Giving the music industry its due: Antiquated regulations are damming music revenues
September 17, 2020 5:10 AM
The WIPO creative industry study is a globally-accepted document designed to calculate the value of the contribution of the creative sector to the economy.
Radio, an industry worth Rs 3,100 crore, pays just Rs 75 crore as music royalties to labels.
By Blaise Fernandes
Big Hit Entertainment, a South Korean music label, will launch its IPO in October 2020 with a $4 billion valuation. Home to the K-pop band BTS, the label plans to hand each member of the band a special onetime reward of shares worth $8 million. It’s a classic example that illustrates that if the river is not dammed, the tributaries will receive more than ample supply of water. Tencent Music, listed on the New York Stock Exchange (NYSE), was valued at $26 billion as on Friday, September 11, 2020. Will India ever witness the day when its music companies see these types of valuations? What is it that ails us? Does the current regulatory framework help in unlocking fair value and addressing the value gap?
According to the International Federation of the Phonographic Industry’s Global Music Report, while Brazil earns $313 million from the recorded music industry, India earns just $181 million. While there are a lot of similarities between the two markets, there is one stark difference; Brazil is more or less homogeneous in culture and has one predominant language—Portuguese—whereas India has diversity in culture and language. The Indian heterogeneity mirrors Europe, which is the perfect ecosystem for the creative industry. If that is the case, why is Brazil ahead of India in the recorded music business?
Post the 2012 amendments to the Copyright Act, 1957, why has the government of India not conducted a study in collaboration with the World Intellectual Property Organisation (WIPO)? The WIPO creative industry study is a globally-accepted document designed to calculate the value of the contribution of the creative sector to the economy. Recorded music may be the smallest component of the media and entertainment ecosystem, but it provides huge levels of employment and the fuel that powers the radio, film and television industries. The WIPO India study may just be the awakening needed for the neglected music ecosystem.
Radio, an industry worth Rs 3,100 crore, pays just Rs 75 crore as music royalties to labels. TV spends around 20% of its revenue on developing content and bears the risk of the content being unsuccessful. Radio bears no such risks and can cherry-pick the most popular songs. The royalty pool for music labels ought to be at least `300 crore, or 10% of the top line revenue earned by the radio industry. But the government still utilises precedents and laws created when radio was a nascent industry to define royalty payable now. The regulator should take into consideration that fair value needs to be paid to the record labels by radio broadcasters.
India, in its framing of the Information Technology Act, 2000, broadly followed the US’s Digital Millennium Copyright Act, 1998 (DMCA). At that time, the country needed a fertile ecosystem to encourage innovation. Circa 2020, have the safe harbour provisions benefited India’s creative industry or global tech giants based in and paying taxes abroad? Recent trends show video social media apps emerging from Russia and China taking shelter under safe harbour provisions. A relook at the intermediary liability regime under the IT Act, 2000, and associated rules is needed immediately.
Public performance is another growth driver of the recorded music industry worldwide. Brazil earns $70 million via public performances, as against India’s $18 million. The wedding industry in India has an estimated value of $45 billion. But while music labels are deprived of public performance royalties during western-style celebrations at Indian weddings, the government imposes a 3% GST on even the most sacred mangalsutra.
A formal recognition of a collection society for sound recordings by the government would be an excellent first move to allow creators of music to achieve fair value rewards for the risks they take and the work they do.
We are all proud that, by 2025, India aims to be a $5 trillion economy, bigger than Germany, Japan, the UK and Australia. The contribution of the creative sector to the GDP in most developed markets is 4% on average; in India, it is just under 1%. Antiquated laws, relics of the past, are speed breakers slowing down India’s answer to BTS Korea.
The author is president, The Indian Music Industry