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Why India's M&E sector is still struggling with FDI?

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Why India's M&E sector is still struggling with FDI?

M&E sector is beset with some unique challenges. Domestic investments have dried up in the sector as serious investors have been staying away. Though, the government recently allowed 100% FDI via automatic route for broadcasting carriage services in certain cases, but sectoral regulations continue to be a challenge.

At the recent 5th edition of CII Big Picture Summit 2016, experts debated the funding conundrum as far as the FDI in M&E sector is concerned and shared some interesting insights on the subject.

According to Brandson S Amber, APAC Advisor, ROKU, USA, the onus lies with the government to come up with a well-defined FDI process that makes it easier for the investors to look at the potential Indian M&E sector. He says, “The biggest thing needed is a clear process from the government to be able to get things done. There is great possibility of growth as far as the Indian content is concerned not just in India but around the world. Indian players who are operating from off-shores are witnessing decent investments, for example Yupp TV has India-South Asian content. So there is capital flowing into Indian M&E but not directly to India.”

Explaining why FDI is not coming into India, Rajiv Verma, CEO Hindustan Times believes that it is not about regulations but about a different business set-up that Indian M&E sector offers, which often poses a big challenge for foreign investors as they are not used to operate with such business models. He stated, “The thing to bother is why FDI is not coming to India. Is it because of the regulations or does India really need FDI for the M&E sector? While India is a strategically important country in many ways, the fact is that digital world is changing all that. I don’t think there is any regulatory hurdle as far as FDI in M&E is concerned. The main point to remember is that India has different market dynamics compared to most other markets in the world, especially the developed world, because business here depends largely on advertising revenues. Even in TV for instance, 65% revenue is coming from advertising. This creates business models which are very different for the multinational companies to follow as their revenue models are content and distribution and not necessarily advertising. This requires companies to reconsider their business models for Indian market, and this is something which many investors are not keen to do. Another point to keep in mind is: does India really need FDI in the M&E sector since there are enough resources available for investments. Ultimately, it is about finding business models which are attractive for investors to come in.”

Speaking about the capital inflow into the booming digital media ventures in India and how capital inflows alone won’t solve M&E sector challenges, Verma added, “As far as digital businesses are concerned, they are struggling to find business models which will have enough viability, and it’s not just the case in India but across the world. It’s is an industry that is in the forbidden years, barring a few digital models that have arrived. So, access to capital alone is unlikely to be a key success factor unless the business model is worth investing.” 

Tags CII M&E Sector Hindustan Times Rajiv Verma FDI

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