FDI in media

Consider this: Foreign direct investment (FDI) in the media and entertainment sector headed north in 2011-12, receiving Rs 32.54 billion during the fiscal. This was 72% more than the Rs 18.87 billion received in 2010-11. In 2010-11, FDI in the sector was Rs 23.40 billion.

In India, the media has been both powerful and dominating. As the government aims to increase Indias share in the global FDI space from 1.3% in 2007 to 5% by 2017, the media has its role cut out in projecting the face of an economy that continues to be growthintensive, a country that has a growing and young labour force, rising adult literacy and per capita income, and talented human resources. All these factors motivate flow of foreign investments.

FDI in broadcast services

The government has decided to raise the FDI ceiling to 74% from 49% in broadcast carriage services. Indeed, it will be a booster to Indias cable TV sector. With the aim to completely digitize broadcast distribution in the next two years, raising the FDI c eiling in broadcast carriage services will not only bring in substantial transparency and accountability into the system, but will also initiate expansion of the media and entertainment sector, and in the process, add to the economy. According to an estimate, Rs 25,000 crore is required in investments by cable TV operators to digitize 100 million cable homes by 2014. The target is set for a complete digitization of Indias cable TV infrastructure by the end of December 2014; before that Delhi, Mumbai, Chenn ai and Kolkata will complete the task by October 31, 2012. Foreign majors will watch the metros digitization carefully so that they are at the ready to invest in the next phase.

Consolidation is also likely with mobile players stepping in for digital licences. On this front, the opening of 74% FDI in mobile TV is a welcome step, but more will be expected when the spectrum logjam is cleared and with 4G becoming a more clear and present reality.

Raising the FDI ceiling is good news for independent cable operators too, as they have an opportunity to consolidate and strengthen their base in an otherwise haphazard existence at present. The government has to ensure that foreign participation is further made seamless in order to build Indias own digital infrastructure and a base for new technologies.

FDI in Print

The government is likely to propose raising the FDI limit in the Print media to 49% from its present level of 26%. According to reports, the Information & Broadcasting (I&B) Ministry constituted committee, headed by I&B director Asha Swarup, has recommended the move. The panel is in the process of providing a roadmap to the government for policy initiatives in this regard. Unlike in broadcast carriage services, raising the FDI limit in Print media may not be as sound, transparent or beneficial to the industry.

By the governments own estimates, the country has more than 78,000 registered newspapers, a majority of them vernaculars and significantly local. A road-map to further FDI in Print media, if brought into being, would only discourage the domestic, smaller aspirants. Worse, the existing local players will be at the mercy of mergers and acquisitions, and risk losing their autonomy and being obliterated by foreign media more driven by corporate interests.

According to Papa Rao of AP Herald, Naom Chomskys Manufacturing Consent would be in full force, comprising a band of inves tors who would try to generate consent for the mission set forth by their countries corporate and the political class. This, in turn, Rao says, would be dangerous for our native culture and the self-sustenance in the economy too. Drawing a parallel to the Latin American banana republics who have lost their sovereignty and are subservient to corporate interests, Rao says raising FDI limit in Print media would only expose native newspapers who may not be able to cope up with the (foreign) competition and news content too.

However, the report presented by the I&B committee is not without its merits. Although Indian Print media, unlike anywhere else in the world, has been able to withstand the extremities of the global financial crisis, it still awaits a point of acceleration fo r achieving higher growth. Indeed, as the committee said, innovation in the sector is th e key, particularly in business models where the regional newspapers dont have to fear the big fish, be it domestic or foreign ones.

Another pertinent issue is about Indias dire need of news agencies with global footprints, where a certain degree of consolidation is required within the home brands to be projected to the rest of the world. Foreign investments, in this context, can play a significant role in taking India abroad via its news.

FDI: The road ahead

The contribution of foreign investments in an emerging economy like India can never be undermined. Foreign investments have been a crucial gamechanger in projecting India overseas as a country of opportunities, in spite of its inherent challenges.

On the other hand, media in India along with Print, TV and now, the Social Media is here to stay. For us, the newspaper with the morning cup of tea is as much part of our daily routine as dal and roti/rice constitute our staple diet.

Admittedly, coming of news channels and Social Media have had an impact on Print media but it is not as if one is parasitic to another. At best, the segments complement each other.

In the case of FDI, under the present policy, newspapers and journals publishing scientific, technical, specialty journals can get 100% FDI. Foreign publishing houses, who own foreign newspapers, are also allowed to bring out a facsimile edition of the foreign newspaper through a wholly Indian-owned subsidiary.

