Digital music giant Spotify, which entered the Indian market earlier this year, has already opened its account in local courts. Music behemoth Warner Music, a former investor in Spotify, has sued the company over a matter that promises to send ripples through India’s intellectual property regime. Specifically, Spotify recently invoked a statutory licensing provision (Section 31-D) under India’s Copyright Act, in an attempt to gain access to content owned by Warner Music, for redistribution. Warner Music has, in turn, filed an injunction at the Bombay High Court to prevent Spotify from accessing its content through such means.
Statutory licensing serves as an exception to the exclusive economic rights of a copyright holder. This makes copyright licensing a minefield of litigation. The Spotify-Warner case will add a nebulous layer of jurisprudence to an economic area that merits more detailed legislative attention.
India’s copyright regime is ostensibly based on the premise that “knowledge must be allowed to be disseminated". This public-interest rationale stems from a much-cited 2008 Supreme Court judgement. The ruling firmly established that the use of non-voluntary licences to enhance consumer access can be availed of by private entities, as well as public entities. However, the proliferation of information and communication technologies (ICTs) has changed the knowledge-dissemination paradigm. The dominance of digital markets necessitates a relook at the existing copyright regime—which is not a job for courts.
Historically, music licensing in India has involved bundling of the underlying rights for musical composition, lyrics, performance, and even synchronization with the copyright for the sound recording. Until a seminal legislative amendment in 2012, which made such underlying rights “non-assignable", the wholesale transfer of rights to movie producers was a common practice. Such producers would then transfer these rights to record labels. This gave primary-rights owners, such as lyricists, performers and composers, no claim on future royalties. In many ways, the erstwhile regime was fit for a market where the music industry was primarily financed by the film industry, particularly Bollywood. However, the Bollywood-centricity of music markets is being disrupted by internet streaming.
Market disruptions notwithstanding, judicial intervention is never far from upending accommodative legislative reform in India. In 2016, in another court case with large economic ramifications, the pre-2012 practice of transfer of rights was re-allowed for sound recordings that are not embedded in a cinematograph film. Primary-rights owners were dealt a blow through a judicial intervention that paid insufficient attention to changing market dynamics. Independent of the legal rigmarole, India’s music industry has managed to cross the₹1,000-crore mark in 2018, and need not play second fiddle to films forever. Through sustained growth of internet streaming revenues, the industry can become a force to reckon with in its own right.
In fact, technology has helped several Indian industries overcome challenges stemming from static regulatory regimes. For instance, TV broadcasters in India have invested heavily in online video platforms to disseminate new content. Such investments will help them overcome a legacy of prescriptive economic regulations in the TV market. Similarly, in the case of the music industry, digital platforms will enable greater consumer reach, as well as product and service innovation, to maximize industry revenues.
To its credit, the government recognized an untapped export potential of the audio and video industries last year and gave them “Champion Sector" status. The earning prospects of audio-visual exports are linked to the growth of digital markets.
Several Indian industries, ranging from telecom to mining, have suffered the consequences of judicial overreach in economic matters. As a principle, such interventions should be curtailed to instances of discernible market failure. Moreover, digital markets are exceptional on several counts, necessitating that judicial interventions be narrow in scope. First, internet streaming does not rely on the use of scarce public spectrum, as television or radio broadcasting does. Second, the cost of switching between streaming services is negligible as it does not involve replacement of any equipment or distributors. And third, in theory, there can be no discrimination between large and small streaming businesses at the network level of the internet, thanks to network neutrality rules.
Wisely, Indian legislators have held back from expanding the scope of statutory licensing from broadcasting to internet streaming. However, the department for promotion of industry and internal trade issued an “Office Memorandum" in 2016, seemingly attempting precisely this. While the legality and impact of the memorandum remains untested, it underlines a latent impulse to carry over legacy licensing constructs into the new economy. The Warner-Spotify dispute may heighten similar impulses within the judiciary, which seldom bothers to frame interventions in the context of market forces. The 17th Lok Sabha would do well to redraft the country’s copyright law to reflect the realities of digital markets, before other arms of the government begin to redefine public interest in this issue.
These are the authors’ personal views