Annual Report 2013-2014 Extract Annual Report FOCUSING ON THE VALUE OF MUSIC - our best result ever From Gramex Annual Report 2013-2014 In 2011 and 2012 Gramex achieved the best result ever. Accordingly, expectations for 2013 were extremely high, but at the same time not so encouraging due to a radio market still under pressure and stores still closing. However, we succeeded in repeating the success from 2011 and 2012, and accordingly once again we improved the result for 2013, making it the best result ever for Gramex. Close control of costs, new agreements, and extra focus on minimizing loss for our customers are all contributory factors to this result. Accordingly, we succeeded in reducing costs by more than 7 % compared to the previous year - more than DKK two million and we made a series of agreements within among others the areas of theaters and fitness. All together, the amount of income has gone up from DKK 187 million in 2012 to almost DKK 193 million in 2013. Given a decline in costs of more than DKK two million, the available amount for distribution has gone up by more than DKK seven million to a total of DKK169 million. The strategy we initiated in 2012 focusing on improved member service, increased visibility, and intensified business development has had a clearly positive effect on the result, but it also positively affected the already improved image Gramex has today among our customers. We are maintaining the strategy in 2014. 1. Let the music play our best result ever The amount of income in 2013 reached almost DKK 193 million. This is an improvement of more than DKK seven million compared to 2012 at which point we had already improved the result by DKK 5.5 million. During a period of two accounting years we have accordingly improved the result by more than DKK 12 million, and increased the amount for distribution to DKK 169 million compared to DKK 162 million in 2012 (and DKK 157 million in 2011). This is an increase of 4.3% compared to 2012, and 7.6% compared to 2011 which is a very good result considering a radio market under pressure and the fact that the crisis within the retail business is far from over. But is a good result worth anything if our rights holders don t receive their money? This is why it is equally important that we pay out the money to our members, and we are accordingly very happy to have paid out the highest amount ever in the history of Gramex. Page 1
2. Focus areas successfully implemented In 2013, Gramex continued the implementation of the strategic goals, which were approved by the Board at the end of 2011, to be implemented during the accounting period 2012-2013. The new organisational structure and the new target areas which were initiated and implemented at the beginning of 2012 have successfully supported the work of creating a New Gramex focusing on service, visibility, and business development, and putting customers and members first. 3. Increased efforts in 2013 to further strengthen service, visibility, and business development In 2013, Gramex introduced a series of new initiatives focusing on customers and members. 3a. Member Service; improved quality and increased quantity The department Member Service & Repertoire has maintained focus on improving quality and increasing quantity. The number of registered studio recording forms has increased by 30 % since 2011. Despite errors in 25% of the forms we received we managed to enhance the efficiency of our work which has enabled us to handle 20% extra forms than we did in 2011. In the beginning of 2014, we launched an improved version of Dit Gramex ( Your Gramex ). Consequently, we aim at receiving 75% of all studio recording forms online in 2015 as there is every indication that online receiving will reduce the number of errors and increase efficiency. We enhanced the efficiency of the registrations of the reporting from Radio and TV stations last year, which has prepared us for the increasing volume of reporting. Since 2011, the number of registered titles has accordingly increased by approx. 50%. More awareness on KPIs has ensured a heavy increase in the number of registrations without reducing quality. In 2013, we have focused particularly on our international relations. The improved efficiency of the administration of claims from abroad has paid off the cadence of claims has increased by more than 200% since 2011 owing to the implementation of new international IT-standards. The intensified efficiency has enabled us to make new bilateral agreements without increasing the consumption of resources, and we accordingly made agreements with GVL in Germany, PlayRight in Belgium, and Nuovo Imaie in Italy. The management of Gramex has focused on receiving foreign amounts in due time. Obviously, Gramex has no influence on the size of the amount our members earn abroad, but we do have some influence on how fast we can get the money to the Danish artists. The total amount to performing artists from abroad rose from DKK 4.1 million in 2012 to almost DKK 6 million in 2013. In 2014, the management of Gramex will maintain focus on making more bilateral agreements and making sure that our rights holders will be remunerated for the use of their music abroad. This requires additional bilateral agreements and a sharp focus on these agreements, as well as a substantial travel frequency in 2014. We expect 2014 will bring about new agreements with Re:Sound in Canada and SoundExchange in USA. Page 2
