India: Foreign Investment And The Indian Media And Entertainment Industry

India: Foreign Investment And The Indian Media And Entertainment Industry

With more than 600 television channels, 100 million pay TV households, 70,000 newspapers and 1,000 films produced annually, India's vibrant media and entertainment (M&E) industry provides attractive growth opportunities for global corporations. In recent years, with near double-digit annual growth and a fast-growing middle class, there has been a renewed surge in investments into the country by multinational companies.

At present, India has probably one of the most liberal investment regimes amongst the emerging economies with a conducive foreign direct investment (FDI) environment. The M&E industry has significantly benefited from this liberal regime and most sectors of the M&E industry today allow foreign investment. The government (GOI) has recently further liberalised the FDI caps in key sectors (including Direct-To-Home (DTH), print media and radio) and entry restrictions for foreign companies have been relaxed for most segments of the M&E industry.

In the year 2001, the film industry was granted the status of an 'industry'¹. Since then, the GOI has taken several initiatives to liberalise the foreign policy regulations relating to films. Through the liberalisation of the foreign exchange regulations, the GOI has allowed 100 percent FDI in the film sector. For the purposes of FDI, film sector broadly covers film production, exhibition and distribution, including related services and products. FDI in the sector is permitted without any prior approval ('automatic route'). In addition, there are no entry level conditions for FDI in the sector. However, investors must comply with certain post filing requirements, including notifying the Reserve Bank of India within 30 days of receipt of inward remittance in India and filing of certain documents within 30 days of allotment of shares.

The GOI has also entered into film co-production treaties with several countries² and is in the process of entering into more bilateral pacts with countries like Australia, China and Canada.

Entry routes:

Foreign investments are permitted in an Indian company either after obtaining approval from the Indian Foreign Investment Promotion Board (approval route) or freely (automatic route). As a thumb rule, unless sectoral restrictions/caps have been provided under the Indian foreign exchange regulations, 100% foreign investment may be made in an Indian entity under the automatic route. However, even under the automatic route the foreign investor is required to fulfil certain procedural compliances, such as the valuation at which the shares of the Indian company can be transferred/issued need to be met. Set out below, is a brief outlook of the sectoral restrictions for foreign investment in the M&E industry:

subsidiary)

SECTOR/ACTIVITY	% OF FDI CAP/ EQUITY	ENTRY ROUTE
. Broadcasting
a. Broadcasting Carriage Services
1. Teleports (setting up of up-linking HUBs/teleports) 2. Direct-to Home (DTH) 3. Cable networks (Multi System operators – MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitisation and addressability) 4. Mobile TV 5. Headend In The Sky (HITS) Broadcasting Service	74%	Automatic up to 49% Government approval route beyond 49% and up to 74%
Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalisation and addressability and Local Cable Operators (LCOs))	49%	Automatic
b. Broadcasting Content Services
Terrestrial Broadcasting FM (FM Radio), subject to such terms and conditions, as specified from time to time, by Ministry of Information & Broadcasting, for grant of permission for setting up of FM radio stations	26%	Government approval
Up-linking of 'News & Current Affairs' TV Channels	26%	Government approval
Up-linking of 'Non- News & Current Affairs' TV Channels/Down-linking of TV Channels	100%	Government approval
II. Films
Films and advertising industry	100%	Automatic
III. Print Media
Publishing of newspaper and periodicals dealing with news and current affairs	26% (FDI and Investment by NRIs/PIOs/FII)	Government approval
Publication of Indian editions of foreign magazines dealing with news and current affairs	26% (FDI and Investment by NRIs/PIOs/FII)	Government approval
Publishing/printing of scientific and technical magazines/ speciality journals/ periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting	100%	Government approval
Publication of facsimile edition of foreign newspaper	100% (In case, the foreign publishing house is bringing out facsimile editions of their own newspaper through wholly owned subsidiary)	Government approval

International film studios such as Warner Bros., Disney, Fox and DreamWorks have collaborated with local film production houses to develop Hindi and regional films. Some recent investments in the M&E industry by global players includes³:

• US based investment firm Tiger Global Management LLC has acquired a 25 per cent stake in 'The Viral Fever' (TVF), an online video content creator, for US$ 10 million.

• Balaji Telefilms Limited has raised Rs 150.08 crore (US$ 22.09 million) through allotment of equity shares on preferential basis to catapult the launch and growth of ALT Digital Media, a Business-to-Consumer digital content business segment of Balaji Group.

• Reliance Entertainment (owned by Mr Anil Ambani) and DreamWorks (led by Mr Steven Spielberg), along with Participant Media (led by Mr Jeff Skoll) and Entertainment One (eOne) have formed a new film, television and digital content creation company called 'Amblin Partners', and have raised US$ 500 million in debt to develop and produce films.

• Walt Disney, who earlier held a 50% stake in UTV, has now acquired a controlling stake in UTV Software Communications.