Onerous licensing regime killing legal digital music

NEW DELHI: Last Friday, one of four major legal music streaming services - Dhingana - shut down, leaving only Gaana.com, Saavn, and Hungama as the remaining digital music outlets broadcasting music from India for consumption in India and abroad. This follows another recent shutdown of Flyte, a music download service offered by Flipkart, a company that has raised over $200 million to date.
India currently suffers from rampant music piracy, both offline and online. Consumers visit sites like songs.pk or local retail shops, and download thousands of songs for free or at little cost onto their phones, digital devices or computers.
Globally, the most significant force to curb piracy has been the emergence of music broadcast services, such as Pandora and Spotify. The Indian parallels, Gaana.com and Saavn, allow users full, legal access to millions of songs on their computer or phone for free, by broadcasting it over the internet through various digital devices. They also offer a paid model, where unlimited songs can be downloaded for a monthly fee.
Despite wide consumer appeal across towns, these services are suffering from onerous licensing costs, which in some cases are more than 600% of the revenue of the service, making these businesses wildly loss-making. That's why Dhingana recently shut down. Because music services are dependent on music owners, music labels have been able to extract high committed payments, even without a business justification. For music broadcast services that stream music legally, the choice is either pay the fees, or shut down.
In addition, one of the largest music owners in India has blocked competition by offering exclusive internet access rights for mobile to only one of the four music internet services broadcasting from India, whom many speculate is at least partially owned by the music label itself. There appears to be an abuse of the monopoly that they enjoy and therefore as a result, the other services are at a major competitive disadvantage, despite stronger consumer appeal of those services. In an era where most consumption of music is happening on mobile, where is the question of blocking access to mobile users? Both for public good and to ensure there's a level playing field, consumers should be able to access music on any and all platforms of their choice.
So what can be done?
First, music labels must take a long-term view on the growth of legal music consumption, and support digital music services with rational pricing. The huge Minimum Guarantee structure should end. A rational cost maybe charged based on the size, scale and revenues earned by a music service, such as a revenue share model. The music services and the music owners need to work out a royalty rate together, failing which the legal recourse available in India would have to be availed, be that Statutory Licensing rights given to broadcasting services or compulsory licensing for fixation of the correct royalties payable to music owners.
Just as in the radio business, where intervention by the copyright board was the only solution for rationale royalty payouts even for the online music services the intervention of the Copyright Board may be the only way to establish fair pricing that encourages business growth, consumption of legal music, and therefore royalty payouts to the music owners. For the record, radio operators in India pay 2% of their net advertising revenues to music owners based on a copyright board judgment of 25th August 2010 as against an exorbitantly high royalty regime prior to 2010. Digital broadcast services offer the best future prospects for the music industry to encourage consumption in a legal, monetizable way, and to curb piracy, the largest form of music consumption today. The music industry should support their growth as the industry only begins to emerge.
It is in the interest of all to work as a synergy and therefore facilitate great and big innovative ideas related to music instead of wasting creative minds in strategizing high royalty regimes.