A servant of the media oligarchies in India – a diplomat

Massive concentration and conglomeration is taking place in India’s convergent media landscape.

The decision-making process of the Competition Commission of India (CCI) is largely opaque and not evidence-based. This risks being perceived as a facilitator of media oligarchies. Nowhere is this more evident in the case of Reliance Industries Limited (RIL), an industrial group that has a presence in multiple markets of television audiences, television advertising and online video.

The response of successive governments to RIL’s gradual expansion in the media economy highlights the weaknesses of the existing regulatory framework.

This can be seen in the recent ones we are meeting RIL and the Indian arm of one of the world’s largest media conglomerates, Disney. Press reports they presented it variously as an acquisition, a joint venture and a merger. The main players – RIL, Viacom18 and Disney – called it a joint venture as they held around 16, 46 and 36 per cent stake in the new entity, respectively. However, it is actually owned by RIL as it has majority ownership in Viacom18.

The deal follows a decade of RIL’s expansion into the media and communications industry.

In 2012, RIL entered the television broadcasting market by acquiring two established multilingual networks, TV-18 and ETV. Thanks to this, it also became the owner of Viacom18, then an emerging player in the television entertainment segment.

In 2016, RIL entered mobile telecommunications with the launch of Jio. He benefited from the state not enforcing corporate disclosures, retrospectively changing policies and overlooking procedural violations.

After winning the mobile telecom license, Jio separated subscribers from incumbent telecom operators through “predatory pricing” – a commercial strategy that also took advantage from the regulatory magnanimity of the CCI.

RIL’s earlier acquisitions, though made in unorthodox way, did not pose a threat of market domination. In all language markets, there were competing networks with larger viewership shares in the news and entertainment segments.

However, the scenario announced by this latest agreement is completely different. It is estimated that among the 10 largest broadcasters in 2023, broadcasters belonging to Viacom18 and Disney together have share in viewership over 40 percent.

Regulatory response

Given the scale of the new plant and its implications for the media, it was expected that the CCI would be precise and transparent in its inquiries to the companies involved. Press reports claimed that the CCI asked RIL and Disney around 100 questions. Neither the questions nor the answers are publicly available.

CCI bulk order quickly concluded that the measure “would not result in any appreciable adverse effect on competition in India.” It was also recognized that “the precise definitions of the relevant market for assessing the proposed transaction may remain open.”

Concept relevant marketcrucial to competition regulation, it designates a specific ‘product market’ in which substitute offers, such as news services in a specific language or subscription-based online videos, compete; and “geographic market” – the territory in which comparable services are traded.

By refusing to clarify this issue in the RIL-Disney case, the CCI missed an opportunity to clarify a long-existing gray area in India’s complex, competitive and convergent media economy. This may be due to the time-consuming nature of this activity, lobbying obstructing such efforts, lack of internal capacity within the regulator and/or its inability to access the required data from companies.

Many spheres of domination

The merger heralds a high degree of concentration in the two most profitable television segments, entertainment and news. This will increase its influence on cable operators and enable direct use of the services of home operators.

As a result, the new combine would have market power in wholesale television distribution. It is unlikely that such a scenario would have no impact on the monthly fees paid by TV viewers.

Moreover, three online video platforms – Jio’s Jio Cinema, Viacom18’s Voot and Disney’s Hotstar – will be owned by the company, which will raise over 30 percent of the existing user base. This paves the way for RIL’s telecom arm, Jio, to bundle broadcast and native online video content produced by Viacom18 and Disney for its subscribers.

It won’t be a surprise if Disney TV shows and/or HotStar internet offers are offered by the combine at a higher price to subscribers of rivals Jio or some offers are offered exclusively to Jio subscribers.

Facilitating oligarchy?

Following CCI’s inquiries to the parties forming the joint venture, feedback from others in the industry and comments from the Ministry of Information and Broadcasting – details of which are not public – the combine proposed modifications to aspects of the joint venture. This was to ensure that the CCI did not initiate a detailed and lengthy investigation into the effects of this merger on the competitive environment.

Next detailed CCI reportdated late August but made public in late October, approved the joint venture with proposed modifications. However, this order does not meet the procedural, substantive and empirical requirements.

Surprisingly, it contains numerous rewordings of words, numbers and even entire sentences – without any explanation. In places they appear to mask details of the internal shareholding and/or indirectly owned subsidiaries of the companies involved; in other places, the income of individual entities is masked. Sometimes the names of the entities and subsidiaries involved are blurred.

This does not bode well for the institutional transparency and empirical accountability expected from a regulatory order.

One of the company’s proposals is to give up its presence in four television segments (Marathi and Canadian entertainment, Bengali films and children’s), in which the total market share of its broadcasters is over 40%.

While this sounds generous, there are still television segments in at least two markets (Hindi entertainment and Hindi films) in which the company has over 33% market share and its closest rival has 15% share. The CCI report is not convincing as to why this would not result in appreciable adverse effects on competition.

Importantly, these voluntary divestitures to offset market dominance were based on audience share. This ignores evidence regarding the advertising share obtained by the company. In recent years, Viacom18 and Disney together have amassed, by conservative estimates, a significant 45 percent share of total television advertising. CCI’s baseline analysis did not convincingly demonstrate the extent to which this could have an adverse impact on the competitive environment.

For example, such a large market share will give the combine disproportionate power in dealing with relevant parties: it can extract higher rates from advertisers and/or induce advertising agencies to lower their commissions.

In the online video market, it is clear that the new entity will have a large market share. The report estimates that the three in-connect video streaming platforms will generate approximately 40 percent of advertising revenues in this market, with each of its closest rivals averaging less than 10 percent.

RIL’s entry and behavior in the telecom industry has resulted in numerous changes in the industry. The recent consolidation of broadcast and online video services will change the converged media landscape.

This raises questions about equal opportunities and constraints for innovation in the competitive environment of one of the most dynamic media economies.

Originally published under Creative Commons By 360 information.