Indian gov't issues music royalty directive


NEW DELHI -- A long-standing issue over revenue terms between private FM radio stations and music labels here saw the Copyright Board issuing a directive Wednesday laying out a revenue-sharing model instead of the earlier fixed-cost structure.

The Copyright Board, part of the Ministry of Human Resources Development, has been mediating a bitter dispute over the last couple of years between FM stations and music labels over establishing a revenue model between both parties. Private stations launched here over five years ago after the government auctioned licenses inviting private players in radio broadcasting.

The new directive states that FM stations will share 2% of their net advertising revenues (total advertising income minus agency commission and government taxes) with music labels as royalty.

Earlier, music labels were charging stations a fixed per hour royalty rate  estimated at between 1,200 – 1,600 rupees ($26.60 - $ 35.50) that was opposed by FM players as being unrealistic while complaining that heavy license fees and other costs were already hurting their business.

Industry estimates reckon that in the last financial year ending March 2010, radio broadcasters paid out 1.2 billion rupees, or 18% of their net ad revenues, as music royalty. But this figure would drop considerably with the new directive of a 2% share of net ad revenues, resulting in music companies only receiving about 140 million rupees, according to estimates.

Expectedly, the new directive is welcomed by radio broadcasters but upsetting music labels who are considering legal options to challenge this ruling.

India's largest music label, T-Series VP Neeraj Kalyan said the Copyright Board's directive is “absurd, biased and one-sided,” clearly favoring FM broadcasters.

“In India the biggest challenge is to establish a fair value for content and that is at the heart of this issue between FM broadcasters and music labels,” music industry consultant Mandar Thakur told THR. “While I am still not aware of the details of the directive, as an observer, all I can say at the moment is that this decision seems hasty and I would not be surprised if it is legally challenged by the labels.”

Estimates reckon that in developed radio markets internationally, music royalties can range up to 4% of broadcasters' net ad revenues.

The judgment is to be implemented with immediate effect valid for the next 10 years and is also seen as an incentive for stations to expand into more markets as part of the government's upcoming plan to issue more licenses.
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