banner image banner image
 

26% FDI in Digital Media: Welcome move, but needs more clarity, says industry

The Union Cabinet chaired by the Prime Minister Narendra Modi yesterday (August 28, 2019) approved the proposal for Review of Foreign Direct Investment (FDI) on various sectors. 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 Government has put in place an investor friendly policy on FDI, under which FDI up to 100 per cent is permitted on the automatic route in most sectors/ activities. These reforms have contributed to India attracting record FDI inflows in the last 5 years. Total FDI into India from 2014-15 to 2018-19 has been $286 billion as compared to $189 billion in the 5-year period prior to that (2009-10 to 2013-14). In fact, total FDI in 2018-19, that is, $64.37 billion (provisional figure) is the highest ever FDI received for any financial year. 

Global FDI inflows have been facing headwinds for the last few years. As per UNCTAD’s World Investment Report 2019, global FDI flows slid by 13 per cent in 2018, to $1.3 trillion from $1.5 trillion the previous year - the third consecutive annual decline. Despite the dim global picture, India continues to remain a preferred and attractive destination for global FDI flows. However, it is felt that the country has the potential to attract far more foreign investment which can be achieved inter-alia by further liberalising and simplifying the FDI policy regime. 

In Union Budget 2019-20, the Finance Minister proposed to further consolidate the gains under FDI in order to make India a more attractive FDI destination. Accordingly, the Government has decided to introduce a number of amendments in the FDI Policy. 

Industry Speak 

Manav Sethi, Group Chief Marketing Officer, Eros International:
“The scope of the impact will be determined by the wording of the provision in the FDI policy. News and current affairs are present on social media platforms, on digital platforms that are subsidiaries of foreign brands, etc. How would you differentiate between TV channels which have 49 per cent and their online streams, which will effectively have 26 per cent?” 

Himanshu Parekh, Partner and Head, International Tax, KPMG in 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. 

The Government has today 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.” 

Ashish Pherwani, Partner and Media & Entertainment Leader, EY India:
“This move will necessitate a rethink of their India strategy by many digital news companies and require clarity between digital news production companies, news aggregators and platforms.”

Sabyasachi Mitter, Founder & Managing Director, Fulcro:
“The policy announcement of FDI in digital media hides more than it reveals in the small paragraph right at the end of the document released. It assumes that a television broadcaster also is not a digital media streaming company as the former gets a 49 per cent FDI limit and the latter 26 per cent. In practically all cases, television channels have websites and mobile apps that show live TV and thus, practically all television channels, unless they set up different legal entities, fall under the 26 per cent cap on FDI. For pure digital media “news and current affairs”, who currently had no limit on FDI, the limit will now be 26 per cent, in effect the policy appears restrictive. I hope the Government consults industry experts and refines the policy in line with the real world."

Gautam Sinha, CEO, Times Internet:
“At present, a significant part of the growth in the media sector is coming from digital consumption of content, with around 25 per cent of the Indian youth being hooked to this medium. It is great that the potential of digital content is being recognised and an industry-specific exception is being made in the guidelines. I believe this move will definitely benefit the online media industry, since it will help companies raise additional capital from overseas players/ investors. I think it is a good start and as we tread with caution, I would like to see it move higher in years to come.”

N Chandramouli, CEO, TRA Research

“The automatic 100% FDI in retail, with 30% domestic sourcing above equity ownership of 51% has been a long-standing demand of the industry and is welcome, though a little delayed. It will help FDI influx from many iconic brands, who stayed away as they did not want to risk their brand or operations with equity sharing arrangements. This is also likely to help in domestic job creation. I personally think the actual benefits will only be seen in the first quarter of the next financial, even if this rule gets applicable immediately.

*Many brands, like Tiffany and others, which have come under the franchise model in India, may rethink their strategy of India considering this new announcement.”

Media
@adgully

News in the domain of Advertising, Marketing, Media and Business of Entertainment

More in Media