Foreign Direct Investment in Indian Newspapers

By Dinesh C. Sharma
Indian government recently announced a new policy on foreign direct investment in print media. Move comes after years of discussion and debate in media and political circles on whether print media should be opened to foreign capital. While the well-entrenched print media houses opposed the entry of foreign newspapers, liberals felt there was no point in keeping print media out of bounds to foreign investment when foreign companies own and operate television news networks in India.

As a first step, the government 2 years back allowed foreign direct investment up to 26% of equity in Indian newspaper companies.

Now, institutional investors and non-resident Indians can also invest in Indian newspaper and magazine companies, but the limit on total foreign investment will remain 26% of paid-up equity capital.

New policy says permission will be granted only to organizations in which the largest Indian shareholder holds at least 51% of paid-up equity. The idea is to ensure management control remains in Indian hands.

In addition, foreign newspapers can launch facsimile editions of their international editions after incorporating local subsidiaries in India. Here again, these facsimile editions will not be allowed to carry any locally generated content or India specific content, which is not simultaneously published in the original edition of foreign newspaper and advertisements aimed at India's readers. Ministry for information and broadcasting has ruled out permitting Indian editions of foreign newspapers because of apprehensions that Indian Newspapers would not be able to withstand competition.

The International Herald Tribune launched its facsimile edition in May, 2004 from Hyderabad, in south India, taking advantage of loopholes in regulations existing then. It is only now that facsimile editions have been legally allowed. Yet another important aspect of the new policy is a hike in the foreign investment limit for non-news publications from 74% to 100%. The cap for foreign syndication in newspapers has also been raised from 7.5% to 20% of total editorial content.

FDI or no FDI, the Indian press is on a roll. Circulations and readership are booming at a time when American and European newspapers are reporting declines in sales. With nearly 80 million copies sold daily, India is next only to China, where about 93 million copies are sold daily, according to latest data released by the Seoul-based World Association of Newspapers. Readership figures are even more impressive. Country has 200 million newspaper readers, a large number of them in Indian languages, according to National Readership Survey 2005. The highest read daily 'Dainik Jagaran' in Hindi language commands a readership of 21 million. Still there is huge potential over 310 million people who can read and understand a language but do not yet read a publication.

In Asia, India commands the largest market for English-language newspapers. The overall Indian print market is set to grow at the compounded annual growth rate of 6.9% (compared to a growth rate of 2.7% for the Asia-Pacific region) and will be worth $2.4 billion in 2008 from $1.8 billion in 2004, according to a Pricewaterhouse Coopers' study. Besides the growth projections, the Indian press is much more vibrant, competitive and free compared to China and Southeast Asian countries.

So, it is obviously an interesting market that international publishers cannot afford to ignore. After the policy was relaxed 2 years back, United Kingdom's 'Financial Times' acquired a stake in 'Business Standard' and 'Henderson Global' bought a 20% stake in 'Hindustan Times'. Some technical and scientific publications, including 'Scientific American', have also made their entry. BBC Magazines bought a 50% stake in the magazine business of the 'Times of India' last year. BBC says the venture will provide a base from which to launch BBC titles in India in the future.

However, media experts see the new policy as not going very far. International news media may take a strategic stake for access to local printing capacity and distribution. There will be little interest beyond this, they feel. The overall impact of new regulation will only be marginal, said Paranjoy Guha Thakurta, media commentator and director, School of Convergence, New Delhi. ''Most of the large Indian newspapers are family-owned businesses and FDI can come in only for specific projects. As far as technology is concerned, they are already using the best available.'' At best, he said, international companies can hope to ride piggyback on successful Indian companies by taking minority stakes in them.

While sales and readership are booming, there are areas of concern as well. Since cover prices are low, newspapers have to make up with advertising revenues. And these revenues are under threat because of the growth in satellite and cable television. In addition, newsprint costs are rising. In such a scenario, the influence of the market on news is growing. Advertising is creeping into news and editorial space is up for sale. All over the world, consumers are losing their respect for the press as they deliver consumers to advertisers. Credibility and believability of media in general is being lost through displacement of the reader by advertiser, as the core mission of newspapers and TV.