Respite from music royalties for FM Radio broadcasters

According to the new arrangement, FM radio players will now pay 2% of their net advertising revenue to the music companies.

Till date, FM radio broadcasters had to pay a fixed amount per hour. This amount varied from Rs. 300 to Rs. 1600. Radio stations were compelled to pay these royalty amounts without taking into consideration the size of the town. This led to some radio stations paying exorbitant amounts even in smaller towns, which in turn affects their revenue generation. As much as 15-20% of the revenues were being paid by the radio stations as royalties. Radio broadcasters constantly attempted to change this but in vain. This difference of opinion has been in discussion over some time now and the current decision by the board should bring in some relief.

Also with this step the operations of FM Radio business is at par with the International Radio business. Most radio operators are very satisfied with the new ruling though there still issues to be dealt with like the licensee fee issue.

Vineet Singh Hukmani, Managing Director of 94.3 Radio One said, "I think its great news and we are thankful to I&B minister, Ambika Soni. This corrective action was long overdue, I also feel that we have paid huge royalty fee in the past and the ministry should also retrospect on this issue as there are stations or broadcaster who has suffered heavy losses and if at all they can be compensated because of the lack of such rulings in the past. I feel there will be more investment in this sector now and since the Government has already corrected one of the wheels of Phase III, the Government should now address the license fee issue as well."

Prashant Panday, Chief Executive Officer, Radio Mirchi, stated "I think it is a very progressive order. This order brings the Indian music royalties in line with global trends. Worldwide, in all markets where radio has developed well, music royalties are between zero and 4%. These are countries where radio is consumed by more than 80-90% of the entire population. Since in India, radio penetration is still low, we had been asking for a 1% royalty rate¦.however, we respect the Board's order as it stands. Our request for extending the license period from 10 to 15 years remains an important issue to improve viability of the radio business and hence the investment opportunity. The government is considering our request, we hope it will consider it favorably."

Earlier the high royalty rates didn't allow a boost which now the new order will abet in to the proposed third phase which is the auctions of private radio channels. As of now there are eighty five towns in India which have FM radio services, although there are talks of the government auctioning 806 radio frequencies across 283 towns post this order.

"It will help in the viability of the markets covered by Phase II,hence it will help Phase III. And when this happens, it will help music companies as well as their royalty collections will increase" said Panday.

According to Soumen Ghosh Choudhary, Business Head, 92.7 BIG FM, "Music royalties has been an issue for a while now and this is sure to bring some respite to the industry. With phase III on the anvil, the timing couldn't have been better. If the music royalty issue is sorted, it will further fuel phase III growth for the FM industry and allow broadcasters to deepen footprint while offering advertisers greater reach." | By Janees Antoo [janees(at)adgully.com]