MANAGEMENT DISCUSSION AND ANALYSIS REPORT Industry Structure & development The Indian Media and Entertainment Industry witnessed a moderate growth in 2014. The industry grew from Rs. 918 billion in 2013 to 1,026 billion in 2014, registering a growth rate of 12%. Television sector grew from Rs.417 billion in 2013 to Rs. 475 billion in 2014, registering a growth of 14%. (Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2015) Total advertising spend across media was Rs. 414 billion in 2014 contributing to 40% of Media & Entertainment industry revenues. In light of the continued economic growth, advertising revenues saw a growth of 14% in 2014. On account of improving monetization due to digitization, in 2014, subscription revenues grew at annualized growth rate 16%. (Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2015) The FICCI-KPMG report further brdicts that the Media and Entertainment industry in India is poised to grow at a CAGR of 13.9 per cent. This means KPMG expects it to grow from Rs. 1,026 billion in 2014, to reach Rs. 1,964 billion by 2019. The growth in popularity of digital media continued to surge in 2014, with a significant growth in digital advertising of 44.5 per cent over 2013. Critical tax and regulatory interventions were critical for enabling growth. Digital media continued to show stupendous growth in 2014. India became the second largest country in terms of number of interest users. The digital advertising industry grew from Rs. 30.1 billion in 2013 to Rs. 43.5 billion in 2014- a growth of 44.5 per cent, driven by steady growth in ad spends across most digital platforms. It was another landmark year for the television industry in many ways. F.Y 2014-15 saw the formation of the viewership measurement system by Broadcast Audience Research Council (BARC). BARC is expected to deliver superior viewership data on account of more relevant classification parameters (NCCS instead of SEC), tracking of substantially higher viewership including rural households, as well as higher quality of data monitoring through audio watermarking of channel feeds. KEY POINTS 1. Supply: There are a total of 833 private satellite TV channels, permitted by the Information and Broadcasting Ministry, out of which 163 are pay channels. 2. Demand: In the electronic media, the highly fragmented viewership has led to an increasing brference for niche channels. 3. Barriers to Entry: In the electronic media, entry barriers are high for broadcasting since it is very capital-intensive. It involves the cost of leasing the transponder, setting up up-linking facilities, setting up br and post-production facilities. The barriers to entry are far lower for content providers. Besides, broadcasters themselves commission programs and fund their production. Hence margins are lower. In spite of the high barriers to entry a slew of channels across languages and genres have been launched in the recent past. 4. Bargaining power of customers: Relatively high in both print and electronic media the consumer finds a surfeit of players to choose from Conditional Access System (CAS) and DTH services now enable the consumer to choose the channels that he wishes to view; thereby increasing his bargaining power. The players in the electronic media can be classified into a three-link chain. First are the studios (Including the Animation & VFX), which comprise the hardware part of the industry, the second are the content provider and the Third link comprises the distribution trolleys, which includes the satellite and cable channels, multiplex theaters, MSOs and DTH Players. The Trends That Drive The Future The M&E industry is undergoing a seismic shift. The pace of technological change is accelerating so quickly that finding the right balance between addressing today's daily operational challenges and planning for the next big thing can be a struggle. Many M&E executives are so focused on the critical issues they need to address today that looking forward is nearly impossible. And yet, looking forward is what M&E executives need to do if they want to innovate, prosper and survive. The digital new media and E-Commerce are on a rapid growth and will set a new dimension for the M&E industry. Here are six emerging trends that we see as having the biggest impact on the future of television: 1. Storytelling will evolve to make better use of an omni platform environment. 2. Ubiquitous screens will demand greater content mobility. 3. Social dynamics and synergistic experiences will drive more event-based viewing. 4. Innovation in program discovery and television controls will drive new techniques to cut through the clutter. 5. Bingeing will drive more innovation in measurement and personalization. 6. New entrants demanding unique content will drive innovation beyond the traditional studio system. Risk and Concerns The company has to face shorter life span of programs due to non attainment of expected TRP. The emerging of new players has fragmented the time slots in the various producers due to that the existing business have been shared with lot of content creators. The Company operates in highly competitive environment that is subject to innovations, changes and varying levels of resources available to each player in each segment of business. The urge to compete and provide the best content to viewers/audience, it may not be possible to consistently brdict changing audience tastes. People's tastes vary quite rapidly along with the trends and environment they live in. In this makes it is virtually impossible to brdict whether a particular show or serial would do well or not. Hence, the company would have to incur high expenditure to provide an impetus on its programming to deliver up to the highest satisfaction level of broadcast and people from time to time. The increase in costs might not necessarily perk up its revenues in the same proportion. The management of the company is taking all measurable and effective steps to face various risks in its business that is common to our industry. The company is reviewing all risk factors periodically to cope up with same to avoid any negative impact on the business of the company. Segment-wise or Product-wise performance The Major segment of the Company's turnover is from production of TV Contents. Turnover of the segment Human Resources The Company's relationship with its employees continued to be very cordial and harmonious. It is the endeavour of the Company to improve and instill confidence in each of the employees and to improve their morale to move forward in their respective jobs with courage, conviction, dedication and commitment. The company provide healthy environment of working to produce best efficiency in term of result. Internal control system and their adequacy The Company has in place adequate internal control systems and procedures commensurate with the size and nature of its business. Our internal control system is designed in such a manner that financial and other records are completely reliable and authentic for brparing the financial statements. The management and independent internal auditor of the company also keep watch on the internal control system and consistently take necessary steps to further strengthen the internal control system and procedures of the company. Cautionary Statement Estimates and expectations stated in the Management Discussion Analysis Report may be "forward looking statements" within the applicable securities law and regulations. Actual results might differ substantially or materially from those exbrssed or implied due to the external factors, which are beyond the control of the Company. Important factors that could make a difference to Your Company's operation include the channels decision, changes in the government regulations, tax laws, statutes and other incidental factor. Acknowledgement Your Directors exbrss their apbrciation for the contribution made by the employees to the improvement in the operations of the Company. Your Directors also thank all the Government Agencies and Regulatory Bodies, Bankers, Financial Institutions, Stakeholders, Customers, Vendors and other business associates, who through their continuous support and co-operation have helped in your Company's progress. For and on behalf of the Board of Directors Creative Eye Limited Sd/- Dheeraj Kumar Chairman & Managing Director Place: Mumbai Date: 25th May, 2015 |