NEW DELHI/MUMBAI: Walt Disney has got caught in the battle of swadeshi vs videshi as far as government permission for the Disney Channel is concerned in India. Its Indian partner, the KK Modi group, has invoked its right to say no to a no-objection for a Disney subsidiary in India for the kid's channel.
Citing Press Note 18 (which states that a foreign company ought to have a no-objection for a wholly-owned subsidiary, operating in the same or related areas, from its Indian joint venture partner if it had one), what the Modis have argued is that Walt Disney's proposed wholly-owned subsidiary was in direct conflict with the existing joint venture and so a no-objection could not be given unless Disney agreed to partner with them again for the kids channel also.
Walt Disney, the second largest media company in the world after AOL Time Warner, has a 50:50 joint venture company with the Modi group. This JV - Buena Vista - is a TV, software, production and distribution company and holds the rights to Disney products in India. One of the arguments that Disney had put forth was that apart from the existing joint venture, its earlier agreement with Modi Entertainment Network, another Modi group company, was for a free to air Disney channel. Now that Disney proposed to bring the kids' channel as a pay-per-view channel, the whole business plan has undergone a change and, hence, the Modis should have no objection to issuing an NOC.
Lalit Modi, president and managing director, Modi Enterprises, however, says the status of the matter was clear in April itself, which was when the information and broadcasting ministry had indicated its thinking on the issue. Still, Walt Disney can re-apply for permission from the government after making changes in its application, according to government officials.
Queried as to what could be the fallout of all this and whether this put paid to the possibility of Disney launching its 24-hour children's channel in India, Modi said that the two sides could still sit across the table and come to some agreement. Modi said the subject would be discussed in the next meeting between the JV partners. According to Modi, the situation at this juncture was that if Disney wanted to bring its channel bypassing the existing agreement, then it would have to either buy out the stake of the Indian partners or else air non-Disney software on any channel it might bring into the country.
For the time being therefore, The Disney Channel (TDC) has hit a roadblock, as reported in the Hindu Business Line today.
This comes almost a year after the company moved the Foreign Investment Promotion Board (FIPB) in October 2001. Though an initial go-ahead was received from the Department of Industrial Policy and Promotion (DIPP) in January this year, a final decision against the proposal was reportedly taken only last week.
The FIPB, under the DIPP, was informed by the Ministry of Information and Broadcasting (I&B), the administrative Ministry in this case, that it cannot support Walt Disney's proposal to launch The Disney Channel.
According to government sources, the I&B Ministry's decision was taken after consideration of the guidelines issued by the Ministry of Commerce, including Press Note 18 of 1998.
The Indian partners have been opposing Disney's proposal for setting up a 100 per cent subsidiary and launching of Disney Channel on grounds that the businesses of the existing joint venture company and the proposed wholly-owned subsidiary are similar. The US company has, however, refuted this.
Earlier, in January this year, FIPB had permitted Walt Disney to launch the Disney Channel with riders that the new wholly-owned subsidiary will not be permitted to undertake activities that is already being undertaken by the joint venture company.
Walt Disney later made representations against the riders which were forwarded to the I&B Ministry for its comments.
