- It was quite disheartening to hear renowned Gospel musician Reuben Kigame highlight his frustrations with the Music Copyright Society of Kenya (MCSK) tied to his sub-par earnings (read royalties).
- With April being the month when artistes receive their first royalty cheque of the year (the second and last arrives in October), today’s article highlights the possibilities of a working collection system.
It was quite disheartening to hear renowned Gospel musician Reuben Kigame highlight his frustrations with the Music Copyright Society of Kenya (MCSK) tied to his sub-par earnings (read royalties).
But reading his note, I couldn’t help but notice the year he says he started out in music; 1987. The reason being that only two years before, Michael Jackson had just concluded the purchase of ATV Music, a 4,000-Beatles song catalogue, for Sh500 million.
Jackson made the investment knowing he’d secure over 30 years of reliable cash flows. My point; same artistic expression, two different royalty collection systems, one working, the other broken, chaotic and highly inefficient. The result; the artiste suffers.
With April being the month when artistes receive their first royalty cheque of the year (the second and last arrives in October), today’s article highlights the possibilities of a working collection system.
One area with so much latent potential is intellectual property asset-backed securities (ABS) or in this case, music intellectual property securitisations. Simply, the assets being securitised are the cash flows generated from ownership interests in copyrights relating to a catalogue of songs.
Ownership interests can be those shared by a songwriter, performer or publisher. In a typical music royalty transaction, the music related ABS are packaged in form of a debt serviced for a term such as 10 or 20 years.
In essence, the investors of the securitisation have two sources of repayment: the cash flows generated from the copyrights and the liquidation proceeds from the sale of the copyrights. In other words, cash flows cannot be coming from “one hit wonders” that will fall off after only a few years. Moreover, if the annual cash flows are inadequate to repay the bonds, then the investors will look toward the recovery proceeds from the liquidation of the music catalogue.
Alas, this wonderful scenario remains a “distant dream.” Collective Management Organisations (CMOs) in the country; MCSK, PRiSK (Performers’ Rights Society of Kenya) and Kamp (Kenya Association of Music Producers), are yet to deliver any meaningful gains for artistes.
Though total entertainment and media spend stands at Sh2 billion (2017) according to a survey by PwC titled the Entertainment and Media Outlook 2018-2022: An Africa perspective, royalties remain meagre at best.
What’s worse, radio “local music” spins are not that encouraging compared to neighbouring countries. Moreover, radio broadcasters hardly comply in paying artiste royalties. (note; radio broadcast advertising was valued at Sh9 billion in the same PwC report).
That notwithstanding, positive change can always be catalysed. Besides, there’s enough track record to follow since the successful issuance of the first music-related ABS in 1997 by British rock star the late David Bowie. The so-called “Bowie Bonds” suffered no default despite dwindling music record sales.
The bonds netted Sh6 billion in return for 7.9 percent interest for 10 years. Notable artistes that have securitised their catalogues include; Marshall Mathers (Eminem), James Brown and Motown trio Holland-Dozier-Holland.
In all, music royalties are big bucks. If all the infrastructure is put in place and working, as an asset class, music could revolutionise our capital markets.
Mr Mwanyasi is the managing director at Canaan Capital