3b. Visibility In 2012, Gramex initiated a series of initiatives to increase the visibility of what we do for our members, and the visibility of the value of music to our customers. We have focused on paving the way for our members achievements and products and showing how music may add to our customers business. Our newsletter supports these initiatives by publishing articles that relate to our members and customers. In between the newsletters we publish news on our homepage on a weekly basis. These efforts have made a significant exposure in the media. Our external communication helps to show the value of the work we do for our members and give our customers an even better awareness of the value of the music they use. Since the publication of our first newsletter on 10 th February 2012 the number of Gramexarticles has increased immensely - to more than 200 - and many of our articles are being referred to and debated in other medias. One of the general themes in 2013-2014 has been sound. We have focused on both quality and on the extend and value of the sound that surrounds us. Furthermore, we have cohosted two large conferences on sound at Christiansborg and at Aalborg University. And with a number of partners we have promoted the establishment of the incubator Lydens Hus. Another target area to further increase focus on the value of music is our involvement in Dansk Musikstatistik. In 2012, Gramex initiated the establishment of Dansk Musikstatistik following the closing down of Musikzonen who first tried to establish this kind of music statistics. Dansk Musikstatistik which has existed for two years has been prepared by Rambøll. We presented the latest version at Folkemødet at Bornholm this summer. Dansk Musikstatistik was well received, and the subsequent panel discussion with Morten Østergaard, Minister for Taxation at that time, has further brought focus to the contribution of music to the economy. Gramex cooperates with IFPI, Koda, Dansk Live, Dansk Musikforlægger Forening, and MXD, in financing the music statistics and ensuring relevant data. The preparation of next year s statistics has already been initiated. As the effect of our communication efforts on our members, customers, and Gramex, has been so favorable and visible to everyone, we will further strengthen our communication efforts during the forthcoming financial reporting period. 3c. Business Development focusing on the top line We have entered into several new agreements of great importance, among others with Fitness Danmark and within the area of theaters. This is why we were able to increase the amount of income despite a radio market under strong pressure and a continuous recession owing to the financial crisis. The agreement with DR is successful and we cooperate smoothly. In 2014, income has increased also within this area. The agreement is up for renegotiation this year. We still haven t got an agreement with Radio24syv and consequently we have only taken to income the amount paid on account, which was agreed upon between Gramex and Radio24syv. The case has been brought before Østre Landsret (Eastern High Court) and we expect the final decision during 2014. Page 3
The agreement with SBS has been renegotiated following the big consolidation within the area of nationwide commercial radio. Furthermore, Gramex has cooperated closely with Koda and as such we succeeded in making an agreement with Danske Tandlæger. Gramex has strived to highlight new ideas for the music business to develop new products which can improve earnings of the business. One of our initiatives is the establishment of Lydens Hus which is the first incubator worldwide for entrepreneurs working with sound. The increasing use of streaming services such as WIMP, Spotify, etc. clearly indicates that the future innovation of music from a business point of view to a large extent originates from people with an IT background. Lydens Hus will provide the framework for artists to be able to meet high technology partners and will make it possible for them to focus on refining sound and music products together and as such to put new initiatives into practice to the benefit of our members and customers. 4. Ophavsret Danmark and RettighedsAlliancen Together with RettighedsAlliancen and Ophavsret Danmark Gramex has participated in improving the general image of copyright and has put copyright related issues on the agenda. We joined RettighedsAlliancen in the beginning of 2013. The aim of the project is to improve the positive coverage in the media of copyright and create increased focus on solutions rather than threats, thereby creating a dialogue based communication of the consequences involved with illegal use of music and other copyright products. 