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A Thousand TikTok's, A Thousand Cuts

Short form video apps are used by 45% of the 600 million internet users in India. Local short form video apps are also riding the Digital India investment wave, with millions of dollars pouring in.

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The mid-July ban by the Ministry of Electronics and Information Technology (MEITY) on TikTok, the Chinese short form social media app, on account of national security, was also the trigger for domestic innovation. After the ban over half a dozen domestic short form video apps and domestic platforms with integrated short form video features have been launched and seen exponential growth - alongside global apps.

Short form video apps are used by 45% of the 600 million internet users in India. Local short form video apps are also riding the Digital India investment wave, with millions of dollars pouring in.  

Given that TikTok is currently valued at $50 bn /~Rs. 3.75 Lakh cr. and the Chinese entity Kuaishou Technology received a valuation of $60.9 bn /~Rs. 4.56 Lakh cr., the valuations party has just begun for short form video apps in India.

Short Form Video Apps to grow 16% 
Short form video apps are also expected to grow 16%  in terms of total number of users and four times in terms of minutes spent within 5 years.

This growth comes at the cost of the creative community which comprises performers, authors, composers, and investors by way of music labels.

The platforms are at liberty to deny copyright holders royalty payments or pay royalties at their own discretion creating a value gap. This occurs because the apps can claim to be "Intermediaries" under the Information Technology Act of 2000 (IT Act) which shields them as they host user generated content.

A Thousand Cuts to Creative Talent 
Meanwhile, user generated content uploads go on unabated with lakhs ov videos uploaded daily  and a high number of videos viewed by users per day.  The increasing engagement and content creation will further boost the valuations and bottom lines (through advertising) of these short form video apps.

While a thousand TikTok clones bloom, a thousand cuts are delivered to the creative talent and the record labels in the Indian recorded music ecosystem.

Rs 200 Crore Lost By Way of Royalties 
Around Rs. 200 cr. annually is lost by way of royalties thanks to the protection accorded by Section 79 of the IT Act. Big Tech also takes cover under the same section - even while the estimated or declared revenues of FB and Alphabet in India were Rs. 1,277 cr.  and Rs. 5,593 cr.  respectively in FY20.  The pay-outs to record labels by the Big Tech are not commensurate with the huge revenues earned by them through copyrighted music causing an estimated loss of ~Rs. 739 cr. annually.

The platforms are at liberty to deny copyright holders royalties payable to them or if the platforms do pay royalties, the royalty amounts payable at the discretion of the platform. This occurs because these short format video apps hide behind the garb of "Intermediaries" under the Information Technology Act of 2000 (hereinafter referred to as IT Act) which shields the platforms. This creates what is described as a Value Gap, where local legislation gives the licensee the upper hand over licensors during negotiations.

Recorded Music Industry Bleeds 

Even in the US, a report by the copyright office on a similar intermediary liability provision in the Digital Millennium Copyright Act of 1998, noted that the "the scale of online copyright infringement and the lack of effectiveness of section 512 notices to address that situation remain significant problems."

Without immediate attention, the recorded music ecosystem will continue to haemorrhage. This will have a massive impact on the livelihoods of an estimated 53 million households. The Rs. 19,100 crore Indian film industry will suffer too, as the first investors in any film project are record labels who license the soundtrack of the film.

Legislations in Other Countries
The administration should borrow a leaf from copyright reforms enacted in the EU via the Digital Single Market Copyright Directive  which makes online content sharing platforms liable for copyrighted content hosted on their sites. The Australian Parliament, followed by the Canadians, also recently amended its copyright law to provide copyright owners with additional tools to enforce their rights against online infringement, including injunctions to block domain names.  

If Section 79 of the IT Act 2000 is not repealed it seems inevitable that the Indian recorded music industry, along with its creative community, will sink into an abyss. Currently the recorded music industry including the creative community lose around Rs. 1500 cr which is a 100% leakage of revenues.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Blaise Fernandes

The author is President – The Indian Music Industry

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