Private FM channels threaten to tune out over royalty row

             With no solution emerging in the legal battle between music companies and private FM radio operators over royalty rates, many of the 37 private FM radio companies have threatened to shut shop soon. This is because music royalty payments have become unmanageable for a number of radio operators, causing them to lose money. Royalty payments account for nearly 40 per cent of the total cost for a large number of the 250 FM radio stations .

             Earlier this year, the music companies demanded that music royalty fees be tripled (from the current Rs 661 per hour of music played). The music industry have also demanded that radio stations treat sound recording rights and rights in musical lyrics as separate rights for which payments should be made, a move the radio industry has vehemently opposed. The matter is currently being heard in the Copyright Board that comes under the ministry of human resource development.

           The private FM operators are not happy with the extremely slow progress by the Copyright Board in hearing the matter. Currently, any private FM station has to pay between Rs 50 lakh and Rs 80 lakh annually as music royalty, irrespective of the location of the station. This has created a skew in terms of profitability. “Delhi is a Rs 100 crore ad market for FM radio companies. The music royalty rates account for less than 10 per cent of the operational cost of an FM station here compared to, say, Hissar or Bareilly where the potential advertisement market is just under Rs 1.5 crore annually but the music royalty outgo is the same as Delhi or Mumbai,” said a radio expert.   On the other hand  film  industry, world over is plagued by the issues of  piracy.  According to one of the  official reports published on early 2007, the Indian film industry faces almost 40% revenue pilferage due to piracy. In terms of money the industry looses approximately 2000 crore on account of piracy directly on which the government  earns neither entertainment tax nor income tax.  

          Meanwhile, AROI has informed the Ministry of Information and Broadcasting (I&B) that it may not participate in the third phase of FM radio expansion (over 500 stations are expected, all for smaller towns) even if the government announces it..