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Key issues raised at Indian Music Industry Convention 2019: compulsory licensing, fair value, safe harbour

“The biggest raw material for the radio industry is music, and they pay the music industry Rs 60 crores. We don’t get paid more than 2% of the topline,” said Vikram Mehra, chairman of the Indian Music Industry (IMI) and Saregama MD, at IMI’s 2019 Convention in New Delhi. Pointing out a legacy IMI issue, Mehra said the music industry powers larger industries like radio (worth Rs 3200 crore) and TV (Rs 17,000 crore), but doesn’t get a ‘fair value’ for their music.

When we ask for a legitimate share, are we being unfair? Television also has protection under statutory licensing. If music labels are asking for fair share from a 17,000 crore company, are we being unfair?”

‘Outdated’ safe harbour: intermediaries are not passive anymore

Lauri Rechardt of IFPI (International Federation of the Phonographic Industry) blamed the safe harbour granted to intermediaries such as YouTube, who are protected from user-generated content that violate copyright. “User upload and video sharing services such as YouTube account for 50% of all time spent for listening to music,” he said. Regarding OTT services being intermediaries, Aditya Gupta of Aditya Music said they’re conflicting with music streaming apps, and sought support from government. “All these intermediary services, in the name of user-generated content, have huge consumption,” he said.

Record labels have evolved with technology. Today, about 78% of the recorded music industry’s revenues in India come from digital services. However, they point out that the law has not kept abreast with changing technology. The internet, its intermediaries, and its standard business models are rapidly evolving. For instance, intermediaries that once qualified as passive pipelines of information, now actively track, manage, and control the content on their platforms. Thus, one area for regulators to explore could be around outdated safe harbor provisions and exceptions that shield internet intermediaries from liability – these could be factors that enable the value gap.
IMI-Deloitte Report 2019

Streaming has no business model

IMI and music industry executives also repeatedly brought up the business model of the streaming services who are “merely seeking valuation”, and harming the music industry in the process, and also stating that compulsory licensing is part of the problem. 

“The primary focus is to increase valuation,” said Mehra, drawing a parallel to WhatsApp which doesn’t earn any revenue. “Any global platform uses monthly active users, and they get that by giving content for free.” He continued: “We are not in the valuation business. we have paid serious amount of money to a film producer. The flexibility should be done to have a voluntary commercial negotiation. Commercial negotiations have gone awry. There is a threat of using Section 31D for statutory instead of voluntary negotiations.

The intent of the music industry was to sell music, after digital came in, now the intent is to sell the business,” said Atul Churamani of Turnkey Music. “Its all about getting a higher valuation, and I can’t understand the business model or the value proposition. You give my music away for free, and hope for ads and subscribers using my music, and you’ll give me a percentage of that. That’s supposed to be my business model.”

  • Streaming services have failed get enough ads because they can’t find a value proposition for advertisers.
  • “How is this the fault of the music industry? how does knocking our royalties down help? Spotify has launched in India without an international label, and they’re spending on advertising like hell, and struggling to get subscribers. They’re just saying “reduce our royalty rates and the world will be fine”.
  • Its like trying to support the car industry by deflating the tyre industry.”

Neeraj Roy, Hungama Digital CEO, defended streaming services, blaming the valuation model on the same content being available on YouTube. According to him, the streaming market is bound to grow and would be a Rs 30,000 crore market in a few years; there are already 400 million paying subscribers in India for content based services via bundling.

“Free music is not okay”

Devraj Sandyal from Universal Music Group said the problem in the Indian music streaming industry is that consumers have become used to freeness, “but we need to make sure that free isn’t good”. He said piracy has to become an actionable offense to “make sure that future generations understand that free is not okay”, and sought the government’s help. Aditya Gupta from Aditya Music said music OTT services have a significant subscriber base, and now the focus should be on making them pay, even if it starts with small payments. “Karaoke has already picked up in India, including Smuul, they have subscription plans, and they’re doing well.”

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Roy highlighted the “potential” of the music streaming industry multiple times, citing high data consumption, and music being a repeat consuming category out of 26 app categories. He indicated that streaming services have to think about value to consumer, and what services they would pay up for: “Today, when you’ve got million of hours and categories in thousands, at Rs 3-5 rupee yields, how does the industry match up for it? A 50-100 rupee price point is going to be for bundle of 5-6 services that a consumer will choose to go in and out of. Even if music industry made 5 rupees, it becomes a huge market. The market is going to be bundled, we need to lead this industry to commerce.”

