An analysis of public policy interventions, growth and strategies of media organisations in post-liberalization era

Abstract

The post-liberalization era has been a boon for the media and entertainment (M and E) industry in India. While the print media acquired wings to enter into new territories and later into related media-businesses, the television media made its entry in the world of an ordinary Indian rather stealthily. The Internet emerged strong despite the dotcom bust even as the Radio a truly mass medium for people of this country -remained a prisoner of the much delayed and restrictive policy regime. Though accustomed to the socialistic economy and control era of the pre-liberalization years, the media used every opportunity to grow in size within a period of over a decade and a half. As a result, the M and E industry in India has grown at a cumulative rate of 18%per annum in last 5 years i.e. 2002-07. The government and public policy professionals, however, have continued to struggle for devising an effective intervention for regulation of media conglomerates. In my work on An analysis of public policy interventions, growth and strategies of media organizations in post-liberalization era , I explore three questions to study in depth the policy interventions, its linkage to the growth trajectory and strategy of media organizations in India in post-1991 era. The study uses semi-structured interviews, case-study method and quanti-qualitative analysis and data from websites of media organizations, TRAI and other established sources to arrive at various findings. The first objective of the study relates to understanding the growth of media especially, newspaper, television and radio and its linkages to specific media-related public policy interventions. While the growth of M and E industry in the post liberalization era took place under the overall neo-liberal paradigm of privatisation, liberalisation and globalization, I argue that specific media-related public policy interventions in print media such as putting the raw print under OGL, reduction of duties for import of raw print and machinery and 26% FDI in newspaper industry were incremental in nature and therefore did not lead to any shift in growth rate of newspaper industry in the country. However, the television medium, which started almost as an illegal entity out of sheer entrepreneurship of Indian businessmen, first acting as junior allies under their foreign partners but later dominating the relation, did benefit from key public policy interventions from 1998 onwards in terms of Satcom policy 1998, Up-linking policy 2000, liberalization of FDI 2003 etc. The radio, which gained momentum through two phases of license distribution by the government in 2000 and 2005, also grew phenomenally. The liberalisation of the media industry especially the television broadcasting came nearly a decade after the process was carried out in other sectors of the economy. The Up-linking Policy 2000 was the first measure taken by the government to open the media industry. The FDI policy took another three years (2003), when 26% FDI was allowed. Using the Kingdon Schema for policy formulation and enactment, I content that during the first decade of reform, the problem, political and policy stream did not come together to open the window of opportunity for passage of policy measures on opening the media sector. Moreover, the policy consensus emerged only on incremental changes. I analyse the motivations and urgency shown by different actors in the policy formulation arena to understand the timing and pace of liberalization of the media industry. In the second question, I deal with the reasons for inability of the established newspaper industry to enter the upcoming television industry (which was a related business sharing a number of synergies) and difference in nature of television revolution in the southern and the northern states of the country. I advance eight strands of logic to map the broad terrain of the television revolution in India. In part or in combination with others, they explain the reasons behind late entry of newspapers in the television domain, difference in nature of entrepreneurship, process and specifics of television revolution in northern and southern states. I argue that the rise of television industry in the 1st decade of liberalization owes a lot to the arrival of journalist-entrepreneurs with understanding of the medium and vision to exploit the opportunities offered by the new medium; character of the television medium with focus on current affairs, its audio-visual nature and its perception as a medium of entertainment; requirement of networked organizational structure at a national/regional level; pre-occupation of newspaper industry with the existing market opportunities in the print medium; requirement of high investment and lack of capital for the television medium; presumed lack of threat by the newspaper industry from the new medium borne partly out of tendency to look down upon the television medium; absence of regulation in television and differences in perceptions; and sociocultural economic and political nature of Indian State combined with reaction to the centralizing character of Public Service Broadcasting. In the third question, I explore a number of questions relating to dynamics of industry attractiveness, drivers of media businesses, and diversification strategies of media conglomerates with its effect on financial outcomes. Through, Porter s Five Forces analysis, I contend that the two traditional media businesses i.e. newspaper and television have medium potential for profit with television being slightly more