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LEGAL CHALLENGES FACED BY THE MUSIC INDUSTRY DOING BUSINESS IN INDIA

Music Articles - 24 Aug 2020

We, at IPRMENTLAW conducted our second virtual roundtable conference on July 26, 2020 on the topic “Legal challenges faced by the music industry doing business in India”.

This report has been authored by Harshil Dureja and Anushka Verma and edited by Akshat Agrawal and Anushree Rauta.

Performing rights– new opportunities and challenges in the post COVID world

Premise of the discussion:

To understand the discussion, the underlying topics that were talked about are mentioned briefly here:

  1. Reference was made to the 1977 Supreme Court judgement of Indian Performing Rights Society v. Eastern India Motion Pictures. The landmark case laid down that the producers are owners of copyright in the underlying works (music or lyrics) if the works are incorporated in a cinematographic film, where the work has been created at the instance of the producer for a valuable consideration. The composer/author loses their rights over the work so incorporated, as they automatically become a part of the cinematographic film. The judgement has often been touted by critics as one that extinguished performers rights by giving precedence to producers of cinematographs, and the glaring gap in the legislation lead to future amendments to the Copyright Act, in 1994 and then in 2012.
  2. The IPRS live-streaming tariff was discussed at length. In early July, IPRS had released a new tariff scheme for ‘live-streaming of online events and live/disc-jockey performances’. The notification received a lot of backlash, and subsequently, there were several clarifications on the same. Presently, it has been clarified that the Tariff is not slated to come into force until it is approved by the General Body of IPRS, and it has been further stated that the scheme shall not be applicable on online streaming ‘free events’, ‘devotional music’, ‘classical music’ and ‘folk music’.

Following views were presented by the discussants:

Mr. Atul Churamani:

Mr. Atul started emphasizing the importance of new-age solutions to the age-old problems which the Copyright Act presents.

Mr. Churamani succinctly laid down the problems faced by the music industry today while elucidating that the 1977 judgement has been a basis of most roadblocks in performing rights and for revenue earning. He emphasized on how a conflict on royalties resulted in a decision focusing on rights and entitlements. He emphasized the need to not conflate royalty- and rights. Firstly, he highlighted that the non-fluid definition of a cinema hall leads to much ambiguity for authors/composers. What constitutes as a cinema today is changing, especially when such movies are available on various platforms. He gave an example by asking, “Who will get the money when a song plays within a film that is available on YouTube?” Secondly, he suggests that the 1977 judgement is understood to extinguish the rights of composers and lyricists when their work is used in a sound recording. In this manner, when a sound recording is played on radio, the author/composers are not getting any royalty.

Thirdly, he elaborated that the law must be clear with regard to performers’ societies. The law suggests that there must be 1 society for one class of work. In the same vein, should all performers be considered one class of work, or should different occupations within the definition of performer (for e.g. actor, singer, dancer etc.) each be allowed to have different societies representing their interests? Fourthly, he brought us the point that it is very difficult to find out who is the owner of a work for a layman. IPRS may be planning to create a repository, however then not all the artists are signed up with IPRS, in fact a lot of artists are not signed up with IPRS. There is an urgent need of some central repository of information. He emphasized on the need to ease the process of licensing and in fact stated that the issue of licensing being cumbersome and problematic is one of the reasons for infringement.

Lastly, he stated that non-compliance of IPR requirements is the biggest challenge in the industry. While IPR violations are categorized as criminal offence, their enforcement is not the same as other criminal offences, for example income tax fraud. Just like it does in the latter, the government needs to start taking proactive steps to ensure the filing of compliances. Such enforcement measures will definitely lead to the exponential growth of public performance revenues. He again emphasized the need for a separate copyright court and cited the example of USA for starting the same on a small scale. He emphasized the need for judgments within a week.

