Copyright Review Commission Report - ICT Law and Regulation ...

6.3.3. SAMPRA should be given one year to rectify all areas of non-compliance.6.3.4. The CRC recommends that the legislation be amended to allow for one collecting society per set of rights withregard to all music rights governed by the Copyright Act of 1978 (performance, needletime and mechanicalrights). Currently, only the needletime collecting societies are supervised by the Registrar. Due to the recentcollapse of SARRAL and inadequate protection of its members, the CRC believes it appropriate to regulate allrelevant collecting societies. Due to administration problems (consistently voiced by users and interestedparties) associated with the multiple collecting societies and the international trends for both developed anddeveloping countries, the CRC believes that ‘one society one right’ is the answer for the current situation. Aspart of this change, it proposes that all collecting societies be mixed (e.g. a collecting society for needletimeshould cater for both performers and record companies) and existing societies should be given a period of twoyears to merge, failing which an appropriate process should be used to appoint the mixed collection societies.The suggested merger of collecting organisations is as follows: For mechanical rights, it is suggested that NORM’s and SAMRO’s mechanical rights units merge to formone collecting society for mechanical rights; For needletime, SAMPRA should merge with SAMRO’s needletime unit to form one collecting society forneedletime; and SAMRO should remain with performance rights.7 LEVEL OF CORPORATE GOVERNANCE COMPLIANCE BY COLLECTINGSOCIETIES7.1 BACKGROUND: COLLAPSE OF SARRAL7.1.1. SARRAL was a collecting society looking after the mechanical rights of composers. SARRAL’s objective wasthe protection, reinforcement and enhancement of composers’ rights. The court ordered the liquidation ofSARRAL almost three years ago due to insolvency. A significant number of music composers and artists losthuge amounts of monies between 2003 and 2008 due to legal costs, reduced collections and other increasedcosts arising as result of legal disputes.7.1.2. The following facts should be kept in mind:7.1.2.1. SARRAL’s change of business model or accounting policies (between 2003 and 2004) resulted in abreach of contract with members. An extract from SARRAL’s standard member's contract is as follows: “Inconsideration therefore SARRAL shall be entitled to retain a commission of 7,5% of the gross total ofroyalties collected.” The consequences of the change in business model or accounting policies were thatthe members only received between 50% and 60% of the collections instead of 92,5% (100% minus 7,5%)as per their agreements with SARRAL. Without altering the members’ contracts, SARRAL unilaterallydecided not to honour the agreements (See Appendix 5 for a copy of SARRAL’s contract with one of itsmembers).7.1.2.2. According to the external auditors, they could not verify receipts from the SABC and distributions to themembers for the three consecutive financial periods of 2003, 2004 and 2005. (See Appendix 6 for copies- 46 -