26% FDI in digital media: Some cheer, others complain calling it restrictive & ambiguous

Until now, there was no policy on FDI-related matters in the sector

by Shikha Paliwal
Published - Aug 29, 2019 8:39 AM Updated: Aug 29, 2019 9:15 AM

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DigitalNews

In a much needed boost for a lacklustre economy, the government on Wednesday relaxed foreign direct investment (FDI) rules for several sectors such as manufacturing, single brand retail and digital media. The announcements were in line with Finance Minister Nirmala Sitharaman’s Budget promise of further opening up of FDI in several sectors.  

While a majority of the announcements were welcomed with open arms, the decision to bring in 26 per cent FDI  in the digital news media sector drew mixed responses from experts due to ambiguity on how and who would the new policy impact.

According to the government release, “The extant FDI policy provides for 49 per cent FDI under approval route in up-linking of 'News & Current Affairs' TV channels. It has been decided to permit 26 per cent FDI under government route for uploading/streaming of News & Current Affairs through digital media, on the lines of print media.”

The digital media industry has seen phenomenal growth on the back of cheap data availability, a growing smartphone user base and consumption of content through the internet. Keeping this present digital readiness of the Indian ecosystem in mind, some experts feel that 26 per cent FDI in digital media will further unlock the true potential of the industry.

According to Himanshu Parekh, Partner & Head, International Tax, KPMG India, “the M&E industry grew by 13.3 per cent in FY19 (as compared to FY18) on the back of colossal growth of 43.4 per cent in digital media segment. This is despite the fact that while the FDI policy currently permits 49 per cent foreign investment in up-linking of News & Current Affairs TV channels and 26 per cent in print media sector, both through government approval route, it was silent on FDI in the digital media segment.”

“Today, the government has approved the proposal to allow 26 per cent FDI for uploading/ streaming of news & current affairs through digital media. This is a welcome move and should lead to larger FDI inflows in India in the already burgeoning digital media sector,” he adds.

 Underling a similar sentiment, Jehil Thakkar, Partner Deloitte India, says, “FDI in digital media is a welcome development. Clarity around this fast growing segment of the media industry will act as an enabler for capital infusion. Significant value will be unlocked going forward.”

 Atul Pandy, Partner, Khaitan and Co, believes that the new norms will bring in much more clarity for the industry which was so far devoid of any direction on matters of foreign investments in the segment.

He explains, “Earlier there was no clarity. There was an issue whether FDI is allowed in digital media news or not. There's a lot of interest among the foreign investors, specifically with the Indian population being so young and everyone using mobile and cheap data. Everyone thinks that there is a great scope in this segment as well as in terms of disseminating news and getting the subscriber base at a larger level. So, from that perspective, government has now clarified that 26 per cent FDI will be allowed in digital media, that too under government route.”

While FDI is largely seen as a tool to push investments into the country thus fuelling growth, employment and income. The 26 per cent FDI in digital media, however, is being looked at with trepidation by some experts, who say that more clarity is needed on the subject to better understand the impact.  

Explains Sabyasachi MitterFounder & Managing Director at Fulcro, “The FDI policy on digital media lacks enough details. It prima facie does not seem to reflect ground realities of a multi-media news and current affairs environment where news is disseminated through both TV and streaming via mobile apps and websites of the same entity. Let’s take the example of a mainstream news channel which would be able to get 49 per cent FDI for its TV channel, but what happens to its streaming services through app and website?”

“Technically, as per the policy, it would be 26 per cent. Now, this would mean that unless the news channel creates two legal entities, one for television and one for digital, it can only get 26 per cent FDI. How is this feasible? In no way does it reflect the realities of the news and current affairs business in the world today. Also, it may be noted that there was no FDI limit for digital media till date, in which case this will be restrictive. I hope the government brings in industry experts to rationalise the policy so that it does not become a tool to restrict FDI in the overall news and broadcasting industry. However, if that is the real intent, it should be spelt out clearly,” he added.

According to Vishal Chinchankar, Chief Digital Officer, Madison World, “For digital sector, it’s not relaxing of foreign investments rules as there was no restriction on digital media earlier. So imposing 26 per cent limit is restrictive.”

Raju Vanapala, Founder, Way2News, too agrees that till the time that there is no clarity, the news doesn’t bring much cheer for the sector. “Surely not exciting for news aggregators, although there is no clarity yet because the minister only had a small statement around this. There is no clarity yet on what about those who have already raised funds in this area. Are they going to regulate these players or is it applicable only going forward?”

Clearly, given the multiple interpretations surrounding the announcement, for now, it’s a wait and watch for stakeholders to fully understand the implications of the government move. 

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