India’s Creative Economy Needs Creative Solutions

It is time to either upgrade Trai’s capacity or to even start thinking again of an independent and separate broadcasting regulator

Sometimes you don’t need to look under rocks to find the objectionable.

The auction for T20 cricket’s Indian Premier League (IPL) broadcast rights, across geographies and media, has amplified the asymmetry in regulatory frameworks operating in the creative economy. The entire issue should also help triangulate a policy conversation between competition law, intellectual property rights and a sectoral regulatory/legislative narrative that has failed to comprehend the dynamics of India’s growing media and entertainment industry.

Star Group’s winning bid for IPL media rights was made via a transparent process. But the voluble protests preceding and following it have their roots in the Indian economy’s enduring legacy of cronyism and government patronage. Even if we move beyond the immediacy of the complaints and try to focus on the larger picture, the state of strife and conflict does underscore the need for regulatory reform in the creative economy. Specifically, it highlights three issues: multiplicity of regulators leading to lack of clarity on regulatory jurisdictions; need to grant supremacy to Indian Copyright Act—which governs creation, broadcasting and monetization of content—over a plethora of other laws and regulations that are stifling legitimate rights of content creators; and, finally, whether the 20th century mode of administered pricing for content produced in the private sector for sale in the open market can still work in the 21st century.

At the heart of the debate is the difference between monopoly over content and content monopoly. Monopoly over content arises when the content creator has the sole right, granted by law, to monetize the intellectual property embedded in the content for a specific period of time. Content monopoly arises when there is only one content producer in the entire industry and can hold distributors and consumers to ransom, which is clearly not the case in the India.

However, the extant regulatory framework seems to be ignoring these nuances and apprehension over content monopoly seems to have engendered systems that grant subordinate status to the Indian Copyright Act for broadcasting organizations, which is in contrast to global norms. Indeed, indications about content’s future were discernible in the IPL auctions: Facebook’s Rs3,900 crore bid for digital rights (for the Indian Subcontinent) trumped Airtel’s Rs3,280 crore and Reliance Jio’s Rs3,075.72 crore bids. Though Facebook eventually lost out to Star’s consolidated bid, the incident demonstrates how digital content is clearly the next battleground and how companies are according supremacy to content. It also brings into sharp relief the question of net neutrality and the role of gatekeepers. This then also begs the question: Is the current regulatory structure, erected to generate societal equity through mandated economic pricing, adequate and symmetrical for content delivered through cable/satellite and through digital pipelines?

The private television industry in India is of fairly recent vintage. Yet, a vice-like grip of regulators and regulations governs its creativity. The key regulatory institutions overseeing the industry are the ministry of information and broadcasting, the ministry of electronics and information technology, the Telecom Regulatory Authority of India (Trai), the Telecom Disputes Settlement and Appellate Tribunal, the Competition Commission of India, the department of industrial policy and promotion in the ministry for commerce and industry, the Intellectual Property Appellate Tribunal and the department of telecommunications in the ministry of communications.

Given the multiplicity of agencies, there is a wide and bewildering assortment of laws, rules and guidelines that govern this sector: Indian Copyright Act, Information Technology Act, Consumer Protection Act, Cable Television Networks (Regulation) Act, plus a labyrinthine web of regulations from Trai.

Historically, all attempts to establish an appropriate regulatory regime for the broadcasting and cable industry fell victim to political fragility of the 1990s, till the Centre reclassified broadcasting and cable services as telecommunication services in 2004 and appointed Trai as the designated regulator. Occasional attempts to create an independent broadcasting regulatory authority suffered pre-mature deaths due to political uncertainty.

With Trai and so many other agencies, acts, rules and guidelines at play—often at cross-purposes to each other—it is only natural that the playing field gets skewed in favour of those with unequal political bargaining power. In the sector’s infancy, the boundaries were stretched by organizations that employed musclemen and were friendly with political parties. Not all companies were born from this violent crucible, but some of the leading names in media and entertainment rose to prominence from this brutal churning. In addition, as various stakeholders have pointed out, the regulator’s lack of capacity has also led to the current regulatory distortions.

According to the KPMG India-Ficci report on Indian media and entertainment industry, 2017, Trai’s March order on inter-connect and pricing of channels may lead to a decline in revenue for broadcasters and might even result in an increased monthly outlay for many subscribers, thereby defeating the very purpose of the pricing model. Clearly, it is time to either upgrade Trai’s capacity or to even start thinking again of an independent and separate broadcasting regulator.

This article was originally published in Mint newspaper and can also be read here 

Remembering Water...

