India is emerging as a strong market for the over-the-top (OTT) service providers. Increased access to affordable internet, consumer preference for ‘Original’ content, and the ability to carry exciting entertainment in one’s pocket devices have given the perfect boost to this setup. While the consumers are happy about the service offerings, and the edgy content that is coming their way, social activists, government agencies, and moral vigilantes find this unsettling. The concerns around regulation, potential use and abuse of the platforms and welfare of the presumably gullible consumers have ensued, resulting in legislative speculation.
Although several public interest litigations seeking stricter legislative regime have been filed in the past, the concerned agencies have chosen to defer to the extant framework. Interestingly, Telecom Service Providers (TSPs) also will for the licence regime to be applicable to the OTT players. Recently, a draft National E-Commerce Policy was released by the Department for Promotion of Industry and Internal Trade, bringing in a greater degree of uncertainty around the operation of OTT platforms in the country.
The draft policy defines e-commerce as “buying, selling, marketing or distribution of (i) goods, including digital products and (ii) services through electronic network.” Further, the draft policy also uses the terms ‘e-commerce’, ’electronic-commerce’, and, ’digital economy’ interchangeably. It is not far-fetched to presume that OTT platforms will be part of this wider scope. With this definition holding true, the OTT service providers will also be subjected to Press Note 2 (2018 Series) with respect to Foreign Direct Investment (FDI) in e-commerce.
To clarify, Press Note 2 does not permit FDI in inventory-based model of e-commerce. This is concerning, because Netflix Originals, Amazon Prime Originals, and Hotstar Specials, all focus on the creation and ownership of the content that they stream. Netflix became the first OTT player to foray into the space of providing original content streaming services when it acquired House of Cards in 2011 (show first aired in 2013). Since then, Netflix has been building on the Originals segment and has created a sizeable repository. This ownership of the content that they stream qualifies the OTT players as inventory-based entities, and so the draft policy delineates them from the marketplace-model which stands to benefit relatively.
All these platforms have made notable investments in creating original content and preserving exclusivity. Needless to say, a lot of the investment money comes from the parent companies, which are not domestic entities. This might no longer be the case, when the draft policy becomes the law of the land.
All these OTT players have introduced their Indian consumers to a lot of international content and have also invested heavily in sourcing locally created content to connect to their consumer base better. Several OTT players have also engaged with local artists for multiple projects, allowing them to appeal to a global market with relative ease. An embargo on the inflow of capital might result in considerable changes in content creation and delivery.
It can be expected that the players might have to move to a marketplace model, to ensure that they can avoid being covered under the scope of Press Note 2 and continue to benefit from FDI. A walkaround solution could be streaming of Original content across competing platforms, a tad bit too much to ask of OTT players for this nascent Indian digital economy. If the draft policy is effected as-is, the OTT players will find it difficult to stream the in-house productions/ Original content on their own platforms.
Along with the issues discussed herein, the implications around collection and processing of data will also add to the cost of compliance for the OTT players. Bringing in heavy-handed regulations will not be the best solution in the present case. Allowing the OTT players to innovate and compete freely will empower consumers with greater choices. As the current trade demonstrates, even home-grown OTT players are making efforts to bring home richer customer experience with original content.
Under the extant framework, where the OTT platforms are regulated under the Information Technology Act, 2000, and the rules thereof, amongst other claims, subjecting the sector to the proposed regulatory and governance mechanism will not bode well with the players. The harrowing uncertainty will continue to plague the concept of ‘Originals’ till an efficient course of implementation is charted for the draft Policy.
(Bagmisikha Puhan is senior associate and Abhishek Malhotra is managing partner at TMT Law Practice. The views expressed here are their own and Indiantelevision.com may not subscribe to them)
