What Will 26 % FDI in Digital Media Mean, Ask Industry Veterans

Allowing 49 percent in television news but 26 percent in digital media has led to confusion and concerns.

People react less strongly to malicious speech on digital platforms, believing that such abuses on social media cause less harm than in face-to-face interactions

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The government, on Wednesday, 28 August, approved 26 percent Foreign Direct Investment in digital media and relaxed FDI rules for foreign single brand retailers, manufacturing and coal.

Briefing reporters on the decisions taken by the Union Cabinet headed by Prime Minister Narendra Modi, Commerce and Industry Minister Piyush Goyal made the announcements at a time when the Indian economy appears to be staring at a jobs and capital crisis.

The official press statement explains that the new FDI policies “will result in making India a more attractive FDI destination, leading to benefits of increased investments, employment and growth.”

Here’s what the announcement regarding digital media says:

The extant FDI policy provides for 49 percent FDI under approval route in the uplinking of ‘News & Current Affairs’ TV Channels. It has been decided to permit 26 percent FDI under government route for uploading/streaming of News & Current Affairs through Digital Media, on the lines of print media.

Breaking down the operative parts of the announcement:

• After obtaining prior government approval,
• FDI to the tune of 26 percent can be obtained for ventures involved in uploading/streaming of News & Current Affairs through Digital Media

The announcement, however, has been received with cautious optimism by the digital media industry. While many have welcomed the move, some view it as being riddled with discrepancies.

The Quint spoke to several industry experts about the new policy.

Some of the broad questions and discrepancies that have surfaced since the announcement include:

• If there is a subsidiary of a broadcaster and they stream online will the 49 percent FDI apply to those?
• What about news aggregators?
• What about digital media that focuses on video content?
• What about offshore digital media companies and an Indian company whose job is to create content exclusively for the digital media company abroad?
• Will this apply retrospectively?

“What happens to those, whether they qualify under 26 percent or 49 percent (FDI)? What happens to news websites which are 100 percent foreign entity?” Deloitte India, Partner, Jehil Thakkar told PTI.

Government Had Been Thinking About This

Arjun Sinha, partner at Cantor Associates, said the announcement was not developed recently and the government has already applied its mind on this issue, not only once but twice.

“In 2014 and 2015, Newslaundry had applied for an approval to DIPP on whether foreign investment in setting up the NL website required permission from FIPB or not. In the annual compendium there is approval on this,” Sinha told The Quint.

“If you are digital media outlet, you are akin to online print and therefore, if you are taking foreign investment to do business in India, you have to take approval of Foreign Investment Promotion Board (FIPB) and the cap on foreign investment is up to 26 percent and any investment is subject to government approval,” he added.

Government Misreading True Nature of Internet?

Nikhil Pahwa, founder of Medianama, raised a point about the decision to treat platforms on the Internet in a similar way as that offline.

“So there is a separate regulatory regime for audio/radio, broadcast and print. Now Internet is all three, it is always shape-shifting. People are always experimenting with it and keep changing what they are because finding a product market is much more difficult on the Internet,” Pahwa told The Quint.

An entity focusing on news and current affairs could, over time, become an information services entity, or could become an entertainment video content entity, by virtue of experimentation.

“So, by creating a differential regulatory regime, you are forcing organisations to become one type of entity, when earlier, they had the option of evolving,” Pahwa added.

Acknowledgment That Digital Media Has Matured

Sachin Taparia, founder and chairman of LocalCircles offers a perspective different from Pahwa’s. He says that the announcement is an acknowledgement of the fact that digital has become the primary medium of news consumption and that the digital media sector has reached a certain level of maturity.

“I tend to agree with the announcement because the entire medium is moving from print to digital. The website of a newspaper carries the news much faster than the print edition,” Taparia told The Quint.

He added that it is an acknowledgement of the consumption shifting from television and print to digital, which is media in equal measure as the other two mediums.

Backhanded Regulation Attempt?

A question that some have asked and which also requires clarity is whether the move is a backhanded attempt to exercise regulation or control of the growing media space.

“In some sense, twice before (in the case of Newslaundry), indications were given by the government on what it thought on the issue. See, regulation was already there but now they are making it explicit and saying now we are going to start looking into it,” Sinha said.

“When an industry is evolving you wait for it to reach a level of maturity. Once it gets there, then you bring in regulation. From day one if you apply strict rules, it will never prosper. It is similar to the e-commerce industry that way,” he added.

The Question of News Aggregators

A question many have raised is about news aggregators whose business model appears to be dealing with news and current affairs but comprises of the content that they do not compose themselves.

“How does this impact them? They are not producing content but also producing content,” Pahwa asks.

“DailyHunt has a majority shareholding in OneIndia which is a news organisation and DailyHunt has raised millions, so how are they impacted and how has their shareholding in One India been impacted?” Pahwa added.

49% in TV but 26% in Digital

An issue that most appear to have agreed on is the need to provide clarity on providing 49 percent FDI to television but 26 percent to digital.

Eros International Group Chief Marketing Officer Manav Sethi told PTI that, “News and current affairs are present on social media platforms, on digital platforms that are subsidiaries of foreign brands etc. How would you differentiate between TV channels which have 49 percent and their online streams, which will effectively have 26 percent?”

“I would assume that those structure will also be needed to be revisted. That makes it look really odd,” Sinha said.

“Maybe it will require some creative restructuring in which you restructure out the India business into a separate arm and have a separate digital media services arm, but yes, it does create some weird discrepancies in how the media market works.”

Arjun Sinha, Cantor Associates

Taparia agreed as well, stating, “Since digital is as much media as print and television, it is an acknowledgement of consumption moving from television and print to digital. But if you have 49 percent for some then it should apply to all. It should be the same across the board.”

(With Inputs from PTI)