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This article has been written by Lavanya Bhakuni, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho.

Introduction

India is one of the most culturally rich countries in the world. This culture and diversity can be experienced through the illustrious music that is created across genres and languages. It is a country of music lovers. According to a consumer insights study conducted by IFPI in 2018, it was found that an average internet user in India spends 21.5 hours every week listening to music, while the global average of 17.8 hours.

According to the IFPI, radio was the most used method for listening to music. Radio has for long been a cherished source of entertainment because of its affordability and bandwidth. It is popular across all age groups due to the wide range of content available across the country whether you want to catch the nail-biting commentary from a live cricket match or you want to enjoy some music while you are off on a road trip with your friends.

India has more than 381 operational private radio stations covering 106 cities and towns so it is very evident that the radio industry is not in a germination phase and has shown constant growth since its inception. According to the FICCI-EY report, the Media and Entertainment industry in India is expected to reach INR 2.23 trillion by 2023. The private radio industry contributes a fair share to this number. It grew from an INR 74 Cr. industry in 2001 to an INR 3100 Cr. industry in 2019 (read here) Before the Covid-19 pandemic, the radio industry was estimated to grow to INR 3610 Cr. by 2022 (read here). 

Now that we have understood the potential of the radio industry, let’s look at the licenses and royalties the radio stations need to pay to broadcast the songs they play.

What are royalties? Why are they paid?

The definition of royalties is not provided in the Copyright Act 1957(hereafter referred to as Act), but we can understand its meaning from Section 9(1)(vi) of the Income Tax Act 1961 which defines the term royalty in a fairly exhaustive way — it means, inter alia, the transfer of any right or the granting of a license in respect of a patent, copyright, design or model, plan, secret formula or process, or any other like right or property. Royalties are paid to the copyright owners in exchange for the right to use, broadcast or communicate the music to the public.

For the administration of these royalties, there are many copyright societies like the Indian Performance Rights Society (IPRS), Phonographic Performance Limited (PPL), the Indian Singer Rights Association (ISRA), and Novex. Each of these societies has different functions, for instance, PPL deals with songwriters and music composers for sound recordings i.e., music labels whereas, ISRA deals with performers i.e., singers. IPRS on the other hand works on rights in musical work and literary work and the stakeholders are music composers and lyricists. In this article, our focus will be on IPRS.

An artist doesn’t need to be a part of any copyright society but the process of individual administration to collect royalties is quite difficult hence most artists prefer to be part of society. Members of IPRS comprise lyricists and music composers as well as publishers, IPRS collects royalties on their behalf and distributes them according to the distribution rules which will be discussed later in the article. 

How are IPRs authorized to grant licenses and collect royalties?

IPRS is a copyright society registered under Section 33(3) of the Act, in 2018 it was officially granted a certificate of registration by the copyright office to carry on with the copyright business. On 31 Dec 2020, The Intellectual Property Appellant Board passed a landmark judgment wherein they upheld the rights of musicians and allowed IPRS to collect royalties from FM radio stations on behalf of its members. This meant that FM stations were entitled to pay a royalty to lyricists and music composers if they have used their lyrics or music in any form. The argument in favor of this judgment is that as per Section 13(4) of the Act which talks about the author is the owner of the work created. In the practical sense, it is not possible to communicate the song to the public without the communication of the underlying works too, this should mean that the authors of the underlying works should be paid royalty too.

How do radio royalties work?

IPRS has formulated a distribution scheme for the administration and collection of royalties. IPRS collects royalty from a wide range of sources and this amount differs according to the mode of broadcast as mentioned in Section 31D of the Copyright Act. The distributions are generally made four times a year in June, September, December, and March for the revenues that are collected in the previous fiscal year from 1st April to 31st March.

If Radio Mirchi wants to broadcast the album from the latest movie, they would be required to report the musical and literary work that they have played on the radio, this data would then be brought into the IPRS Distribution System and matched against the worldwide repertoire of works held on the IPRS database. IPRS identifies the copyright owners of each musical and literary work and then with this information combined with the information provided by the members and affiliate societies they calculate the royalties due.

IPRS calculates the royalty on a ‘Per Play Basis.’ For instance, if the total net royalty that is paid by a promoter for a wedding reception event is Rs 60,000 and the total number of songs played is 20 then the value per play would be Rs 3,000. Radio broadcasters are granted a blanket license that enables them to get permission to use all licensed repertoire without seeking prior approval. Music is licensed to radio networks on a ‘Per Station’ basis. There is no differentiation made between national or regional stations apart from the fact that the license fee differs with the category of the city. The cities are divided into 5 categories depending on the population, an A+ city category would be a metro city, the license fee is higher here as compared to the fee for a D city category which would be a small town.

Distribution of payment

The table below portrays the share of musical and literary work that is allocated unless there is a specific contractual agreement between the parties that states otherwise. Self-published work means that you are the owner of the IP of the song and there is no Publisher involved while original published works involve a publisher.

Type of work

Composer

Lyricist

Publisher

Self-Published composition with lyrics

50%

50%

Self-Published composition without lyrics

100%

Non-copyright composition with copyright Lyrics

100%

Original Published Works

25%

25%

50%

Current position of radio royalty in India

On 4th January 2021, the Delhi High Court gave a judgment in the case of IPRS vs ENIL that changed the momentum of everything that was established by the Intellectual Property Appellate Board’s decision on royalties. The judgment held that when a song is played on the radio, separate royalties are not payable for the underlying works as long as it is a part of the sound recording. The literary and musical work owner is not entitled to claim infringement until the song is communicated to the public via a song recording. The owner retains the right to do so in all other cases of communicating the work to the public.

For instance, if a radio station decides to conduct a show like Coke Studio where the singers would actually sing the song then irrespective of the fact that such song also exists in a sound recording the radio station will have to take a license from IPRS as the lyrics and tune of the song are exploited in a live performance.

Many countries across the globe give more or equal emphasis to publishing rights rather than the master rights of the song in terms of music royalty. India has not been the epitome in this regard. After the sudden abolition of IPAB in May 20121 and the contrary judgment by the Delhi HC, there is a lot of discrepancy on the issue of radio royalties but as far as the current industry practice goes, the radio stations pay to music labels who are part of PPL.

Conclusion

After the Copyright amendment of 2012, it took almost eight years to have a judicial interpretation related to the amendments and because of these two contrary landmark judgments discussed above, there is much ambiguity on the position of royalties payable by radios. Also, there is a need to regulate the practice of ‘big fish in a small pond’ prevalent in the industry, as most music labels are members of both IPRS as well as PPL and since the rights of the authors are assigned to these music labels through assignments, the labels end up earning royalties from both the associations and the authors end up with mere amounts.

References


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