Management Report Writing for CMOs

27. The purpose of management accounting and reports has been mentioned above. These reports assist and guide a CMO’s management in the

discharge of their fiduciary duties to members and rights holders by providing important financial, quantitative and qualitative information relating to the

‘day to day’ operations of the CMO. This enables management to ‘respond’

to developments in the CMO’s business environment rather than waiting for the production of annual financial statements. Management reports on a CMO’s activities are traditionally considered within the themes of Scope, Frequency, Period and Content.

28. The Scope and nature of management reporting varies between CMOs and is dependent on the nature of the bundle of rights which a CMO administers;

the user market profile and the extent of centralization or decentralization of the CMO’s activities. As was alluded to earlier in this tool kit, the income and expenditure of a CMO can be broken down into various divisions, sections and segments of the CMO’s business, in addition to a further analysis and reporting on the appropriation of the distributable income. Other core subjects which are frequently reported on internally by CMOs relate to user market statistics, membership, documentation and distribution activities.

29. The Frequency of the production of management reports varies depending on the subject-matter being monitored or measured. Some CMOs monitor and report on their income and expenditure and the divisional, branch or

segmental activities on a daily basis, while others do so on a weekly or bi-weekly basis; however, all CMOs should produce management reports on their income and expenditure on at least a monthly basis. Reports relating to movements in CMO membership, rights holder affiliation and international representation/affiliation agreements may be produced less frequently but on at least a monthly basis. Similarly, reports on works declarations and the documentation thereof are often produced on at least a monthly basis.

Reports on distribution activities are frequently divided into pre- and post-distribution reporting with the frequency of production often correlating to the frequency of distributions as provided for in the CMO’s distribution rules.

30. Periods of measurement covered in the management reports traditionally deal with information in a current period, the immediate previous reporting period, the current financial year to date period and the same reporting period for the previous year.

31. Content of the management reports usually revolve around the CMO’s core business processes.

4.6.1 Licensing Income

32. It will be recalled that a CMO’s licensing income is dependent on the bundle of rights administered. In the case of musical works CMOs, this would extend to reporting on the Broadcast of musical works often broken down into the broad categories of radio, television, cable and satellite services with possible further segmentation into public, commercial/private and community services.²⁰⁵ Dedicated mechanical rights CMOs would use the same segmentation split for reproductions by broadcasters. In the case of audio-visual CMOs, Broadcast reporting would relate to audio-visual works, normally broken down into television, cable and satellite television services possibly also segmented into public, commercial/private and community services.

33. In the case of the Public Performance income stream for musical works CMOs, management reports are frequently broken down into the major sources of income (depending upon each CMO’s market conditions).

Typically, public performance income is measured by the contribution of the various sectors of users such as the accommodation industry (hotels, motels, lodges etc.); hospitality business (restaurants, night clubs, dance halls, karaoke bars, bars, fast food outlets etc.); the large retail sector (warehouse stores, hypermarkets, supermarkets, and similar stores) and departmental

205 Some national legislations may exempt certain or all community services from the need to procure a license.

and specialty stores (including both soft and hard goods as well as clothing apparel etc.); the transportation or conveyance sector (public service

vehicles, motor coaches, busses, trains, ferries, boats and airplanes etc.) and other major public performance user groups, as determined by each CMO’s business. In the case of audio-visual CMOs, the management reports would include the use of audio-visual works in cinemas and similar establishments exhibiting these works.

34. With the prevalence of rapid Internet applications and business models, the communication to the public sector involving ‘online and new media’

exploitations is a special focus of CMOs. Reporting should include uses by ISP/DSP companies, telecommunications operators, various hybrid services such as audio or video streaming with download possibilities, DVB-H²⁰⁶ and other mobile services. Income (dependent upon the extent of legislative protection) is also reported in categories such as webcasting and other streaming services and if licensed to do so digital downloads and ring-/ring-back tones (audio – in the case of musical works CMOs only) etc.

35. Reproduction/Private Copy or Blank Media levy systems – dedicated mechanical rights CMOs would also report on other income such as phono-mechanical, synchronization (where applicable), digital downloads etc. In some jurisdictions where private copy or blank media levy systems exist, rights holders have mandated CMOs to collect and distribute on their behalf the shares of this income for authors, publishers, directors, scriptwriters, producers and other members of their CMOs. Typical income categories are CD-R and DVD, audio/video players, external HDs, set-top boxes, smart phones, HD and other recorders etc. The specific categories will vary between countries depending upon the scope of legislation/regulation.

