The Fate of Music Copyright Society of Kenya (MCSK)

Today IPKenya came across this story in the Bahamas Tribune about the Bahamas Copyright Royalty Tribunal titled “Copyright Holders Recieve ‘Not One Cent’ in 11 Years” and the opening paragraph summarises the article as follows:

“”NOT one single cent” has been paid by the fund set up 11 years ago by the Bahamas to compensate intellectual property rights holders, Tribune Business can reveal, due to the absence of a regulatory regime that stipulates payment rates.”

Immediately one is reminded of Kenya’s own challenges with fees collection and royalty payments, best exemplified by Music Copyright Society of Kenya (MCSK).

As you know, an ugly row took centre stage last year after KECOBO deregistered MCSK as a collective management organisation (CMO) acting on behalf of authors and composers of music primarily because MCSK’s operational costs were too high compared to the royalties it pays musicians. For instance, MCSK’s expenses stood at Sh137 million in the year to June 2010 against revenues of Sh185 million, leaving it with a surplus of Sh48 million or 25 per cent of its collections, which are supposed to go to musicians. Meanwhile KECOBO maintained that the guidelines for CMOs clearly stated that only 30% of monies received can be spent on administrative costs and the remaining 70% must be distributed among musicians as royalties. As the financial books showed, MCSK was doing quite the opposite: distributing 30% and spending 70%, notwithstanding the large number of complaints over unpaid royalties from musicians.

Owing to enormous pressure from its membership as well as KECOBO, MCSK is now trying to conform to the tough conditions set by KECOBO in order to get back its collecting license this year. In particular, MCSK has been urged by KECOBO to use effective means to collect and distribute the royalties such as embracing IT. On that front, MCSK seems to be slowly getting the message. Late last year, the Business Daily reported that MCSK had upgraded their licensing and collections infrastructure by acquiring a new software that is able to track all songs played by broadcasters in a bid to arrive at a more accurate calculation of royalties for their members. Also, MCSK now appears to have a running website, although it is largely incomplete.

But the fate and future of MCSK hangs on how convincingly it can prove to KECOBO that it’s financial and corporate governance systems are in place and functioning. In this regard, IPKenya has learned that external auditors have been called in to carry out a full systems audit of MCSK which involves verifying the reports submitted by MCSK in its application for a license as well as inspections to be carried out at MCSK’s headquarters here in Nairobi.

Here are some of the key questions the auditors will be examining:

1. What systems (whether IT or physical) does MCSK use to update cash inflows and transactions?
2. What kind of procurement policies does MCSK have in place?
3. What kind of financial policy does MCSK have especially on payments by cash and if it is in use? (this includes handling of income, banking and entry into books of account).
4. How is MCSK’s distribution account managed? Who are the signatories to it?
5. Are MCSK’s records for distribution of royalties well-maintained?
6. Are MCSK’s reported payments accurate and do they conform with the scientific distribution model?
7. Does MCSK have a staff policy with a well maintained payroll system?
8. Is MCSK capable of achieving the required 70:30 share for royalties and expenditure?
9. Are the costs and benefits of MCSK’s Board of Directors kept in check?
10. Has MCSK adhered to its budget?
11. Does MCSK maintain a proper record of assets of the society?

The advantage of having external auditors carry out this task is that once they table their report before KECOBO, it will have an objective basis on which to decide whether or not MCSK deserves to be issued with a collecting license for this year.

And so, although Kenya is not as badly off as the Bahamas, there has been an unprecedented legitimacy and confidence crisis amongst copyright holders and copyright users with many pointing an accusing finger squarely at MCSK, eg. here, here and here.

IPKenya argues that the over two decade old MCSK, one of the oldest collecting societies in Africa, still has a chance to re-invent and re-brand itself through sound governance policies, demonstrated financial discipline and efficient service delivery. If MCSK can prove that it is capable of efficiently and transparently carrying out its copyright mandate, then artists and other creators can slowly begin to regain their long-lost trust in this important organisation.

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