Some data points from IMI-Deloitte report 2019:

  • Value of the audio OTT streaming: Rs 2,700 crore (based on valuations)
  • Revenue of audio OTT streaming: Rs 270 crore
  • Revenue from streaming accounted for 70% of the recorded music industry’s total revenue in 2018
  • The average internet user spends 21.5 hours per week listening to music, global average is 17.8 hours
  • Over 4,440 million monthly streams are running across leading audio OTT players (including JioSaavn, Gaana, and Wynk)
  • The conversion (into subscription) among 150 million music listeners on OTT streaming platforms is low – at about 1%
  • In a recent study in India, 76% of the surveyed internet users admitted to accessing musical content through pirated means

‘Fair value’ from streaming services

Aditya Gupta said usage and consumption of online streaming platforms may be increasing every year, 70% revenues of the music industry comes from streaming platforms. This is higher for regional labels, since they don’t as many revenue streams, and are are more dependent on the OTT market. “Regarding fair value, all our content is available for free, how can we invest in new films, we cannot recover the cost via streaming platforms. How can premium songs be made free to the users, when ad revenue is negligible?”


“We’re working with the government to reduce piracy. Youngsters are fine with listening to music through legitimate means. 60% of all the music heard on streaming platforms is the music which came in in the last 12 months. New artists are getting great breaks. We have a lot more work to do,” Mehra said. “Piracy has fallen down, and we appreciate the value that streaming platforms bring to reduce piracy,” he added.

On music industry bodies in India

Mehra said contracts in the Indian music industry are becoming clear and transparent. “We’ve come together with the music composers and lyricists to form Indian Performing Rights Society (IPRS). Revenues have gone up significantly. When all the fighting parties come together, and start saying ‘can we grow revenue together’, miracles will happen. Mehra pointed out the work the IMI has done:

  • PPL (Phonographic Performance Limited) has been revamped as an organisation. All the policies and processes have been reaudited, to address leakages.
  • We will ensure that PPL becomes as open as global organisations.
  • We’re working on more regional representation. The real growth is coming from regional languages. It’s fair that all the music labels who work in these languages get a fair representation.
  • Another big change is that the management at PPL and IPRS have professionals with a clear cut agenda to revamp the organisation and put them on the growth path.

Multiple music bodies

“As if there wasn’t enough confusion, we have messed up by having 3 bodies, and where to take a license from. We need a single body for license, and the ministry should enable that,” said Mehra. “Music is just an Rs. 1100 crore industry. The scope to grow this is significant. If this music Ganga can flow unhindered, I see three positives:

  • it will give a balance to film and non film sectors. As labels we will not just buy film music, but we’ll got to top 5 sectors.
  • Second is the growth of regional content. Malayalam rap has its own market. The artists will find what’s good for them, and labels will find it worthwhile to invest in them.
  • The third part is that music allows us to assert our soft power. What hollywood did for the US, music can do for India.

How music rights purchases work

The first rights a film producer sells are the music rights; 75% of all music heard in India is film music. On an average, a music label pays Rs 15-25 crores up-front, and once that is fully recovered, it pays up to 30% royalties in perpetuity. “We at Saregama are still paying rights for RK Films, because most royalty arrangements are perpetuity arrangements”, said Vikram Mehra, chairman of the Indian Music Industry and MD at Saregama.

Mehra explained how rights purchases work in India: Its not a singer or composer who comes to the music labels directly, instead the labels have to pay rights to the producer. “To recover the cost, we license the music. The IP belongs to us. As music labels it is our job to market and license this content. It gets licensed to OTT and streaming platforms, TV channels, radio stations and hope to make money through public performance”

When an OTT platform is licensing content from us, they also have to get an approval from IPRS for publishing rights. They’re not allowed to stream music otherwise. The authors and music composers and the IP owners are in IPRS. The money gets distributed between stakeholders

The China lesson: Sword Net and a 97% takedown rate

KT Ang from Universal Music Group spoke about the Chinese intervention into piracy in the past few years, “Five years go, the value of the Chinese market stood at the 19th rank, and India 20th, both were similar size and global positions. Today, the Chinese market exceeds $500 million dollars, while India lags far behind at $156 milion.”

The key reason is the singular focus of Chinese government on combating piracy, especially in the digital sphere,” he said.

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  • Out of notice and takedowns issued in China, the takedown rate used to be 52%, which wasn’t great.
  • Chinese consumers were still getting music from illegal sources in 2013. As of June 2019, the takedown rate is 97%, and the time for compliance is now just two hours, from a period of 2 days to 2 weeks back then, he said.
  • As for India, of all notices issued, takedown rate was 37%. If you account for the fact that each notice can carry multiple links, the takedown rate is even lower at 17%.

Steps taken by the Chinese government

  • The Chinese government has also implemented Sword Net Action. Every year the copyright office invites people to submit administrative cimplaints about piracy and other issues, the music industry submits upto 500 complaints a year in the last 5 years. Last year, 90% of the 214 cases have been solved. 64% got warning after they removed illegal content. 11% will shut down. 5-6% are fined and assets seized.
  • Key Chinese sites were forced to get licenses, and those were voluntarily negotiated. Digital platforms make billions and are far stronger, and are in good position to a negotiate, this resulted in the Chinese market growing. And its still way off its potential, paying subscribers in China is far off from the global 47% average.
  • In India, IFPI issued notices to 467 sites, which offer Indian content, all based outside of India.

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