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Why TRAI chose news as the relevant genre for cross-media rules

MUMBAI: The Telecom Regulatory Authority of India (TRAI) has chosen news and current affairs as the relevant genre for formulating cross-media ownership rules as it is of utmost importance and direct relevance to the plurality and diversity of viewpoints.

TRAI elucidated that in popular perception, it is the news and current affairs genre, including business and financial news and information, that is the direct purveyor of authentic news and opinions based on extensive research, first-hand reporting, analysis and editorial checks.

Giving reasons for leaving out entertainment channels out of the cross-media ownership rules, the authority noted that while the general entertainment genre has high viewership and therefore has the potential for influencing views through its programmes, the opinion disseminated through this genre is informal and indirect in nature as the prime objective of programmes in this genre is entertainment and any perceived social and political influence cannot be determined objectively.

For print, the authority recommended considering only daily newspapers, including business and financial newspapers.

Observing that television and print are the most influential media segments when it comes to news, TRAI chairman Rahul Khullar said, “Here we are dealing with print and television. It does not matter whether you are present in both. What we are worried about is undue influence. So we have devised rules on market concentration. We measure the degree of market concentration. If someone has more than the required share of concentration, he needs to dilute control in the company.”

TRAI has left out radio and internet since news is not allowed on radio and internet, though an important platform for opinion formation, does not seem to be a relevant segment owing to low penetration. It said that once airing of private news is permitted on private radio and penetration of internet goes deep, the review of the cross-media ownership rules will be undertaken.

The authority recommended using the Herfindahl Hirschman Index (HHI) to measure concentration in a media segment in a relevant market as it reflects the market scenario in totality.

HHI considers the market shares of all entities in the market, thus reflecting diversity both in terms of number of voices present, as well as influence, it stated.

Relevant data required for computing market shares are available; hence computation of the index would not be problematic, the authority pointed out.

Market share of 32%

TRAI stated that the threshold level of contribution to HHI by an entity in a relevant market should be fixed at 1000, which approximately translates into a market share of 32 per cent.

As only two media segments, namely television and print, are being considered part of the relevant market, the ‘1 out of 2’ rule can be applied above the defined levels of concentration. This means that if the television as well as newspaper markets are concentrated (HHI> 1800 in each), then an entity contributing more than 1000 to the HHI of the television market cannot contribute more than 1000 towards HHI in the newspaper market as well, and vice versa.

If it does so, it will have to dilute its control in one of the two segments. This rule applies only if the HHI thresholds are violated consecutively for two years.

Control

Defining control, the authority said that an entity is said to ‘control’ another entity if it directly or indirectly through associate companies or subsidiaries owns at least 20 per cent of total share capital. In case of indirect shareholding, the extent of ownership would be calculated using the multiplicative rule.

It recommended that the following proviso be added to the definition of control as provided in the ‘Recommendations on Issues related to New DTH Licences’: “Provided that E1 advances a loan to E2 that constitutes not less than [51 per cent] of the book value of the total assets of E2, E1 will be deemed to ‘control’ E2.”

 For a media company which dominates a market in both print and television, a restructuring is needed and the equity holding needs to be brought down to 20 per cent.

Rules to be reviewed after 3 years

The authority recommended that the cross-media ownership rules be reviewed three years after the announcement of the rules by the licensor and once every three years thereafter. The existing entities in the media sector which are in breach of the rules should be given a maximum period of one year to comply with the rules.

Defining the relevant market in terms of language and states

TRAI opined that the relevant geographic market should be defined in terms of the language and the states in which that language is spoken by the majority.

Thus, the twelve relevant geographic markets would be—(i) Assamese and Assam (meaning, Assamese newspapers read and Assamese television channels watched in Assam, and similarly henceforth); (ii) Bengali and West Bengal; (iii) English pan-India; (iv) Gujarati and Gujarat;  (v) Hindi and Himachal Pradesh, Haryana, Delhi, Uttarakhand, Uttar Pradesh, Rajasthan, Madhya Pradesh, Chhattisgarh, Bihar, Jharkhand (these ten states together should be considered as a single market); (vi) Kannada and Karnataka; (vii) Malayalam and Kerala; (viii) Marathi and Maharashtra; (ix) Odia and Odisha; (x) Punjabi and Punjab; (xi) Tamil and Tamil Nadu; (xii) Telugu and Andhra Pradesh and Telangana.

“Defining the geographic market in the above fashion would make the markets homogeneous, as each would largely consist of consumers demanding news in the same language. Supply conditions with respect to media outlets would also be similar,” said TRAI.