Yet, keeping the ground realities in mind, the policies have to ensure a careful balancing act, to keep the national and domestic interests aloft. In my view, the I&B Ministry will be a real catalyst for social transformation by increasing FDI in news media, both Print and TV. I am all for FDI going to at least 49% if not 100% in this crucial sector, the fourth estate. Realistically.

The Indian Government has recently announced the raising of limits on Foreign Direct Investment (FDI) in the broadcast distribution sector to 74 percent. This is a significant step that will allow majority foreign interest in cable companies, Direct To Home (DTH) companies and other broadcast distribution entities.

17.

Broadcasting
Subject to Guidelines notified by Ministry of FIPB Information & Broadcasting. www.mib.nic.in Subject to Cable Television Network Rules (1994) Notified FIPB by Ministry of Information & Broadcasting. www.mib.nic.in Subject to guidelines issued by Ministry FIPB of Information & Broadcasting. www.mib.nic.in Subject to Up-linking Policy notified by Ministry of FIPB Information & Broadcasting. www.mib.nic.in Subject to guidelines issued by Ministry FIPB of Information & Broadcasting. www.mib.nic.in Subject to guidelines issued by Ministry FIPB of Information & Broadcasting. www.mib.nic.in

a.

FM Radio

FDI +FII investment up to 20%

b.

Cable network

49% (FDI+FII)

c.

Direct-To-Home

49% (FDI+FII). Within this limit, FDI componentnot to exceed 20%

d.

Setting up hardware facilities such as up-linking, HUB, etc

49% (FDI+FII)

e.

Up-linking a News & Current Affairs TV Channel

26% FDI+FII

f.

Up-linking a Non- news & Current Affairs TV Channel 100%

27.

Print Media
Subject to Guidelines notified by Ministry of FIPB Information & Broadcasting. www.mib.nic.in Subject to guidelines issued Ministry of FIPB Information & Broadcasting. www.mib.nic.in

a.

Publishing of newspaper and periodicals dealing with news and current affairs*

26%

by

b.

Publishing of scientific magazines/ specialty journals/ 100% periodicals

Media & Entertainment Sector Overview The Indian Media and Entertainment Industry continues to grow at a good pace and is estimated at US$ 14.4 billion in 2010, according to a report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and research firm KPMG. The report further estimates the industry to grow to a size of US$ 16.2 billion in 2011 and to US$ 28.1 billion by 2015. Indian advertising industry stands at the size of US $ 5 billion in 2010, based on PwCs India Entertainment and Media Outlook 2011 estimates. The main components of Indian advertising are Internet advertising which is its fastest-growing segment Radio advertising Print advertising - the largest segment in the advertising industry Television advertising- the second largest segment. FDI inflows in Information & Broadcasting sector, including print media is totaled at US$ 2.17 billion in India during Apr 2000- March 2011, according to Department of Industrial Policy and Promotion statistics. Investment Policy Today, India has one of the most liberal investment regimes with a conducive foreign direct investment (FDI) environment. The media and entertainment industry has significantly benefited from this liberal regime and most segments of the industry today allow foreign investment. Government has permitted 100% foreign direct investment (FDI) in the advertising sector through the automatic route and the government has also liberalised the conditions for 100 % FDI in the film industry. The eligibility conditions for Direct-To-Home (DTH) Service provide for total foreign equity holding, including FDI/ NRI/ OCB/ FII, in the applicant company not to exceed 49%, and within the foreign equity, the FDI component not to exceed 20 %. It also requires that Applicant Company must have Indian management control with the majority representatives on the board as well as the chief executive of the company being a resident Indian. Moreover, in order to increase the reach of private radio channels, the Union Cabinet has approved e-auction of licences under the third-phase expansion of FM radio. 74% FDI: Under the Broadcasting Carriage Services investment policy, 74 % FDI is permissible for Teleports, Direct to home (DTH), Cable Networks {Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability}, Mobile TV & Headend-in-the Sky Broadcasting Services (HITS). There is automatic route upto 49% investment and government route beyond 49% and upto 74%. 49% FDI: Under the Broadcasting Carriage Services investment policy, 49% FDI is permissible for Cable Networks (other MSOs not undertaking up gradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)) under the Automatic route. 26% FDI: Under the Broadcasting Content Services investment policy, 26% FDI is permissible for Terrestrial Broadcasting FM (FM Radio) and Up-linking of News & Current Affairs TV Channels with the Government approval. 100% FDI: Under the Broadcasting Content Services investment policy, 100% FDI is allowed for Uplinking of Non-News & Current Affairs TV Channels//Down-linking of TV Channels with the Government approval. Print media 26% FDI: Under the Broadcasting sectors investment policy, 26% (FDI and investment by NRIs/PIOs/FII) is permissible for Print media in Publishing of Newspaper and periodicals dealing with

news and current affairs and Publication of Indian editions of foreign magazines dealing with news and current affairs with Government approval. 100% FDI: Under the Broadcasting sectors investment policy, 100% FDI is permissible for Print media with Government approval.

