News makers have to rework strategies

Finally, the rules of the news channel game have been spelt out. It‘s as good a time as any to examine the implications.

First the rules.

The Indian Cabinet on Tuesday put a 26 per cent foreign direct investment (FDI) cap on television news companies desirous of uplinking from India. This is at par with the FDI cap prevalent in the print medium relating to news and current affairs.

The 26 per cent FDI cap, unlike that in other sectors like DTH and the print medium, is inclusive of investments in a television news company by foreign financial institutions, overseas corporate bodies and non-resident Indians.

Existing news channels (like CNBC India and Zee News) that are currently on air but do not satisfy these conditions have a year in which to restructure themselves as per the new policy.

The government has also made it clear that though 100 per cent FDI is allowed in entertainment channels, if there is any amount - small or big - of news and current affairs programming, the same terms and conditions as apply to news channels would be in force in this case as well.

The finer points of the new policy would be "finalised by the I&B ministry as soon as possible."

In a smart move, the Cabinet also decided that the communications ministry would finalise another set of guidelines that would stop backdoor uplinking. Some channels use V-sat networks to uplink from point to point from, say, Delhi to Singapore. This, the government has said, would be stopped and permission for bandwidth for uplinking broadcasting material through V-sat networks would not be given now and, if given, then the FDI cap would be applicable as per the case. Channels like CNBC India use this route, finally going through Videsh Sanchar Nigam Ltd. (VSNL), to uplink from India.

Tuesday‘s Cabinet decision has to be ratified by the Indian Parliament when it reconvenes next month.

What are the implications of this decision by the government?

In the immediate term, it more or less rules out Star News being able to uplink out of India on 1 April D-day, which is when the "new improved" channel replaces Prannoy Roy‘s NDTV as far as the content it delivers is concerned.

The Virgin Island-registered Star News Broadcasting will now have to apply afresh or amend its existing application for uplinking from India after locating an Indian partner(s) for the venture.

Does that mean there will not be a Star News on 1 April. Little chance of that happening. According to information available with, Star India plans to fly down over 50 people to Hong Kong to anchor and package news content for the Star News channel.

The backup plan is simple: have a remote control news facility in Star‘s Hong Kong headquarters ready for the news channel to be put on air once the agreement with NDTV comes to an end on 31 March. Semi-finished feed and material could be sent through VSNL to Hong Kong via a satellite for the graphics to be put in and read out by the newsreader or anchors. The same way as other foreign news channels do with programmes like Question Time India (on BBC) , sacrificing those precious few minutes in case of important events when one needs to go live - from the site of the event to the broadcast centre. But then most foreign news channels like CNN or BBC don‘t need to go live from India so often as do channels Zee News and Aaj Tak (uplinking from India) because the latter mostly cater to very India-specific audiences with India-related news.

Of course, when the communications ministry comes out with a fresh set of guidelines, then VSNL too, would have to adhere the those guidelines while facilitating uplink from India despite it not being a fully owned government company any more. As and when the communications ministry guidelines come in, Star may not be able to send absolutely finished products.

The A-priority obviously, will be to get the Indian partners in place or buy 26 per cent equity stake into an Indian company that, preferably, has an uplink licence too. While probable partners in places like Bangalore, Mumbai and Delhi may have already been sounded out, getting all the paperwork done will still take time. And that race against time is what is worrying Star.

But Star‘s aim would also be to ensure that the screens don‘t go blank for Star News on 1 April. Even if that means putting on Fox News and BskyB footages under the garb of Star News with some local content packaged in Hong Kong. Of course, the US-led invasion of Iraq will be in full swing by then and will push all other news aside anyways (assuming of course that it continues that long). So it gives Star that much more time to sort out exactly how it will get around this.

After Star, it is CNBC India that would be hit hard by the new guidelines. Television Eighteen Ltd, the 49 per cent Indian joint venture partner in the Mauritius-registered CNBC India that runs the business news channel, looks like having a difficult task on its hands to salvage the situation. The reason being that it is difficult to visualise the Singapore-based CNBC Asia Pacific (which holds the controlling 51 per cent stake in this JV) accepting such a drastic whittling down of its holding in the franchise.

It needs noting that of the seven feeds that CNBC has in the region, four (Asia, Australia, Singapore and Hong Kong) are wholly owned subsidiaries, while in South Korea it is present through a licencing deal.

A JV arrangement similar to that of CNBC India exists vis-a-vis Nikkei CNBC in Japan. Nikkei CNBC is 51 per cent owned by Nikkei and 49 per cent by CNBC Japan, which is CNBC Asia‘s Japanese affiliate.

Even if CNBC were to agree to offloading 25 per cent of its stake (which looks highly unlikely) there is the "small" matter of TV18 having to raise the resources to buy out that share.

But then India is such a big market - and promises to get bigger over the years - that CNBC may actually agree to reduce its shareholding in CNBC India. After all, closing down the business channel - at a time when CNBC India has managed to establish its brand equity - would not be the right response to the Indian government‘s policy decision, something that is the prerogative of any country.

Still, TV-18 insiders indicate that the Indian company is "best suited" to become the majority partner in the JV as getting in another company may complicate matters further. Moreover, when the time comes, TV-18 may just be able to cobble together the funds to buy the additional equity stake in CNBC India. Alternately, some other devise can also be worked out that may not result in a big outflow of money from TV-18‘s coffers.

The other problem case is Subhash Chandra‘s Zee News. Parent company Zee Telefilms would have to restructure itself to continue uplinking Zee News from Noida, on the outskirts of Delhi. The foreign shareholding in Zee Tele, including that of the NRI promoter Chandra, is much over the permissible limit of 26 per cent. One possible option could be to create a whole new company in which the stakeholding conforms to the requirements. That offers a (relatively) simpler solution than trying to reorganise Zee Tele.

According to Zee insiders, the FDI cap should not be too big a problem as some quantum of shareholding can be transferred to India and Indians.

For the other two big names in the fray, the TV Today Network and NDTV, both at present, have less than 26 per cent foreign holding so there are no issues there. But any future expansion plans would be what is of concern to both of them. The restrictions would likely hamper their efforts.

It‘s not an easy road ahead for the news channel players. But those who were hoping for an "Open Sesame" route were barking up the wrong tree, the government says. And for all those crying foul, the government does have a point. No one allows unfettered access in the news space. And whether you agree or not, there has been no lack of clarity of thought or purpose in the framing of these rules.

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