“The definition of e-commerce, as defined by the current draft, will also be applicable to the press note 2. This is making the industry very apprehensive about what the policy means for services companies,” said a senior industry body representative, who did not wish to be named.
A DPIIT official said, “Netflix will be treated as FDI under the current rules as most of the production originates out of its US parent company.”
While e-marketplaces such as Flipkart and Amazon have managed to dodge the restrictions posed by the press note 2, arguing they operate only as a platform, OTT players find themselves in a more complicated position. Also, by the definition of services, even companies
such as OYO, Ola and Microsoft will be affected by the policy, sources said.
“Digital content in the form of TV shows, films and documentaries can be classified as the inventory of these OTTs and we have been informed that these businesses often own what they stream,” the DPIIT official quoted above said. This means that OTTs may not be permitted to stream their original productions in India.
Netflix has been very vocal about wanting to produce most of its projects in-house, instead of licensing content from other studios. Similarly, Amazon Prime makes content through its Amazon Studios arm, as do YouTube and Apple. India’s most downloaded OTT Hotstar was also reported to have earmarked a budget of Rs 120 crore for producing original content last year. These platforms license a host of content from different production houses, but original content gives them better control over their intellectual property.
Netflix, Amazon Prime, and Hotstar did not respond to a request for comment.
“If these platforms are working on a licensing model for what they are broadcasting, the content will not be treated as inventory. However, if they also own the content, the proposed e-commerce rules will also apply to them," said Atul Pandey, partner at Khaitan & Co. In addition, OTTs will have to adhere to data-localisation norms as specified by the e-commerce policy within a "three-year window from the date of policy coming into effect," Pandey added.
Another issue with OTTs, said a person who works closely with one of these platforms, is that there is no clear oversight authority. The regulation of content on these platforms has swung between the Information and Broadcasting Ministry, the Ministry of Electronics and Information Technology, and the Telecom Regulatory Authority of India.
"The (draft) policy uses e-commerce, electronic communications and digital economy interchangeably. This really creates definitional confusion as e-commerce is only a subset of the digital economy," said the person.
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Each agency has at different times tried to regulate these platforms for content, broadcasting, and economic regulations. The possible addition of OTTs under the e-commerce policy further complicates the scenario.
“The initial idea was that there would a comprehensive classification of goods and services available online before the draft e-commerce policy is made. While it hasn't been done yet, a list may be made after elections and entertainment services may be governed under specific provisions,” another government official said.
Hitting a hurdle
Apart from the big ones like Netflix and Amazon Prime, regional and homegrown OTT players such as Zee5, Alt Balaji, Hoichoi and Eros Now are becoming popular
Under the current draft e-commerce policy, OTTs may be barred from streaming original productions
E-com policy also deals with issues of intermediary liability and piracy, which have traditionally not been handled by DPIIT
Industry says bringing services under the purview of e-commerce makes it applicable to any business that operates online