It’s hard to remain apathetic to the difficult time many Israeli entertainers are having. Most actors and singers have been unable to perform for nearly a year. Some are taking random jobs to make some money; others are counting on royalties from old television appearances and radio play.
For the latter, they depend on Eshkolot, a company responsible for distributing royalty payments collected from the major broadcasters to over 41,000 performing artists on its roles. But many artists, including some who have shares in the company and have worked for it, think Eshkolot is too secretive about its finances and could be paying them more.
It all came to a head in July 2019. A routine shareholders meeting to approve the employment terms senior executives and expand the board, turned into a pitched battle between the Eshkolot executives and 30 shareholder representatives, most of them celebrities such as Gidi Gov, Gila Almagor, Gadi Yagil, Yair Nitzani, Alma Zack and Guy Loel.
Minutes of the meeting show that the shareholders had no clue how the company they supposedly oversee is run. Gov asks, for example, “What’s the significance of this whole business with directors?” Nitzani adds, “How often are they replaced?” and Loel says, “Just to make it clear, the board hasn’t been changed in 34 years, am I wrong?” The shareholders didn’t know how executives are chosen, what they are paid, and how they can be replaced, if at all.
As the meeting progressed, the anger grew. Loel – who is deputy chairman of Shaham, the Israeli Actors Guild, and who was one of the most militant shareholders – refused to comment to TheMarker, but his remarks during that meeting shed light on the feeling among the performers. “What happens to our royalties? How are they distributed? How much is kept on the side? Every shekel that comes into the company is money that artists worked for – it belongs to the performers. The battery of respectable lawyers Eshkolot employs is also paid for with our money. When we were told that we were going to discuss the salaries of the board, we asked for numbers. I want to compare it to other organizations, but you’re not giving them to me. I’ve been trying for two years to get a document.”
In response, Sasi Keshet, a director, says, “Don’t be ridiculous. You’re lying. You can go to the office and get everything.” Loel responds, “Why is this lying, Sasi? I’ve been in the office a million times, I know what it’s like to be in a room with Oshik Levy.” In the background, Keshet is yelling, “Lies, lies,” while Loel continues, “Anyone with eyes must oppose the clauses up for a vote.”
But the board’s proposal – to enlarge it by two directors; to approve a gross salary for the CEO of 50,000 shekels ($15,550) a month plus expenses as well as payments to directors of 3,000 shekels a month, plus 1,200 shekels for every meeting – was approved by a majority of shareholders, with six artists abstaining.
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Eshkolot was founded in 1983 by Illi Gorlitzky, Keshet and the late Shaike Ofir; Gorlitzky and Keshet are members of the board to this day. A year after the company was founded, the Performers Rights Law, which Eshkolot had lobbied for, was passed in the Knesset. A decade later, it was amended to give performers royalties every time their performance was played or shown, to be paid via the organization that represents the largest number of performers. In 1998, the Culture Ministry deemed Eshkolot that organization.
Shareholders in the dark
Since then, all the broadcast organizations pay the company an annual fee to cover royalty payments. Eshkolot shareholders are neither party to the agreement nor informed of the amounts involved on the grounds that they are a commercial secret. Eshkolot also gets annual payments from supermarket chains, events halls and community centers that use music or other works.
For years Eshkolot has waged legal battles with the broadcasting companies, including Yes, Hot, Cellcom TV and Kan, to increase the payments. Eshkolot’s financial statements show that in 2019, its revenue increased 16.8% to 42 million shekels, but royalties paid out by the company grew only 3.8% to 25.7 million shekels. Critics say Eshkolot’s management hasn’t explained what it has done with the difference.
Royalties are distributed to the artists based on per-minute of airplay or broadcast, but the company says the rate is a trade secret. In any case, the formula changes from year to year, based on how much the company takes in. Documents obtained by TheMarker show that in 2019, artists got 5.29 shekels for each minute their music was played on public radio stations, but for each minute on Army Radio the rate was only 1.38 shekels.
For each minute an actor appeared on a TV series aired on Reshet, he or she got 54 shekels, but if it aired late at night, the rate fell to just 17 shekels. Night broadcasts on the competing network, Keshet, gave the actor 16 shekels per minute. A song broadcast on Channel 12 entitled the artist 45.50 shekels per minute, while the artist got 49 shekels per minute on Channel 13. The pricing of these minutes is very important to the performers, since very often these royalties make up a significant part of their annual income.
Eshkolot’s approximately 100 shareholders have no financial interest in the company, but they do have the right to oversee management and vote at the annual general meeting on major decisions, such as executive salaries and who sits on the executive committee.
Surprisingly, many of them have no clue how they became shareholders. “I only found out a few months ago that I have a share in Eshkolot,” says actress Nitza Shaul, who added she has no idea how she got it. Nor does singer Dori Ben Ze’ev recall how he obtained his share. “Only recently, Nitzani reminded me that I have one,” he says. Nitzani says he got his share more than 20 years ago, “but I don’t remember exactly how it happened. I assume it was a decision by the board.” Actress Hani Nahmias doesn’t recall how she came by her share or how long she’s had it. One actor who preferred not to be named said that a few years ago he got a phone call telling him he had been awarded a share, but wasn’t told why.