It also said that the other languages included in the Eighth Schedule of the Constitution, namely Bodo, Dogri, Kashmiri, Konkani, Maithili, Manipuri, Nepali, Sanskrit, Santhali, Sindhi and Urdu, will be considered based on the growth of newspaper circulation and television viewership in these languages in future.

The metrics factor is GRPs for TV and circulation in case of print

The authority recommends that a combination of reach and volume of consumption metrics should be used for computing market shares for the television segment. GRP would be the relevant metric for the television segment. For the print segment, using only the reach metric is sufficient.

In the case of television viewership, the authority observed that though the values of reach were almost the same for all the news channels in a particular market, minutes of viewing of the channels varied widely. Therefore, measuring reach as well as volume of consumption is important while measuring market share for television, the authority stated.

For newspapers, minutes of consumption are not directly related to the extent of influence as much also depends on the reader’s speed of reading, level of understanding, etc. For print, the reach metric alone would be sufficient to reflect the extent of influence, the authority reasoned.

The authority also recommended that for calculating market shares, in the relevant market for the television segment, the GRP of a channel should be compared with the sum of the GRP ratings of all the channels in the relevant market and the market share of an entity number would be the sum of the market shares of all the channels controlled by it.

Market share of a channel = GRP of the channel / ∑ GRP of all channels in the relevant market and Market share of an entity =∑ Market share of all channels controlled by it.

Similarly, in the relevant market for the print segment, the market share of a newspaper would be the circulation of that newspaper compared with the combined circulation of all newspapers in the relevant market, and the market share of an entity would the sum of the circulation of all the newspapers controlled by it.

Market share of a newspaper = Circulation of the newspaper ∑ Circulation of all newspapers in the relevant market and Market share of an entity = ∑ Market share of all newspapers controlled by it.

The authority recommends that mergers and acquisitions (M&A) in the media sector will be permitted only to the extent that the rule based on HHI is not breached.

Reporting requirements

The authority recommends the following list of reporting requirements for this section.

These reports are to be made on an annual basis to the licensor and the regulator.

A. Transparency Disclosures (to be placed in public domain)

(i) Shareholding pattern of the entity

(ii) Foreign direct investment pattern of the entity

(iii) Interests, direct and indirect, of the entity in other entities engaged in media sector

(iv) Interests of entities, direct and indirect, having shareholding beyond five per cent in the media entity under consideration, in other media entities/companies

(v) Shareholders agreements, Loan agreements and any other contract/ agreement

(vi) Details of key executives and board of directors of the entity

(vii) Details of loans made by and to the entity

(viii) For all channels registered as news channels with the MIB – Registered language(s) of operation, actual language(s) of operation, time slots for news programs

B. Reports to be submitted to the licensor and regulator (confidential)

(ix) Subscription and advertisement revenue of the entity/ company

(x) Advertising rates

(xi) Top ten advertisers for each media outlet of the entity.

Changes in any of the parameters (i) to (vi) listed above must be reported to the licensor and regulator within 30 days of implementation of the change.

Vertical integration among media entities

Based on an examination of the issues and analysis of the comments received in this exercise, the authority reiterated its recommendations on vertical integration among broadcasters and distribution platform operators (DPOs) as contained in its ‘Recommendations on Issues related to New DTH Licenses’ dated 23 July 2014 and recommends early notification and implementation of the same.

In its recommendations on cross-media holdings in the new ‘DTH Licensing Regime’, TRAI had liberalised the cross-holding between a broadcaster and a DPO but imposed restrictions on market share, channel capacity reservation and nature of content deals.

The broadcaster is also restricted to have ‘control’ of only one DPO of any category, meaning that it can exercise ‘control’ in either a direct-to-home (DTH) or a cable TV company.

The authority recommended that the entity that controls a broadcaster or the broadcaster itself cannot ‘control’ more than one distribution platform operator (DPO) of any category either a multi-system operator (MSO)/HITS operator or DTH operator in a relevant market and vice versa.

The recommendations, subject to government approval, will mean that companies like the Essel Group and Sun Group, which have interests in cable as well as DTH, will have to give up control of one of the distribution platforms.

Pertinently, the recommendations are silent on the quantum of cross-media holding restriction between broadcasters and DPOs, implying that the broadcasters can virtually own 100 per cent in a distribution platform subject to foreign direct investment (FDI) guidelines.

In the existing DTH licence guidelines, the authority had imposed a restriction of 20 per cent on cross-media holdings.

By not having a cap on cross-media holdings, the authority has allowed broadcasters like Star India to increase their holdings in the existing distribution platforms. Star India holds 30 per cent in DTH company Tata Sky.

Also read:

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