In what may be seen as the latest extension to government’s Digital India campaign, the Union Cabinet has approved 26 percent foreign direct investment (FDI) to digital media platforms. This was previously only applicable to print media in the country. Industry experts point out that there was no explicit policy on digital media previously.
“All digital media was simply subsumed under the broader legal entity it was part of, broadcasting or otherwise. This will now allow digital platforms to be unlocked from the bigger companies and seek separate valuation,” explained Jehil Thakkar, partner at Deloitte India.
This essentially means, for example, that video streaming services like VOOT or ZEE5 that are run by broadcast networks like Zee Entertainment Enterprises Ltd. or Viacom18 Media Pvt. Ltd. may now be listed as separate companies and raise their own investment.
The government has been exceptional and at the forefront of creating digital infrastructure as public good. One is not sure why there was this wait for FDI in digital media when the print media and broadcast allow for 26 and 49 percent FDI respectively through government approval route. Unlike traditional media, digital impacts 1.2 billion people across social strata in cities and villages. In fact, the figure should be raised even higher to 49 percent. This money will help unlock lot of value, which today is captured in listed entities. It will help create consumption and employment across digital payments, entertainment, education, and healthcare. However, there are two sides to the coin given that there were no specifications at all earlier.
“Earlier there was no FDI restriction in digital media, so the current imposition of 26 percent is restrictive, and so bad news for the sector,” said Manav Sethi, group chief marketing officer at over-the-top streaming service Eros Now.
“Even as foreign direct investment slows down across the globe, we are looking to liberalize norms in the country. We hope India can maintain its position as an attractive investment destination and grow in the coming months.”