THE Indian media industry is the most exciting media market in the world today, despite government regulation. Ahead lies an opportunity to create one of the most dynamic and innovative centres of media excellence globally. All it needs is for the government to step back from controlling the media by keeping it in the hands of a few families who exercise concentrated power over 1.1 billion people. Instead, it should focus on allowing creativity, diversity and innovation to flourish through encouraging competition, thus preventing market abuse by any organisation or group – whether by a prominent Indian family, an NRI backed organisation, or indeed a foreign company.

Government regulation should focus on concentration of ownership, not the colour of the owner. At the very least it should treat the NRI community of 20 million, who have done so much for the country, both financially (sending billions of dollars back to their families in India) as well as politically, on an equal footing with residents of India. The NRI expatriate population represents the 29th state of India, and one which arguably has given more back to India and is infused with more patriotic feeling than any other.

Over the last ten years, the media industry has thrived, triggered largely by the ‘foreign’ arrival of Star TV, as well as the emergence of new publishers and producers in the vernacular (non-English language) markets, targeting middle class and lower middle class urban populations often outside the metros. Creativity in the sector has flourished with opportunities mushrooming for talent across news journalism, television acting and production, technical facilities, advertising sales, and a wide variety of supporting services. Creativity, the life blood of the media, is rich and deep in the professionals of the industry.

But despite all this progress, the approach of successive governments has been, albeit inadvertently, to stifle innovation, thwart competition, and restrict financial awards to only a handful of typically family owned businesses – all in the name of national interest. The biggest losers of this approach have been the people of India, whose appetite for diverse and creative news and entertainment can no longer be doubted, and the professionals in the industry, whose opportunities and salaries have been severely limited compared with international standards.

By encouraging an opening up of the sector to all, with light but responsible regulation, the government can set a democratic example to the other nations of South Asia, and demonstrate a maturity and self-confidence that accompanies any attempt to attain Great Nation status.

 

The changing media marketplace: Over the last ten years there have been seismic changes in the Indian media market. While radio has remained in the grip of the government, TV and print have been transformed. Television has seen the greatest changes, triggered by the entry into the Indian skies of Star TV. This innovation helped to create a dynamic new Indian industry encompassing broadcast channels, production houses, facilities businesses, cable TV operators and opportunities for Indian professional talent to thrive beyond the grey facade of the monopoly state broadcaster, Doordarshan.

DD indeed has a major role to play in the Indian TV market, but not as a monopoly player. The establishment of major new organisations such as Zee, NDTV, Balaji, TV18, and others (including the thousands of cable operators across the country) were all driven by the spur of innovation of a foreign group, Star. More than that, the Indian audiences were finally given choice, and the opportunity to see (beyond just the entertainment value) what they might aspire to by way of living standards and other freedoms.

In the print media, while the English language sector has been shamelessly uncompetitive, the emergence of major new players in local language newspaper publishing has allowed news dissemination to reach a far wider proportion of the population than has ever been seen in the country. This has led to the growth in independent distributors and in far greater print capacity, bottlenecks that had hitherto blocked competition in the English language press.

But what of the changes we are witnessing now? With the government finally opening up the economy in the early 1990s, the entrepreneurial energy of the country has been unleashed and resulted in economic growth rates that have put India on the world stage. Finally, in the western media, India is being written and talked about as a major country with enormous potential; a country that is challenging the established world order, that is destined under current forecasts to be among the top three economies in the world within our lifetimes.

The political parties of the West are now setting their core agendas based on how best to compete in the future with China and India, and almost without exception are concluding that they need to be ever more competitive through reducing taxes, through encouraging inward investment, through competition. And despite many in India who still cling to the belief that poverty can be alleviated by taxing the rich more, and further regulating the economy, the example set by former communist countries of eastern Europe and the Soviet Union are showing that encouraging competition and entrepreneurship and generating free market economic growth is the only way to build the resources to tackle poverty.

 

This recent economic growth in India, coupled with a democratic and legal system that puts China to shame, has allowed organisations access to public and private capital markets. Already many Indian media companies, both print and TV, have tapped these markets, and raised significant amounts of capital. And while TV businesses have always had good valuations because of their growth potential, a new phenomenon has been taking place in the print sector bucking a worldwide trend.

