• India doesn’t need better media. A distress sale. A 1955 law. Ten ecstatic incumbents. By Praveen Gopal Krishnan and Rohin Dharmakumar. Illustrated by Sharath R.
  • In 2015, an international news company called News Corp decided to acquire a small Indian startup called VCCircle. News Corp is a global news giant that owns assets like the Wall Street Journal, the publishing house HarperCollins, and Dow Jones.
  • VCCircle was one of India’s first digital publications that had built itself on subscriptions. It reported news on tech, investments and startups and had 100+ employees in India.
  • Here’s what News Corp’s Chief Executive, Robert Thompson said at the time of the acquisition, ‘This significant investment is a sign of our faith in India’s future and our enthusiasm for working with and building up emerging talents in the country. India is an increasingly meaningful part of our portfolio, which is itself increasingly digital and global.’
  • In 2020, News Corp sold VCCircle to the Indian publisher HT Media. VCCircle had reported revenues of around Rs. 14 crore the previous year. It was sold for half of that amount, for a sum of Rs. 7 crore.
  • One of India’s leading subscription media companies was purchased by an international news giant with the intention of making it into an international institution of repute like the WSJ. 
In five years, that plan was abandoned and the company was sold as a ‘distress sale’, according to one publication.
  • What happened in between?
  • The most important policy change around digital news in India was announced in 2019. Last week, the details were announced. It’s probably one you’ve heard little about. But it’s the one that will restrict the way you consume news in India forever.
  • It seeks to change how you consume news on WhatsApp, on Google News, on Facebook and on any website or app that you rely on to understand what’s happening. Its expansive scope and broad language could turn the clock back on how you've been discovering and consuming news each day. Because it covers anyone from independent news websites to internationally respected publishers to news aggregators to Google News and even Facebook or YouTube.
  • All done by keeping the most important person out of the room, You. The reader.
  • You’ve heard the following arguments about the media in India.
Media is divided. 
Media is under attack. 
Media companies are struggling to make money. All partly true.
  • But they hide a larger truth.
Media is united. 
Media has fought against reforms. 
Media companies lose money voluntarily, to keep others out.
  • Let’s begin, right at the beginning, in 1955.
  • Back then, the government of India under Jawaharlal Nehru created a blanket rule. No foreign funding in any of India’s newspapers. No foreign newspapers in India either. This lasted for a long time. And resulted in a small, powerful group of companies who controlled India’s print media.
  • Times of India. Hindustan Times. The Hindu. Dainik Jagran. Malayala Manorama. You know them. You grew up reading them.
  • Nobody else was allowed to enter, because with restrictions on funding, nobody else could enter. So Indian newspapers remained the same. The same players. The same rules. The same quality. All dividing the advertising revenue between them.
  • Take the case of the Jagran Group of Newspapers, who wanted to raise Rs 150 crore by selling a minority stake to foreign buyers, but couldn’t. 

‘I needed the money to upgrade and expand our presses,’ said Narendra Mohan of the Jagran Group of Newspapers. 

Finally, their wish was granted.
  • In 2002, Prime Minister Atal Behari Vajpayee suddenly overruled this rule. 

