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India doesn’t need a media market regulator. Industry actually needs more economic freedom

Economic regulations make it harder to recoup investments made on content and drive firms towards consolidation for greater efficiencies.

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On 12 April, the Telecom Regulatory Authority of India or TRAI released a consultation paper, which considered the effects of consolidation in the media and entertainment sector on viewpoint plurality in the country. The TRAI paper contends that concentration negatively impacts media pluralism and proposes the creation of a media market regulator as a possible solution. The proposed body will check mergers in the media sector with a focus on maintaining viewpoint plurality, which indicates that it may also look at content regulation. The suggestion is problematic on several fronts, not least because the roles seemingly envisioned for the new regulator stand fulfilled.

In the present context, a media market regulator would be redundant. The Competition Commission of India (CCI) already plays the role of an ex-ante merger regulator. The TRAI contends that the CCI’s regulatory power over consolidation is limited by exemptions introduced for combinations involving enterprises of a certain size. According to an analysis, the exemptions were introduced to focus merger scrutiny on transactions that significantly affected market competition. However, these can easily be done away with to restore the extent of the CCI’s oversight. Such a step would be simpler than creating a new institution and resolving its jurisdictional overlaps with the CCI. Either way, the CCI is best placed to determine whether the removal or revision of exemptions is necessary.

Similarly, standards for content regulation are well-established in Article 19(1)(a) and 19(2) of the Indian Constitution, which outlines the contours of permissible speech in the country. The Cable Television Networks (Regulation) Act and Rules encompass the Programme Code, a set of content standards for the television broadcasting industry. Correspondingly, the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 lay out content standards for both curated and user-generated digital content. While parts of the Rules are currently not in force, reports indicate that platforms are adhering to their stipulations.

The TRAI argues that mechanisms for content regulation in the media industry are self-regulatory and consequently, toothless. The assertion is untrue. Both television and online curated content players have a three-tier content oversight mechanism. The top tier comprises an executive-led body in the government that has the power to take down any content that does not conform to either the Programme Code or the Digital Media Ethics Code.

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Advertising revenue dependency

When it comes to viewpoint diversity, a discussion around the concentration of media ownership is irrelevant when advertising revenues drive these businesses. It is well-established that an over-dependence on advertising revenues skews content production towards programming that appeals to the widest possible audience base. One study indicated that an advertising-led broadcasting industry with limited channels would prompt “duplication rather than diversity in programming schedules”.

Indian media industries are disproportionately dependent on advertising revenues compared to their international counterparts. Print media in India garnered around 66 per cent of its revenue from advertising in 2021, according to a 2022 FICCI-EY report on the Media and Entertainment sector. Broadcast news is heavily dependent on ads. Approximately 71 per cent of news channels rely on advertising as their only source of income. The revenue ratio between advertising and subscription in the broadcasting industry is similar – with about a 60:40 split in 2017. Comparatively, the advertisement to subscription revenue ratio in 2017, was 30:70 in China, 40:60 in the United States, and 38:62 in the United Kingdom. Advertising constituted only 38.1 per cent of cable television network revenues in the United States in 2018.

While India’s socio-economic landscape contributes to the media’s lop-sided reliance on advertising, unfavourable regulation has played an equal part in heightening this dependency. Price ceilings in broadcasting and caps on theatre ticket prices in certain states thwart the media industry’s ability to realise revenues through diverse monetisation strategies. Entertainment industries are also taxed disproportionately by state governments looking to generate revenue. Concurrently, containing media piracy is seemingly low on the list of policy priorities. Indian films earned $2 billion every year but lost $2.7 billion to piracy, according to a report in 2016. The Indian video-on-demand industry loses approximately 30 per cent of its revenues to this menace. Despite these figures, the Indian government recently mooted a proposal to decriminalise offences under the Copyright Act, 1957, including those related to piracy.

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The political censorship

Importantly, the consultation paper ignores the role played by political actors in diminishing media pluralism. India has a long history of political leaders bringing in measures that curtail viewpoints that run contrary to theirs. Before 1950, the government could only restrict speech that undermined the security of or aimed to overthrow the State, according to a report by the Centre for Internet and Society. That year, the government attempted to censor Organiser, the Rashtriya Swayamsevak Sangh’s weekly magazine, and was overruled by the Supreme Court. Crossroads, a journal published by Romesh Thapar, secured relief in court against a ban by the Madras state. Consequently, then Prime Minister Jawaharlal Nehru introduced the First Amendment to the Constitution in 1951, which ushered in most of the restrictions on speech.

Content creation is both risky and cost intensive. Illustratively, in 2019 only 51 per cent of the movies released managed to recover costs from box office collections. Piracy exacerbates such risks because it makes it harder for media businesses to recoup their investment in content production. Price freedom in media and entertainment plays an important role because it enables these businesses to use content that appeals to a wide audience base to offset the cost of producing content that appeals to a niche audience. Media content that is driven by subscription revenues necessarily focuses on satisfying the needs of the consumer. Consequently, it is also more diverse because each consumer has different preferences when it comes to content consumption. The lack of economic freedom in the media industry drives consolidation and an over-dependence on advertisement revenues. The latter, in turn, pushes the industry to create products that attract the maximum number of eyeballs rather than focus on the individual preferences of a consumer.

Both the Programme Code and the IT Rules have stipulations that go beyond Constitutionally permitted restrictions on free speech. Economic regulations make it harder to recoup investments made on content and drive firms towards consolidation for greater efficiencies. While the government proposed new measures to tackle piracy in the Cinematograph (Amendment) Bill 2021, it also floated the induction of an executive heckler’s veto in the same draft. The proposed veto enables the government to remand certified films back to the Central Board of Film Certification for re-examination. It is not time-bound and raises far-reaching concern for business certainty in the film industry. It would, then, behove the TRAI to consider these dimensions more carefully before floating suggestions that will further restrict media freedom in India.

Meghna Bal is a Fellow at the Esya Centre and consultant at Koan Advisory on emerging technologies. Varun Ramdas is a Senior Associate at Koan Advisory. Views are personal.

This article is part of ThePrint-Koan Advisory series that analyses emerging policies, laws and regulations in India’s technology sector. Read all the articles here.

(Edited by Pranay Duttaroy)

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