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Music royalty issue: Music Cos slam Copyright Board’s order; fear negative impact on entire entertainment industry

31-August-2010
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Music royalty issue: Music Cos slam Copyright Board’s order; fear negative impact on entire entertainment industry

The tussle between music companies and the radio industry over the music royalty issue is not over yet. The Copyright Board had recently recommended a revenue sharing model for the radio companies and the music companies. However, music companies are far from happy with the recommendation and have come out strongly against it. They share their reservations with exhange4media.

As per the Copyright Board’s recommendation, around 2 per cent of the net advertising revenues of radio companies will be given as royalty tax to the music companies. This is as opposed to the earlier norm, which required the radio industry to pay as much as 20 per cent of their revenues as royalties.

Understandably the radio industry has welcomed the new recommendation as it feels that it will provide some much needed relief to radio operators, who have been struggling with lower profitability on the account of the high royalty burden in the past.

Counterproductive & negative, says music industry

Apurv Nagpal, MD, Saregama, firmly believed that the decision was going to cast a negative impact on the entire entertainment industry. He said, “I think, against the 7-8 per cent, which was coming in, it is going to go down to 2 per cent. The impact though is going to be negative not just on music companies, but on the entire entertainment industry. The filmmaking bodies – the producers – will also get affected.”

Coming down strongly on the recommendation, Neeraj Kalyan, Vice President, International Business, Publishing & Digital Content, Super Cassettes Industries Ltd (T-Series), said, “The Copyright Board’s order has really come as a shock to the entire music industry. It is a sundown on free trade and freedom to contract. The Copyright Board’s order seems biased in granting compulsory licenses for broadcast of copyright works, thereby curtailing the powers of copyright owners to bargain. On the other hand, this places the broadcasters on a higher pedestal by placing no fetters, whatsoever on their powers to freely negotiate their advertisement rates on their channels. This partial control by the state is discriminatory, counterproductive to the industry and will lead to placing of unprecedented checks on freedom of trade in the history of independent India.”

Kalyan further said, “ India cannot be compared with international markets, which are developed. For example, in the UK, the minimum percentage of royalty is 5 per cent of the gross revenue for master sound recording and another 5 per cent of gross revenue for performance royalty for radio broadcast. The total reception of the copyright owner is at least 10 per cent of gross revenue of radio broadcasters.”

“The radio industry has been working in tandem with copyright owners on freely negotiated voluntary licenses. The recent order will impose a state controlled regime that is neither desired nor workable. This will not only take away the concept of copyright and exclusivity, but it will also make it unviable for many copyright owners which, may again, seriously jeopardise the commercial interest of the copyright owners and create market imbalances and affect free trade in the economy,” he added.

Kalyan further said, “We are really astonished to note that the Government is charging 4 per cent of the gross revenue as license fee from the FM channels, whereas CRB has ordered a mere 2 per cent for the copyright owners.”

Positive effect on Phase III, say radio players

Meanwhile, the radio industry has welcomed the Copyright Board’s order. BAG Films and Media CMD Anurradha Prasad remarked, “The music royalty cost used to be a huge drain. The radio industry wasn’t growing due to huge costs in the music business. A 2 per cent revenue share will actually be a big help for radio broadcasters in smaller towns, who were burdened with a heavy payout to music companies. This is a positive effect on Phase III.”

Prashant Panday, CEO, ENIL, Radio Mirchi, too, said that the music royalty’s resolution was very good news. He added, “For radio broadcasters, it obviously means relief from a unique extortionist regime. Whereas radio broadcasters around the world paid between 0 per cent and 4 per cent of their advertising revenues as music royalties (in the markets where radio has developed well), in India, the music societies were demanding 30 per cent. Being ‘natural monopolies’ (you have no option to the music they own), music societies had imposed a repressive regime. The Copyright Board’s order of 2002 helped overcome the problem then; but that was at a time when private FM was present in only 12 cities. Since then, private FM has expanded into nearly 85 towns. The matter was embroiled in legal issues till May 2008, when the Supreme Court settled the matter of compulsory licensing and sent the royalty rates matter back to the Copyright Board. Since then, the Board has done an extensive exercise and has finally announced this new order.”

On Phase III, Panday commented, “It will relieve the radio industry a lot. The radio industry was accruing more than Rs 100 crore annually under this repressive regime. Now at 2 per cent, that number would be Rs 14 crore for FY11. So, it’s a significant relief. Of course, as radio revenues grow, so also will music royalties. It’s always good to work in partnership than in an ‘I win you lose’ kind of a situation!”

Nisha Narayanan, Senior VP, Programming & Projects, Red FM, observed, “With the industry estimate of approximately 18 per cent of the net ad revenues going as royalty to the audio music companies, the FM radio industry was bleeding. This has been a move in the right direction. A 2 per cent share in the net revenue as royalty will bring relief to many broadcasters. This was long overdue and such a move should have happened earlier, and would have avoided shutting down of radio stations in the past due to exceptionally high operational costs and sustenance issues. It is good to note that both the HRD Ministry and I&B Ministry took this initiative to support the growth of the industry. We would like to say that there are still various issues that are pending, which also need to be resolved for successful growth and survival of private FM radio broadcasters.”

She further said, “We are still studying the full Copyright order. However we are of the view that this is for sound recordings only and accordingly, the copyright license fees will be paid at this rate to all music bodies. At present, we will continue to pay separately to each agency and music body (on a proportionate basis) till the Government appoints a single collection agency for the same.”

Narayanan concluded, “This will go a long way in making radio a viable industry. This will also allow the industry to expand to smaller cities where the huge cost of royalty was an inhibiting factor for the industry. As I mentioned before, a few private FM stations shut down due to high operational costs and high royalty fee earlier. This will come as a big relief for the smaller networks. This will also lead to a higher competitive space and hopefully should encourage a higher variety of music being played in the industry.”

Also read:

Music royalty issue resolved; radio players to now pay 2 pc of ad revenues as royalty tax

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