Adopt a self-regulation model for tech industries
Allow the online entertainment industry to govern itself. It will sustain creativity, ensure growth, boost revenue
Government interventionism, long the default regulatory approach, is falling out of favour in India. A chapter in the Economic Survey 2019-20 recognises that the country is still “among the shackled economies in the world”, and examines the distortionary impact of government intervention across domestic markets. For instance, it cites experiences of government regulation in agricultural markets to suggest that interventionism cannot be the default approach to public policy. Government intervention may also undermine wealth creation — the new governance mantra echoed in the Economic Survey. This thought is especially applicable to regulatory discussions on emerging technologies.
Consider the brief history of the unregulated video game industry, which introduced new technologies to vulnerable young people. In 1993, United States (US) senators conducted hearings to address societal concerns on violence in video games. Mortal Kombat, a popular video game, had introduced technology to “enhance realism”, allowing graphic depictions of violence. Senators criticised the industry’s lack of consumer outreach and non-standard ratings. They also introduced a Video Game Rating Bill. Industry majors like Electronic Arts, Nintendo and Sega formed the Interactive Digital Software Association (IDSA), which subsequently established an Entertainment Software Rating Board (ESRB), a self-regulatory organisation. As a result, there was no need for the Video Game Rating Bill.
Today, ESRB is well known to parents and children alike. A 2019 survey on parental awareness and use of these ratings in the US found that 87% of parents who purchased physical copies of games were aware of the ESRB ratings. Seventy seven percent indicated that they regularly checked the ratings before they bought new game. This bolstered the US Federal Trade Commission (FTC)’s 2013 finding that ESRB had the highest in-store ratings enforcement of all entertainment industries, which included film, home video and music. Most video game publishers submit new releases to ESRB, and major retailers seldom carry games that are not certified by the organisation. The European industry, inspired by these developments, set up its own self-regulatory body.
India’s entertainment sector today finds itself at a crossroads just like the US gaming industry did in the mid-90s. Technological growth is driving the evolution of several segments of the audio-visual industry. It is also responsible for the emergence of new segments such as eSports and online gaming. Culturally, this media expansion brings with it new challenges and concerns centred on the interests of children. These range from exposure to age inappropriate content on entertainment platforms, to economic exploitation via in-app purchases in games.
In this context, what is an appropriate regulatory approach? Overbroad regulatory restrictions stifle creative expression. This is regularly seen in the case of movie censorship in India. Interventionism also puts at risk nascent industries that are growing at double digits, and exhibit unlimited investment and employment potential. The online gaming industry engages over a quarter of a billion Indian gamers. It’s expected to touch a billion dollars in revenues this year. Similarly, the online video entertainment market caters to the entire base of around half a billion broadband users. This home-grown industry will soon be counted among the top 10 markets globally in terms of total revenues.
Self-regulation is useful because it fosters responsibility without diktats that hamper growth of new industries. The key is to allow technology industries, which demonstrate willingness to contain societal harm, to govern themselves in a transparent manner. This approach, where governments and industry act cooperatively has been effective in the past, not least in the ESRB example above. These services are online and direct-toconsumer and can engage with the people who use them. This makes them wellplaced for greater trusteeship. They also have the ability to act on feedback which can improve content recommendations and quality.
Nobel laureate Richard Thaler’s work on “nudge theory”, where positive reinforcement and suggestions are used to influence individual and group decisionmaking, is ripe for implementation in this ecosystem. It lies in between a laissezfaire approach and a prescriptive path to influence decisions. Standards can nudge consumers towards making informed choices. At a time when home-grown digital entertainment businesses are competing in global markets, self-regulation can also nudge industry to adopt best practices followed worldwide. This can ensure competitiveness in a cut-throat international trade environment, where high standards can become barriers if industry struggles to keep pace.
India’s ambitions for a $5-trillion economy and beyond will require a willingness to remove the post-colonial impulses of a nanny State and enter an era of collaborative regulation. The government has shown an inclination to recognise the role of technology-driven businesses to achieve this objective. It must now manifest this recognition in the form of regulatory forbearance and trust industry’s ability to maximise consumer welfare.
SELF-REGULATION FOSTERS RESPONSIBILITY WITHOUT DIKTATS THAT HAMPER GROWTH OF NEW INDUSTRIES. THE KEY IS TO ALLOW TECH INDUSTRIES TO GOVERN THEMSELVES IN A TRANSPARENT MANNER