Recently, Dhingana had to shut down because it could not afford the music licensing costs for internet broadcasting, despite having raised over Rs 50 crore from investors. Prior to this, Flipkart's music service, Flyte, had also closed down — along with Rediff Soundbuzz and In.com music, a Network18 subsidiary business. All cited high royalty costs as the primary reason for closure. Those still surviving, are struggling with music costs often being more than 500% of their total revenues itself! This, despite the fact that the legal Indian music broadcasting industry has attracted massive interest from consumers — especially on mobile devices — in the past couple of years. Online broadcasters such as Gaana, Hungama and Saavn, all offer a "freemium" model with free broadcast, as well as a paid model (with unlimited song downloads and no advertising).
In fact, the struggling internet broadcaster industry in India is contrary to the situation across the world — where the legal internet broadcasting and streaming industry is strong and growing, and has been instrumental in curbing music piracy. In US, internet broadcasting (companies like Spotify and Deezer) is today the fastest growing revenue stream for the music industry, apart from being a major contributor to music artistes' earnings.
Sources said that the only reason why Indian internet broadcasters are struggling to survive is the onerous licensing costs put forward by music companies which supply them music. It is learnt that several internet broadcasters have in vested over Rs 150 crore each — but are still not profitable, because they have to pay more than 500% of their revenues as licensing costs for music alone, apart from other operational costs. Sources said that they are forced to do this, because music labels have a monopoly over their content and can dictate terms for using their music at will.
In addition, most music licensing agreements are for one or two years, with no predictability on future rates. Industry sources pointed out that music companies — as a result — try to extract as much as 300% escalation in minimum guarantees every year. This has only resulted in licensing costs for the music massively outstripping the total revenues that these small broadcasters have been making over the last few years.
Is India missing out on a huge opportunity to grow the internet broadcasting industry, as is the global trend? In the US for example, internet broadcasting/streaming generated $1.4 billion revenues for the music industry, and is now more than 20% of all music industry revenues in that country as per Billboard.
Internet broadcasting also offers significant opportunity to curb rampant music piracy prevalent in India, given that legal music downloads are few. Industry experts believe that music streaming is the best way to curb piracy, and develop legal consumption. A study done in September 2013 in Norway showed that nine of ten paying subscribers to internet broadcast services said they download illegally less often.
It may be recalled that the Indian FM radio industry had also faced similar licensing costs problems with music companies in 2000-2010. Indian FM radio stations are not allowed to air news and current affairs, and a vast majority of their content is music. However, due to the high cost of this content, almost all the 21 radio stations (of the 120 licenses distributed initially) which became operational went into huge losses. It was only after the Copyright Board — set up in 2010 under the HRD Ministry — established relatively fair pricing between radio broadcasters and music companies that radio companies were able to survive.
Internet broadcasters point out that a similarly urgent approach is required for the nascent industry as well. Industry experts believe that music companies must take a long-term view on the growth of legal music consumption, and there should be rational pricing such as revenue share, elimination of minimum guarantees, and long-term agreements to grow the industry.
Second, music broadcasters and the music owners need to work out a royalty rate together, failing which, the Copyright Board should intervene and establish a relatively fairer pricing, as it did in 2010 for the FM radio industry (which now pays 2% of revenues to music companies). Industry sources point out that without a fair and healthy discussion between both parties, the internet broadcasting industry risks dying before it really ever began.
Furthermore, today, most people consume music via digital broadcast on laptops, tablets, computers and mobiles. It is imperative that music is freely available for the public to consume as and when they choose — and at their will. More legal consumption of music will be fruitful for the public at large, for the artistes, the broadcasters and also the music companies. The entire chain will benefit from easy access to legal paid music.
http://timesofindia.indiatimes.com/followceleb.cms?alias=online music,Music piracy,digital music,Online music India,Digital music India
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