for the management and distribution of remuneration, and sets guidelines for the possibility of conducting cultural policy through the distribution of remuneration. Remuneration funds must be distributed “… to the rights holders in a satisfactory and accurate manner …” (Section 21 of the Act on Collective Management). The Act also sets requirements for equal treatment of all rights holders.
CISAC, the umbrella organization for collective management societies worldwide, also sets requirements for its members – regarding efficiency, transparency and equal treatment of rightholders (nationally and internationally), and obligations for statistically representative distribution of remuneration where information on specific rightholders is lacking. Rights management is also characterized by increasing internationalization and stronger competition, between the management societies and with other completely new types of management actors.
Authors and music publishers choose a collective management organization based on quality, precision, and efficiency. TONO also often meets the expectation from both rights holders and licensees that there should be the strongest possible one-to-one relationship between use and the remuneration paid and disbursed.
The sum of these framework conditions – legislation, international rules, and the competitive situation – is that funds can no longer be redistributed across, or within, settlement areas in the same way as before.
TONO must meet all these demands that are placed on us in an offensive manner. Otherwise, we risk breaking the law or regulations we are bound by through agreements, falling behind in the face of competition from other management companies, and losing partners and members.
With the settlement model adopted by TONO's board on 7 May 2024, and which will be presented to the annual meeting on 11 June, TONO strives to establish a settlement practice that is easy to explain and understand, and that meets the various requirements that TONO must comply with. Here, it is a basic principle that the remuneration collected by TONO shall specifically go to those who own the repertoire that has been used in the situation in which the remuneration has been collected. For example: The money a concert organizer pays TONO for one specific concert shall, after deductions and costs, be paid to the authors and music publishers who have the rights to the music that was performed at that specific concert.
TONO's previous practice, where we have added funds from non-program areas (such as shops, hotels and fitness centers) to the broadcasting and concert area, cannot be continued as before. It is not precise enough, because the concert area does not constitute a statistically representative basis of the rights holders that have been used in the situation that has led to the payment. It is also important to note that TONO currently receives reports from 1 in 4 shops and 2 in 10 fitness centers. These non-program funds are being reduced, as technological developments mean that more and more are settled on specific reports, and find their way to the correct rights holders.
Developments are happening quickly, but they still won't happen overnight. Compensation that cannot be directly linked to reports will therefore be distributed based on the most representative data possible. Existing reports from the same and similar areas will form the basis for settlement of this money in a new model.
In some areas, such as broadcasting, TONO receives a so-called lump sum that is to be distributed over extensive music use of varying nature across a wide range of platforms and channels. In such cases, the new model strives to treat all types of performance equally, calculating remuneration based on, among other things, the market value of the channel and the amount of music used.
The goal of the new model is to create the greatest possible precision and traceability. For example, it will be easy to understand the relationship between paid and paid out fees for concerts.
The consequence of this is, as mentioned above, that there will be an end to contributions across settlement areas. Most settlements in the concert area have been artificially high due to the addition of non-program funds. In the concert area, this has resulted in a minimum payment of just under 800 kroner resulting in a payment of 1500 kroner.
In the new model, cultural funds and other costs will be deducted directly from the payment from the organizer, before the net amount is settled to the rights holders. With today's minimum remuneration, this will mean that the payment in the concert area will range from approximately kr 1500 till kr 500.
In the broadcasting area, the effect is similar to that in the concert area. The total amount that has been settled for music use has been far higher than what has been paid in. When the addition of non-programme funds under the current scheme is removed, this will affect the settlements in this area. The model also treats all types of performances equally.
This means that the existing scheme that gives certain types of performances a higher payout than others (live performances) will be removed. However, a reduction factor will be retained for channel vignettes and advertising because the number of performances of these is significant, and will take an unreasonably large share of the settlements from customers who pay a single lump sum, such as larger broadcasters.
The funds used for the premiere performance supplement have previously been taken from the revenue areas of concerts, broadcasting and cinema. We can no longer do this in the same way according to the Collective Management Act. The scheme will be replaced with a premiere performance boost financed by non-distributable funds, that is, funds where TONO, despite all efforts, is unable to identify rights holders within three years. The argument for establishing such a scheme is that it is in line with TONO's statutes §3e “to work for the innovation of music”.
It is important to be aware that all the money that is distributed in the current model will also be distributed in the new model. At the same time, there is no doubt that these necessary changes will have dramatic consequences for many Norwegian licensees. Lower payments to TONO members is not a desired situation.
The board's decision assumes that the model will be phased in over several years from 2025. The new model will be fully implemented in 2029 for the carryover year 2028.
The new settlement model should be easy to explain and understand for TONO's members, customers and sister societies. By removing the additions and redistribution of money, which have made payments artificially high, compared to what TONO's customers actually pay in, we have also highlighted a challenge. In some areas, higher revenues are needed to be able to defend that it is a fair remuneration.
At the same time as the new settlement model is being phased in, the new price model for the concert area will also be phased in. The model is not being introduced to stem the consequences of the settlement model, but because it is, in isolation, correct in principle. However, it will to some extent counteract the effect described for the concert area.