Spain’s SGAE Adjusts Royalty Payouts for Broadcast TV

LONDON — Spain’s largest rights collecting society is changing the way that it distributes royalties from music broadcast on television as part of its efforts to turnaround years of scandal concerning alleged fraudulent business practices.

Members of the Spanish General Society of Authors and Publishers, known as SGAE, approved the measures at an Extraordinary General Assembly, held virtually on Feb. 9, with 11,326 members voting in favor, versus 5,642 against. The changes come into effect immediately and mean that SGAE will now pay out television royalties based on the size of audience, broadcasting time and advertising spend.

They replace the heavily criticized old model that placed few limits on how television royalties were calculated. That system was ripe for exploitation and in May of 2019 the International Confederation of Societies of Authors and Composers (CISAC) temporarily expelled SGAE, in part for its role in a long-running royalty scam known as La Rueda (“the wheel”).

The swindle involved members who were also broadcasters playing songs they owned rights to on late-night Spanish television — sometimes as low-level background music – and collecting the royalties. (In Spain, some music publishers are owned by TV stations, which pay a set annual fee to SGAE to license music from its catalog.)

When La Rueda was revealed, 14 TV stations were indicted for fraud for helping SGAE generate tens of millions of euros in royalty revenues by playing music in the middle of the night heard by less than 1% of their average TV audiences.

Paris-based CISAC readmitted SGAE last March, citing a number of reforms it had made, including establishing a code of conduct to address conflicts of interest. That same month, Spain’s national court separately acquitted a group of defendants led by the former president of SGAE, Teddy Bautista, who had been briefly detained by police in 2011 and then stood accused of embezzling millions of euros from the collecting society.

SGAE, which represents over 120,000 authors and publishers, and over 16 million works, says the new methods for calculating television royalties “guarantee the most accurate and proportional remuneration to creators, based on use and revenue.” The organization is due to make its next royalty distribution in March.

For SGAE’s members, the reforms bring some rare good news, following years of courtroom battles and feuding between executives, notably over allegations of fraud, document forgery and mismanagement.

Only last month, Spain’s antitrust regulator opened a new investigation into the troubled society looking into “a possible abuse of a dominant position.” The investigation is focused on tariffs applied by SGAE in the television and radio markets, as well as the way it licenses its catalog to users on the basis “that it is allegedly universal,” says the regulator, known by its acronym of CNMC.

Madrid-based SGAE refutes the claims and says it is “convinced” that its rates and licenses “are in accordance with the competition legislation.”

It’s not the first run in that SGAE has had with the regulator. In 2019, CNMC fined he organization almost 3 million euros ($3.37 million) for unfairly limiting the ability of members to withdraw their rights, as well as for using a system of bundled rights that prevented outsiders from making pricing comparisons between different competitors.

Since then, the society — which collects performance royalties for compositions across all platforms, from digital to theater performances, and had revenues of 259 million euros last year ($289 million) – has made a number of changes to how it operates.

Last month, it introduced a new system to speed up the payment of concert royalties as part of its digital transformation plans. SGAE president Antonio Onetti says the end of La Rueda is another significant step towards making the organization “fair, equitable and transparent.”