Newspaper companies are now also being seen as high growth stocks. In most other major economies in the world, newspapers are in decline. Circulations are falling, and advertising categories are shifting to online media, particularly classifieds. In India, because of the lack of competition in English language newspapers, and because of the emergence of the local language press, there is a strong expectation that the potential for growth in circulation is significant. With such limited innovation and such poor quality products (by international standards) available, the opportunity to grow the market with quality products in every major city was clear. Capital, both from public and private equity sources was suddenly available. As some of the firms began to look beyond their regional strongholds to challenge players nationally, tapping into the capital markets suddenly unleashed a wave of new competition during 2005. Three new papers were launched in Mumbai alone in 2005, and the air is buzzing with speculation about merger and acquisition activity.

 

Despite this sudden frenzied competition, there remain some perceived problems. The page 3 culture seems to have led to a ‘dumbing down’ of the papers. There is very little innovation, with newspapers looking largely the same, covering the same stories in the same way. There is still a pronounced lack of opinionated commentary, little segmented marketing and a growing concern (frequently voiced at media seminars) about the adverse effects commercial pressures are having on editorial content.

Curiously, while regulation has been targeted at preventing foreign competition from entering the newspaper market, the dependence of these businesses on advertising is significant, representing up to 80% of revenues. And the largest advertising agencies are mostly owned by foreign companies such as WPP. Many Indian media firms are perceived to place editorial values at a discount to commercial values, and many journalists are aware that advertisers come first in the decision-making of several newspapers. Perhaps the firm most mentioned in this way is the Times of India group (TOI), where it is common knowledge that even select editorial space is available for sale, something that few publishers anywhere in the world will even believe.

 

Compare this approach with major international media firms such as Reuters or the Economist (where there are safeguards for editorial independence and integrity built into the companies’ Articles of Association), or the Daily Mail of the UK (where more money is spent proportionately on editorial than in any Indian paper, and the editor last year earned £1million/Rs 8 crore). It is not by coincidence that it is also the most successful newspaper in Europe, and a clear case of how investing in editorial is in the best interests of the business. Government regulation preventing foreign ownership of newspapers has resulted in the financial monopoly benefits of a protected industry going to a few families, while editorial values have been savagely sacrificed, and consumer choice has been ignored. These are some of the consequences of a monopoly industry, even one in which new competition domestically has finally taken root.

Even in radio, where the regulation is finally allowing an opening up of the airwaves, foreign players have once again been excluded so that the same groups who already dominate the Indian media are given preferential treatment yet again. The radio market is ready for significant growth driven by an insatiable advertising market and pent-up demand from listeners. Radio is also probably the most effective way of disseminating news, real news, to the millions who cannot afford TV and are illiterate for newspapers (even vernacular ones) to be of any relevance. The country deserves choice in this area, a democratic choice.

There are some seasoned professionals in the industry who favour FDI limits as a sensible approach to ensure a free press, the argument being that the media are exempt from the quarterly reporting pressures of the stock markets the international media houses are faced with. The preference it seems is for the privately-owned Indian family groups to maintain their grip on the market. There are two flaws in this thinking. First, more and more Indian media houses are now public and also have to submit to the demands of the financial markets. And second, while upholding the values of the Indian family groups, these same professionals in the same breath constantly criticise these family groups for sacrificing editorial quality and independence.

 

Opportunities for growth: The Indian media industry has three major opportunities ahead. The first is the opportunity for talented Indian professionals to be creative in ways that are only just beginning to be realised in TV, print, radio, and especially on the Web. The second is the opportunity for professionals, not just senior management, but across the spectrum of the media and creative industries, to earn salaries on a par with their international colleagues. And the third is to establish India as the global centre of excellence for media, whether in reporting standards (India should have an internationally recognised equivalent of the Pullitzer prize), technology, design, or creative talent.

There are a multitude of specific areas of growth that one can imagine.

 

In print, there are many untapped opportunities including the launching of national tabloids (the UK market has four national tabloids alone), creating newspapers for specific demographics, such as middle- and upper-middle class women, quality evening papers in all the cities (like Midday in Mumbai), papers with specific political leanings along the lines of the Guardian of the UK, and of course free newspapers (one of the fastest growing sectors in countries around the world). On the issue of tabloids, I refer more specifically to the size of the paper rather than necessarily the content.

