Digital News Media Now In FDI Policy Net

Maybe it was a blind spot. Or the government had not made up its mind on what to do. For either reason - digital news media had so far been spared India’s foreign direct investment regulations. Not anymore.

Today, the Cabinet Committee on Economic Affairs met and decided to permit 26 percent FDI in digital news media.

The exact words used in the government statement are;

“The extant FDI policy provides for 49% FDI under approval route in Up-linking of ‘News & Current Affairs’ TV Channels. It has been decided to permit 26% FDI under government route for uploading/streaming of News & Current Affairs through Digital Media, on the lines of print media.”

There are two ways of looking at this development...

1. Level Playing Field

The extant FDI Policy permits, with case-by-case government approval -

• 49 percent foreign investment in broadcasting content services—up-linking of news and current affairs television channels.
• 26 percent foreign investment in print media—publishing of newspaper and periodicals dealing with news and current affairs as well as publishing of Indian editions of foreign magazines dealing with news and current affairs.

The FDI Policy made no mention of digital media. So there was no clarity on whether foreign direct investment was permitted, and to what extent, in digital news media companies. Though, a few years ago, one digital news media company did get government approval to raise up to 18 percent foreign investment. Most others have operated in what can best be described as a policy-free zone, assuming that the lack of a policy limit, and any government action against them, meant no limit.

Policy clarity was necessary, Vivek Gupta, partner at KPMG, told BloombergQuint.

Today’s CCEA decision brings digital news media on par with print media now, with both permitted up to 26 percent FDI.

Though curiously the government statement, when listing this decision, makes a reference to the 49 percent limit applicable to broadcast as Nikhil Pahwa, founder of Medianama, pointed out. Medianama offers information and analysis on digital policy in India.

“They’re contextualising digital media with TV, but putting a limit equivalent of that of print. How does that make sense? Is digital media the same as TV or print?” Pahwa said to BloombergQuint.

This in itself has raised some questions regarding the scope of the policy move. For instance, will the FDI cap apply only to companies that upload or livestream video content or will text-based websites, where content is being ‘uploaded’, also be impacted, asked Pahwa.

2. Restrictions On Existing Platforms

The new rules, fineprint pending, may substantially impact a variety of digital news media platforms operating in India or serving Indian audiences.

According to the government statement - the FDI limit will apply on “uploading/streaming of news and current affairs through digital media”. (emphasis added)

The use of the words uploading or streaming indicate the new rule may potentially impact entities ranging from

• Foreign-owned and controlled social media platforms like Facebook, YouTube and Twitter that allow for the uploading/livestreaming of news to Indian viewers.
• Indian subsidiaries of foreign digital platforms that run digital news platforms locally.
• Any company that runs a news TV channel and that has 49 percent FDI - as its digital livestream will now be subject to a lower FDI limit.
• Maybe even news aggregator platforms.

One expert, speaking on the condition of anonymity, said the policy text may likely distinguish between social media and news media and leave intermediaries out of the scope of FDI policy. Calls to Facebook and Twitter representatives yielded no comment.

Many other details will need clarification too, Pahwa pointed out. Will the FDI regulations apply to those uploading content on YouTube or Facebook, or to the platforms themselves? What happens to foreign TV channel news-streams accessed online in India?

Gupta lists at least three impact areas or questions that could arise now.

1. Will digital arms of television companies, where existing FDI exceeds 26 percent, have to restructure their holdings and hold digital assets through a separate vehicle with lower foreign holding?

2. Will some existing digital-only players need to restructure ownership to comply with this change and how will the government look at their past operations?

3. Is there a case to urge the government to look at harmonising FDI caps across print, TV and digital media, especially because technology is increasingly causing blurring of boundaries between some of these platforms?

The FDI Policy notification is expected to clarify the full scope of impact of this CCEA decision. Meanwhile, some argue this levels the playing field whereas others say it’s an attempt to rein in digital news media.