He permitted foreign direct investment (FDI) into the print news media — up to 26%. Vajpayee faced enormous opposition. From a parliamentary committee.
  • And of course, from the newspapers themselves. Who fought hard against these changes. Really hard.
  • 34 out of 50 leading newspapers in India — with a readership share of 76%, opposed the move. They didn’t want any competition from foreign newspapers in India.
  • At the time, a survey commissioned by a group of large newspapers in Delhi published findings that said that a 26% share could actually be quite destructive, and could cause the company to lose control and cripple it. It cited examples of companies that went through this. Bajaj Auto. Asian Paints. Maruti Udyog. This is how the survey concluded
  • A dispute between the indian and foreign share-holders in tvs suzuki, for example, seriously affected its growth and impaired its ability to compete in the market. The stalemate took place though the foreign partner held only 26 per cent stake. Such instances bear testimony to the fact that a 26 per cent stake to the foreign partner gives no guarantee of smooth, independent functioning of a company and non-intervention by its foreign partner. For the newspaper industry also the same is equally true. with 26 per cent shares, a foreign player can effectively block the direction and functioning of a newspaper if the above examples are anything to go by.
  • Think about any new, promising, newspaper to emerge in India in the last 20 years. Mail Today? It went out of print this year. DNA? It went out of print last year. Mint? Okay. That’s because Indian newspaper companies are very good at making sure that doesn’t happen.
  • For starters, while print is declining globally, in India, it’s actually a growing segment. It’s ad revenues are also growing every year. And how are players kept out?
  • This is probably a good time to explain how a cartel of players reduce the quality of the Indian newspaper industry. It’s the industry’s dirty secret, that only insiders know. Here’s how it works.
  • First, most newspapers in India sell their newspapers at a loss. A newspaper that costs Rs. 15-20 to produce is usually sold for Rs. Rs3-5.
  • This makes newspaper media companies much more reliant on advertiser revenue. Which means advertisers control what gets written, how it gets written and why.
  • When advertisers and sponsors control what gets written, journalists become mere cost heads. They get paid less and less each year. They get laid off. The quality of journalists declines.
  • Those journalists still left with jobs have to create more content aimed at luring in masses while simultaneously doing other things like advertorials to bring in more advertisers
  • One of India’s biggest advertisers is the government of India. They pay newspapers for placing ads about tenders, political ads and the like. The government exerts control on the newspapers by giving or withholding access to these ads. Losses continue to mount for newspapers who lose access to government advertising.
  • So you may think: ‘How does this matter to me? I don’t read newspapers anyway. I get all my news online’
  • Well, that’s because these same companies are now here to stop that from happening. By placing the same restrictions that’s levied on print on digital media companies. And they have won.
  • Digital news was always less restrictive as compared to print. Anyone could invest in digital media companies, up to any amount, and it could freely be present to all consumers in India, just a click away. Think about all the major digital-only news media companies that emerged in the last few years.
  • Like Newsminute, which reports and delivers local news in South India. Or Newslaundry, which is a strong voice for independent news. Or even Swarajya, which gives a right-leaning view. Or The Wire, which presents a left-leaning perspective. Or the list of aggregators which give you news. Like Inshorts. Or Dailyhunt.
  • The list is endless. 

You may like some of them. 

You may dislike others. But they existed. 

All for you. Depending on your preference. But now, things look much more difficult for them.
  • FDI may be presented as a horrible thing, but it’s always been the biggest catalyst of change against an archaic, old, established order.
  • FDI was what resulted in the emergence of companies like Flipkart, Ola, Swiggy, Zomato, Paytm and PhonePe — some of the biggest names that have transformed the way we buy, eat and pay. For the better. These are Indian companies, with Indian employees, started with Indian founders and servicing Indian users like you.
  • FDI is almost always a good thing. It funds competition. It leads to innovation. It results in better products. It’s what enables e-commerce companies to create a new way to sell products online, or payment companies to beat a legacy banking system.
  • Remember all those companies that India’s newspapers cited in 2002 as cautionary tales against allowing FDI in India? Here’s how they are doing.
  • Here’s how they have been doing since the onset of the decade, till today. Stock prices of Bajaj Auto Limited, Asian Paints, Maruti Suzuki India Limited have grown multiple times.
  • Meanwhile, here’s how India’s biggest media outlets fared. Their stock prices have plummeted.
  • In other words, the ones who got FDI were the ones who grew in value. The ones who fought against it were the ones who shrunk.
  • Perhaps you want to change this. If you are an entrepreneur looking at all this, and you have an idea for doing something radically different in the media space—like say a new political news website, or a video news app, or a local news bureau distributed through WhatsApp.
  • You may have a better idea, for a better product, for readers who deserve better. All you need is some funding to build this out, and someday, your company will be valued at several hundred million dollars. Like The Athletic. Or Axios. Or Vox. Or Buzzfeed.
  • Except, you can’t. Not anymore.
  • In 2018, a bunch of digital companies formed a coalition called the Digital News Publishers’ Association. Here are the members. See if you can spot a pattern. 