Market Highlights Film industry, television, print, music and radio are the main components of Indian media and entertainment sector. India is the biggest producer of films in the world, producing more than 1,000 films each year, in all languages. The Indian Film Industry generated revenue of US$ 1.9 billion in 2010, according to the FICCI-KPMG report on the Media & Entertainment Sector. The report estimated the industry is to grow to US$ 2.6 billion by 2014. The key growth drivers for the film industry are expansion of multiplex screens resulting in better realizations, an increase in the number of digital screens facilitating wider releases, higher cable and satellite revenues, improving collections from the overseas markets and ancillary revenue streams like DTH, digital downloads, etc, which are expected to emerge in future. Television: TV industry is sized at US$ 6.5 billion in 2010 and is projected to reach a level of US$ 13.9 billion by 2015, based on FICCI-KPMG report. Another estimate by PricewaterhouseCoopers (PwC) is equally promising and suggests that the Indian television industry is estimated to grow by 13 % cumulatively over 2009-14.The total number of TV channels in India was 626 in Jan 2011. Radio: In 2010, the total size of the Radio Sector was estimated to be US$ 0.22 billion, expected to grow to US$ 0.44 billion in 2011. In 2010, total 245 FM Radio Channels were operational in India. Additionally, 29 community radio stations are also operational in India. Print: Indian print industry is estimated at US $ 3.7 billion in 2010 according to PwC. Hindi dailies have the highest growth in readership. Regional players are expected to grow at a brisk pace, both in terms of advertising revenue as well as market expansion. There are more than 62,000 newspapers printed in India, around 92% of which are published in Hindi & other vernacular languages. Newspaper publishers are expected to continue to increase their presence in the online format. Niche and business magazines are showing good growth. Finally, print is likely to show steady growth for the next five years. Major Players Prominent content creators on Indian television landscape are UTV, Balaji, Sri Adhikari Brothers, Television Network Limited, Creative Eye Limited etc. These content providers operate independently or through broadcasters who re-package content. Some of the big national broadcasters are Star Plus, NDTV, Sony, Colors and Zee TV. Main television distribution companies are Digicable, Hathway, DEN, Tata Sky, Big TV and Bharti Airtel. An ASSOCHAM- Deloitte report suggests that the competition amongst broadcasters is expected to increase further with Government approving 75 licenses for launch of new channels or re-launch existing channels in HD after a freeze of two years. The major players who are launching new channels and HD channels are Discovery, UTV, Fox, ZEE and STAR amongst others. According to industry estimates, there are nearly 125 million television households, and over 85 million cable and satellite connections in India. The DTH segment comprises of 14 million homes. It is expected that there will be 143 million television households in India by 2014, out of which 133 million are expected to have cable and satellite connections. Apart from Prasar Bharati, Dish TV India Ltd., Tata Sky Ltd, and Sun Direct TV Pvt. Ltd., Reliance Big TV Pvt. Ltd., Bharti Telemedia Ltd and Bharat Business Channel Ltd have been granted license for operating DTH services.

Sector Prospects Future prospects for the growth of the sector are promising. The growth of media and entertainment in times to come is going to be led by factors like increasing media penetration and per capita consumption in the sector across India, potential for growth in leisure platforms, immense penetration potential in the tier 2 - tier 3 towns and rural markets, scope for digitization with film studios and music companies adopting digital prints and rising demand for same, rising consumer understanding enabling players to target their consumers specifically and build loyalty and regional media channels gaining popularity, different tastes of the audience and thereby different content and growth of the importance of the media. Going forward, the Indian animation industry is all set for an enhanced outsourcing pie from global players, according to ASSOCHAM-Deloitte report on Media and Entertainment Industry. It is also prepared to move up the value chain and play a larger role in the overall animation and gaming ecosystem. Where earlier only post-production work used to be outsourced from Hollywood studios, Indian studios are now looking to create their own IP through innovative business models. Also, with the popularity of 3D, a large amount of 2D-to-3D conversion is being done by indigenous studios. Additionally, convergence between entertainment, information and telecommunication is increasingly impacting Indias overall media and entertainment industry. In India, the ratio of advertising expenditure to GDP is about 0.41%. This is substantially lower in comparison to the developed economies as well as developing economies. As the Indian economy continues to develop and the media reach increases, the advertising expenditure to GDP ratio is expected to increase over the next 5 years.