In this hot and fractious season of water shortages, cricketing villains and simmering public anger, I was reminded of an Op-Ed I wrote for The Economic Times on August 9, 2006. It was titled "Water of Love, Deep in the Ground". Is it coming true? Here it is:

With the government unwilling to act, except to frame effete policy, and the sharks devouring public assets by tacit political consent, it won’t be long before water becomes the incendiary fuel for public strife, warns Rajrishi Singhal

STOCKS are jejune, gold is passe and land is old-fashioned. So, what’s the next big asset class, which will allow investors to get in on the ground floor before every other punter in the land wisens up to it? I asked this question to a couple of my senior colleagues and pat came the reply: “Water”! Certainly not what I was expecting to hear, but the more one thought about it, the more convincing and compelling the idea seemed. In fact, as a commodity and an asset class, water has already triggered wars between nations in Africa and the Middle East and, closer home, strained relations between Tamil Nadu and Karnataka. It also plays a vital role in determining property rates in almost all the major cities — Mumbai, Chennai, Delhi definitely being the main ones. 

The query came up in connection with the unabashed land grab that’s going on in the name of every conceivable enterprise — SEZs, shopping malls, educational institutes, highway projects. What’s more, every major metro has seen the emergence of land sharks who have been cornering large swathes of land — mostly at rock-bottom prices by threatening owners and using the shield of political clout. The modus operandi usually involves bending a few rules here, paying off a few politicians there. But it’s all kosher as long as there’s a profit at the end of the transaction. So, don’t be surprised if you see the same sharks — or at least sharks with similar intentions — taking to water before you can spell aqualung. 

This raises a basic issue — what is an asset? Can water be called one? An asset can, loosely, be defined as an investment that generates cash flow, whether it is a machine owned by a company or a fixed deposit owned by an individual. There is huge opposition from certain quarters to water being termed either as an asset or a commodity since it is part of the “commons”. The argument certainly does have an element of logic to it but does not entirely do justice to ground reality. In fact, various policy documents from the government — including the last National Water Policy of 2002 — also curiously maintain a studied silence on the issue, leaving it not only open to interpretation but to subsequent bending of rules. 

The reason for considering water as an asset is pretty obvious. It is getting increasingly scarce and its supplies have started carrying a premium. In fact, certain members of the conspiracy theory camp even ascribe the current conflict in Lebanon to Israel’s growing thirst for water resources and yearning to control the Litani river basin. Agreed, this probably sounds a bit outlandish, especially given the Iran-sponsored Hezbollah’s involvement in the conflagration, but water is irrefutably a flashpoint in West Asia and Africa. British journalist and author Adel Darwish said in a conference way back in 1994: "Most borders have been set, oil fields mapped and reserves accurately estimated — unlike the water resources, which are still often unknown. Water is taking over from oil as the likeliest cause of conflict in the Middle East." 

In India, the problem is not over availability of water, though that might soon become the issue. Inadequate and corrupt service delivery standards crimp the pipeline. However, given that water supply is largely in the domain of state governments and urban local bodies (ULBs), their inherent inefficiencies and embedded corrupt practices are bound to create opportunities for private sector investment. In a 1996 survey by the Indian government, in 241 towns with populations between 50,000 to 100,000, more than one-third ULBs could not provide more than 100 litres per capita per day. 

SO, THERE does exist a gap between demand (which is growing, with rising population and urbanisation) and supply, which the government bodies seem incapable of addressing. Given this, there does exist an investment opportunity which will certainly be exploited by the sharks, unless the central and state governments, along with the private sector, jointly pursue rigorous structural reforms in the management and delivery of water resources. In fact, at the risk of being labelled a neo-liberal, it must be said that a large part of the responsibility might have to be shouldered by the private sector. 

Involving the private sector in water has many detractors, but the choices are limited. Given the huge investment outlay required to provide water to every Indian, a World Bank document observed: “On the ‘supply side’ there are ultimately only two sources of financing — tax revenues and user charges — and both are falling.” Also, the government has proved to be entirely incapable of delivering the required services at economic rates. Therefore, if we assume that the private sector will play a larger role, it might as well sharply define which areas work and which do not. For instance, building physical infrastructure might not be feasible for all private sector enterprises, given the long payback period and the system allergy towards paying user charges. Some private companies might find it useful to invest in bottled water, given the phenomenal growth rate in the sector (an annual growth rate of over 50%) and the fragmented nature of the industry structure (200 brands with 80% local brands). 

There could be opportunities in other areas that have already seen the emergence of water sharks — water tankers. A lot has been written about them and their unshakeable grip over water supply in metros as well as smaller towns. These sharks have close links with politicians, or have been indirectly promoted by them, prevent the ULBs from investing in the supply infrastructure and then supply to the deprived neighbourhoods at exorbitant prices. Tanker sharks have today become ubiquitous in both metros as well as smaller towns. 

This signifies only one thing: even though the NWP is silent about water markets and the Maharashtra Water Resource Regulatory Authority Act of 2005 wants a water market in the state, a parallel and unregulated water market has already sprung up and is thriving under the official tutelage of the political class. And with the government unwilling to act, except to frame banal and effete policy documents, and the sharks devouring public assets by tacit political consent, it won’t be long before water becomes the incendiary fuel for public strife.

