Impacts of COVID-19 and your future royalties
The COVID-19 pandemic has already had a huge impact on our industry. We understand that your livelihood is at risk and we want to do whatever we can to support you in this time of need. We understand how important our view of the impact is for you to be able to plan financially, so we’ve put together the below to outline our distribution forecast in more detail. We hope you find it useful.
The figures below show our forecast as of July 2020. We'll be providing updated and additional information in early 2021.
Financial performance in 2019 gave us a strong foundation to face the impacts of COVID-19
2019 was a positive year financially for PRS with record breaking results. Revenue in 2019 increased by 8.7% to £811m. This was largely thanks to growth from online and public performance licensing income.
The increase in revenue in 2019 was coupled with a decrease in costs. Our cost to income ratio, which provides an indicator of how efficiently a company is run, reduced from 12.7% in 2018 to 10.7% in 2019.
We distributed £686m in royalties to members in 2019, that’s 13.7% more than in 2018. This performance in 2019 was going to provide a strong foundation to make 2020 an even better year.
Our initial forecast for 2020
When looking at our financial estimates for 2020, before COVID-19 and its potential impacts were known, we anticipated 5% growth in revenue for 2020. We also had an agreed plan to bring our cost to income ratio to below 10% and we anticipated increasing the royalties distributed to members by 10%.
In the early part of this year, our financial performance was strong and the outlook positive. However, as we’re all too aware, COVID-19 and the measures introduced to control its spread changed everything.
It’s incredibly hard to accurately forecast the financial impact this will have on both PRS and you, our members, even in the short term, let alone over the years to come. There’s no blueprint for us to follow and so while we’ve used as much external data as possible to shape our predictions, they are still predictions and will constantly change to reflect the way in which UK and international governments and markets react to the COVID-19 pandemic. Despite this, it is important for any business to have predictions. We know how important it is to share our forecasts with you, including the possible impacts on your royalties.
We estimate overall revenue to be down 15-25% when compared to 2019
This is in line with the Goldman Sachs – Music in the Air report, which predicts an average 25% decline across the music industry.
The main areas where we anticipate reductions are:
We estimate revenue will fall by between 50% - 75% when compared to 2019
The live sector has been worst hit, with festivals, concerts and gigs postponed or cancelled due to the COVID-19 pandemic. As a result, there is very little live revenue forecast from the end of March onwards.
Businesses who use music such as pubs, clubs, cinemas, hotels etc. have also been significantly affected. With the recent positive news about the reopening of some of these venues, we are expecting a slow pick up in revenue in the last six months of the year.
Up to 10% reduction in 2020 revenue compared to 2019, further decreases are expected from 2021 onwards
It takes longer to pay out international royalties, this is because it takes time for other societies to send us the money and information about which members we need to pay. While international revenue is down 10% in 2020, we expect the impact will be felt even more in 2021.
Revenue will be largely stable overall
We anticipate a slight revenue increase due to the unique situation caused by COVID-19. Revenue from online streaming services is expected to be up slightly (e.g. Netflix and Amazon Prime Video), this is due to the increase in viewing figures due to lockdown measures. This will broadly offset the decrease in radio and TV broadcasting income caused by a fall in advertising.
Currently predicted to be up to 10% down in 2020, compared to 2019
While we have seen record-breaking distributions in the first half of this year, we expect member distributions to see up to a 15% decline in the latter half of this year when compared to the same period in 2019.
This is mainly down to the areas outlined above. The immediate impact on distributions this year will be less than the decline in revenues because of the time lag between when music is used and when it is paid out in royalties. The fall in this year’s revenues will have a more significant negative impact on distributions in 2021 and beyond. 2021 distributions are expected to fall by at least 10% compared to 2019, while 2022 distributions are expected fall by up to 10% compared to 2019.
We are hopeful that revenue in 2021 will be better than in 2020. However, we still expect to see a revenue shortfall compared to 2019. This is due to the time lag for International payments to flow through alongside the time it will take for Public Performance and Live in particular to return to pre-COVID-19 levels.
2019 saw a considerable reduction in our costs. Now more than ever it’s important that we do what we can to take this further. On top of last year’s significant savings, this year we are working towards cutting costs by an additional several million pounds. Here are some of the further measures we have introduced due to the financial impact of COVID-19:
- A recruitment freeze within PRS for Music
- Reduction in staff costs, including some employees on reduced hours and pay
- Reviewed and reduced our legal and consultancy costs
- No employee bonus will be paid for 2020 performance
We are also looking at ways in which we can reduce our office costs and rent. Lockdown has shown us that we can work efficiently and effectively from home and so there should be opportunities to make savings in this area.
We have also carried out similar cost reduction exercises in PPL PRS.
The events sector has been particularly hard hit this year, with gigs, concerts and shows, due to happen from March onwards, rescheduled or cancelled. Similarly, the majority of our planned activities have been cancelled or moved online in 2020. While this has meant missed opportunities to connect with members, licensees and the wider industry, it has resulted in a significant cost saving.
We are doing everything in our power to maximise financial return and minimise the risk to future distributions through this period of significant disruption. This includes working with industry partners to lobby the UK government for sector specific support both now and in the future. We will continue to analyse our data, monitor the government updates and the market analysis and forecasts so we can constantly review and adapt our predictions. By sharing these predictions with you, we hope all members will be better equipped to navigate a way through the difficult times ahead.