As the lines distinguishing media platforms get blurred, the government must help facilitate this convergence process
As the lines distinguishing media platforms get blurred, the government must help facilitate this convergence process
Comment
Jaideep Kulkarni
The media and entertainment industry (M&E) has been growing at a compounded annual growth rate of around 19% and is expected to reach Rs1,00,000 crore in 2011.
The players in the industry can broadly be classified into three key segments, i.e. studios (including the animation studios), content providers and distribution platforms, which include cable/ satellite/ direct to home (DTH) channel, internet protocol television (IPTV), Mobile TV as well as multiplex theatres.
India has been emerging as an important outsourcing destination for animation business. Accordingly, the government ought to consider providing incentives such as setting up a dedicated special economic zones and lowering of customs duties on import of basic equipments etc, which would act as a catalyst for growth of animation industry.
Developing world class studios in India akin to Hollywood studios established by MGM, Disney, Fox, etc requires substantial capital investments and tax incentives. Nearly all of the capex of setting up studios is incurred on imported items. The import duty on such equipments is as high as 35%. Accordingly, the government could consider lowering of custom duty on basic necessity equipments.
The government can also consider establishing a dedicated media city on the lines of Dubai Media City (DMC) for providing growth impetus to M&E industry.
DMC has been established as a tax free zone and is fast growing into a regional media hub for news agencies, publishing, online media, advertising, production and broadcast facilities. Today, DMC houses amongst others global media giants such as Reuters, CNN, MBC, Sony, CNBC, etc.
Piracy is one of major issues affecting the entertainment industry. Piracy has proved to be a bane to M&E industry and continues to cut into revenues of industry players as well as eating up government’s share of tax. Advancement in technology has made piracy cheaper and easier. In order to combat piracy, there needs to be greater intervention from the government in the form of enactment and enforcement of stringent anti-piracy laws.
Currently, there is only one reputed and well recognised academy, the Film and Television Institute at Pune, which provides certificate courses in various aspects such as direction, cinematography, acting, editing, art direction, animation, etc.
The government, considering the paucity of trained professionals in M&E industry, should strive to set up world class film training institutes in India which would provide training in various facets to develop a vast pool of talented M&E artists and professionals.
Advancement of technology has blurred the line between telecom, broadcasting services and networks. This convergence would also pose great challenges to M&E industry as it would result in increased collaboration between various industry players. Accordingly, the government may consider review of existing laws and enacting new laws for facilitating and effectively regulating the convergence process and meeting the challenges poised by the same.
Overseas investments in India in the M&E industry are regulated by Foreign Direct Investment (FDI) policy. The FDI limits are divergent across various segments of the M&E industry ranging from 20% to 100%.
The FDI limit is restricted to 49% for cable, 20% for DTH (increased upto 49% by FII) and 74% for Telecom and IPTV. Inspite of the fact that cable, DTH and IPTV platforms would deliver the same television signals, there stills exists different FDI limits for these segments.
Currently, 100% FDI is permitted for uplinking of entertainment channels while for up linking of news and current affairs channel it is 26%. Interestingly, FDI limit for internet service provider is 100%.
In view of this dichotomy, there is an urgent need to rationalise the FDI limits amongst various segments considering the recent convergence trends and keeping in mind similarity of products delivered by various platforms.
(The author is tax partner, Ernst & Young)
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