Mr. Rakesh Nigam:

Mr. Nigam discussed at length the scope of the new IPRS tariff scheme and also addressed several concerns that were raised by other panelists. He clarified that the notification was only a measure to engage in discussions with the stakeholders and was not intended to come into force. While discussing how this tariff came into being, he stated, and we paraphrase: “In early June IPRS wasn’t ready to come with online tariff. However, user groups pressurized us. We did some consultations, and under pressure we got it out. We had a typing error with respect to 1st July instead of 1st September. We made it a point to not charge people who have been performing for charity and especially in such tumultuous times. This is our bit to the society. However, the hostile response on social media has been undermining.” The basic premise of the tariff is that if a person is making money out of performance on online platforms, the same shall be liable to the proposed tariff. A question was raised by our moderator, Ms. Anushree Rauta as to the automatic applicability of the existing tariffs for on-ground events to online live streaming as well. Mr. Nigam reasoned that on-ground events are very extensive and happen on a large scale, as compared to online events. IPRS aimed to reduce the tariff in a reasonable manner to accommodate the reduced scale in online events. A clear distinction was drawn out between live events that are free, and ones for whom there is an access fee, or which are generating revenue through sponsors. The former category, it was clarified, would not be covered by the tariff scheme. Therefore, any live session on Instagram or Facebook (or other such platforms) will not be covered, so long as the recording of the live stream is not stored and shared again on platforms. The latter will be the prime subject of the tariff. Mr. Nigam further clarified that IPRS does not set rates of sync rights. Mr. Nigam further stated that the “folk music clarification” was specifically to avoid wrong interpretations.

Once the music is mapped, once it’s on the platform, through the content ID system, royalty is automatically being shared, if its ad supported. If the master gets paid even the artist gets paid. With respect to foreign works, Mr. Nigam stated that there is no royalties for foreign works which would be disseminated or collected, as they aren’t within the repertoire of IPRS. IPRS grants exemption only for its own repertoire. The consultation process on the rates and other issues with the tariff is on. The earlier tariff has been withdrawn. All concerts which are free on social media platforms will be free for the next 9 months. IPRS also licenses on behalf of its members.

Mr. Neel Mason:

Mr. Mason brought out the three concerns he had with relation to the IPRS Tariff. He commented on the conspicuous absence of Over-The-Top (OTT) platforms. A consideration should be made with regard to OTT players, as there is an increasing trend of OTT licenses, which are of various types, i.e., they may include license only for certain libraries or catalogues or can encompass user generated content (UGC). He questioned whether such live performances can be considered as UGC, and what shall be the implications of such a definition. He suggested that this is one aspect IPRS may want to look at. Secondly, he brought in the clarification issued by IPRS in relation to the exemptions granted to folk Music. He pointed out that mostly these works would be beyond the scope of copyright protection, but the move to exempt was still made in the right direction.

Lastly, Mr. Mason talked about the distinction drawn between free and commercial live events. He said that the move must be made cautiously as there is no such distinction made in the Act. The fact that a person is making copies of a book and distributing them freely is not a defense, and parallelly, should the free performance be allowed is a question one must look at.

Ms. Tanvi Misra:

With regard to the IPRS notification, the concept of sync licenses was brought up by Ms. Tanvi Misra. (For our readers, (in relation to live performance) a music synchronization license, or a sync license, is the right given by the owner of a composition to the licensee to allow synchronization of music with some visual media.) Mr. Nigam clarified that IPRS tariff scheme is only applicable on mechanical and performing rights. However, if a person is hosting the recorded version of the performance (i.e. if they sync a video to the performance of the composition), another applicable tariff shall apply.

Ms. Misra further established the entire question centers around the rights of the performers. What right is allowed is at the core of the discussions.

