India is at the cusp of a new revolution, not just democratically but also for its entertainment and media industry. A number of investment opportunities are open in this industry and it remains to be seen how the new Narendra Modi-led NDA government can tap in on them.
Modi, throughout the election campaign, has projected himself as a pro-business leader. He has thus raised hopes of stakeholders in the entertainment and media industry as well, which is keenly anticipating some huge investor-friendly changes.
It is important to note that the Indian entertainment and media industry is gaining a lot of importance not just on home ground but also across the world. As per observers, India’s media and entertainment industry is projected to grow by 18 per cent over the next five years and is expected to become a $ 1.157 trillion industry. But the industry is also currently facing challenges posed by a slowing economy.
Even in this scenario, the Modi government has a number of channels open to ring in fresh bells of joy for the members of this industry. The Modi government’s biggest challenge is to introduce foreign direct investment (FDI) in the entertainment and media industry to make these sectors even more attractive.
It is well known that FDI is allowed in most sectors in this industry. More specifically, in the film industry it is allowed up to 100 per cent; in radio up to 20 per cent and for print media, up to 74 per cent publishing scientific/technical and specialty magazines/periodicals/journals and up to 26 per cent publishing newspapers and periodicals dealing in news.
Media companies with print, television and radio businesses have been signalling at the need for FDI in the three segments during the tenure of the last UPA government as well.
In fact, a draft paper on the FDI policy in different sectors, including the Rs 60,700 crore media industry, had been drawn up by a panel led by Arvind Mayaram, secretary of the department of economic affairs, in 2013. The panel had reviewed the overseas investment policy with a view to boost FDI flows into the country by raising limits in order to raise resources and help revive economic growth which had slumped to a 10-year low.
Mayaram had recommended raising FDI caps in many sectors, including the media and also doing away with the need for obtaining the approval of the Foreign Investment Promotion Board in media sector. This was recommended in order to open up the media and entertainment sector for long-term foreign investors and see inflows supporting the rupee, which has been railing an all-time low.
However, the policy paralysis of the UPA government affected this industry too,especially the radio industry. While private FM radio companies were pleased with the proposed raising of the FDI limit to 49 per cent from 20 per cent under the automatic route by the panel, it was never heeded by the government. This is despite awareness that these measures could attract companies such as the Canadian network CBC, the American CBS Radio, MediaCorp in Singapore or Radio Disney for children.
The Modi government should realize that the radio industry needs to be liberalized as the entertainment sector is moving towards profitability and needs funds to expand further. Geographical expansion is also a need of the hour for growth in the radio industry. Only then can it emerge as a mass media medium instead of being restricted to a few cities.
One of the major contentions of radio broadcasters has been to be allowed to broadcast news. In fact operators have been demanding 100 per cent FDI in case the government does not allow them to broadcast news. Significantly, even the Supreme Court had, last year, asked the government to look into demand of the private broadcasters to be allowed to read news. It failed though to wake up the in-slumber UPA government.
The UPA government kept insisting that there was no monitoring mechanism for radio stations making it difficult to keep tab on content. The then government also said NGO-run community radio stations in remote areas faced a security risk and could be used to incite the community. But both private radio operators and community radio stations had termed these arguments as specious since there is no precedence of radio stations “inciting crowds” or causing law and order problems.
To think of it logically, opening up news broadcasting to private and community radio channels is the logical thing to do. When private TV channels are allowed to do so, what sense does it make to bar radio channels from also doing the same? Even today, radio has access to certain segments that satellite TV does not quite reach.
Continuing to ban news on private radio channels only sends across the message that governments do not want these sections to gain access to news and information not controlled by them. At a time when transparency and open access to information is the mantra in all other spheres, this is a jarring exception, one that should end, the sooner the better.
The Modi government can also act on Mayaram panel demands in print media sector where it recommended 49 per cent FDI as well. This is because Indians are already consuming a lot of global news through online and other media. This will make foreign capital participation and larger flow of funds possible. Not to forget, Indian newspapers are still attractive to foreign media companies as they are profitable and but the total advertising market is still small with immense scope to grow.
Even in television sector, foreign media companies will bring the experience and forbearance and will augment the standards even for news television in India. Approximately 100 news channels operate in India, with their total advertising estimated at Rs 2,000 crore a year. Media experts believe foreign media companies are keen to partner Indian firms even though the industry is currently going through a rough patch. At a time when only a few news broadcasters are making money, such steps would be a boon. Since it is a knowledge business, it would help to have an experienced knowledge partner.
Modi has also raised hope by speaking in favour of autonomy for Doordarshan, the government official broadcaster. He can go a step forward by promoting entertainment services abroad. Over the last few years, foreign nations have become major markets for Indian films and other entertainment services. It can thus give industry status to films segment. Moreover, it can undertake several development projects for the film industry and set up a centre for excellence in animation, gaming and visual effects among others.
If the Modi government is brave in implementing such changes, it will mark a new dawn for the entire media industry. The government needs to do away with serious and severe regulatory issues that have curbed the growth of this industry. Unfortunately, investors will not enter this sector if such issues are not addressed. It remains to be seen if the ‘Modi’-fications will come soon.