36. International Income – the usage of a CMO’s repertoire in foreign

countries/regions is of significant interest to its members and rights holders.

Similar categories are followed as with domestic license income with the added feature of type of uses and source by country/region.

4.6.2 Expenditure

37. Reports on Operating Expenditures are frequently monitored in general categories, usually associated with the specific organizational/structural profile of a CMO. The expense categories frequently seen in some CMOs are licensing expenses, distribution expenses, member services expenses, IT costs, administration and finance costs. In other CMOs, management reports follow a functional line and categories such as human resources

206 Digital video broadcasting handheld – a form of mobile broadcast to mobile phones

costs, accommodation expenses, technology expenses, legal and

professional services, marketing, international and other costs. In addition to the categories above, many CMOs report on expenditure related to the various regional and or branch offices they operate from.

38. Management reports on Membership/Rights holder representation may cover such matters as new domestic elections/additions to the CMO’s membership; transfers from the CMO to other CMOs; deaths of members/

rights holders; disposal, closure, dissolutions or liquidation of corporate publisher or producer members/rights holders; disposal of individual catalogues and signing of new international representation agreements with CMOs or rights holders. Other subjects covered would include various activities undertaken in respect of member recruitment initiatives, information workshops and similar member outreaches.

39. Reports dealing with management oversight of Works Documentation²⁰⁷ normally cover such matters as the number of works on the documentation data base; additions of new works declared by members/rights holders;

works where the copyright has expired; data relating to the actual (or proportion of the) database of works which are active and those which are inactive; disputed works – as to authorship or a division of fees between rights holders; the extent of unidentified works or unidentified rights holders;

the proportion of works which are undocumented as compared to the total number of works on the CMO database and possibly information relating to overall domestic works and foreign works.

40. As mentioned above, Distribution management reports may be separated into pre- and post- distribution activities: (i) qualitative pre-distribution reports cover a number of areas. With regard to the activity monitoring of significant or important users and the processing of their licensed activities, it is customary for CMOs to have a report which provides management with information on the progress of processing such activity/usage. Typically such reports would cover the names of major licensed users, whether the users’

data are the subject of a census or sampling practices in terms of the CMOs’

internal distribution policies, the actual usage data received, the integrity of the data received, the progress being made internally with the processing or research associated with the data, resolution of any queries arising out of the data and the degree of progress with these processes towards final inclusion of the data in the distribution. The report may also cover the extent/

degree to which rights holders/owners of works about to participate in a distribution have been identified and if so, whether the full documentation

207 The term ‘works’ here means either musical or audio-visual works.

(share splits between rights holders) of the said participating works is available; and (ii) post-distribution reports include works and shares identified as un-distributable at the time of distribution and the management of queries arising after the distribution has been made. The quantitative aspects of the distribution would provide information relating to the actual categories and amounts of collections included for the named distribution, the value of distributable amounts broken down into members/rights holders and affiliated CMOs or other foreign rights holders. The un-distributable amounts may be separated further into sub-categories depending upon the CMO’s member/rights holder requirements.

41. Other Management reports may cover subjects such as legal &

litigation (number of court cases being handled – contractual debt or infringement of rights; lobbying on matters of legislation or regulation, corporate legal matters, etc.); ICT activities (relating to computerization, networking, automated systems, telecommunications and similar); public affairs & marketing (matters relating to the external image of the CMO, communication and information sessions with government departments, representative associations of users of rights etc.).

42. Where various functions/departments/operations of a CMO are

decentralized, many of the above reports may be produced on a regional or branch basis with consolidations taking place at the CMO’s head office so as to obtain a macro or national view of all its licensing, membership, documentation, distribution and related operations.

43. Many CMOs’ internal operations are structured in such a manner that the leadership team meets regularly (at least once per month) with line, function and regional managers to receive, consider and respond to actual results and information presented. Any revision of plans, actions or tactics deemed necessary are dealt with so as to be able to respond quickly to such matters as the management reports highlight as requiring attention. Good CMOs ensure that their management reporting is organized in such a manner as to synergize with and enhance the operations of the CMO.