HuffPost India Shuts Down, Modi Govt's New FDI Policy for Digital Media Claims First Scalp

"It would be impossible for BuzzFeed, who bought HuffPost, to operate in India given the new FDI regulations," a company source told The Wire.

New Delhi: HuffPost India, the Indian web publication of the US-based digital media company, HuffPost, shut down on Tuesday after six years of operation, leaving the 12 journalists who worked there out of a job.

The closure is the first direct impact the Modi government’s new policy limiting foreign investment in digital media publications has had on the Indian media landscape. Under an official notification, FDI in digital media has been capped at 26% of equity. Media ventures with FDI beyond the limit have a year to disinvest. Until recently, there was no limit.

“It would be impossible for BuzzFeed, who bought HuffPost, to operate in India given the new FDI regulations,” a source in the merged company told The Wire.

The closure of HuffPost India followed the sale of HuffPost – hitherto owned by communications giant Verizon – to another US media company, Buzzfeed, in a deal that left two foreign extensions of the popular American news site – India and Brazil – orphaned for legal reasons.

In a Slack message to staff, Jonah Peretti pointed to Indian FDI restrictions. “The India team was surviving with a grace period. Verizon Media would’t have been able to own them for much longer either. Foreign companies aren’t allowed to control news organisations and BuzzFeed India can only operate because we are a culture and entertainment property”.

John Peretti, BuzzFeed editor’s message to staff. Source: Twitter/@maxwelltani

On November 24, HuffPost pulled the plug on the Indian and Brazilian editions. Indian visitors to the site, huffingtonpost.in, were greeted with a terse message saying HuffPost India “will no longer be publishing content”.  Though none of its earlier content is available anymore.,The Wire understands that the entire Indian archive is in the process of being redirected to HuffPost.com.

On Tuesday, Huffpost’s Brazil site displayed a big thank you to its readers, along with its editor’s note highlighting the site’s most important stories.

Home page of HuffPost Brazil

While the FDI cap and regulatory uncertainty in India sealed HuffPost.in’s fate, Peretti’s note explains that the closure of HuffPost’s Brazil site was linked to BuzzfFed’s prior decision to license out BuzzFeed Brazil to a local company and a no-compete commitment that went along with that license.

Huffington Post India Private Limited was incorporated as a subsidiary of a foreign company in 2015 with authorised capital of Rs 6.5 crore and paid up capital of Rs 3.15 crore.

Under a recent government order, the owners of the company, Verizon, would have until October 2021 to reduce their shareholding to 26%. With the site shut, it is not clear what will happen to the company and its assets.

Tilting at digital windmill

Ironically, while the Modi government’s new rules target companies, nothing prevents HufffPost’s new owners from running an Indian edition on the existing HuffPost.in URL directly as a venture of the parent company and hiring journalists in India to produce news content. Since there would be no India-based company involved, there would be no FDI rules to follow.

FDI rules for physical media products can act as an effective entry barrier since newspapers and broadcast television require a territorial presence – to print and distribute copies or uplink/downlink satellite signals and have them physically distributed through a cable TV network.

When it comes to digital media, however, a foreign owned company can publish a news website from offshore and have it accessed by Indians regardless of what India’s FDI rules say. Of course, the FDI rules would affect the ease of doing business: certain commercial aspects of the media business like ad sales would be harder to exploit from offshore but if the audience is large nothing prevents foreign media companies from hiring sales staff in India either or contracting an Indian agency to do the job.

Among the major stories HuffPost.in broke was a series on the lack of transparency in the Modi government’s decision to launch electoral bonds as a means of political financing and how the concerns of the Reserve Bank of India were overruled.