The crisis between Eshkolot and its critics erupted in 2017 when comedian Roi Levy sent a sharply worded letter to Eshkolot’s royalties committee. The job of the committee, which comprises representatives of Eshkolot shareholders, Shaham and the Israeli Union of Performing Artists, is to review complaints by artists about the level of royalties they receive. In Levy’s case, he wanted to learn why in 2015 he was paid 4.80 shekels per broadcast minute, while the year before he’d gotten 10 shekels.
Eshkolot responded that in 2015 the royalties committee had decided to change the rate for programs aired more than 1,200 times. However, the change was revealed only after Levy complained. When Levy asked to see the minutes of the meeting at which this new method of distributing royalties was decided upon, Eshkolot’s legal adviser said they were secret, so as not to expose committee members to outside pressure. When Levy and his attorney left the room, committee members held a discussion that revealed how much they, too, didn’t really understand the process.
“It seems that it’s clear to all of us that there’s a mistake here,” said Shahar Botzer, the CEO of Shaham and a committee member. “I must note that when we made the decision about the 1,200 it would be problematic. If he goes to court, he’ll win.” Loel added, “This rule was mistaken. To tell a person that if you work 1,200 minutes you get 60,000 shekels but if you work more it goes down to 30,000 shekels isn’t logical.”
The meeting ended with a recommendation to begin issuing regular announcements about decisions likely to harm performers’ income and to provide the committee with all the regulations and classifications on which royalties are based. However, Levy’s complaint also revealed that the royalties committee didn’t have the power to impose order on the system and over the following year they resigned one after the other. Now only Eshkolot executives sit on the royalties committee.
In July 2019, Shaham and performers, including Loel, Ohad Knoller, Yehuda Levi and Esti Zakheim, sought a court order for the company to release the documents. The lawsuit argued that the artists were kept in the dark about their royalties and how they are distributed, the salaries of senior executives or how the profits Eshkolot generates are used. In response, Eshkolot said the lawsuit was nothing more than an act of revenge by Uri Rashtik, Shaham’s CEO, who it asserted had sought Gorlitzky’s job.
Wall of silence
Since then, tensions have subsided to the point that when TheMarker began pursuing the story it was met with a wall of silence, even from Eshkolot’s critics. The reason, it was said, is that a settlement recently reached between Eshkolot, Shaham and the artists involved in the lawsuit includes a non-disclosure clause pending approved by the court. “We’re satisfied with the compromise that was reached and working hard to make sure it moves forward,” explained one of the artist activists.
TheMarker has learned the settlement includes Tali, which collects royalties in the name of film and TV directors and screenwriters. It will allow Gorlitzky to stay on as Eshkolot president as long as he wants and to serve as an adviser to the board. Two CEOs will be named, one of whom can serve for no more than six years and will be responsible for strategy and business development and restructuring management. Eshkolot will reveal its royalties formula and its board will be expanded to eight directors – three appointed by founding members, three by younger ones and two from outside the organization.
But the settlement hasn’t brought an end to all the infighting. A month before it was presented to the court, singer Shai Gabso filed a class action suit in the name of 40,000 performers alleging that Eshkolot was not distributing enough of the royalty income it was receiving and that its management and other overhead costs were excessive and non-transparent – in short, much the same complaints that the Shaham suit cited.
Gabso attached an expert opinion in his lawsuit that asserts that Eshkolot’s costs are out of line with its revenues and mission. Gorlitzky’s 600,000-shekel annual salary is much higher than those of his peers, it asserts. It also charges the company with transferring money to third parties, such as Shaham, without the artists’ consent. Similarly, it awards older performers higher royalties. “Young artists are subsidizing older artists regardless of their financial state,” the suit says.
“The sole purpose of Eshkolot is to collect money for artists and distribute it, but in practice it doesn’t pass on a significant portion of the royalties and that’s because the company doesn’t operate according to corporate governance nor and the directors do as they please, without supervision of the shareholders,” said Ohad Rosen, one of Gabso’s lawyers.
“Strangely, only a month after the class action suit was filed, Shaham and Eshkolot reached a secret settlement. But this agreement won’t be able to supersede the clarifications the lawsuit seeks, since it seems on the face of it that it does not give real value to the artists, but deepens the discrimination and erosion of their royalties.”
In response, Eshkolot said it would respond to the lawsuit in court and added “that all the allegations in (TheMarker) article are false and at variance with the facts.”
“(Last) month Eshkolot signed an agreement with two artists associations in Israel, Shaham and Tali … The new agreement ensures all artists transparency, involvement and complete representation according to the industry’s highest standards, so that in any case the article’s claims are irrelevant,” it said in a statement. A lawyer for Shaham also lauded the settlement as strengthening artists’ rights.