Eenadu,India Today Group,Jagran New Media,NDTV,Amar Ujala,Dainik Bhaskar,Indian Express,Malayala Manorama,Times Internet,Hindustan Times

How many digital-only companies are there in that group?
  • None. Zero.
  • They are all digital arms of print and broadcast companies. And this group has been formed, with all these companies united around a singular purpose.
  • In 2019, the government of India announced that digital media companies, which until now, had no restrictions on funding, now could not take funding beyond 26%.
  • The DNPA welcomed the ruling. ‘The government's decision to cap FDI at 26% for digital news media will provide a level playing field for Indian news publishers and the news aggregators,’ said Mr Pawan Agarwal, chairman, Digital News Publishers' Association (DNPA). Of course, they did.
  • They used the same arguments as they did when they fought against FDI in print. Mostly, they were concerned about funding received from China to aggregator companies like Inshorts and Dailyhunt. Except…
  • … some of them had no problems taking this money from China to their own companies.
  • Take the Times Group, India’s most powerful media company. And its most profitable one. Sure, it publishes some of India’s best known newspapers like the Times of India and Economic Times. But it also has a division that not just offers to place the content companies want across its various news websites, but guarantees coverage.
  • It also has a division that solicits equity stakes in the companies that it writes about everyday, in return for promoting their brands in its newspapers. These equity stakes are worth over $4 billion across 850 companies. It has also raised money for its companies from international investors, including China’s Tencent…Tencent led a US$50 million round into Gaana, the music streaming app owned by the Times Group.
  • With this round, Tencent owns nearly 35% of the company. For an investment from a Chinese company, the routing came via a Tencent entity in Europe.
  • Last year, Tencent had also led a US$110 million round into another Times Group media streaming company, MX Player. All while the Times Group’s editorial pages argue vociferously against Chinese apps and foreign investment into India’s digital news startups. None of this is new or recent.
  • Except, last week, the government of India issued a clarification to their 2019 ruling restricting FDI into digital news companies.
  •  It applies not just to digital media companies but also to aggregators and startups. It applies to blogs, podcasts and videos. It applies to news agencies, and maybe even to local bureaus of international publications.And by a reading of the law, it applies to Google, to Facebook, to YouTube, and even WhatsApp.
  • In essence, none of those companies can exist, because they all violate this law. All of them have a foreign investment of greater than 26%. 

All of this was done in secret, without public consultation, behind the scenes, lobbied by powerful legacy media companies interested in protecting their turf.
  • Oh, and on the same day, the Press Information Bureau came out with a missive: It would offer digital publications which conform to the 26% FDI policy advertising. You know. Tenders. Government ads. The like.
  • No digital media unicorn will emerge out of India as a result of this policy. Even as the Prime Minister, Narendra Modi, argues in favour of Indian media going global. Also, don’t forget, that there’s one person missing in all this.
  • That’s right — you, the reader.
  • Nobody asked you whether it was okay to do this. Nobody has issued a single statement that highlights how any of this makes things better for the Indian news consumer. Instead, it’s all been about a cartel of media companies seeking to protect themselves from those who seek to challenge it by offering a better product, paid for by subscribers who want better journalism, available freely on any platform.
  • So what can you do? Well, they can clamp down on a 26% FDI, but not on millions of SDI - subscriber direct investment.
  • You can subscribe to the publications you believe in by giving them money.
  • Big media is afraid that startups will show readers that change is possible, that better products are possible.  Better products that promise intelligent analysis over mindless content. Better products that are written for readers, not advertisers. Better products composed of original journalism from talented journalists who are treated and paid well.
  • Make better journalism possible.
  • The Ken is India’s first subscribers-only business publication. We launched in Oct 2016 with bureaus in Bengaluru, Delhi and Mumbai. We’ve raised some venture capital, to create better journalism and better products for our subscribers. But sadly for some of our larger rivals, we never had to cross the 26% FDI mark. How?
  • Because over 25,000 subscribers directly and actively fund our journalism. Who have enabled us to expand to Southeast Asia, where we now have colleagues in Indonesia, Malaysia, Thailand, Philippines and Singapore. And subscribers too.
  • While incumbents may have successfully thwarted foreign direct investment in media, we believe subscriber direct investment is the best counter. When enough Indians start seeing themselves as subscribers and readers, instead of audiences and traffic, India too will see the emergence of world-class media organisations.

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