Unlocking the potential of public performance revenue in India

At a WIPO conference in Brussels in 2011, Javed Akhtar was speechless when French collecting society SACEM announced its collections of about 800 million euros (Rs. 5,164 crores in those days) as public performance revenue.

“How do the India numbers compare?” he asked.

“Embarrassingly,” I replied.

That is as true today as it was then.

In a country that has 14 million retail stores, over one million eateries, innumerable hotels, and so many more establishments that play music across a landmass of 3.2 million square kilometres. Compared to France, which is one-sixth the size of India and has only about 200,000 eateries listed.

India. The land of 1.3 billion people. The truly emerging music market. Growing in leaps and bounds in smartphone penetration, online access and all those other parameters that keep getting thrown at you… subscription data, streaming numbers, YouTube views, double-digit growth… there are many happy stories celebrated by the industry each year, as we learned at the recently concluded All About Music conference.

After their travails of the past, the Indian Performing Rights Society (IPRS) and Phonographic Performance Ltd (PPL) have emerged shiny and new, refurbished with new global processes and practices in place. They have revisited tariffs in the face of user unhappiness in the past and have used international benchmarks to draw up new rates. Plus there is the Indian Singers’ Rights Association (ISRA), our newest collecting society which represents the Performers’ Right and which is important enough to merit a separate piece on its own.

All hunky-dory, so everybody involved needs to be congratulated.

Yet, our public performance collection between IPRS, PPL, Novex (which represents Non-IPRS, Non-PPL labels), ISRA and other individual rights owners is in the region of Rs. 200 crores (that’s about 25.3 million euros). Something is desperately amiss.

For starters, it is the fragmented nature of the music industry that is a huge impediment. There are at least four entities walking into establishments asking for money!

As the owner of Gajalee restaurant in Mumbai told me,

“Good Lord. It is my job is to sell food! Am I going to spend my time negotiating music license fees, finding out which track belongs to whom and checking the legality of these people asking for money? I do not give a rat’s ass about who is supposed to be paid, whether performers, composers, authors, publishers or music labels. It is beyond my comprehension and hey, when I bought your cds and cassettes, I made a one-time payment that covered everyone, isn’t it? I would rather not play music than deal with this nonsense!”

How does one argue with that logic?

Everyone is aware that collectives like copyright societies are established to provide ease of use to license seekers as well as negotiate and set the best possible rates for their members. However, a multiplicity of such organisations means more headaches than solutions for the user. While the norm has been for sound recording and works societies to collect separately for their constituents, practicality has made some countries rethink this and in the UK, for example, PPL and PRS joined hands for public performance licensing in February 2018.

In fact, the latest entrant to the social world, Pakistan, has set up one entity called COMP that licenses all rights. That is convenience, isn’t it? Plus it helps optimize the costs of field staff.

In India at the moment though, our Copyright Amendment of 2012 has two stumbling blocks to collective licensing, viz.

(1) There can be only one society for one class of work. So there needs to be government recognition of one society for sound recording, one for composition/lyrics and one for performers.

(2) One society cannot conduct business on behalf of another. Three societies in a developed market may be acceptable but for India where people especially loathe to pay for the public performance of music, how does this help the industry?

In addition, the industry is a divided house. A majority of the copyright owners are part of the collectives but some significant ones are not and have handed over public performance collection (and in some cases, other rights as well) to third parties.

Why? To get advance earnings in the form of Minimum Guarantees, that may be great in the short term but have a longer-lasting implication on industry collections.

And finally, there are the independent labels and artists who are neither part of the collectives (“I do not believe in that shit / I do not care because the money is so small / I do not trust those sharks who run the societies”) nor are signed with aggregators. This lot is being poached by companies offering ‘royalty-free music’ to establishments, which simply means that they get the music for a pittance.

Hardly an overall scenario that is going to maximise revenue.

If this is the way things have been going in the past few years, what am I getting angsty about?

Chew on this

I was chatting with PPL CEO, Rajat Kakar, who said that the average cost of an annual license for an establishment to play music is about Rs. 20,000/-. That is less than Rs. 2,000/- a month, so should not cause anyone to go bankrupt, I would imagine! PPL currently licenses about 17,250 establishments at this rate.

Now, if we were to look at licensing only 5% of 14 million retail stores with a floor area of over 500 square feet, we have 700,000 licensable establishments! Multiply that by the average license fee and the collections suddenly look like Rs. 1,400 crores. And of course, the same establishments need an IPRS license as well.

So if the IPRS tariff were to be equivalent to the sound recording license fee, that is another Rs. 20,000/- which means an additional revenue of Rs. 1,400 crores. So Rs. 2,800 crores from just retail stores for IPRS and PPL members. Take an estimated 25% of this figure for copyright owners outside of these two organisations and you have an incredible Rs. 3,500 crores (443 million euros)!

Just from retail shops!

Let’s look at restaurants now. A million-plus paying for music may be too much to expect (though I do not think it is) but say we got half that number paying Rs. 20,000/- to PPL and Rs. 20,000/- to IPRS (using consistent logic), then the value of licenses from restaurants would be Rs. 2,000 crores. Add another 25% for other repertoire owners and the sum becomes Rs. 2,500 crores (317 million euros).

Which means that together, just these two streams could generate Rs. 6,000 crores (760 million euros). “And we’ve only just begun,” as the Carpenters sang!

There are hotels, malls, offices and other establishments that play the music that could easily add a third of this revenue, to make at least a cool Rs. 8,000 crores (1,013 million euros).

How ridiculous does that Rs. 200 crores look now?

Can this actually be done or are these just numbers for the sake of doing numbers?

Consider this and of course, it is my favourite option. Work in tandem with the government. If income earners compulsorily need to file Form 16-A for tax returns, why can’t establishments be mandated to file Form 8000-CR (cool name, huh?) every year to prove that they are complying with the Copyright Act and paying their annual license fee to play music? Is that such a difficult task? It calls for intense lobbying with the government obviously and someone on the government side to see that such a humongous jump in revenue to the music industry will result in over Rs. 1,000 crores in GST alone! Plus it will make the music industry far more amenable to certain other changes the government is dreaming up. Scratch my back and I’ll scratch yours.

Alternately, overcome the handicap that societies have of limited manpower to physically license so many establishments by having societies outsource collection to an organisation that has plenty of feet on street, whether a private or public outfit. I can think of one immediately and it does not take a rocket scientist to figure out which one.

Oh My God! Blasphemy!! Hand over our industry!!

Isn’t outsourcing a contravention of the current mandate for societies?? Hmm. For an industry that relinquished control to internet players, without a clue as to where the money would come from, this would be a far safer bet, in my book. And hey, does Rs. 200 crore float your boat or does Rs. 8,000 crore actually help you buy one? Safety mechanisms can be put in place, rates can be rationalised and the Copyright Act can be amended to facilitate this and provide much-needed growth in the music industry’s favour. Details can be worked out if there is consensus and unity.

But we are so taken up with squabbling over the division of our Rs. 200 crore collection that we would not even look at options.

It is time for the music industry to flex its muscles instead of constantly being beaten into submission and having to limp its way back to normalcy, which is how it has always been. Come on guys, get your act together (pun intended) and put some pressure on a government that prides itself on being business focussed. Any takers?

Disclaimer: The numbers quoted are not gospel so please don’t spend time going over exchange rates and IFPI reports. The idea is to give you a perspective of the potential of the earning from the public performance of music, not to do a business plan for investors!

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