Sweet grapes, sour grapes, or the grapes of wrath: what is going on with this collecting society?

“Unus pro omnibus, omnes pro uno”, “Un pour tous, tous pour un”, and “One for all, all for one”; whether in Latin, French or English; whether the unofficial motto of Switzerland or a famous line from “The Three Musketeers” by Alexander Dumas, the saying has become a by-word for mutual obligation. In these days, the saying would seem particularly apt for those in the entertainment industry, many of whom have seen their livelihood swept out from under them.

But perhaps not so. An article that appeared in The Marker, a section of the respected Israeli newspaper, Ha’aretz, suggests that when it comes to the operations of at least one collecting society, the motto seems more— “me, myself and I”. Instead of helping each other, the article suggests that senior management may be less than forthcoming regarding the financial well-being of their members. Even more, such disregard is justified by a claim of trade secrets. Since the newspaper report is in Hebrew, permit this Kat to summarize its most salient points.

The name of the Israeli collecting society is “Eshkolot” (which roughly means “bunch” or “cluster”, as in grapes). It was founded in 1983 by three performers for the purpose of advancing the interests of their fellow performers, a year before the Israeli legislator gave statutory recognition to performers’ rights. About decade later, the law was amended to entitle performers to receive royalties. Since Eshkolot represented the largest number of performing artists, it became the collecting society that would administer the collection and distribution of the moneys paid for such performances.

Two of the three founders of the organization have remained as directors, one of whom still also serves as chairman. The third director, also a performer, came on board when the third original founder died in the late 1980’s.

The organization is described as a private company that serves as a fiduciary on behalf of its members (currently reported to be approximately 40,000) Eshkolot has 100 shareholders, none of whom holds any share capital. Rather, shareholder status only confers the right to supervise the organization and to vote at the general meeting on a variety of issues.

Surprisingly, a notable number of shareholders are reported either not to recall how they received their respective share or to have only recently discovered that they are a shareholder. One of the shareholders is the wife of one of the three directors. [Full disclosure, this Kat has represented at least one of these shareholders, albeit in the distant past and in a different context.]

Since its appointment as a collecting society, Eshkolot has indeed collected moneys and distributed royalty payments to performers. The problem is, so it is reported, that this process of collection and payment may lack adequate transparency. For example, the organization reported that its income in 2019 had increased by 16.8%, as compared with 2018, to the amount of 43 million Israeli shekels (approximately $14,000,000). However, it paid out in royalties 27.70 million Israeli shekels (approximately $8,411, 000), being only 3.8% more than paid out in 2018.

In light of these figures, a group representing the performers has sought to force management to better account for the remaining amounts collected in 2019, as well as how management decides the formula by which it allocates the royalties. The response seems to be— “Sorry chums, but that information cannot be disclosed because it is secret annd confidential. ”

But that is not the only time confidentiality has been claimed in response to a request for disclosure. When the minutes of the Royalty Committee were requested, the request was rejected on the ground that otherwise, members of the committee would be subject to social pressures. (Israel is a small country, most of the leading performers know each other, and it is not unusual for them to be running into-- hopefully, not over--each other.)

At the most recent general meeting, the following exchange was reported to have taken place in connection with a request to see the books regarding the salaries of the directors:

Shareholder: “I have been trying to get these records for two years.

Director: “Stop with this nonsense. You are lying. You can simply go the office and get everything you need.

Shareholder: Why are you lying? I have been to your office a million times. I know what it means to go with [name of one the directors] to a room.

Director [calling out in the background]: Liar, Liar.

Shareholder: Anyone with eyes should oppose the items up for vote.

Except that they did not. The article reports that management’s proposals were approved by majority vote, including a generous monthly salary for the chairman (plus vehicle allowance and insurance), the directors’ monthly salaries and receipt of payment for “personal meetings”. It is not reported how many shareholders took part and what was the breakdown in the vote (other than there were six absentions).

Kat readers can make what they wish of these events—sweet grapes, sour grapes, or grapes of wrath. Whatever one’s view, the claim of confidentiality and trade secrets to base the non-disclosure of requested documents and information seems outrageous, especially coming from a fiduciary organization created for the benefit of its members.

This Kat has long championed trade secrets as a worthy alternative form of protection for one’s technology. But is it appropriate for a collecting society under these circumstances? We tolerate collecting societies as a matter of competition law, even if they are price-setting cartels, because they offer efficiencies for those concerned. Evoking trade secrets against your own shareholders and members seems hardly in line with these efficiencies.

Picture on right is by Maurice Leloir and is in public domain

Picture on left is by Carstian Luyckx and it is in the public domain

By Neil Wilkof