| 'People
are using music increasingly but the value is not coming back to the music industry' |
|
| Published
on 4 April 2008 |
The
spectre of piracy continues to haunt the music industry, draining its revenues
and crippling new initiatives. The Phonographic Performance Limited (PPL), the
licensing arm of the Indian Music Industry, is striving hard to license the use
of music in the public arena. In
an interview with Radioandmusic.com's Anita Iyer, PPL CEO Vipul Pradhan
outlines PPL's plans for the year ahead. Excerpts:
How has the
spread of digital music impacted the industry?
In the past five years,
mobile downloads have been on an upward curve with a variety of products available
for consumers - from ringtones, track downloads to caller ringback tones. But
piracy that exists at multiple levels is now beginning to eat into it. The crucial
one is at the consumer level via bluetooth, which is threatening the growth of
this market. The ringtone industry was perceived to have great potential, but
the market has now vanished and has actually shown a decline in the past 12-14
months. If we analyse the revenue, ringback tones form 75-80 per cent of revenue
to the music industry, 15-20 per cent comes from ringtones and 10 per cent from
streaming services. We can conclude that there is zero per cent piracy in ringback
tones, but about 80 per cent piracy in ringtones.
Is
the revenue from television licensing increasing with the rise in music related
shows on TV?
With
the success of music based reality shows, there is a different trend to the value
of music on TV. There are channels which thrive on music based shows and in the
short run, this has started to give us a reasonable amount of revenue. But there
are still problems because some broadcasters, specially the regional ones, do
not have legitimate licenses for using third party content. The
revenue from television licenses, which was 10 per cent of the whole last year,
has doubled to 20 per cent. We are also contemplating action against those who
do not have legitimate licenses. In the first phase, we targeted the big broadcasters
and have been successful in converting them into legitimate users. In the second
phase, we would be targeting the niche or regional channels, so hopefully, the
percentage share may go up to 25 per cent by next year.
The
radio industry has been demanding rationalization of music royalties. Has any
amicable solution emerged from talks with radio operators?
The PPL is here
for the business of licensing. The fundamental question here is that the current
rates of Rs 660 is fixed by the government and our demand for Rs 2400 per hour.
The cost of packaging of content in radio is two to three per cent which is evident
from balance sheet of various companies. The revenue share to us from mobile and
internet radio is 25-40 per cent, so the question is why should we liberate content
for FM at two to three per cent. It is nothing but pressure tactics by radio companies
to bully individual music companies to surrender their rights at marginal cost.
That is not acceptable to us and we are here to protect the rights of the industry.
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Has the PPL been taking a closer look at licensing music for events? How do you
monitor events?
Event licensing forms a very big share of revenue to PPL,
particularly from public performances in the international market. We
have a team of a hundred employees to keep an eye on the events in cities. We
have also outsourced eight agencies who work on a commission basis on a larger
scale, and also direct sale agents who have access to information about events.
The problem is we have not penetrated in all the 500 cities in the country and
are currently focusing on only 40-50 cities and have not touched more than five
to 10 per cent of the events market. Although the big events are easy to figure
out, the smaller ones are still untouched. What
is the current number of companies under PPL?
From 60 companies within
our fold some years ago, we now have 140. The increase is largely because music
labels want to retain their content with us. Also, PPL controls a large amount
of music, 100 per cent of international music, a sizeable amount of Bollywood's
old and new content and has a good presence in regional content like Telugu, Gujarati
and Marathi. What
can you do to lessen the effects of music to music transfers?
Music transfers
via bluetooth are hampering the growth of the industry due to easy availability.
One solution could be manufacturing handsets with restricted formats where there
is no easy conversion of formats, but manufacturers would be loath to accept this
idea. Another
solution would be easy access of music to people who do not want to opt for CDs.
The industry has already started issuing licenses for putting up jukeboxes and
kiosks at public places with easy operations and minimal rates. With lesser prices,
we hope consumers might opt for buying music. Other plans include having a DRM
block so that songs can be downloaded but cannot be forwarded via bluetooth. The
problem here is that there is a need for thousands of kiosks throughout the country.
While all these steps may reduce piracy, it is not possible to eliminate it completely.
How
does the PPL track websites offering pirated ringtones?
Full track downloads
is a big problem even in international markets. In the past, India was an exception
owing to the limited proliferation of Internet and bandwidth speed, but Indian
music was downloaded abroad on a large scale. Now, we need to keep a track on
servers worldwide. Also, the IFPI based in London helps us to keep track of international
websites. Companies hosting these websites either block their websites or get
legitimate licenses to operate legally. Does
this mean that the PPL will be posting higher revenues this fiscal?
Today,
the issue is not about music industry or the PPL but about physical versus non
physical music. The monetisation of music is undergoing a radical change like
in Korea, where 50 per cent of the revenue comes from physical formats and 50
per cent from non physical like wireless, events etc. India is also going the
same way and is the second market after Korea where the revenue is equally divided.
We are doing really well. So,
where is the music industry headed?
Physical sales continue to be on the
downward curve. A few years ago, chartbuster albums sold a million copies, but
today, the benchmarks of hits have changed to only a few thousand copies. People
are using music increasingly but the value is not coming back to the music industry.
It can also be attributed to a shift in terms of utilization, from CDs to pirated
MP3 CDs and media like radio, internet radio, IVR radio. The losses from physical
sales cost the industry about Rs six billion (Rs 600 crore), pirated ringtones
and full track transfers via Bluetooth cost about Rs three to four billion (Rs
300-400 crore) affecting the industry to the tune of about Rs 10 billion (Rs 1000
crore) annually. Is
there any other way to deter pirates?
The police suggest we reduce our
prices to compete with pirates. But it is not possible, as the only similarity
seems to be the raw plastic CD cost. The pirates do not pay for IPRS, VAT, excise
duties, income tax arising from the profits. There is no cost of content, marketing
and promotions, and the pirates sell only hit content in the market, so there
is minimal risk involved. So, there is no way we can compete with the pirates.
All we can do is punish them when found guilty. | 
