Music royalty: AROI proposes revenue sharing structure

Deepasree Venugopal - Televisionpoint.com | Mumbai
The Association of Radio Operators for India (AROI) says that the last Copyright Board order in 2002 favours the music industry. The Supreme Court directed the Copyright Board to resolve the issue. The board started hearing the matter from July 28 and then give its judgment.

The business model maybe profitable in bigger cities, for instance if a 24-hour radio station plays music for 18 hours a day, it ends up paying Rs 70 lakh as royalty a year to music companies, the same amount of royalty fees makes no sense in smaller cities. At present, a broadcaster in Nagpur or Sikkim pays the same for music as a broadcaster in Mumbai or Delhi.

The current regime is not practical because FM stations are paying unreasonable amounts as royalty fees. The royalty in large and small cities is the same, it does not take into account the revenue potential of the city and there are also multiple bodies claiming copyright ownership for the music.

Apurva Purohit, chief executive officer, Radio City and president, AROI, says, "The industry on an average pays 15-20 per cent of its revenues as royalty, whereas this is about 70-90 per cent in smaller cities."

Its believed that till the time the royalty issue is resolved, phase III bidding would prove to be futile. Phase III is where further deregulation and changes in policy will be allowed by the Information and Broadcasting (I&B) Ministry.

In this phase, it is expected that multiple frequencies, broadcast of news and current affairs, increased FDI and networking will be allowed. This part of phase III is certainly welcomed by the industry.

"However, where several hundred more frequencies will be auctioned, especially in smaller towns, is the problem area. This is because the current royalty rates are causing FM businesses in smaller towns to flounder with the cost structure and making it completely unviable for radio stations to operate in these places." Purohit says.

Since the matter is sub judice, Purohit was cautious in sharing details of recommendations and expectations of radio operators. However, she says the Association has proposed a revenue share structure for different cities based on their advertising revenue.

"AROI recommends that a revenue-sharing model with the music industry be worked out, which is in the line of the radio players arrangement with the government on the licence fee." she says.

It is learnt that a revenue share will benefit the FM players, music industry and government concerned. The viability of radio stations in large and small towns will immediately improve, thus radio operators will see the benefit in expanding to more cities under phase III.

The Ministry is keen to ensure that radio, which is the cheapest form of entertainment, reaches to the largest audience as possible and this will happen if the FM industry is given an impetus to expand through improving its cost structure.

It is also a known fact that radio is the primary source for increasing awareness about music and film releases and indeed, most film producers aggressively use the medium for film and music promotions. Clearly, expansion of the medium means increasing penetration, promotions and sales for the music industry.