Industry divided on FDI in media; extreme views come to the fore

Few stakeholders feel that increasing the cap from 26% to 49% will help the industry grow, others say that media is already cash rich. Some remark that this is all Govt. game play

e4m by Abhinav Trivedi
Updated: Jun 27, 2013 9:11 AM
Industry divided on FDI in media; extreme views come to the fore

The Arvind Mayaram Committee, which submitted its recommendations on the FDI norms to the Finance Minster, has a vital ingredient for the media industry. The panel has advised that FDI limits in information and broadcasting sector be raised.

The Committee has recommended raising the foreign investment limit from 26 per cent to 49 per cent in sectors such as print and television media (news), and FM radio.

For sectors such as broadcasting carriage services and facsimile editions of foreign newspapers, where ownership and control either by Indian or foreign nationals is not imperative, the FDI cap has been raised from the current 74 per cent to 100 per cent, as per the Committee’s recommendations.

Various experts have different and extreme opinions about the suggestion made by the panel. While many broadcasters (radio and TV) support the move, some industry members are questioning the timing and susceptibility of the move.

The glass half full

Vikram Chandra, CEO, NDTV Group shared, “This step is welcome, and we are open to such norms which benefit the industry as a whole.” Supporting his views further, KVL Narayan Rao, EVP, NDTV Group said, “FDI cap increase in the media sector has been in offering for a long time. This would bring more capital into the system and is beneficial for all of us.”

The Government has already hiked the FDI ceiling to 74 per cent from 49 per cent in broadcast carriage services. It has been a booster to India’s cable TV sector, citing the expansion of the digitised cable services in India. Currently, India is in the second phase of digitisation, expected to be completed by March 31, covering 38 cities. Till date only 25 cities have been covered.

Aswin Padmanabhan, Business Head, Big FM said, “FDI cap increase is a good opportunity for media like us to penetrate deeper into the India territories. We are in the phase of expansion and such norms would provide us capital to materialise our ambitions.”

Cautious approach

Some experts predict that the recommendation given by the panel would give little returns. They are vocal about the needs of the sector to be more open first. “The media industry does not need money. They are cash rich. The most important decision to be taken in this context is the freedom and regulation crisis of the sector. Most of the media companies such as ToI, HT, DB Corp and ENI are cash rich. The cost of programming in our country is very low. The FDI would definitely give a way to expansion of operations in the sector, but the problem here is far from solved. We need better regulations in place first,” said Amit Patil, Media Analyst, Angel Broking.

Few radio owners are of the view that the Government should change the basic rules of the game first and then go for FDI. They feel that radio or the FM business is not crippled because of the lag of FDI, but the regulatory norms. Auctions announced two years ago are yet to be held, while the last auction in the FM space was held in 2007. Industry experts feel that instead of opening the FDI, the Government should open the spectrum for the radio first. Secondly, broadcasting of news should be allowed on radio. The radio fraternity feels if the Committee can think of increasing the FDI cap in the sector, they should also consider news broadcasting allowance to the FM channels.

The glass half empty

“The Government is in its last year. My question is why recommend a norm like this at this juncture. Do you seriously believe that the norm would be executed before Lok Sabha polls? This is just a game play. Also, why to open the media of the country to foreign control; I understand the entertainment beat, but news is serious stuff. One should not compromise with the editorial integrity of the news by giving a stake to foreign companies. News media is a sensitive sector, and before proposing such norms, the committees must take many factors into consideration. This investment must not be routed through the automatic route, but like defense, should be scrutinised properly,” said a highly placed source in the broadcasting space, on condition of anonymity.

Some experts in the print fraternity feel that many vernacular and regional newspapers in the country are small in size and may suffer due to the development. If FDI cap expansion is approved, they fear that many such small papers would be on the verge of mergers and acquisitions. Further, some may even vanish.

Although, if materialised, the FDI norms might bring more funds, which can help in expansion of some sections like radio in the small cities, but that is not enough. Although, it is a positive step in the right direction, experts feel that money is not the problem here.

Will control of the media be hampered?

Some media analysts fear that the FDI cap expansion might give a substantial weightage to foreign companies in the Indian media. KVL Narayan Rao of NDTV mentioned, “A 26 per cent cap curtails investment, but the 49 per cent cap will encourage investors and will still allow control to be with Indian company. I don’t understand where the question of losing control is? The recommendations are welcome and the foreign investors would invest in robust media companies.” 

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