PHONOGRAPHIC PERFORMANCE LIMITED REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2009
The directors submit the annual report and financial statements to the Members for the year ended 31 December 2009.
PRINCIPAL ACTIVITY
The company’s principal activity is the collection of licence fees for broadcasting and public performance of sound recordings on behalf of its Members.
The total amount available for distribution is distributed to the company’s Members and Performers, with the intention that there are no retained reserves at any particular balance sheet date. The recognition of the net pension liability on introduction of FRS 17 in 2005 resulted in a deficit on the income, expenditure and distribution account.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
During the year the company increased its licence fee revenue from most sources in accordance with management objectives. It is expected that this trend will continue.
PPL considers its key performance indicators to be revenue, revenue growth and cost to revenue ratio. 2009 was a difficult year financially, given the Copyright Tribunal Decision on three Public Performance Background Music Tariffs. The Decision resulted in PPL having to refund customers for Licences purchased between 2006 and 2009. Income before accounting for backdated refunds was £129.6m, an increase of 2%. After accounting for this exceptional item (£18.1m), income declined by 13% from 2008. Broadcasting income grew by £1.0 million (2%) despite an 8% fall in commercial radio revenues, which was as a direct result of a downturn in advertising revenue in this sector. Public performance revenue in the year declined by 10%, due to the Copyright Tribunal decision. International revenue increased by £6.2m (40%) to £21.6 million. Despite further investment in IT systems and employees, the cost to revenue ratio remained at 14.6%, as per the 2008 cost ratio.
BUSINESS ENVIRONMENT
In tough market conditions for PPL’s Members the changes within the music business in recent times have been immense. Sales of physical music carriers continue to decline generally around the world though the ‘use’ of music continues to grow as media expands and public performance and dubbing increases.
STRATEGY
It is critical that the company plans carefully for the future. Investment in systems will continue to meet the demands of increasing membership, evolving media, new tariffs and the developments that the company has started, and will continue, to make in overseas collection for Members and Performers. In addition to investment in systems, the company will continue to place increasing emphasis on staff and employee training. The company needs to maintain the high quality of service for Members and Performers against a backdrop of increasing media platforms and expanding numbers of territories.
PRINCIPAL RISKS & UNCERTAINTIES
The economy continues to play a part in our ability to collect licensing income and 2009 proved particularly difficult in some markets; such as the retail and pub industry where business closures resulted in less venues playing music. As the economy is expected to improve throughout 2010, we would hope to see collection rates and revenues increase.
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