Statutory licensing for online streaming: A case of legislative inaction

A recent case of Tips Industries v. Wynk Music has sparked a widespread discussion over Section 31D of the Copyright Act 1957, which provides a scheme for “statutory licensing”. The section was introduced to remedy the challenges faced by the radio and television industry and sought to ensure appropriate returns to the owners of the copyrighted work and easy access of protected material to broadcasters. The requesting party can directly obtain the licence through a unilateral notice informing the copyright owner and paying the royalty rates specified by the Intellectual Property Appellate Board (IPAB). Interestingly, the section was introduced in 2012 when internet broadcasting was prevalent but failed to make any references to the same.  

New music streaming services, such as Spotify, now find themselves in similar shoes as FM operators. However, India possesses no guidelines to regulate the manner in which licences are to be obtained by online streaming services, and it is mostly left to voluntary arrangements which open the door for exploitative agreements and allows setting of unreasonable licensing conditions, leading to loss of consumer welfare by affecting accessibility. This, including the fact that streaming services are now key players in the music industry, presents a strong case for introducing a statutory licensing scheme exclusively for these which are now obtained under 31D.

The Bombay High Court was faced with the question of whether online streaming services could claim under the scheme of 31D. The court held that 31D is an “expropriatory legislation” i.e. an exception to the principles of copyright, and therefore, needs to be read strictly. Additionally, since it was enacted for meeting a specific public-policy objective of protecting radio and television broadcasting companies, its ambit cannot be extended beyond the legislative intent to also include online streaming services.

In response to this judgment, the Copyright Rules 2013 were hastily sought to be amended to make the statutory licensing scheme applicable to online broadcasting organisations. The proposed amendment would replace the words “by way of radio broadcast or television broadcast” with the more broadly worded “for each mode of broadcast” in the relevant rules. However, no similar amendment has been proposed to the Copyright Act itself.

This hasty action fails to account for several issues and causes confusion. Primarily, it fails to account for the fact that streaming services are unique and distinct from broadcasting services. While broadcasting services offer little or no control to users in terms of what content they may view or hear, streaming services pride themselves on offering users access and control to the wide database of licensed content. This unique nature of streaming services makes it redundant for consumers to directly deal with record labels, changing the bargaining dynamics between parties in such licensing arrangements. The automatic nature of the right under 31D would exacerbate this divide and have a negative impact on music publishers and copyright holders. Additionally, there is no requirement on the part of the broadcaster to attempt bona fide negotiations on fair terms before claiming under the scheme. Such inclusion may lead to 31D being used as a shield to avoid licensing music on fairly negotiated terms. This would curtail fair revenues from being returned to those that create and invest in producing music, negatively contributing to the “value gap” in the music industry.

Notably, similar challenges were faced by the US prior to its enactment of the Music Modernization Act (MMA) in 2018. The MMA is aimed to increase the royalty payments of songwriters, artists, and creatives in the present digital era. Prior to the MMA, royalty rates and terms and conditions of licences were determined by the Copyright Royalty Board and broadcasters were entitled to obtain licences as a right merely by sending a notice to the Copyright Office, much similar to India. The MMA remedied this by mandating broadcasters to show that the other party was setting unreasonable terms while negotiating, before a licence is granted to such broadcasters. For ensuring that genuine copyright owners receive the royalty payment, it established a Collective, which has the duty of identifying copyright owners and ensuring speedy payment.

The Department for Promotion of Industry and Internal Trade (DPIIT) invited comments until the end of June 2019 and no further action has been taken since. Instead of hastily introducing the amendment, the legislature must urgently take action to ensure the new business models in the industry are accounted for, and a fair licensing regime is brought about. India would benefit from looking towards the MMA in how it accounted for the unique challenges faced in the music industry with streaming services.

(The writers are student at National Law University, Delhi)