Mr. Rafael Pereira:

Mr. Rafael Pereira made an interesting observation on why on-ground tariff schemes cannot be applied to online events. He stated that the reciprocal arrangements between Collective Management Organizations (CMOs) get broken down in an online environment. One cannot divide the internet or divide the users over the internet, and therefore the regulation becomes much more difficult. He suggested that in a complex digital world, the tariff must be figured out on prorata basis or on the basis of the User Centric Payment System (UCPS) (the UCPS approach makes payments based on what users are actually listening to via their streams). He stated that blanket licensing, although good for UGC, gives rise to complacency.

Mr. Pereira brought into picture an interesting conflict that may arise out of free live streaming of content. When a live stream is recorded and posted, one can easily map the content ID and the master’s side (i.e. the producers of sound recording) will be able to earn revenue. (For our readers: audio and video files are registered with Content ID by content owners. Whenever anything is uploaded on a platform, it is compared with Content ID to find any similarity with the protected content.) However, in case of live public performance of work which is free from the obligation of license fee/ royalty under the new scheme, no money will be generated, and can lead to a longer-term conflict situation between performers, owners of underlying works, and producers. Lastly, he questions if a live performance that is not pre-recorded and not offered for post-live viewing will be considered a sync. An answer was provided by Mr. Churamani where he provided a business perspective and stated that if a publisher company specifies that such situation is considered as a sync, it must be treated in that manner. However, he was also inclined to not treat it as a sync to ensure greater consumption of works.

 

Performers rights– fixed or unfixed/ live or recorded?

Premise of the Discussion:

The discussion mostly revolved around the importance of performers rights. The relevant sections under the Copyright Act, 1957 that were discussed were the definitions i.e. Section 2(q) laying down the meaning of a performance, Section 2(qq) which defines the term ‘performer’, and the scope of Section 38, 38A and 38B. The discussion revolved around the meaning of phrase ‘made live’ in the definition of performance, as well as whether a recording can be included in such a definition.

Following views were presented by the discussants.

Mr. Neel Mason:

Mr. Mason discussed the controversies that arise in the avenue of performers rights. Firstly, he threw light on the phrase ‘made live’ in the definition of performance under Section 2(q). He referred to Explanation 3 Rule 68 of the Copyright Rules, 2013 that states that “performance includes recording of visual or acoustic presentation of a performer in the sound and visual records in the studio or otherwise.” It implies that even when a performance is in a studio, it can be construed to fulfil the requirement of ‘made live’. Mr. Mason opined that this may be the wrong way of looking at it as anything live involves a continuum of activities, and something that is going on at that time, for eg, live news. In a studio recording on the other hand, there is no continuum, as there may be several retakes to produce the sound recording. This is a grey area in the controversy.

Secondly, he referred to the question of whether performance rights are assignable. Prior to the 2012 amendment, the question revolved around consent of the performer. If the performer consents to performance being recorded, none of his rights remain. However, the 2012 amendment made performers rights assignable. The controversy revolves around whether or not a performer can assign his rights. He questions whether such assignability impinges on the author/composers rights in the underlying work.

Lastly, Mr. Mason brought forth the point that just because performance rights are subject to licenses from owners of underlying works, does not make it an inferior right. All these rights provided in the Act are independent rights.

Ms. Tanvi Misra:

Ms. Misra replied to Mr. Mason’s comments and stated w.r.t. the first issue that after a reading of the Act and explanatory clauses, she believed that Section 2(q) was always meant to include recordings in a studio. She denied that there is a requirement of continuum and stated that the first fixation of any sound recording happens by live performance in a studio. Therefore, the rules did not add any meaning to the Act that was not intended, instead just acted as a clarification.

With regard to the second issue, she denies the assertion that performers’ rights are assignable. She states that Section 38A is an exclusive right. The WPPT gave the option to have a mere right of remuneration for the performers, but India specifically submitted a reservation stating the performers’ rights are exclusive in nature. A question was posed by our moderator, Ms. Anushree Rauta- “By comparing the wording of Proviso to Section 18 and Section 38A(2), we can see that the wording is different with regard to royalties. Had the intention of the legislature been to make performers rights non-assignable or non-waivable, wouldn’t the same language have been used?” Ms. Misra answered that the 2 sections referred have entirely different scopes of application and talk about different utilisations of work; in Section 18 reference is made to incorporation in a sound recording, and in Section 38, reference has been made to cinematographic films. Therefore, both are not comparable.