Speculative "I-said-so"...

I know, I know...every charlie in town is saying he had seen it coming. But it took a Twitteroor to precipitate matters, to shake the foundations of IPL. But, why now? Is the government trying to get even with Lalit Modi because he had the gumption to take on a minister in the government? Or, is there something else? Mocha is also throwing its hat into the ring with its version of what might have brought government tolerance to its tipping point (read here) . For a smart man, Lalit Modi has been quite foolhardy in his choice of enemies. Consequently, he may have bitten off more than he can chew...he is now being force-fed humble pie.

Games People Play

The ownership mess surrounding the Kochi franchise of the Indian Premier League, along with all its suggested subterranean filth, is what happens when you put together all the unholy elements of Big Business, Bollywood, Betting syndicates and Ballot champions into a box and shake hard. Now that this vile-looking genie is out and at large, it’s time to raise some issues, ask some questions:

1. Is Lalit Modi going to come clean? He has painted himself into a bit of a corner by forcing the new Kochi franchise to reveal its shareholding details. Now all the other franchises might have to follow suit; plus, the government agencies are reportedly investigating the web of companies that camouflages the real shareholding. Some of the powerful franchise owners might not be happy with Modi for precipitating matters. Things were going smooth so far and, for some inexplicable reasons, Lalit Modi has rocked the boat. Unpardonable.

2. The Income tax department has already showed up in force and any information they get gives them a handle. Some leverage that.

3. This raises questions over Lalit Modi’s managerial capabilities. Or, as they say in India, his ability to manage the “environment”. If he had wanted a certain corporate house to be awarded the franchise (as has been speculated in media), existing Indian management ethos (adopted wholesale from the Indian political narrative) would have expected him to have delivered the result. No questions asked about the means adopted; the ends matter more than anything else. He had managed to have his way so far; what went wrong this time? Time for the ungainly heave-ho, going by unconfirmed reports that a BCCI factotum is likely to be installed alongside Lalit Modi?

4. Why was Kochi selected for the franchise and not Ahmedabad as had been planned a year ago? Did Shashi Tharoor influence the decision? Was there any quid pro quo? The story of how a South African model was denied a visa by the ministry of external affairs – reportedly on a request from Lalit Modi -- remains incomplete.

5. Was Lalit Modi under pressure from Narendra Modi to scuttle the Kochi deal?

6. Clearly, not all IPL team owners have stumped up hard cash. They could be just faces on hire, proxies lending their names for a fee to some moneybags who prefer staying in the shadows for the obvious reasons. How does IPL rid itself of this stigma?

7. Going by reports so far, only the IPL organizers seem to have made any money so far. Most teams still seem to be languishing in the red zone. So far, the league looks like a one-way funnel for pouring in cash with no guarantee of returns. What’s the big rush then for acquiring a franchise? Valuation game? Or, is there a pay-off somewhere else?

8. Sunanda Pushkar’s role is likely to come under closer scrutiny – getting a 5% sweat equity stake, apparently “undilutable in perpetuity (sic)”, according to some news channels, is bound to raise some eyebrows.

R-Day Ruminations–II: Cricket and Not-So-Cordial-Entente

Speaking of institutions, there is a danger when organisations with a limited role – particularly in sports and entertainment – go beyond their ken and meddle in unrelated fields. The conduct by Indian Premier League (IPL) is not only most curious but borders on the dangerous.

If reports are indeed true, then home minister P Chidambaram’s outburst (read here) at the wilful boycotting of Pakistani players by the IPL franchisees adds a new layer to this fetid mess. PC denies that there was any nudge-nudge, wink-wink from the government, or any signalling to IPL franchisees to snub Pakistani players. Interestingly, and somewhat inexplicably, filmstar Shah Rukh Khan has also suddenly emerged out of the woodwork to voice his displeasure at the turn of events.

But, IPL is playing an extremely hazardous game if it is indeed over-estimating its clout and trying to use that to influence the country’s foreign policy. Last year, it locked horns with the authorities by shifting the IPL matches to South Africa because the government said it could not provide adequate security for players in view of the impending general elections. What was appalling was IPL’s intractable stand.

First, it refused to pay for and provide private security. Strange as it might sound, here was a private enterprise (admittedly with a sound business model) which wanted the government to spend tax-payers’ money to help it carry on its private business. Cute. But, what was even more worrisome was the fact that it refused to pay heed to the government’s legitimate reason for its inability to provide security: general elections across the country with a gruelling schedule spread over 30 days. The message from IPL was posed like a question: what’s more important, IPL matches or elections?

In this latest display of audacity, there are rumours that the government might have conveyed to the IPL franchisees that the responsibility of ensuring players’ security lay with the League. And, if reports are to be believed, it is this that might have prompted franchisees to give the Pakistani players a miss. Whatever the reason might be, IPL needs to get some reality check. Celebrity status for some of its members doesn’t guarantee immunity from national priorities.