Decoding digital media and OTT content regulations
Premium- Blatantly unethical behaviour because of corporate rivalries has led to misuse of social media by enterprises
Digital media has blended content and technology effectively and has largely been unregulated with people being given complete creative freedom. The Indian audience has welcomed this wave. This consumption of content has also led to a growth in the number of over-the-top (OTT) platforms launched in India.
However, blatantly unethical behaviour because of corporate rivalries has led to misuse of social media by enterprises. The ministry of information and broadcasting has stressed on the need to regulate OTT platforms and digital media but the latter are worried about what sticky content could be on their platforms. The downside when there are no guidelines is that what consumers see is dependent on the whims and fancies of the platforms and the lack of accountability and transparency. Updated regulations say that if a government agency or individual objects to something controversial, it can be taken down. This could impact revenue for digital media and OTT platforms.
The media business is very IP-centric, with tech and content being forms of IP, said Tanu Banerjee, partner, Khaitan & Co. Hence, a lot of investment and diligence needs to be done around compliance. Protecting one’s IP would mean dealing with regulations properly and being aware. The tricky part, in terms of intermingling and interlocking, is that demarcation for regulations is not based on the platform but the activity that the platform is performing and most platforms perform multiple functions. What the legislation has missed is that everyone can’t be painted with the same brush and there can’t be something so divided in terms of compliance, Banerjee said.
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The place to which the IP belongs is important because it determines where its ownership is presiding, said Vinita Krishnan, Partner, Khaitan & Co. So, when an employee is rolled in, there are employee contracts or third-party content and service providers. Who has control over the IP is has to be agreed upon. If this doesn’t happen, the cost of moving the IP from the service provider or employee to the company creates tax implications. The nature of the licensing arrangement has to be seen clearly as to whether it’s just licensing or whether there is a sale of a copyrighted article. This is more relevant for foreign entities in software businesses. For a foreign entity, a pain point is the taxation of profits. From an investor perspective, one challenge is the tax risk for digital media companies, because if valuation is not justifiable, the tax loss allows the tax officer to tax the excess valuation in the hands of the Indian entity.
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