The unintended consequences of regulating User-Generated Content

India’s content and app economy is at a critical juncture. Policymakers have the opportunity to cultivate a digital market that leverages creativity, supports product development, and is globally competitive, writes Koan Advisory's Vivan Sharan.

By  Storyboard18Jun 24, 2024 5:56 PM
The unintended consequences of regulating User-Generated Content
The potential regulations also pose a threat to the evolution of next-generation digital products and devices that leverage UGC, writes Vivan Sharan.

By Vivan Sharan

Last week, the Ministry of Information and Broadcasting (MIB) initiated discussions on the potential regulation of user-generated content (UGC) under the Broadcasting Services (Regulation) Bill. This move follows recent meetings between social media and content companies and the MIB, sparking widespread concern about the impact on creative and free expression online. While it's crucial to address these concerns, the developments thus far reveal two surprising facets.

Firstly, it’s surprising that the conversation around the impact on UGC has gained momentum six months after the broadcasting bill was introduced for consultation. The public draft already contained broad provisions that threatened to subject UGC to TV-style content regulations.

Content creators who “systematically” produce “news and current affairs” for social media and other UGC services could find themselves bound by the same stringent adverting and programme “codes” as traditional TV broadcasters. These codes are content standards that go well beyond the restrictions on speech in the Indian Constitution. For instance, they prescribe that TV content should not “offend good taste or decency”. The vague definition of news and current affairs could also encompass a wide range of online commentary, stifling diverse voices and innovation.

More surprising still, is lack of discussion on the significant commercial implications of such content regulation for India’s app landscape. The true benefits of digitisation lie in the democratisation of content creation and distribution. Today, anyone can become a creator and reach a national audience at minimal cost, with most content consumed for free. Indians downloaded a whopping 26 billion apps on their smartphones last year, but revenues of the main app stores still added up only to around 25th in the world -- illustrating consumption preferences.

The low cost of creation and consumption, coupled with the proliferation of apps, has sparked a Cambrian explosion in India’s digital market. Imposing TV-style content regulations will stifle this creative surge, leading to formulaic content akin to TV’s current landscape, dominated by shrill news anchors and formulaic soap operas.

Secondly, India risks undermining digital product development, which thrives on low-cost, high-volume dynamics. Few premium consumer-driven apps have achieved significant scale. Consider the largest Initial Public Offerings of tech stocks like Paytm that commoditised payments, or even upcoming listings of companies like Meesho which operates a zero-commission, ad-driven marketplace. Similarly, in the content sector, scaling hinges on UGC.

In fact, the compression of digital economy margins in the years following the COVID-19 digital consumption boom has led global companies to adopt a broader approach to capture users and transactions, transforming specialised apps into "everything" apps. Twitter's (now X) rebranding under Elon Musk, with its new focus on audio, video, messaging, payments, and banking services, exemplifies this trend. In India, this aspiration is evident as giants like Tata and Jio vigorously pursue the superapp model. App diversification is here to stay, and nothing facilitates this better than UGC, which enables hosting diverse content at minimal cost.

Historically, online media has undergone cycles of bundling and unbundling, driven by individual creators and aggregators. Blogs and podcasts, once highly individualised, have found new life through platforms like Substack and Spotify. Similarly, YouTube’s UGC bundles benefit creators by leveraging established distribution channels. With close to three billion monthly active users globally and nearly 500 million in India alone, YouTube’s success highlights the potential of UGC. Imposing new liabilities on UGC services could disrupt this seamless cyclicality, stifling app innovation and growth.

The potential regulations also pose a threat to the evolution of next-generation digital products and devices that leverage UGC. Modern gaming and emerging technologies like metaverses already depend heavily on UGC for scaling. Meta’s expanding Quest universe leads this trend.

Constraining Indian content production online would also be inherently discriminatory, as it would be impossible to enforce these regulations on global creators, putting Indian creators and app markets at a disadvantage.

India has around three million content creators, with 1,50,000 able to monetise their content. Earnings vary, with micro-influencers earning around Rs. 20,000 per post and celebrity influencers earning up to 15 lakhs. UGC creators also have a discernible social impact. For instance, “Khan Sir” helps his 23 million followers prepare for exams through YouTube, while Instagram Reels enabled Bhagpat’s Nancy Tyagi to support her family and attend the 2024 Cannes Film Festival.

Global apps with vast content libraries will have an advantage over Indian players, who may be pushed out of the market, if they are liable for offending the “good taste” of the establishment of the day. Services with diverse slates and global content offerings will withstand greater scrutiny, but smaller, niche, India-focused services will suffer.

India’s content and app economy is at a critical juncture. Policymakers have the opportunity to cultivate a digital market that leverages creativity, supports product development, and is globally competitive. They must recognise the unacceptable risks that overregulating UGC poses to each of these goals. Simultaneously, organised industry groups should engage more actively with government to ensure better sense prevails. They owe individual creators.

Vivan Sharan is Partner at Koan Advisory Group. Views expressed are personal.


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First Published on Jun 24, 2024 8:12 AM

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