Mr. Rafael Pereira:

Mr. Pereira talked about the history of performers’ rights in India, the first Act dealing with it being the Dramatic and Musical Performers Protection Act (UK), 1925 which was applicable in pre-independence India. Under the Act, an appointed agent was entitled to collect royalties on behalf of performers’ rights societies. It has taken a long time from that act to the present Copyright Act, and yet we can see that performers’ rights have taken a backseat in many jurisdictions. He pointed out the paradoxical nature of this situation: performers’ rights are closest to the work, even closer than derivative authors, however the latter is given a stronger recognition than the former. He concluded by suggesting that now is the time to analyse the situation, especially during COVID era and start paying more heed to the performers’ rights.

Mr. Atul Churamani:

Mr. Churamani provided an analysis from the business perspective. Pre 1994, he said, the established custom was to pay the performers equitable remuneration for their performance. He brought about an apprehension in the industry with regard to payment of ‘equal share of royalties’ to performers, and that record labels are not on-board with the idea that performers should get an equal share in the royalties. Secondly, he brought up the point of retrospective application of the 1994 amendment providing for equal share of royalties. He pointed out that such things bring about confusion in the industry and often becomes roadblocks on terms of business. Thirdly, he also pointed out that the Act prescribing the royalty share impinges upon the negotiation capabilities of the record labels.

Mr. Ali Sachedina:

Mr. Sachedina offered a different approach to the performers’ rights, from the perspective of jurisdictions other than India. He stated that in other jurisdictions, there is not such a problem with regard to royalty for performers, like it happens in India. It is widely accepted in other jurisdictions that owners’ rights need to be upheld, and is in fact a sacrosanct principle of copyright law. He stated that performance rights usually get a wait and see approach.

The panelists agreed that the 1977 IPRS judgement has been wrongly interpreted. Ms. Misra mentioned that the case dealt with the question of ownership of rights and not existence of rights. Mr. Nigam elaborated that even the Supreme Court did not extinguish the author/composer rights. It upheld the duality and existence of rights by stating that the author composer is not an owner unless a contract exists to the contrary. It means that it accepted the existence of their rights, but it was interpreted in a wrong manner, that led to the 2012 amendment to clarify the situation.

RADIO ROYALTIES

 

Premise of the Discussion: While discussing Radio royalties, the landmark Copyright Board Order dated 25th August 2010 which fixed the royalty rate for the broadcast of sound recording on FM radio by providing a revenue-sharing model as  2% of net advertisement earnings of each FM radio station to be distributed on a pro-rata basis to all music providers and the IPRS vs Aditya Pandey judgment was discussed at length.

 

Mr. Neel Mason:

Mr. Mason, while discussing the background of the case pointed out that the current 2% share is very less considering the share was arrived at after taking into account data going back to 2007-2008. He further threw light on the fact that the only respondents in the present case were PPL and yet this 2% share is applied to all as a standard industry practice to date. He also discussed how this present order should not be looked in isolation because just a few months later the Delhi High Court held that when you’re playing a sound recording you need not take a license from IPRS. He elucidated how there is a need for the current rates to be revised given the fact that such rates are now obsolete. The biggest problem with this order, he said is that it set a standard for the radio industry. He summed up by saying he hopes, now that it is going to come to an end on 30th September, there would be two battles to be fought; one, for sound recording companies to get greater pay and the second battle being whether they need to pay the IPRS or not. He further emphasized the need to set a new standard share when it comes to radio royalty.

