Annual Report of STEF for 2010
1. The STEF Board of Directors and STEF employees
Members of the STEF Board of Directors in 2010 were Aðalsteinn Ásberg Sigurðsson, Áskell Másson, Jakob F. Magnússon, Kjartan Ólafsson, Óttarr Ó. Proppé, Sigurður Flosason and Þorkell Sigurbjörnsson. Jakob F. Magnússon was Chairman of the Board, and Kjartan Ólafsson was Vice Chairman during the first part of the year, or until the Annual General Meeting of the Society's Representative Council, held on 12 May, when Kjartan Ólafsson took over as Chairman of the Board and Jakob F. Magnússon became Vice Chairman.
Permanent employees of STEF at the end of the year were eight, of which three were in part-time positions. The Managing Director was Eiríkur Tómasson, and the Office Manager was Jenný Davíðsdóttir. On 31 August, Gunnar Stefánsson, Director of Marketing and Collections, left STEF and the position was filled by Guðrún Björk Bjarnadóttir.
The following is a report on the main aspects in STEF operations during the year.
2. Changed operational structure on the basis of new Articles of Association
New Articles of Association were unanimously approved at the 2009 Annual General Meeting of STEF's Representative Council. These involved some changes to the Society's organisation. The main changes are that the number of members in the Representative Council is increased by three. The Council now consists of 21 members instead of 18. Moreover, a third of the representatives, i.e. seven, are elected in direct elections for a term of two years, while the other 14 members are appointed by the two member associations, i.e. the Society of Icelandic Composers and the Icelandic Songwriters' Association, where each appoints five representatives on their behalf for membership in the Representative Council and two members to the Board of Directors of STEF, who are also members of the Council. One of these Board members must be the Chairman of the member association in question. In addition to the four Board members appointed by the member associations, the Representative Council shall elect three of its members to the Board for a term of two years. The Articles stipulate that at least one Board member and at least three members of the Representative Council must be right holders who are not members of the two member organisations.
In March 2010, the first general election to STEF's Representative Council according to the new Articles took place. Seven representatives were elected to the Council for the next two years from a total of nine candidates. The election was a success, and its results were clear.
3. Marketing issues and changed arrangement as regards the collection of royalties
With the appointment of a new Director of Marketing and Collections, the focus has changed in STEF's communications with its customers, i.e. those who pay royalties such as shops, health clubs, restaurants etc.
The Society has hitherto not undertaken any systematic marketing strategy with the goal of improving its image in the eyes of its customers and achieving the most advantageous co-operation with them. Although such co-operation has certainly been in place, it has only been in limited fields. Until now, the Society has generally reacted to music performance with the appropriate request for payment of royalties, around the time that such performance occurs, in other words retroactively. In the future, STEF intends to be more proactive, e.g. by entering into agreements with those responsible for music performance, such as concert promoters, for mutual co-operation with regards to music performance and payment of fair remuneration for the performance, as well as submission of information on the performance.
Another planned change is to transfer the collection of royalties from individual collectors to the offices of STEF. In this context, distinction will be made between monitoring music performance, on the one hand, and collection on the other. In the future, the office will be responsible for collections, while the role of monitors and examiners will be limited to monitoring whether the parties who have not been paying royalties are performing music in public. They will also be responsible for locating new customers. This is in accordance with current arrangements in other Nordic countries, e.g. in Denmark and Norway.
4. Communications with radio stations and other liable entities.
Negotiations and other communications with broadcasting companies, i.e. radio and television stations, are generally an important facet in STEF's operations, as the major proportion of royalties for public performance of music in Iceland stems from them.
Despite the downturn in the Icelandic economy in recent years, which has, of course, had an effect on broadcasting companies as well as others, STEF's income from the largest stations, the State Broadcasting Service (RÚV) and 365 miðlar, has increased slightly from last year according to STEF´s annual financial statement. On the other hand, income from the third largest broadcasting company, Skjárinn, decreased between 2009 and 2010, while income from other broadcasters increased somewhat.
Relations with broadcasters have generally been good in recent years, and the same can be said of other customers. A few cases have been referred to STEF in which individual composers have protested the use of their music, without their permission, in broadcast programmes. This has generally taken place when music has been broadcasted in television, either during programme introductions or in individual television programmes. STEF's attitude has been that the broadcasters have, on the basis of their licence, a relatively free hand in their choice of music to be performed on various occasions, provided that the moral rights of the right holder in question are upheld. Although individual composers and lyricists have not always been too pleased with this policy, such matters have generally been resolved to the satisfaction of all parties.
