RadioandMusic
| 19 Sep 2020
Read why Indian Music Industry expects 10% of radio players' gross ad revenue

MUMBAI: Blaise Fernandes, President & CEO, Indian Music Industry (IMI), is a media and entertainment industry veteran with over 30 years of experience in this field, of which 23 years have been as the head of Warner Bros South Asia.

His previous work profile includes being a part of the WB global leadership team from 2007 to 2013, serving as CEO of Gateway House, a Mumbai-based foreign policy thinktank for four years, and Senior Vice President, Corporate Affairs at Edelweiss Finance. He currently serves as President and CEO of IMI and is also an independent board member of Gateway House.

We speak to Fernandes about the Indian music industry, royalty for recorded music industry from radio players, and more.

Why is IMI suddenly focssing on radio?

September 30 will mark the end of a 10-year-long era where the Copyright Board fixed a royalty rate under compulsory licensing for private radio broadcasters' payment to music labels whose radio licensing mandate at that time was with PPL. This rate was fixed at 2% of the net advertising revenues of the private radio broadcaster, for radio broadcast of sound recordings. The rationale of the extremely low rate was that the private radio industry was in its infancy stage. Today, the radio industry's turnover is pegged at Rs 3100 cr vis-à-vis the recorded music industry in India which has a turnover of Rs 1277 crore.

We need to establish a benchmark on what is fair value of recorded music on broadcast radio. Music content is the fuel that drives the radio broadcast industry. A benchmark is that TV spends around 20% of its budgets on content creation and the risk lies at the TV networks doorstep. Unlike, in radio broadcast, the risk lies with the labels and radio stations cherrypicks the hit songs. For every green songs, given that this is a risk -free model, the label revenue pool from radio broadcasters for the recorded music industry should be around Rs 300 cr per year.

But radio is supposed to be a medium for social good?

Be that as it may, there is an economic value for everything. Rs.5744 crore has been collected by the government in license fees for radio circles. Private broadcasters run commercial enterprises, and some of them are publicly listed. If free market economics were prevailing, Rs 300 cr would be the royalty pool to record labels by private radio broadcasters. But respecting the intent of social good, IMI expects 10% of gross advertising revenue as the new base in terms of royalties. A number of private operators, as stated in their public filings, are already paying 5% to 7% of net advertising revenue. So, 10% for the new accords is a reasonable ask, but still not fair value.

How has Covid 19 impacted the recorded music industry?

This should be seen from many lenses :

What is known to all stakeholders is that streaming grew by 40% in the first half of CY, based on data received from the streaming services. It is important to note that Covid 19 has not had any impact on consumption of content on audio OTT platforms. We eagerly await to see if work from home (WFH) has led to a rise in paid subscribers on audio OTT platforms.
The first six months revenues from public performance is virtually zero given retail, F&B and private events are non-existent . I don’t see an upswing even in the next six months, given that even in the new normal the opportunities to issue public performance licenses will be few and far.

But isn’t OTT the growth driver for the recorded music industry, and by your own admission, OTT hasn’t been impacted by Covid 19, so where is the problem ?

Spot on, OTT is our growth engine and data published by OTT players indicated a 40% growth rate on the 1st half of CY2020. The problem lies in a very low subscriber base in India. It is estimated that the combined paid subscribers will be just about 1 million. Until the land grab by the telcos does not end, we cannot move to a subscription model . A subscription model is the only way forward. It benefits both the telcos via ARPUS impacting their EPS and the labels that will see market dynamics at play to unlock right value of their content.

But does India have a subscription market?

It is fair to assume that the audio OTT consumer base is 300 unique monthly active users. The paying subscriber base will grow now that you have a few international services ramping up their operations in India. IMI is optimistic that the Indian consumer is ready for a subscription model, but the rates will have to be tiered. There has to be multiple price points offering services and options based on what the consumer pays. Example, in any metro or mini-metro, a consumer pays anywhere from Rs. 100 to Rs 700 at the box office for a film, and there is demand at both ends of the spectrum and all in between.

As the President of IMI, what are the issues that you are most worried about?

Unlocking fair value for use of recorded music and formal recognition of a collection society for public performance. Also, with the proliferation of video sharing social networking services, there has been a rise in the use of unlicensed content on these apps. This needs to be plugged as soon as possible.

What according to you will be an ideal situation for the Indian music industry?

When an Indian label, like South Korea’s Big Hit Entertainment, the promoter of the K-POP Band BTS, lists on the NYSE at a valuation of USD 4 billion. That will be true atmanirbhar moment for the recorded music industry in India.