About VIP Contributor | Pankaj Krishna, Founder & CEO, Chrome DM

[caption id="attachment_1901" align="alignleft" width="165"] Pankaj Krishna, Founder & CEO, Chrome DM[/caption]

With over 17 years of experience in the media space, Pankaj Krishna, an industry veteran, has worn many hats. Having completed his O Levels from the University of London, Pankaj finished an executive education programme from Harvard Business School. While his entrepreneurial journey began in 2008, Pankaj has learned the ropes of the media industry at some of the best brands in the business - India Today, National Geographic, Star India - before going on to be the business head of UTV India.

When last year Alisha Chinai, the yesteryear’s pop diva was asked in an interview one thing she wished to change in the music industry, the reply had been plain but sharp, “Singers should get their share of royalty. Record companies should start paying artists. This has to be monitored and regularised.” Read this against the passage of the path-breaking Copyright Act Amendment Act 2012 mandatorily transferring ownership of songs to song creators entitling them to lifelong royalty rights. At a time when disruption has been the buzzword all around, the Act hasn’t quite disrupted the music industry’s revenue ecosystem on the ground. While digitisation may have changed the musical content delivery systems introducing multiple choices for businesses as well as customers, one is not so certain about the disruption of music labels and recording companies’ overwhelming power play in the industry. That said, how are the artists, the most original creators of a song, actually placed in terms of revenue distribution post-Copyright Act 2012, and in an era of digital music? 

Typical monetization journey of a Bollywood song

Given that Bollywood accounts for over 80% of all digital music, it makes sense to retrace the whole monetization path taken by a movie song.

The producers of the movie sell the rights to the record labels – often to cover the risks for their movie production costs – who in turn usually retain the royalty/rights to the music and thereafter monetise it by licensing/selling it to sundry other players such as music channels, radio broadcasts – and now in an increasingly digitised space to online platforms, tech-content aggregators and telecom operators, all for a fee.

In this whole value chain, the trio of songwriters, composers and singers are kept completely outside the loop. However, apparently and in law, the Copyright Act Amendment Act 2012 had sought to bring a semblance of parity for them vis-à-vis the film producers and record labels in a value chain traditionally skewed in favor of the latter. By declaring the authors or song creators as owners of the copyright of the song, the Act was intended to correct a long-standing imbalance in the music industry value chain. Yet and even now, the fees paid to the artists are typically determined by the saleability and the stature of the artists apart from their negotiating ‘heft’ vis-à-vis the producer and the music labels. Now that royalty rights have been assigned to the song creator, the producers would be wanting to make an even bigger amount of a one-time gain while the music labels would be intent on driving down the cost.

Regardless, the moot point is that record labels would still be a pre-eminent presence in the value chain.

Digitisation and its impact on value chain

To put things in perspective, according to several estimates, the digital music industry generates more than 70% of the Rs. 12 billion music industry’s overall revenue with sales of physical forms of music falling year after year. At the same time, what has also changed is that digitisation has not only reduced the cost of production, distribution, and maintenance of recorded music, it has created space for newer players and platforms to enter the fray.

The entry of feature phones had already inspired a host of new stakeholders such as aggregators and technology partners as well as mobile operators through mobile Value Added Services (VAS) such as ringtones and caller tunes. In this arrangement, while music labels sell to aggregators or technology partners who share content with telecom companies, revenue is shared between aggregators and mobile service providers per download offering customers subscription and pay-per-song model. Now as smartphones gain traction and music videos become de rigueur, both service and business models are only turning more innovative.

There were about 50-60 million active monthly users on mobile streaming applications in 2016 on the back of over 300 million internet-enabled mobile phones and ever plummeting tariff rates.

On top of telecom operators hawking music streaming services through innovative freemium pricing models, the arrival of OTT music players such as Gaana and Saavn among others – offering assorted business models – has further democratized the digital music landscape. Notwithstanding the traditional record labels’ efforts to reinvent themselves, the balance of power has steadily begun to shift from record labels and producers to digital players and online portals. For instance, Saavn’s end-to-end sponsorship of artistes while owning exclusive digital rights to music tracks, music videos, and ringtones as the largest digital distributor in Bollywood has tended to dissolve the line between streaming service provider and a music label company. Not to be left behind, Saregama, the oldest record label has come up with a device aptly named Carvaan. Packed with 5,000 evergreen songs chosen on the basis of advanced consumption analytics, it is designed to rekindle the old-world-charm of a radio. Also, music streaming services are partnering with different businesses ranging from an e-commerce company to a payment gateway to a telecom operator to gain customers.

The picture so far for artists

In view of this overcrowding of ‘last mile song sellers’ in a digital music era, how does it all play out for the artist community?

For the artists, digitisation has been a double-edged sword. While it may have enhanced their reach, the increased uptake of music content online would also likely engender higher chances of piracy, in the end, depriving them of a higher share of revenue due to them. According to the co-founder of one leading digital music providers in India, a staggering 98% of online music content is pirated. In spite of digitisation, tracking the usage of copyrighted music online has been an arduous task much less monitoring all performances in public spaces.

Going to the website of Indian Singers’ Rights Association (ISRA) – a copyright society formed consequent to the 2012 Act safeguarding the interests of singers – for every performance/access of a song or part of a song on the internet, the host website is supposed to pay a royalty/license fee of Re. 0.5 if it doesn’t charge the user, and Re. 1 if it charges him. To track every access is nearly impossible. By the same token, digitisation may not have resolved the artists’ royalty issues completely.

In fact, the royalty issues are more to with the resolve of the state (read legislature) to implement its own law that it had passed in 2012. While it is not clear how far the law has been taken in practice, the fact that ISRA successfully fought courtroom battles claiming royalties from bars and restaurants and IPL Mumbai, testifies to favourable winds of change from the artists’ vantage point. However, since a question mark hangs over the very legitimacy of other copyright societies, namely, The Indian Performing Right Society Ltd (whose role is to secure the royalty/licensing interests of composers/lyricists and publishers) and Phonographic Performance Ltd. (which protects the interests of music labels) by virtue of a Delhi High Court order towards the end of last year, the picture as a whole for artists appears somewhat hazy. It must also be mentioned that between composers, playback singers and songwriters, it is the songwriters who possibly receive the rawest deal when it comes to making and sharing money out of music.

Yet also on the upside for the artists, digitisation has reduced the middlemen thereby connecting the artists directly with their fans. Then the popularity of streaming at least solves the problem of illegal downloading for which artists don’t get any money anyway. Between streaming and downloads, while downloads would obviously rake in more royalty for artists as opposed to streaming service, the volume increase for streaming would make up for the loss on account of fall in downloads. At present, downloads and streaming contribute almost equally to the digital music revenue although streaming revenues are growing much faster unlike download revenues in India which have been on a downward curve. For many artists, the intractable scourge of piracy de-incentivises the rewards flowing from copyrights and royalties. Therefore for the artists, the most fundamental dilemma is: whether to give away the rights one-time or should ensure a lifetime of steady revenue for themselves. In an age when there is no dearth of artists, the greatest insecurity for the artist community would be to lose out to someone else who would always be willing to work not only for less but even forfeit his/her royalty rights. Essentially, an artist would want to be on all platforms or on those which generate maximum paid traffic.

In sum, while digitisation has expanded artists’ reach, the jury is still out whether the royalty rights conferred by the latest Copyright Act has decisively tilted the revenue/royalty scales in favour of the original creators of a song.