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, restricting choices for over 200 million FM radio listeners to All India Radio channels.
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 even as revenue opportunities remain limited, since most of these stations are located in small towns.
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.
"We are not happy with the extremely slow progress by the Copyright Board in hearing the matter. We are bleeding financially and may shut shop soon," said Rahul Gupta, Director of Radio Mantra, owned by UP-based Shri Puran Media, a company that owns licences for seven FM stations across UP, Haryana and Punjab.
A number of small radio players have expressed similar intentions to the Association of Radio Operators of India (AROI), the apex body for private FM radio operators, sources said.
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.
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.
"We are hoping that matters move swiftly in the Copyright Board in the next hearing slated for December. The newer FM operators are indeed under pressure financially and we have informed the I&B ministry of our situation," said Apurva Purohit, CEO, Radio City and President, AROI.
Asked about the threat by FM radio operators, a senior executive of a music industry association said: "We cannot comment, as the matter is being heard by the Copyright Board." Over 200 million FM radio listeners will then have no choice without any alternative but to listen to All India Radio's channels.
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