The spectre of piracy continues to haunt the music industry, draining its revenues and crippling new initiatives. The Phonographic Performance Limited (PPL), the licensing arm of the Indian Music Industry, is striving hard to license the use of music in the public arena.

In an interview with Radioandmusic.com's Anita Iyer, PPL CEO Vipul Pradhan outlines PPL's plans for the year ahead.

Excerpts:

How has the spread of digital music impacted the industry?

In the past five years, mobile downloads have been on an upward curve with a variety of products available for consumers - from ringtones, track downloads to caller ringback tones. But piracy that exists at multiple levels is now beginning to eat into it. The crucial one is at the consumer level via bluetooth, which is threatening the growth of this market. The ringtone industry was perceived to have great potential, but the market has now vanished and has actually shown a decline in the past 12-14 months. If we analyse the revenue, ringback tones form 75-80 per cent of revenue to the music industry, 15-20 per cent comes from ringtones and 10 per cent from streaming services. We can conclude that there is zero per cent piracy in ringback tones, but about 80 per cent piracy in ringtones.

Is the revenue from television licensing increasing with the rise in music related shows on TV?

With the success of music based reality shows, there is a different trend to the value of music on TV. There are channels which thrive on music based shows and in the short run, this has started to give us a reasonable amount of revenue. But there are still problems because some broadcasters, specially the regional ones, do not have legitimate licenses for using third party content.

The revenue from television licenses, which was 10 per cent of the whole last year, has doubled to 20 per cent. We are also contemplating action against those who do not have legitimate licenses. In the first phase, we targeted the big broadcasters and have been successful in converting them into legitimate users. In the second phase, we would be targeting the niche or regional channels, so hopefully, the percentage share may go up to 25 per cent by next year.

The radio industry has been demanding rationalization of music royalties. Has any amicable solution emerged from talks with radio operators?

The PPL is here for the business of licensing. The fundamental question here is that the current rates of Rs 660 is fixed by the government and our demand for Rs 2400 per hour. The cost of packaging of content in radio is two to three per cent which is evident from balance sheet of various companies. The revenue share to us from mobile and internet radio is 25-40 per cent, so the question is why should we liberate content for FM at two to three per cent. It is nothing but pressure tactics by radio companies to bully individual music companies to surrender their rights at marginal cost. That is not acceptable to us and we are here to protect the rights of the industry.

Has the PPL been taking a closer look at licensing music for events? How do you monitor events?

Event licensing forms a very big share of revenue to PPL, particularly from public performances in the international market.

We have a team of a hundred employees to keep an eye on the events in cities. We have also outsourced eight agencies who work on a commission basis on a larger scale, and also direct sale agents who have access to information about events. The problem is we have not penetrated in all the 500 cities in the country and are currently focusing on only 40-50 cities and have not touched more than five to 10 per cent of the events market. Although the big events are easy to figure out, the smaller ones are still untouched.

What is the current number of companies under PPL?

From 60 companies within our fold some years ago, we now have 140. The increase is largely because music labels want to retain their content with us. Also, PPL controls a large amount of music, 100 per cent of international music, a sizeable amount of Bollywood's old and new content and has a good presence in regional content like Telugu, Gujarati and Marathi.

What can you do to lessen the effects of music to music transfers?

Music transfers via bluetooth are hampering the growth of the industry due to easy availability. One solution could be manufacturing handsets with restricted formats where there is no easy conversion of formats, but manufacturers would be loath to accept this idea.

Another solution would be easy access of music to people who do not want to opt for CDs. The industry has already started issuing licenses for putting up jukeboxes and kiosks at public places with easy operations and minimal rates. With lesser prices, we hope consumers might opt for buying music. Other plans include having a DRM block so that songs can be downloaded but cannot be forwarded via bluetooth. The problem here is that there is a need for thousands of kiosks throughout the country. While all these steps may reduce piracy, it is not possible to eliminate it completely.

How does the PPL track websites offering pirated ringtones?

Full track downloads is a big problem even in international markets. In the past, India was an exception owing to the limited proliferation of Internet and bandwidth speed, but Indian music was downloaded abroad on a large scale. Now, we need to keep a track on servers worldwide. Also, the IFPI based in London helps us to keep track of international websites. Companies hosting these websites either block their websites or get legitimate licenses to operate legally.

Does this mean that the PPL will be posting higher revenues this fiscal?

Today, the issue is not about music industry or the PPL but about physical versus non physical music. The monetisation of music is undergoing a radical change like in Korea, where 50 per cent of the revenue comes from physical formats and 50 per cent from non physical like wireless, events etc. India is also going the same way and is the second market after Korea where the revenue is equally divided. We are doing really well.

So, where is the music industry headed?

Physical sales continue to be on the downward curve. A few years ago, chartbuster albums sold a million copies, but today, the benchmarks of hits have changed to only a few thousand copies. People are using music increasingly but the value is not coming back to the music industry. It can also be attributed to a shift in terms of utilization, from CDs to pirated MP3 CDs and media like radio, internet radio, IVR radio. The losses from physical sales cost the industry about Rs six billion (Rs 600 crore), pirated ringtones and full track transfers via Bluetooth cost about Rs three to four billion (Rs 300-400 crore) affecting the industry to the tune of about Rs 10 billion (Rs 1000 crore) annually.

Is there any other way to deter pirates?

The police suggest we reduce our prices to compete with pirates. But it is not possible, as the only similarity seems to be the raw plastic CD cost. The pirates do not pay for IPRS, VAT, excise duties, income tax arising from the profits. There is no cost of content, marketing and promotions, and the pirates sell only hit content in the market, so there is minimal risk involved. So, there is no way we can compete with the pirates. All we can do is punish them when found guilty.