Many of the Indian broadsheets are already quite ‘tabloid’ in content; but the size is increasingly being adopted as a more convenient format for reading, particularly for women and for commuters (perhaps as Delhi’s Metro system grows, this could be an interesting area to watch). Newspapers in Europe including the Times, the Wall Street Journal, and others have moved to a tabloid format already and have seen circulation growth as a consequence. In magazine publishing, as the country and its performance begins to attract international attention, the sheer size and potential of India could lend itself to country-specific versions of international publications of repute, such as the Economist (India edition).

In television, whilst many genres of broadcast channel have already been exploited, some more perhaps than the market can bear such as the recent proliferation of domestic news channels – there remains a host of opportunities including dating, shopping, comedy, to name a few. However, the bigger opportunities clearly lie in platform plays, and in particular the Direct to Home (DTH) satellite service, where dishes of 60 cms across can be put on to peoples’ homes and access to hundreds of channels, including pay per view, can be made available. DirecTV of the US and Sky of the UK are some examples of the impact such platforms will have.

The appetite of the NRI audiences has recently grown too to such an extent that some Bollywood films make more money from NRI markets than from domestic ones. But as India begins to become more important on the world stage, perhaps one can even visualise a news channel of global significance covering global events from an Indian perspective instead of the usual US perspective (CNN) or British one (BBC) – an Indian CNN aimed at viewers of all nationalities. There are also opportunities in the technology area such as special effects and animation.

 

How does the role of DD fit into this context of change, growth and opportunity? It seems glaringly obvious to an infrequent visitor to India that the quality gap between the private channels and DD is significant indeed, embarrassingly so at times. DD should not be the mouthpiece of the government of the day – party political TV is simply too tedious. Instead, it should be the guardian of quality programming which may otherwise be ignored by commercial ventures thereby setting standards of decency and ensuring content that may not have mass appeal but is still of relevance to sections of the population. These programmes should be commissioned, ideally by independent producers, and aired. DD should strive to be a public service broadcaster filling a gap the commercial operators may not find profitable and set the standard for high quality content, not the reverse.

 

Changes to the legal framework: The recent opening up of the Indian media industry to FDI was a major step forward. Driven partly by the ground realities and partly by intensive international lobbying over many years, regulation of the print and TV sectors has been gradually relaxed. However, there remain some major obstacles to a free market and at the same time some glaring omissions in the framework, which leave the country exposed to massive concentration of ownership in the hands of five or six individuals, whose preferences can have enormous impact on the country. This is both dangerous politically and corrupt financially.

This needs to change. Not just for these reasons, but also as I have argued above to encourage choice and diversity through competition and to allow the growth of a core industry for the benefit of both the professionals in the industry as well as the population at large. It is in some ways a democratic imperative.

So what needs to change? First, all organisations need to be treated equally. The 26% cap on FDI in news media makes nonsense from a legal perspective, and is no different to a 49% cap. In any case it needs to be removed altogether. The incumbent domestic players are already strong enough, and in some cases have done such harm to the industry ethics and values that there is no real justification for protecting them. The requirement to have editors and senior management as resident Indians is also a huge barrier to better salary levels for Indian media professionals. If this regulation were removed, no one seriously expects there to be a huge flood of foreign editors looking to run Indian news organisations. And the ones that come will be on international salaries that will inevitably raise the salaries for their Indian counterparts. No one really believes that foreign editors have a better finger on the pulse of the needs of the Indian audience/reader than a home-grown editor; media organisations are commercial and will employ the best people to do the job and grow circulation and viewership.

If these caps are removed altogether, there will be a flowering of opportunities in the sector. Major international players will look to move in. But if the returns are expected to be high, the strength and depth of the Indian capital markets are such that domestic players will have just as much opportunity as international ones.

 

What the government must do, however, is to prevent market abuse. No one single company should be allowed to dominate in any major segment. Already TOI has a dangerously high control over large parts of the media. Other organisations on a regional basis such as Hindu, Hindustan Times and ABP have quasi-monopoly positions that are alarming. The government needs to look at putting in concentration limits in readership and viewership, most probably on a state by state basis, to ensure that no single company can charge monopoly prices or have such control over the media whether they be of Indian or foreign origin.

With these two key structural changes in place, the India media industry can confidently stride forward into a new era of opportunity which will establish it as a pre-eminent centre of media excellence worldwide, offering diversity and innovation through competition.