Negotiations on the payment of royalties took place with those that provide video-on-demand services to their customers. These negotiations first and foremost involved three companies, i.e. Skjárinn, Vodafone and Filma. No conclusions had been reached by the end of the year. However, it is assumed that improved royalties for this use of music in films and television series will be collected as of the beginning of the year 2011.
5. Use of music on the Internet and ways to respond to the illegal use that is taking place there.
No single issue has been as prominent in STEF's operations in recent years as the question of how to prevent the illegal use of music that has long been practiced on the Internet and which has caused music creators and other right holders' immeasurable financial damages. Preventing such illegal use is not sufficient. Authors must also be ensured a fair remuneration for this type of use of their works as for other use.
STEF has for many years recommended negotiations with the telecommunications companies to the effect that users should be granted permission for limited access to music on the Internet in exchange for a reasonable compensation to right holders. Despite objections from various parties to this idea, the matter finally made some progress during the year.
The beginning can be traced to a meeting, held on 22 June at the initiative of the Minister of Education, Science and Culture. The meeting was intended to mark the beginning of negotiations between interested parties, for the increased availability of cultural material and actions to prevent illegal distribution of such material. The Ministry subsequently called a meeting on 28 September with stakeholders, involved in music, and the representatives of the telecommunications companies. At the end of the meeting, the representatives from the Ministry recommended that the right holder organisations, STEF and SFH (Collecting Society for Performing Artists and Phonogram Producers), and the four telecommunications companies Síminn, Vodafone, Nova and Tal, should begin negotiations among themselves concerning the problem at hand and the means available to resolve the issue.
On 29 November, an informal meeting was held with STEF and SFH, on the one hand, and the managing directors of the four telecommunications companies on the other, on ways to combat the illegal use of music on the Internet and, moreover, how to ensure that authors and other right holders receive fair compensation for the use of music on the Internet. Discussions in this meeting were very open and useful.. Among other things, the representatives of STEF presented the Society's idea of a reasonable fee for each Internet user. (This idea will be discussed in greater detail below.) The meeting was held in a positive atmosphere, and the parties agreed to establish a working group composed of representatives from all parties to discuss the matter further, after having received the permission of the Competition Authority.
As previously stated, STEF has long fought for its idea that music creators and other right holders should be ensured fair compensation for the use of music on the Internet through the payment of a reasonable fee that Internet users would be obligated to pay on the basis of comprehensive agreements between STEF and SFH, on the one hand, and the telecommunications companies on the other. From the very beginning, STEF has placed great importance on such fees being based on agreements with a legal foundation in the Copyright Act comparable to the Society's agreements with the broadcasting companies. However, the Society has always been against the fee being in the form of a tax imposed on Internet users by law, as in such case, the government would have a free hand in determining the tax, increasing or decreasing it, without right holders being able to have any say in the matter.
Following the meeting in September, STEF's idea was publicised in the media and incorrectly described as a proposal for a new tax. Not least for this reason, the idea was poorly received to begin with. In the end, however, once STEF had had the opportunity to describe the idea in greater detail, the response was not as negative as could be expected. It has come as a great surprise, however, how negative the representatives of other right holders have been toward the idea. Nevertheless, the STEF's Board has been unanimous in their wish to make every effort to achieve an agreement with the representatives of music performers and phonogram manufacturers to take the path that the Society has proposed, i.e. that a reasonable fee should be collected from each Internet user which will grant the user limited access to music on the Internet. At the same time, the Board has vigorously maintained its stance that STEF itself should negotiate with the telecommunications companies for permission for their customers to have access to music on the Internet. Thus, it is clearly stated in the Society's agreements with entities offering access to music on the Internet, such as the websites tonlist.is, grapewire.net and gogoyoko.com, that these parties may not enter into agreements with other companies, such as telecommunications companies, that allow such companies to provide their customers with access to music on their own websites in question. Such agreements, therefore, are invalid unless STEF has granted its approval.
6. Use of music in films and theatres.
STEF operates two committees that have the role of working specifically for the interests of film score composers, on the one hand, and theatre music composers on the other.
