Budget 2010: Media companies will save costs on acquired content; push for digitization

Budget 2010 appears to be mixed baggage for the broadcast industry. There is good news for those in the digital space, and for media companies heavily dependent on content acquisition.

However, the industry heads are disappointed at the levy of service tax on IP (intellectual property rights services). afaqs! finds out the broadcast industry's reactions to Budget 2010.

Ajay Mankotia, president-corporate planning and operations, NDTV Group

Second, the existing taxable IPR (intellectual property rights) excludes copyright from its scope. Copyrights on cinematographic films and sound recording are being brought under the ambit of service tax. This will increase the cost of these services for the broadcasting industry.

However, there is good news on the digital front. Project imports status has been accorded to "Setting up of Digital Head End", with 5 per cent concessional customs duty and nil special additional duty of customs. This will spur the broadcasting distribution companies, such as cable companies, to shift to digitization. This will eventually benefit the broadcasting companies.

The broadcasting industry has been making representations to the government against imposition of service tax on broadcasting services. Service tax is levied on broadcasting, while print media is exempt from it. This is discrimination against the broadcasting industry, because TV is the electronic version of print and print enjoys a larger revenue share.

Imposition of service tax discourages future investment in the rapidly growing broadcasting sector; but still, the service tax continues to be levied on broadcasting services.

MK Anand, chief executive officer, UTV Global Broadcasting

The changed duty structure will work out in favour of players heavily dependent on import of films, games and other basic software. Now, only the actual material cost of the film would attract customs duty, and a duty will be levied only on the value of digital tape or prints. Earlier, the duty was applicable on the license fee as well. Now after the clarification, players dependent more on acquisitions, in comparison to original content, can expect savings of 15-20 per cent.

On the other hand, the levy of service tax on IP services would have some cost implications for media companies. Also, the increase in the rate of minimum alternate tax payable by all the industries -- from the current 15 per cent to 18 per cent -- will result in more monies flowing out from media organisations as well.

The change in tax rates will result in employees' take-home (salary) increasing, thus proving beneficial and good news for all of us.

Prasana Krishnan, chief operating officer, Neo Sports Broadcast

The Budget allows for full exemption from special additional duty to the initial setting up of such projects. The initiative seems to be positive, as it is oriented towards greater digitalization. Although the impact may not be very big in the short term, but the trend is positive and will help enhance revenues from distribution business.

Atrayee Chakraborty, director, planning sciences, Lintas Media Group

Channels will significantly benefit from the clarification issued in respect of customs duty on imported cinematographic films (import of raw material). As part of this, customs duty will now be charged only on the carrier medium.

But at the same time, the levy of service tax on IP (intellectual property rights services) availed by Indian companies from other parts of the world would have some negative cost implications. Net cost implications are yet to be assessed.