 

Mr. Rakesh Nigam

Mr. Nigam talked about how the kind of profits made by the radio industry has increased manifolds over the decade and how the radio industry probably spends more on legal expenses than giving out to content owners. On being asked by Ms. Anushree Rauta whether, after the 2012 amendment, IPRS thought about taking on with the Radio industry legally w.r.t the minimal share, Mr Nigam replied that looking at how legal cases drag on in India coupled with the fact that radio broadcasters being one of the most powerful lobby in the country, IPRS believes in settlement rather than opening a legal battle on all fronts. He further pointed out how it is ironic that All India Radio pays a royalty to IPRS for international music but fails to do so when it comes to Indian music. Talking about the extent of losses born by the PPL Mr. Atul Churamani added that PPL lost around 90% or radio revenue as a result of that order.

 

Mr. Ali Sachedina

Referring to other jurisdictions, Mr. Sachedina brought forth how the rates of procuring the license vary, the right owners vary and how it acts as a constant battle figuring out who is supposed to be approached in order to procure a license in order to have a complete coverage right to be procured. He further talked about how the US Copyright board sets out a general tariff scheme that applies to public performance. However, it’s not an obligation, and rights can be procured from the owner directly as well.

ONLINE LICENSING

Mr. Ali Sachedina

Mr. Sachedina discussed how online licenses are broad and complicated and mentioned the two main issues with online licensing being that firstly, there is many a times confusion w.r.t who the right owners are and secondly, the rates vary based on usage, revenue generation, etc.

Mr. Atul Churamani

Mr. Churamani mentioned that there is a need to lay the ground for industry practice in the online licensing space and he encourages people to join a society to form a collective so as to protect the rights of all the players especially the smaller ones. For streaming services and online streaming he says, there needs to be a standard practice as it does in most countries of the world. He pointed out how the major concern is India is usually about compliances. Those are the challenges that need to be dealt with in our country first.

Mr. Rakesh Nigam

Mr. Nigam agreeing with Mr. Churamani shared an experience of how the concerts are under-declared while the real picture is radically different. He further added that everyone wants to end up getting away with paying the right owners as much as possible and no-one wants to disclose correct numbers and further emphasized compliance being a major problem in India.

Mr. Rafael Pereira

Mr. Pereira talked about the need to have a user-centric payment system. Adding to the issue of compliances, Mr.Pereira added that one of the main problems with compliance and revenue collection arises since there is huge content which is undigitised since people haven’t invested in digitizing content. He pointed out how this would pose a great problem in the near future with respect to live performances on social media such as Facebook considering that online platforms are set to become bigger in the times to come.

Mr. Ali Sachedina

Mr. Sachedina also acknowledges that one of the challenges of doing business in India is about reporting as a result of which revenue generated is not able to be attributed to the rights owners. He added that registering of work by artists with societies is very important.

SINGLE WINDOW LICENSING– A POSSIBILITY IN THE INDIAN LEGISLATIVE FRAMEWORK?

Mr. Ali Sachedina

Commenting on whether single window license has been a reality in other jurisdictions, Mr. Sachedina says it has been there in many jurisdictions across the world and hopefully it would be applicable in the USA very soon as well. He talked about how a single window license is helpful in procuring rights and does away with ambiguity in a lot of spheres.

Mr. Rakesh Nigam

Talking about the possibility of a single window license in the current framework, Mr. Nigam mentions how in the current system it’s not possible, however, he strongly recommended that there should be a single window license at least for public performances. He pointed out how many single window licensing systems are present all across the globe and while some like in Malaysia have broken down, there is a need to evolve so as to bring clarity as to what will be the ratio of sharing between the stakeholders.

Mr. Neel Mason

Mr. Mason explained the possibility of the single window licensing given the current legislative framework taking into account Section 33 of the Copyright Act, 1957.However, he pointed out how single window license sounds attractive but given the current scenario it’s implementation seemed a bit blurry because at present we do not have clarity with respect to who we are supposed to pay and let alone how much you’re supposed to pay. Therefore, the need of the hour was to bring clarity to these two important aspects.