The former committee has discussed, among other things, the necessity of composers retaining their mechanical rights (i.e. the right to make copies, such as CDs) in contracts with film producers for the creation of film scores. At the initiative of the Committee, the Board of STEF approved on 5 November, that on the basis of the powers of attorney granted by composers to the Society to protect their copyrights, STEF will not in the future agree to the composers' explicit assignment of their mechanical rights in their contracts with producers, in which the parties negotiate synchronisation rights.
The latter committee has been involved in discussing ways to improve the position of composers in their dealings with the theatres, as their position is in many ways poorer than the position of other authors in this field, such as dramatists. Among the issues discussed is the need to negotiate a framework agreement between composers and the three largest commercial theatres, comparable to the agreement that has long been in effect between the Writers' Union of Iceland and the theatres on behalf of dramatists. Such an agreement could be used as a foundation on which to build when the theatres negotiate with individual composers and music creators for the creation of music for dramatic works and other stage productions that they intend to produce.
7. Copyright issues.
At the beginning of 2009, the District Court of Reykjavík passed a ruling in the court case STEF brought against Istorrent ehf. and Svavar Lúthersson, to confirm the injunction against the website torrent.is and to recognise the defendants' liability to pay damages to the members of STEF. Initially, several other rightholders´organisations were party to the injunction and the following litigations, but their claims were dismissed, so in the end, STEF was the sole plaintiff This was not the first time that the organisation spearheaded the fight for protecting copyrights in general. The District Court of Reykjavík found in favour of STEF in both of the above claims and ordered the defendants to pay ISK 1 million in court costs. The defendants subsequently appealed the judgment to the Supreme Court, which confirmed it with its ruling, passed on 11 February 2010. In addition to the above court costs in the District Court, the appellants were ordered to pay STEF ISK 700,000 in court costs before the Supreme Court.
In the spring of 2010, considerable changes were made to the provisions of the Copyright Act, for instance as regards penalties for violations of the Act. These changes of the Act involve considerable legislative reforms for composers and copyright organisations such as STEF. Of particular importance is a new provision in the Act that grants organisations authorisation to have injunctions placed against the illegal use of music on the Internet by prohibiting telecommunications companies from transmitting music to specific customers over the Internet.
8. CISAC's audit of STEF's operations
In 2008, the Confederation of Societies of Authors and Composers (CISAC) approved Proffesional Rules for Musical Societies that the Confederation's member societies within the field of music, are expected to follow. These rules contain provisions on the management and organisation of member societies and the manner in which they are expected to make decisions on licensing and collectiosn, the documentation and pieces and the distribution of royalties to authors and other right holders. In their protection of the interests of right holders, member societies are to ensure equal treatment and transparency, as well as to maintaining professional secrecy and confidentiality where appropriate.
In addition to the Proffesional Rules,CISAC perform audits of the organisation and operation of all member societies, to verify that they are in fact following the Rules. The goal of such audits is to ensure, on the part of the Confederation, that the rules are followed everywhere. They are intended as a response to the criticism often heard that the operation of copyright societies is not sufficiently transparent and that they improperly discriminate between right holders, just to mention two examples. The plan is to audit each member society every ten years so that they all undergo the same type of audit every decade.
During the 2009 Annual General Meeting of CISAC, lots were drawn to determine which societies would be the first to undergo such an audit. Two western European societies were drawn, i.e. STEF and Nordisk Copyright Bureau (NCB). Subsequently, a range of documents relating to the organisation and operation of the Society. Furthermore, the Society was required to respond to a large number of questions on the same issues. At the end of June 2010, the management of CISAC visited STEF and met with the representatives of the Society. On completion of his visit, he prepared a detailed report to the CISAC Commission. The conclusions of the report stated that the organisation and operation of STEF fulfilled in all principal respects the requirements of the above mentioned Professional Rules. A few aspects, however, required improvement. The plan is to have them all completed by June 2011.
Among these is the revision of the Society's distribution rules, which must provide for what aspects must be taken into consideration when royalties are distributed for the public performance of music -as well as what principles should be followed in the distribution of royalties to right holders.
9. Co-operative forum of STEF and SFH: Samtónn.
The goal of the collaboration through Samtónn, is to “work for the common interest and strengthen the position of authors, performers and producers of music”, as is stated in Samtónn's Articles of Association. With this shared forum, a large number of issues facing music creators, music performers and phonograph producers have been resolved. Among the projects that Samtónn has been involved in, in 2010, are Dagur íslenskrar tónlistar (Icelandic Music Day), Reykjavík–loftbrú (Reykjavík – airlift), Útflutningsmiðstöð íslenskrar tónlistar (Export Centre for Icelandic Music) and Íslensku tónlistarverðlaunin (the Icelandic Music Awards), as well as fighting against the illegal use of copyrighted works on the Internet in co-operation with SMAIS (the Association of film rights-holders in Iceland).