5. International cooperation At present, Gramex has bilateral agreements with 34 organisations which ensure payments to our members from abroad, and more agreements are being negotiated. In 2013 and 2014, a lot of efforts were made with regard to VRDB and IPD an international database to exchange metadata between organisations across borders to ensure that Danish rights holders receive the remuneration they are entitled to when their music is being played in another country. The database also influences the organisations resource requirements with regard to the international repertoire. IFPI has initiated an international project concerning a mandate and repertoire database (IPPD), which we follow closely. VRDB and IPD are aimed at the performers whereas IPPD is aimed at the producers - the purpose is to link these databases together making all the metadata available to everyone. Societies' Council for the Collective Management of Performers' Rights SCAPR is carrying out a major organizational change that among other things ensures the efficiency of the work carried out by the organizations, an improved service to the members, as well as the entering of bilateral agreements in order to make money cross borders. The first part of this change was implemented in 2012 and continued in 2013 integrating SCAPR and the international performers database IPD and the international recording database VRDB+. These technical systems are available to the members to ensure that rights holders receive the right money in a simple and cost-cutting way. Gramex is a member of the Association of European Performers Organisations (AEPO- ARTIS). Page 4
AEPO-ARTIS carries out international political work in which Gramex participates; especially through the international bodies in which we are represented we have lobbied for an EU-directive concerning collective rights management. We will continue this work to ensure Danish influence. The Directive on collective rights management (the CRM Directive) was adopted by the Commission in February 2014. Gramex has actively tried to affect the decision makers in the EU to limit inappropriate consequences of the Directive. The adoption means that the actual contents of the Directive become effective from February 2016. By February 2016, Gramex must accordingly be able to comply with the requirements of the Directive regarding collective societies. Some of the requirements can be met by slight amendments of our Statutes, our membership forms and procedures, and some requirements can be met by new IT solutions. The requirements regarding amendments of our Statutes will be fulfilled no later than at the Annual General Meeting in 2015, and the requirements regarding IT will be fulfilled by means of our new IT strategy and IT platform. The implementation of the Directive in Denmark is in the first stage. We will watch the process closely to minimize negative consequences for our administration and our members. We have informed the Ministry of Culture that we would look into a solution as to the management of the so-called 20% fund which is part of the Term Directive. Gramex will undertake the assignment provided that a concept can be made which is manageable and transparent. This concept is under completion and the first payment from the 20% fund will take place in June 2015. We are in close contact with the Ministry regarding a potential cooperation on a solution. 6. Gramex full steam ahead On 24 th January 2013 we celebrated our 50 th anniversary at Axelborg. Since then, we have strived at implementing our new visual design and logo, the new member login, and our new homepage. Owing to a decision made by the Board in 2013, Gramex IT setup is now entering a new phase developing a new IT system. The process has been initiated in close cooperation with external consultants and will expectedly start up at the end of 2014. To manage the workload of this project during the next 30 months we anticipate hiring extra resources. Consequently, we will transfer the development of the new IT system from external consultants to our own developers. By doing so, we will save costs and gather knowledge locally. 7. Gramex in the future Gramex continued success will depend on the ability to develop new services with members, customers, and partners, to increase the total income of the music business. We believe this can be achieved by cooperating on sound. New initiatives have already emerged from among others WIMP who has increased focus on the value of good sound via WIMP Hi-Fi; and the commercial radio business has launched new radio products in 2013 and 2014. Through new innovative partnerships, for instance through Lydens Hus, good sound may also pave the way for brand new products never thought of by the music business. Page 5
Gramex will continue to make targeted efforts to develop new business models and new customer compositions to increase income. The traditional sources of income, among others the radio business and public performance are under heavy pressure. 8. Gramex The Workplace Our workplace is characterized by a good work environment mentally as well as physically, and a strong music culture. We will maintain this focus as one of the drivers for working at Gramex. Anders Laursen Chairman of the Board of Gramex During the year under review, the board has consisted of professor ph.d. Morten Rosenmeier, and from the artists rights group Anders Laursen, chairman (Dansk Musiker Forbund/The Danish Musicians Union), Lena Brostrøm Dideriksen (Dansk Artist Forbund/The Danish Artist Union), and Katja Holm (Dansk Skuespillerforbund/The Danish Actors Association), and from the producers rights group Jan Degner, vice-chairman (ArtPeople), Henrik Daldorph (Sony Music Entertainment Denmark), and Casper Bengtson (Universal Music Denmark). Page 6