Say Copyright Board level set too low
The issue of music royalty between radio stations and music companies is expected to take another legal turn. While the Copyright Board has said radio stations should pay only two per cent of their net advertising revenues to music companies, the latter say the Board’s reasoning is flawed and they are evaluating legal options.
FM radio broadcasters have been contesting Phonographic Performance Ltd (PPL) since 2002 on the issue of high royalty. PPL is the largest aggregator of music in the country, administering the broadcasting, telecasting and public performance rights on behalf of over 160 music companies.
Last week, the Copyright Board passed its order on two per cent royalty. It based its order on two premises. One, that FM radio is an infant industry and in a bad financial state. Two, that royalty charged by music companies should be at par with global levels. “The order is blatantly one-sided. The board reasoned that the royalty paid by radio stations should be at par with global standards. Which is not the right way of looking at the domestic situation. FM radio in India has grown in the last 10 years and there has been a drastic decline in physical sales of music companies. That cannot be a mere coincidence,” said Apurv Nagpal, managing director, Saregama India.
Adding: “We are in the process of consultation with other music companies in PPL. We are evaluating the options available before us. Based on the consensus, we will be taking action against the revenue-sharing arrangement worked out by the Copyright Board.” said using global rates as the benchmark in India is unfair. “The excise duty on cars in Western countries is 10 per cent, the duty on alcohol is next to nothing, but does that mean we can have those rates in India? The order is against the spirit of promoting new content creation,” he said.
‘FM radio growth essential’
In its order, the Copyright Board has maintained, “It is true that FM radio industry is in a very bad state of financial health. Except one unit, ENIL...the rest are all loss-making since their beginning and many are on the road to go, or have gone, out of business. Their survival and growth is very much essential for nation building, as the government policy expects them to handle a priority area, which is spreading literacy. Music providers, including the respondent herein, are in a very good financial state, enjoying a robust compounded annual growth rate (CAGR).”
ENIL chief executive officer Prashant Panday said, “The radio companies would be prepared to respond to any measure which is contemplated by PPL. The Copyright Board’s order is a fair one and music companies should look ahead to mend fences with radio broadcasters. They should consider improving the lot of artists and build business in the industry as a whole.”
PPL members include Saregama India, Universal Music India, Venus Records and Tapes Private Limited, Virgin Records, Times Music, Sony Music Entertainment India and Tips Industries amongst others. PPL’s royalty income for 2008-09 was Rs 16 crore from broadcasting, Rs 22 crore from public performance and Rs 99 crore from mobile and digital. Radio companies pay royalty of Rs 525 per hour for FM non-metro and Rs 600 for FM metro stations.
FM radio broadcasters said music companies have been making money, since consumption of music in the digital format and mobile phones is growing. According to a PricewaterhouseCoopers report on the outlook for the media and entertainment industry, while the music industry is projected to grow at a CAGR of 28.6 per cent till 2014 to reach Rs 2,650 crore and mobile VAS music is expected to grow at 55.3 per cent to reach Rs 1,900 crore. Presently the size of the Indian music industry is Rs 750 crore, the report said.
Revert, say music firms
Nagpal, however, said the music industry has been losing a lot of money due to piracy, both in the physical format and illegal downloading of music on the Internet. “Bringing down the royalty is not the ideal step by which the government can bail out radio companies. Government could bring down the licence fees for radio stations, instead of penalising music companies. FM radio operators say that music is oxygen for them and this is how they are treating the oxygen providers. We think the status quo on royalty should be maintained.”
However, Ashish Pherwani, associate director, Ernst&Young, said, “Globally the royalty range is one to three per cent, so the two per cent figure in India is just fine. It will benefit both the FM radio channels and the music industry in the longer run. Paying less royalty will help the smaller radio stations to be profitable and as far as music companies are concerned, they will continue to make money, as many more radio stations are likely to start operations (as) about 800 new licences are expected to be issued.”
According to the PwC report, the radio industry, Rs 900 crore in 2009, is expected to grow at 12.2 per cent CAGR to reach Rs 1,600 crore in 2014. Resolution of the music royalty issue, along with issues of multiple frequencies and extending the licence period, are critical for the radio industry, the report said.
