Between 2002 and 2006, Jean Tirole and Jean-Charles Rochet explored the platform markets in depth. Their work covered a range of industries that have platform markets — portals and media, credit card and debit card payment systems, and the Internet. This column will restrict itself to their contributions to the media market alone.
Mr. Tirole and Mr. Rochet were quick to point out that the demands from advertisers on the one hand and viewers or readers on the other can be very different. For instance, they point out, advertisers might desire that there be more viewers or readers while viewers and readers prefer less advertisements. This, they argue, could transform certain pricing policies that are clearly anti-competitive in a one-sided market into a highly competitive one in a two-sided market. For instance, they established that offering newspapers for very low prices might be a sign of predatory pricing if the newspapers’ source of revenue came from the readers alone. But it may be consistent with competitive pricing if advertising revenues play a major role.
The theory spelt out by Mr. Tirole and his colleagues makes immense sense in the media markets of the developed countries. In the U.S., cross-media ownership restrictions are imposed on the basis of the number of independently owned media voices in the market. The Federal Communications Commission (FCC) acts as a regulator. The U.K. model works on a different principle — restrictions there are based on influence, which prevent one person from owning different types of media over specified market share levels. Countries like Australia and Canada have a blanket restriction on entry into more than one or two media segments.
No restrictions in IndiaBut price wars in India can turn predatory quickly, as there are no restrictions in terms of cross-media ownership. In 2008, the Ministry of Information and Broadcasting asked the Administrative Staff College of India (ASCI) to study cross-media ownership. ASCI submitted the draft report in March 2009 and the final report in July 2009. The report found a pattern in the accumulation of interests and growing instances of cross-media ownership that included print, television, radio and even carriers like multi-system operators (MSOs) and DTH platforms. It used the Herfindahl-Hirschman Index to measure market concentration and the effect of competition in a market. It called for the formulation of cross-media restriction norms across print, television, radio, cable and new media after a detailed study of the relevant markets of each of the mediums. Not much happened in the form of follow-up action to the ASCI report while the Indian media scene underwent a profound change. Apart from cross-media ownership, India also witnessed both horizontal and vertical integration.
This in reality means that some of the dominant players can no longer invoke the logic of the platform market.
Paid news scandalThe issue of media ownership became a topic among policymakers when the ethical foundation of the news industry was rocked by the paid news scandal. This newspaper played a key role in exposing the paid news phenomenon. The Parliamentary Standing Committee on Information Technology’s 47th report tabled in the Lok Sabha on May 6, 2013 was an indictment of sorts for the media industry. It identified corporatisation of media, disaggregation of ownership and editorial roles, decline in autonomy of editors/journalists due to the emergence of contract system, and poor wage levels of journalists as key reasons for the rise in the incidence of paid news. It expressed concern that the lack of restriction on ownership across media segments (print, radio, TV or Internet), or between content and distribution, could give rise to monopolistic practices. It asked the Telecom Regulatory Authority of India (TRAI) to look into the matter and come up with a set of recommendations. The committee also urged the Ministry of Information and Broadcasting to take conclusive actions based on TRAI’s recommendations on a priority basis.
However, the Ministry had asked TRAI in May 2012, a year before the Parliament Standing Committee’s report, to evolve a comprehensive approach to balance the technological and business logic of vertical integration and cross media holdings with the need for pluralism and diversity and the need to protect the citizen’s right to credible choice and competitive pricing of the media he/she consumes. In August 2014, TRAI released its recommendations after many rounds of consultations with various stakeholders. It sought a regulatory framework that has two distinct segments: to preserve external plurality (diversity of ownership) and to ensure internal plurality (diversity of content) in the media ecology of India.
The defining element in TRAI’s recommendation is that it managed to look not only into the ownership issues, but also the “control” over media outlets. It reads: “There may be thousands of newspapers and hundreds of news channels in the news media market, but if they are all “controlled” by only a handful of entities, then there is insufficient plurality of news and views presented to the people. Thus, it is essential to know the actual number of independent voices in the market to determine the extent of plurality. Also, there are numerous ways by which “control” can be exercised over a media outlet. Therefore, it is imperative to clearly define what constitutes or can amount to ownership and/or control of a media owning entity.”
TRAI’s recommendation is rich in its analysis of what is wrong in the media. It documents the failures of the existing legal and regulatory arrangements. It looks at vertical integration in the media but fails to take note of horizontal integration. At the policy level, the recommendations have certain limitations and shortcomings.
(To be continued)
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