attractive. By analysing dynamics of different forces affecting the industry, I argue that the potential for profit in television industry will increase in near future (3-5years) while that of newspaper industry will decline marginally. However backward integration into media education in case of news (both print and TV) and backward integration into production houses in case of GEC TV channels would positively affect the potential for profit. Through Drivers Analysis of media houses, I argue that the first-movers or the innovators in content, marketing/ distribution or technology have gone on to occupy the leadership position. I also establish that continuous content innovation and marketing drove the success of GEC television channels and newspapers whereas content/content presenters/content creators alone have determined the success of television news channels in the post-liberalization era. I trace the trajectory of evolution of 16 media conglomerates in post-liberalization era to uncover patterns of their growth. I argue that those media conglomerates, which had clearly defined forward/backward linkages, have performed better than those without it. In this sense, vertical integration seems to have yielded better results than horizontal expansion into related media. However, when you look at the performance closely, during the phase of economic growth the horizontally integrated media (CNBC, NDTV) performed better than the vertically integrated media (Sun, Star India, UTV, Zee). The result was reversed during the economic downturn where the vertically integrated media organizations performed better than the horizontally integrated media organizations. The difference in performance of two expansion strategies did not show up so much when the Indian Economy was growing at nearly 9% and advertising spend was buoyant. However, once the economic slowdown set in, the difference in performance of these media conglomerates during the first three quarters of Financial Year 2008-09, showed the superior performance of media organisations with clearly defined forward and backward linkages also argue that depending on various bottlenecks (including policy and regulation related, audience measurement system related, information infrastructure related) in the value chain, the established players may exploit policy loopholes, technology and distribution channel distortions to gain interim competitive advantage by first entry. However, technology (less so after sharp reduction in cost, wider availability, standardization and fast replicability) does not provide sustainable competitive advantage. On the other hand, distribution channels (cable being Analogue technology based and clogged due to system constraints, poor implementation of CAS, slow penetration of DTH and broadband for IPTV) will continue to offer temporary competitive advantages in the medium term i.e. 3-5 year horizon. But, as diffusion of multiple distribution channels (DTH, IPTV, Head end-in-the-sky) takes place, digitised cable allows for quality transmission of a large number of channels, DTH acquires a critical level of penetration and IPTV becomes a powerful alternative, the distribution channels will cease to provide competitive advantage. In this regard, the current advantage enjoyed by number of television industry players like Zee, Star and Sun Network due to their control over restricted distribution channels may not entirely disappear in near future, when multiple platforms become available for content distribution. However, on a long-term basis, I contend that the distribution-led strategy of Sun Network and Zee Group would have to be recast as content-led strategy. In this context, I also argue that TRAI recommendations on cross-media ownership restriction between broadcasting and distribution companies would only serve the purpose of reducing the ownership concentration but would not change the market dynamics in term of broadcasters controlling the distribution or vice-versa. This is because limits on cross-media holdings may not necessarily lead to management change, which alone decides the market behaviour of firms. Thus, I contend that sustainable competitive advantage in near future would depend on content innovations through backward linkages into content production or clearly defined content sourcing relations for GEC and other niche TV channels; backward linkages into media education for television news and newspapers; and success at retaining and nurturing talent. Another way of putting this conclusion for the M and E industry manager from a future strategy formulation point of view is: In media, where content has a time value, integrate back into the content production and then content re-purposing/syndication; and in media, where the content has a low time value, integrate back into media education. A corollary of this is that control over content rights of premium content in media having time value of content such as films, television mythologies would provide sustainable competitive advantage. In other word, content rights for premium content will replace the control over distribution channels as a source of market power. In media with low time value of content like in case of news and current affairs, managing content presenters/content creators will provide differentiated and sustainable competitive advantage. What this means for the government is that it needs to put in place a forward-looking, growth-oriented regulation for the converging sectors of IT, Telecom and Media so that it is ahead of market innovations on the ground. However policy and regulation, by itself, does not mean much unless the same is implemented effectively.