Or, will the recent hike in FDI limit for news channels have no significant impact?
The Indian government recently announced the relaxation of foreign investment norms in 15 sectors. With this arrived the news that 100 per cent FDI has now been allowed in DTH and Cable Networks (MSOs and LCOs), while foreign investment in the uplinking of news and current affairs TV channels has been raised to 49 per cent from the existing 26 per cent. The policy also mandates that the largest Indian shareholder needs to have at least 51 per cent of the total equity. So, will this development interest foreign investors? And, what other possibilities does this unlock? Industry experts share their views:
Vikram Chandra, CEO, NDTV Group
This is a good step and further opening up may well be required here. I think what the government is trying to do is get in long-term, stable rounds of financing into the news channel business. This is a business which should actually not be driven by too much of the month-to-month or quarter-to-quarter profitablity, which is why this is a positive step. But, other related steps in opening up may also be required. For the full logic of this step to work, there may be changes needed as in the aspect which require one single shareholder to have 51 per cent. The government may want to relook at that and I'm sure it will. Once these changes are in, you might see interest levels rise.
"Ownership should ideally be left to long-term stable hands, who will not be wanting for day-to-day numbers."
As far as editorial control is concerned, it is, of course, best left to the editors, and should be delinked to that extent with the ownership of the channels. The ownership should ideally be left to long-term stable hands, who will not want day-to-day and minute-by-minute numbers.
Paritosh Joshi, CEO, India TV
If you take Rupert Murdoch or any global news moghul's example, his interest will be in a channel where one can have the ability to speak what he wants. Unless that kind of editorial control is available, big players will be hesitant to come in. This is a politically fraught issue, and not unique to India, as even in the USA or the UK, issues related to their media are as sensitive.
That being said, I also have another point of view. When we think news, we tend to think of big marquee names, but the emerging pattern right now is that the television business is going more and more local. So, we are seeing a sort of splintering from national to regional, regional to provincial, and state to sub-regions within the state.
"Forty nine per cent doesn't mean immediate unlocking of riches, it'll be a slow-burner with an impact in the long run."
Add to that the prospects of digital cable, which has the ability to hyper-localise. There is also a whole range of brink businesses that are keen to diversify from print, and get into radio for instance, and also keen on getting into television. Corresponding to this, there are also investors who might be interested in specific areas beyond Hindi and English. For instance, a Bhojpuri-speaking Surinamese media owner in Holland might say, "This is my time to go to Bihar". But, all this takes time, as a policy announcement starts to kick in only when a potential investor somewhere outside actually studies this. And, that is a bridge built either by an investment banker or a consultant who will pour into the small-type, and meet different prospects. So, 49 per cent doesn't mean unlocking riches immediately, it'll be a slow-burner, and will have an impact in the long run.
Jehil Thakkar, head of Media and Entertainment Practice, KPMG India
The increase to 49 per cent in news is a welcome development, and the best we can expect in news, as a majority seems improbable in this sector. Although India has hundreds of news channels, very few are profitable. Historically, news did not get much interest from foreign investors because of the low FDI levels allowed. With 49 per cent, an investor now has substantial economic interest, and influence and this makes news far more attractive than before to an investor. Though we are unlikely to see a rush of investors given the market dynamics, we may see some strategic investors seriously consider an India entry as they consider an Indian presence strategic for their brand and footprint. Increased private equity is also a possibility.
"We are unlikely to see a rush of investors given market dynamics, but we may see some strategic investors seriously consider an India entry."
Abneesh Roy, associate director, Edelweiss Securities
On paper, the increase from 26 to 49 per cent definitely looks very good, and this is positive news. The question is 'Will the foreign partner be happy with 49 per cent stake?' For news channels in India, the scale is a big issue as even the largest news channels are not that big in size.
Also, profitability is a big concern. It is a fragmented market. There is very little differentiation between the top three or four players, who are very close to each other in terms of market share, so, it's not a very high margin or high growth sector. In fact, even post this news, I don't see many deals happening in the near future, as investors look for returns, but in the long run, things could be different. India is one of the largest markets in the world, with an untapped news media portfolio. So, they might want to wait for the sector to get digitised after which there could be growth in ARPU levels. As for the stocks, they will settle at their fair value, and unless any actual investment happens from foreign players, they will not see that much up-move.
"There is very little differentiation between the top three or four players, who are very close to each other in terms of market share."