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Plagued by piracy, Indian music wants tax break

By Hindol Sengupta, IANS

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With music pirates gobbling away revenues worth three times its estimated value, the beleaguered Indian music industry is demanding a tax break from the government.

The Indian Music Industry (IMI), apex body of the Rs.6-billion ($127.65 million) industry, says it has lost Rs.18 billion ($382.97 million) in the past three years due to rampant illegal copying and sales of music cassettes and CDs.

That's why IMI is protesting the proposal of state governments to classify audiocassettes and CDs under the Neutral Rate Category, which will draw VAT (value added tax) of 12 percent.

"In unit terms, the legitimate market has shrunk by 27 percent in the last two years. In value terms, by 38 percent," said IMI president Vijay Lazarus. "The industry is dying a slow and painful death. The tax breather is desperately needed," Lazarus told IANS on telephone from Mumbai.

IMI, with over 60 member companies including most of the biggest names in India, represents about 75-80 percent of the Indian music scene. The only big name company not part of this consortium is T-Series.

In a letter to the finance ministry, Lazarus said the new scheme would translate to an effective VAT rate of 17-18 percent for the music industry, which, in turn, would decline margins by around 12 percent.

"It'll further cripple the industry," said Lazarus.

IMI also wants the music industry to be categorised as intellectual software rather than the current classification under electrical and electronic machinery.

"The cost of a blank CD is Rs.10 or Rs.20. Once it has music on it, it becomes Rs.125. So 90 percent of the value of the product is on the intellectual property. So it should be classified so."

Lazarus said a combination of factors is killing the industry renowned for its talented artistes and heritage of music.

"Today people are packing MP3s with 100 songs and selling them for Rs.40 (about $1). That has kicked out our bottom end - the audiocassettes.

"The hardware is coming from China, costs only about $50 and anyone can illegal start copying CDs and MP3s."

Then there are remixes and FM radio that meant fewer people than ever before were buying music, said Lazarus.

According to Section 52-1 (J) of the Indian Copyright Act, any tune can be remixed - meaning additional electronic beats added to give it a snazzier, usually danceable avatar - two years after the release of the original.

"So the owner of the original tune gets nothing and producers of the remixes make money. This is sad and a misuse of the law."

The boom of FM radio has also hurt the music industry. Most major Indian cities have 24-hour FM radio stations playing mostly non-stop music.

The Telecom Regulatory Authority of India (TRAI) estimates that the country will have 1,000 radio stations in the next two-three years.

"More radio stations means less buyers of music."

Most radio stations play Hindi film music, by far the most lucrative segment of the Indian music market, cutting margins even further.

This means though the once skyrocketing prices for film music have gone down drastically, the benefits haven't been great because volume sales of cassettes and CDs have also plummeted.

"Prices for film music have gone down to one-tenth of what they used to be four-five years ago but, since volumes continue to fall due to radio and piracy, the benefits are few.

"In places like Mumbai, sales have gone down by 36 percent after the radio channels came."

IMI is fighting back with legal action.

Said Lazarus: "More than half of all intellectual property rights cases filed in India are related to music, we are trying our best.

"But with fines of just Rs.500 to Rs.5,000, no one cares. The prison sentences range from three months to three years but even that doesn't seem to be making a big difference."


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