GAAR? AAAAARGH!

On a regular basis, our business papers bleat about the terrible idea that is GAAR. Apparently GAAR is terrible for FII. (We will note in passing that the two, read in conjunction remind us about an intemperate cartoon feline).

Since I understand little or nothing of matters financial, I had thus far chose to avoid offering any commentary on this, undoubtedly, earth-shaking issue. This morning, however, I actually read such a piece talking about what it was. Turns out that GAAR attempts to ensure that FIIs actually pay tax on profits they realise from the conduct of market transactions in India. It doesn't matter that the tax be paid in India, mind. Even if they pay it in some other jurisdiction, and can prove this, they needn't pay in India. Now FIIs don't like that. Why don't they like it? Because (i) they would have to reveal the provenance of the money they are bringing in and (ii) they would have to reveal the destination of the money going out. Ok, so I'm not getting the technicalities exactly right and so on, but I am looking at it from my own position as a small participant in the financial markets. Here's what happens to me. FIRST my income gets taxed at source. Then I take my post-tax income and invest it in the market. Then, when this punt generates a profit, it gets added back to my income and I pay tax on it yet AGAIN. Unlike these nice FII people who need to be treated with special, super-soft, velvet gloves.

Let me remind you. We are talking about institutional investors here, not direct investors. These are NOT people who are building factories, setting up universities or research laboratories, bringing in new technologies, strengthening our roads, dams, ports or power stations. They are gamblers playing short term punts in the Indian markets. If they think the Rupee is going to harden against the dollar, they will happily buy Indian paper and exit it as soon as it delivers their profit benchmark. If they think Indian equities are going to take a hammering, they will not hesitate to sell short and cover as the markets tank. They are not putting money into the ground, which having gone in, takes a few years to start producing an yield, and what is more, is nearly impossible to liquidate and exit. They are putting money into electronic roulette wheels called NSE, BSE, NCDEX and so on where the cosmetic indicators called stock and commodity indices live. And this money is fungible. If it doesn't like the bed it is sleeping in, it simply goes and finds a nicer one. On the other side of the street. Or the other side of the planet.

And apparently, the only reason why the nice folks at FinMin are so keen to see these delicate darlings smile is because they help keep us nifty and sensexy.

Right then. Here's my rant. My money at least isn't hot money. I don't have the option of upping and picking up my stakes from the table and then storming out in a huff.Everyone knows where my money came from. There are no participatory notes behind which I can hide.

And that fully honest money is treated systematically worse than money that something called an MAD or BSM or KVM illicitly shuffles out of India and then shuffles back in wearing the impenetrable mask of an FII?

How is that a fair tax system? And how come no tax-compliant Indian has any problem with their  being treated systematically worse than dirty, volatile, foreign speculators?

And finally, can we please understand that their is nothing investment-like in FII money? Call it what it is. A gambler's stash.

Broadcasting and Brand Management

A young man who currently works in one of the Big Three television networks dropped by for some career advice last week. After graduating from business school he has spent almost five years at the job, the first two in Ad Sales and the next three in Marketing. He feels like he is beginning to stagnate and has raised the issue with his boss. Boss suggests that he move back into Ad Sales.

What would you advise him?

If he planned to be in the broadcast industry for the long haul, say the next decade, I suggested that he stay in Marketing. If it was just the next two or three however, he was likely better off shifting back to Ad Sales.

Seems cryptic? Hang on, we should soon see why.

Marketing’s role at most Indian broadcasters only comes in when all aspects of the channel, show or event have already been finalized. All that remains is to build awareness of the impending launch to try and ensure the quickest possible pace of sampling among viewers. Talented creative agency is called in and briefed. Wit, emotion, action and drama are poured in and out pops a striking, often award winning, campaign. All that remains to be done is splashing out a large sum on a media plan and the job is done.

If you learned your Marketing at one of the putative Universities of the discipline, P&G or Unilever or one of the beverage majors for instance, you would expect to lead, not follow the process and centre every decision at each stage on the consumer. It would probably offend you to be treated merely as a deliverer of advertising and media campaigns. Given the circumstances, you would want to shift closer to either the Content or the Ad Sales side of the business, where the action really was.

Things are going to start changing. As soon as July 1, 2012 actually.

For as long as we’ve had C&S TV in India, going on 20 years now, the biggest impediment in its expansion has been limited bandwidth due to analog delivery. With capacity of less than 70 channels delivered at indifferent resolution and scratchy audio, the biggest challenge before a channel is to get distribution at whatever cost. Once this hurdle has been negotiated, it enters a relatively limited range of options available in any given genre. The rest depends on casting as wide a content net as possible. Almost every channel tries to be all things to all viewers.

Mandatory digitization arrives in the big metros on July 1. In a fell swoop, channel choice is set to grow three-fold or more. Costs of distribution should fall rather sharply, removing a significant entry barrier and opening doors for many more content providers. Inevitably, the days of every channel wanting to be ‘One size fits all’ must give way to specific consumer needs driving product design. International channels already show this precision in proposition and content. Comedy Central makes no bones about what it stands for and will stay close to the promise. Fox has a whole portfolio of well-designed channels that identify and then single mindedly go after a tightly defined benefit.

And make no mistake. This is the direction where all of Indian television is headed; the era of the Marketing led broadcasting business.