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FM players fear death knell for biz if music royalty issue not resolved soon

FM players fear death knell for biz if music royalty issue not resolved soon

Author | Robin Thomas | Thursday, Jul 16,2009 8:04 AM

FM players fear death knell for biz if music royalty issue not resolved soon

The FM players and music industry are hoping for an amicable resolution to the contentions music royalty issue at the Copyright Board hearing scheduled for July 28, 2009. exchange4media spoke to some industry experts regarding the implications of a verdict in favour of or against the radio industry, and if at all there is a way out.

The Supreme Court of India, in its judgement dated May 16, 2009, had stated that the Copyright Board was the Constitutional authority to decide on royalty rates for the industry. The Copyright Board hearing is scheduled to commence on July 28, 2009, and both FM players and the music industry are hoping for a fine solution that would eventually stop the bleeding and lead to rapid growth.

Meanwhile, one of the issues that the Association of Radio Operators in India (AROI) had presented to the Ministry of Information and Broadcasting (MIB) early this year was that of music royalties. The non-profit NGO had categorically stated that unless resolved, the radio industry would find it difficult to participate in the FM Phase III bidding.

According to Vipul Pradhan, CEO, Phonographic Performance Ltd (PPL), “Every market has a different business environment or model to deal with. In fact, there are different revenue shares. The business dynamics in India, too, have changed drastically, and this is a time when alternate mediums are emerging rapidly, too, like satellite radio/ television, mobile and, therefore, one has to look at the logic of this market. Whatever the Copyright Board’s verdict will be, we only hope that it will be a fair value that is given to the music owners.”

Industry Speak:
Apurva Purohit, CEO, Radio City, and President of AROI, stated, “In the event the verdict of the Copyright Board is in favour of the FM industry by determining a rate that is practical and viable, it will be a significant upside to us. An adverse verdict would certainly prove to be the death knell for our industry, which apart from providing the cheapest mode of entertainment in a developing country like ours, is also providing employment to over 10,000 people and is also contributing significant amounts to the national exchequer through annual license fees, etc.”

She further said, “Several radio operators are not operating during the night time in many cities, apart from metros due to the current high music royalty rates. An even higher music royalty rate would certainly result in the disappearance of the private FM radio industry in the country.”

Harrish M Bhatia COO, My FM, noted, “A favourable verdict on the music royalty issue can go a long way in developing the nascent radio industry in India, especially in the non-metro cities. Since privatisation of radio began, most radio stations have focused on the metro markets and it was only much later in the second phase that radio moved in to the non-metro markets, where individual stations are still struggling to maintain viability since radio is a new medium and high cost of royalty is being paid.”

“If the radio industry is to develop into a sustainable format, the music royalty issue has to be resolved urgently. If the verdict is negative, commercial viability of some stations in these markets may become an issue and there would be a definite impact on employees. Apart from this, there are several other adverse impacts that need to be considered. The tremendous growth that the industry was witnessing will be hampered and the low costs of advertising that radio offers may have to be revisited as well. The whole industry may witness a downward spiral,” he cautioned.

Ismail Dabhoya, Senior Vice President – Finance and Commercial, Big FM, observed, “The current royalty rates are very steep, especially for stations in the smaller markets (BCD), which makes it an unviable business proposition. Unless sorted, we are going to see a huge dip in enthusiasm levels for Phase III bidding. Today, even existing players are finding it difficult to consolidate operations; in fact, established business groups have surrendered their licenses. Music royalties are significant portion of the stations’ costs and a reduction in this could enhance the future earning capability of the radio industry, and in turn augment the current and future employment opportunities.”

Nishant Mittal, CEO, Radio Misty, explained, “If the Copyright Board’s verdict is in favour of the FM industry and there is a solution, it would bring relief to everyone. There would be further investment and expansion in the FM industry. It should be noted that the FM industry is growing at its pace, and in terms of revenue, we still share a relatively smaller portion than other media forms. The royalty rates should increase gradually and not reach the sky at once.”

He further said, “If the verdict doesn’t go in favour of the FM industry, then we still have to pay high royalty rates, the time is not far where you will see most of the smaller FM stations closing down and surrendering their licenses back to the Government as it is not possible to incur further losses.”

Puja Sharma, Head of Finance and HR, Fever FM, said, “It is a known fact that the radio industry is bleeding, thus making huge losses as music royalties are a considerable expense, and if we could reduce rates, it would have a positive impact on the survival of the industry, but if the verdict is not in favour of the radio industry, then one of the adverse effects could possibly have a direct impact on the employees, leading to FM stations having to retrench their employees.”

The way out:
Purohit of Radio City pointed out, “Apart from the revenue sharing regime, which will ensure gradation across cities, a single body representing the music industry is required to ensure that the royalty paid reaches the correct IPR owner. The FM radio industry is represented by AROI, while there is no such organisation representing the entire music industry in India, which is very unlike the situation in other countries. The MIB and the HRD Ministry has evinced interest in resolution of this dispute, but lot more needs to be done for arriving at a solution of this dispute, which is critical for the survival of the private FM radio industry in the country.”

Bhatia of My FM noted, “It is true that if royalty costs are not reviewed, several contenders for Phase III may shy away from bidding for fear of sustainability issues. The solution to the music royalty issue is to understand primarily that the radio industry and the music industry are, in fact, partners in business and that they shouldn’t be seen as competitors. Music royalties need to be changed from the current situation of fixed costs to branched fees for various market segments and within segments be divided based on format, revenues and listenership.”

Big FM’s Dabhoya, too, stressed on the rationalisation of music royalty costs for the radio industry. “At present, it is not in sync with the revenues being generated, making business unprofitable in several cities. The issue, unless sorted, will only hamper the growth of the industry. The music and radio industries have to grow together and not at the expense of each other,” he affirmed.

Mittal of Radio Misty said, “It would be difficult to participate in Phase III bidding until and unless the royalty issue is solved. It is not practical and also unfair to charge higher royalty fees from the smaller cities, where the revenue share is also very less. It should be noted that maximum bidding in Phase III is at D city towns, and there the revenue source is very limited. The music industry should understand the problem of the FM radio industry and should walk together rather than walking in opposite directions for the betterment of both.”

Also read:

Music royalty issue delays Phase III FM bidding

Music royalty issue: ‘Don’t kill the golden goose’, radio industry tells music industry

Music royalty issue: Music, radio industries urged to ‘shake hands’ and carry on talks

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