10. FJÖLÍS (Collecting Society for Reproduction Rights) and IHM (the Collecting Society for Private Copying).
The operations of these two umbrella associations, of which STEF is a member, have been relatively established over the past few years. FJÖLÍS is responsible for the collection of royalty payments for the reproduction of copyrighted works, e.g. the reproduction of printed works of music, while IHM is responsible for the collection of royalties from blank tapes and CDs, as well as on equipment used to record copyrighted work, such as music. With changing technology, where works are increasingly recorded on hard drives in computers or mobiles, IHM's income has fallen substantially in recent years.
11. Foreign relations
The Annual General Meeting of CISAC, the Confederation of Societies of Authors and Composers, of which STEF has long been member, alone of the Icelandic copyright societies, is held every year. In 2010, the Annual General Meeting was held in Bilbao in Spain. STEF´s representatives at the meeting were the Chairman, Vice Chairman and the Managing Director of the Society.
The European Composer and Songwriter Alliance (ECSA)was recently established and has already had considerable success in making author and copyright society viewpoints known to EU leaders. The operation of this new alliance has already led to greater account being taken of the rights and interests of authors, as well as the special position of organisations such as STEF, than before when copyright issues are resolved within the EU. Due to the fact that copyright is one of the areas to which the EEA agreement applies, the decisions made by the EU in this field have a profound effect here in Iceland. As a result, Icelandic music creators should closely monitor the activities of ECSA. This has become the task of the Chairman and Vice Chairman of STEF, both of whom have actively participated in the work of ESCA.
The co-operation between the Nordic copyright societies in the field of music, however, has always been the most important aspect in STEF's relations with its sister associations. Of these, special mention must be made of Nordisk Copyright Bureau (NCB), which is responsible for the collection and distribution of mechanical royalties and which maintains the interests of Nordic music creators in the field of mechanical rights on behalf of all the Nordic societies. It could be said that the operation of NCB has been extremely difficult during the past few years since the income of this pan-Nordic copyright society has steadily been decreasing due to falling sales ofaudio releases. Owing to significant efficiency in operations and increased co-operation with other copyright societies, the economy of NCB has nevertheless been stable. This is extremely important in light of the important role NCB has played and will hopefully continue to play in guarding the interests of Nordic music creators, not only in the field of mechanical rights, but also as regards the protection of interests in the increasing use of music on the Internet.
12. The number of right holders who are members of STEF and the Society's financial matters.
At year-end 2010, 3566 music creators and other right holders had granted STEF power of attorney to guard their interests, an increase of 196 over the course of the year. Thereof, members of STEF's partner societies were 382..
STEF's total income in 2010, with the exception of financial income, amounted to ISK 531,514,288, as opposed to the Society's total income of ISK 517,624,533 in 2009. Despite the difficult economic circumstances, STEF's income, therefore, rose by 2.7% between years. The cost of operating the Society, with the exception of the depreciation of receivables, financial expenses and such cost, amounted to ISK 103,681,458 in 2010, as opposed to ISK 92,413,794 in 2009. The operating costs of the Society, therefore, have increased by 12.2% between years, which is a proportionately higher increase than has been the case for many years. The main reason for this increase in expenses can be traced to increased activities in the operation of the Society, described to some extent above.
In accordance with the resolution of the Annual General Meeting of the STEF Representative Council and reciprocal representation agreements with its sister societies abroad, ISK 20,000,000 was allocated in 2010 to the Music Culture Fund and to special projects such as the Icelandic Music Awards. These contributions amounted to 8.7% of the income for public performance in Iceland during the year, less operating costs and depreciation of receivables. The Music Culture Fund was for the most part used to support the operations of STEF´s two member organisations, i.e the Society of Icelandic Composers and the Icelandic Songwriters Association which both maintain diverse cultural activities and protect the interests of Icelandic as well as foreign music creators, here in Iceland.
Otherwise, as regards financial matters of STEF, reference is made to the Society's Annual Financial Statement, which can be accessed on the Society's website, www.stef.is.
