26% FDI In Digital Media Is Bad Thing For India's News

In 2006, the news agency Reuters set up a bureau in a virtual world called Second Life, and assigned a full-time reporter to the platform. In 2008, it shut the bureau down. In 2017, InShorts, a news app which provides a short summary of the latest news developments, raised $5 million from Tiger Global. Earlier this month, Dailyhunt, a news aggregator, raised $3 million, as part of a funding round of around $25 million. Dailyhunt publishes news articles from various news publications and also owns a majority stake in OneIndia, an Indian language news portal. In 2015, Rupert Murdoch's News Corporation bought VCCircle, an Indian digital publication which focused on the venture capital and private equity investment space in India.

What is so different about the Internet is that what businesses do often defies a fixed definition: just because you run podcasts on your website doesn't make you a radio website. Just because you do a few live streams or host videos, doesn't mean that you're a broadcaster. Just because you supply news to a virtual world doesn't make you a virtual world news agency. How would you classify a website that only has quizzes to allow users to get a deeper understanding of the latest news? Before regulating news on the Internet, the government of India has to consider the nature of the Internet: is it print, TV or radio, or some or all of these things?

The shape-shifting nature of the digital world allows for the combination of audio, video, text and interactivity to provide users with content in ways that traditional definitions of radio, television and print can never encompass. 

This is why the decision taken by the government to restrict Foreign Direct Investment in Digital Media is so difficult to digest. Even the announcement in the cabinet note seems confused: it first mentions that the FDI policy allows 49% FDI for up-linking of "News & Current Affairs' TV Channels", before saying that 26% FDI is being permitted for "uploading/ streaming of News & Current Affairs through Digital Media" on the lines of print media. A few other points to consider:

1. The regulations actually reduce the FDI limit in digital media by restricting FDI in it to 26%, as opposed to a previous situation of allowing 100% FDI. Many platforms, digital news ventures and aggregators have raised money from foreign investors and private venture capital funds in the past without restrictions. Yes, there was a regulatory non-level playing field in comparison with traditional media, but instead of de-regulating traditional media businesses by allowing FDI at 100%, the government has increased regulation for them.

2. The regulations will be open to interpretation: it's not clear how these restrictions will apply on the Internet. Will they apply to news content creators alone, or to platforms which aggregate them? Will they apply to just video streaming businesses, or on those who also upload video to YouTube? What will be the impact on podcasting services like IVM Podcasts which has audio content on the latest news and current affairs?

3. How will news aggregators be impacted? Not just Dailyhunt, but Google News, Facebook, Reddit and YouTube aggregate news content. Will these FDI restrictions apply to those applications and websites that aggregate news? What about services like InShorts which summarise news?

4. Streaming and uploading are two very different functions: Uploading is not the same as uplinking, and content that is being uploaded may or may not involve streaming. If these restrictions are meant to apply to broadcasting on the Internet (wherein live-streams of TV channels are being shared online) in order to control live streaming of certain sensitive content, then they shouldn't apply to video content being uploaded in a manner that is not live. Streaming video is more like broadcast, and it is typically viewed when it is streamed.

5. Does this apply to text-based sites? The text seems to contrast uploaded/streaming content with broadcast, but all content online is essentially uploaded, whether by professional organisations or by users themselves. It's not clear whether text-based websites will be out of the ambit of these restrictions. 

6. What about news websites and apps that have already raised more than 26% funding? Will they now have to buy back equity? What about those news websites that have been acquired by foreign publications/media entities?

7. Different regulations for different entities: A TV channel today, which broadcasts news on DTH, is allowed to raise 49% foreign equity. In some cases, the promoter groups of these entities license this content to be streamed online to a related company, and collect license/syndication fees. Thus, for the same content, for two different entities, a differential limit of 49% and 26% FDI will now be valid.

8. Better to register a media business outside of India: For news entities that want to service Indian readers, the message from the Indian government is that it makes more sense to register outside of India and set up an affiliate/subsidiary entity in India, or even just a bureau.

A few years ago, I received a call from a digital media founder who wanted to discuss the idea of forming an association of digital media entrepreneurs. His company had just received a frivolous legal notice, and was wondering whether they would get protection from the government against such harassment if online news businesses are recognized separately and have accreditation. It was a terrible idea. The fact remains that individuals have greater protection and more freedoms than companies in India. Media businesses even more so. Whether it is controlling the import or sale of newsprint, restricting government advertising, or tax raids, the government has many levers to control the media and its content.

The ability to raise funds, especially in an environment where media businesses are struggling for revenue, is another such option. With this new imposition of 26% FDI in the news media, the government of India has given itself that leverage, and this will end up restricting the ability of media businesses to serve their readers.

(Nikhil Pahwa is founder and CEO, MediaNama. He is also co-founder of SaveTheInternet.in)

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.

More News