Cellphone giants in ringtone rip-off fury

A row over music royalties is heating up across Africa, with cellphone giants accused of violating copyright in both Nigeria and South Africa, and potentially facing billions of rands in fines and bills.

Continental superstars DJ Cleo and Nigeria’s Flavour N’abania have asked for sales data from MTN, its subsidiary and content aggregator Content Connect Africa (CCA), and Vodacom so they can have them audited to establish whether their copyright has been infringed.

While the companies strongly deny any infringements, which CCA dismisses as “ludicrous”, industry insiders say their liability could run into the billions in unpaid royalties and fines in South Africa alone.

DJ Cleo and Flavour have each enjoyed hugely successful hit singles, which would have generated significant revenue when sold by the companies as a a download, ringtone or ringback tone.

If they can prove copyright violations, the SA Copyright Act provides for a first offence fine of up to R5 000, or a jail term. If it is a repeat offence, the act provides for a fine of up to R10 000 or a jail term, per infringement.

However, DJ Cleo and Flavour are not the only musicians in dispute with MTN.

This week, Capasso, the body that collects mechanical royalty rights on behalf of songwriters, accused MTN of owing R1 million in royalties for 2014 and failing to declare music sales data and earnings for 2015. A mechanical royalty needs to be paid to a songwriter each time one of their songs is sold, either on a CD, as a download, as a ringtone or on a streaming service.

Although MTN denies this, Capasso CEO Nothando Migogo told City Press it has been asking for a meeting with MTN since April last year and “they won’t even meet us; they won’t give us the time of day”.

In December, the Nigerian Copyright Commission filed criminal charges against MTN Nigeria for 3 009 copyright infringements relating to the work of Nigerian artist Baba 2010.

But MTN told City Press this week it had settled with Baba 2010 and he had withdrawn his complaint.

DJ Cleo and Flavour

In mid-December, copyright expert Graeme Gilfillan, representing DJ Cleo’s company, Will of Steel Productions, and N’abania’s company, 2Nite Enter10ment, began sending out six separate requests for data from MTN, Vodacom and CCA.

In his letters, which City Press has seen, Gilfillan says there has been “disquiet” at the way the companies use a “three-month limited licence” to sell ringback tones pertaining specifically to how mechanical royalties are accounted, reported and disclosed.

At the heart of DJ Cleo and Flavour’s disputes is the fact that ringtones and ringback tones are sold on a three-month, opt-out licence, which means that if the buyer does not cancel the agreement, they are recharged every three months.

Gilfillan says studies show most consumers keep their ringtone for between two and five three-month periods, and every sale needs to be reported and royalties paid, not just the first one.

Gilfillan wrote that attempts to obtain proof of payment for licence renewals were “rebuffed” by the companies.

He has demanded data, which would allow an audit of the sales of the two artists’ works. He has also asked for a list of all sound recordings hosted by the two artists on the companies’ retail sites and for who supplied the works to MTN, as well as a statement showing all sales and how much was earned on them.

In addition, he has requested a statement tracking all mechanical rights and proof of authorisation to offer these works for free, and how often this was done.

Gilfillan says if the companies had done this already, there would be no need for an audit.

Letters between the parties City Press has seen show the negotiations have become rather heated.

Vodacom and MTN told City Press this week they report on every ringback tone billed for, be it a new sale or a renewal.

But Capasso insists it has faced constant “rate disputes” and that MTN has shown “unwillingness” to enter into licence agreements, adding that CCA is also disputing its rates.

Capasso’s business affairs manager, Wiseman Ngubo, says negotiations have been going on for a year.

Towards the end of 2014, MTN settled publishing royalties with Capasso for the period between 2006 and 2013. The 2013 royalties were paid out at 8%, the rate which Capasso claims is now in dispute.

But MTN insists it is not disputing the rate and is happy to pay it, but wants clarity on claims made for songs belonging to non-Capasso members.

Capasso said in a statement this week: “Failed negotiations and rate disputes have been the order of the day for over five years; this while the mobile giant continues to sell hit singles.”

CCA’s Antos Stella says it has been in good faith discussions with Capasso as late as this month, adding CCA appointed an independent company to deal with the complexity of mechanical royalties. She has declined to comment further.

“MTN is up to date with most royalty payments with Capasso and is in the process of settling the recent royalty invoice from Capasso for the current period, which amounts to less than R1 million,” the company said.

THEIR SIDE OF THE STORY
 MTN

“It is not correct that MTN is liable for billions of rands in royalty payments,” said sales, marketing and distribution executive Larry Annetts. 
“MTN is up to date with most royalty payments with Capasso and is in the process of settling the recent royalty invoice ... for the current period, which amounts to less than R1 million. 
“MTN understands the importance and imperative of paying music royalties for music that it sells on its platforms. With regard to payment of mechanical royalties, we have ... been trying to resolve [this] from as far back as 2012.” 
He said there have been duplicate claims lodged by various collecting societies, but claims that are not duplicated are “paid without any question”. 
“MTN has been dealing with alleged claims for Will of Steel Productions since 2012 ... Mr Gilfillan was invited to participate in this process; however, MTN had not received any document or response from him.” 
Annetts confirmed Gilfillan had asked for information from MTN and was referred to CCA, which gave it to him. “Mr Gilfillan has, in fact, confirmed that he is asserting no claim on behalf of the individuals he represents.” 
He said Capasso previously claimed royalties for both Will of Steel and 2Nite Enter10ment. 
“The fact that both artists have not received their royalty payments is of concern and should be investigated.” 

CCA 
CCA says Will of Steel and 2Nite Enter10ment license sound recordings to it in terms of written contracts. 
“Neither Will of Steel nor 2Nite Enter10ment has shown any proof that they each own the songs and publishing underlying the sound recordings,” said CCA’s Antos Stella. “CCA denies that it has infringed the copyright of Will of Steel and 2-Nite-Enter-10-ment’s copyright in any of their songs and publishing.” 
Stella said Will of Steel continues to invoice and receive money on revenue from master recordings every month and has not asked CCA to stop doing this. 
“We informed Gilfillan that CCA sends recording royalty statements to his clients and that his clients are in possession of these statements,” she said. “We informed him that mechanical royalties are reflected on statements sent to his clients.” 
“CCA can prove that it receives invoices from Will of Steel and 2Nite Enter10ment for recording royalties and that it pays them.” 

Vodacom 
Vodacom denies violating any musician’s copyright. “In particular, we reject any suggestion of criminal misconduct,” it said in a statement. 
“We have communicated with Mr Gilfillan on this issue on an ongoing basis. Vodacom informed Mr Gilfillan that it reports to CCA ... in respect of his clients’ recordings. 
“Mr Gilfillan needs to approach CCA.”

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