Ms. Tanvi Misra

Ms. Misra while talking about the single window licensing issue added to Mr. Mason’s point that there has to be clarity on ‘For what are we paying’ in addition to who we are supposed to pay and how much. She further threw light on the fact that in terms of digital collections, the concept of an extended collective license which has been applied internationally can be a useful alternative to single window licensing.

 

Ms. Anushree Rauta took up a question from the audience which was: How is a blanket license for a mixed repertoire on online show issued which has Both IPRS and non-IPRS content?

Mr. Rakesh Nigam explained that not only in case of virtual events but also in case of a physical event, if some songs are from IPRS repertoire and some are not, IPRS cannot issue a license for songs not in its repertoire and that the license is to be granted for such songs is by the owners of the works of those songs.

Ms. Anushree Rauta took up another question on performers rights and asked Ms. Tanvi Misra that neither the compulsory nor statutory licensing provisions in India recognize performers rights. ISRA claims that before playing any song, it’s license (or clearance certificate as they call it) is required to be taken in addition to a sound recording license and a publishing license. If the intent was to make this license mandatory, why is it that neither compulsory license nor the statutory license provisions apply to performer’s rights? Is it the expectation that a Statutory license under 31D won’t even be enough when granted and a separate license from ISRA would be required?

Ms. Misra answered in the affirmative stating that ISRA license would be required. Statutory and compulsory licensing provisions are limitations imposed on exclusive rights. It is not applicable for performers internationally. Therefore, there is no question of limiting the right.

 

CONCLUSIONS

 Mr. Atul Churamani concluded by saying that the industry needs to get its intent together. If the intent is there, things will happen and this would be a chance to go through with the one window license system. He further talked about the need for people to come in the ambit of a society as much as possible.

Mr. Rakesh Nigam talked about how a lot of difficulties w.r.t valuation and licensing fees would substantially reduce or get rationalized if everyone starts paying for it or at least if most of the users start to pay. He added that there is a need for compliance and better laws that act as a deterrent for people infringing upon copyrights.

Mr. Ali Sachedina concluded by saying that the roadmap ahead is to make the Indian ecosystem conducive for artists wherein everyone is able to monetize, understand clear rights and people are able to be in business. He further added that there is a need to look at how to make this ecosystem grow where artists, creators, business companies, rights owners and everyone thrives which he believes will be done by ensuring all the friction points are taken care of between different stakeholders.

Mr. Neel Mason highlighted that while people in every industry compete with each other, there usually exists a baseline beyond which the industry as a whole comes together to fight and to protect its people; however such as baseline seems to be missing within the music industry which is in turn divided into industries within the industry and therefore, he says, that currently the industry is highly divided and there is a need to set a certain baseline. He further pointed out that once here is the clarity with regard to who all should be paid,  a lot of licensing issues would be resolved and the music industry would benefit from it as a whole.

Ms. Tanvi Misra argued that the law is mostly about whether it is serving the purpose. She further explains how the law has been fragmented and there is a lot of history behind it and how whenever a landmark judgment comes there is a seismic change of event, laws, and interpretations w.r.t the law, the way we read it. She further added that in order to shed clarity on the law it needs to be read in consonance with international principles. She also agreed with Mr. Neel Mason that the industry needs to come together and there is a need for harmony pithing the industry.

Mr. Rafael Pereira concludes by saying that while many think copyright is a creature of statute, Mr. Pereira tends to disagree. He summed up by saying that the complexities of the Copyright Act are something that needs to be figured out together as an industry that would benefit creativity as a whole. He elucidated with the example of positive practices by certain platforms and the Nigerian film industry and argued as to what is holding us back.

Source:https://iprmentlaw.com/2020/08/10/report-iprmentlaw-virtual-conference-2-0-legal-challenges-faced-by-the-music-industry-doing-business-in-india/

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