It's a judgement that was long awaited. Radio stations are heaving a big sigh of relief as the Copyright Board has passed a judgement which states that radio broadcasters and music companies will follow a revenue sharing model - as done internationally.
The new rule entails that radio stations will pay 2 per cent of their net revenues as music royalty fee to all music providers. In most markets where radio has developed well, music royalties are range between 0-4 per cent.
Apruva Purohit, chief executive officer, Radio City, says, "The case has been going on for several years in various courts. We are happy that there is a resolution of the matter and firmly believe that it will benefit both the radio and the music industry."
Under the current practice, radio stations pay a fixed fee as music royalty to music owners. Each radio station is believed to spend Rs 1,200-1,600 every hour as music royalty fee. This translates to paying royalties which were a considerably high share of the overall revenues. Besides, the fee was equal for all stations, irrespective of location, making it a highly unprofitable proposition.
"Big stations used to pay 15-20 per cent of their revenues as royalty to music companies, while the smaller stations ended up paying 75-80 per cent," Purohit adds. She is certain that the revenue sharing model will go a long way in improving the profitability of small stations and networks, which were bleeding under the impact of the fixed fee regime.
Prashant Panday, chief executive officer, Radio Mirchi, says, "The extortionist regime will stop now. Currently, radio broadcasters were accruing close to Rs 100 crore in music royalty every year. At 2 per cent of the market size (of about Rs 700 crore), music royalties will now reduce to about Rs 14 crore. This is a big saving for the radio industry." He clarifies that this should not be seen as a victory for the radio industry but only as a removal of an anomaly of so many years.
While this brings great respite to the radio industry, it will also pave the way for further development in the sector. "With Phase III on the anvil, the timing couldn't have been better. This will further fuel Phase III growth for the FM industry and allow broadcasters to deepen footprints, while offering advertisers greater reach," says Soumen Ghosh Choudhury, business head, 92.7 Big FM.
The judgement will be implemented with immediate effect and will continue for the next 10 years.