MANAGEMENT DISCUSSION AND ANALYSIS REPORT
INDUSTRY STRUCTURE AND GROWTH
Indian film industry has witnessed the arrival of digital technology in cinema over thepast two-three years. Digital cinema replaces celluloid films with digital projection.Movies are filmed and then stored on digital media such as hard disks or servers. Theseare then distributed through physical media such as external hdds or are transmitted todigital cinema with the help of high-speed networks (satellite or optical fiber). Atcinemas, these movies are beamed using special digital projectors. This technology impliesseveral advantages for the film industry. The theater server has the capacity to storemultiple digital movies, thus allowing flexibility to run multiple movies even for singlescreen theaters. In addition, cost per copy of digital print-at inr 3,500-5,000- is muchless as against cost per copy of physical print, which stands at INR 65,000-70,000(excluding the cost of the projector). Moreover this streamlines the distribution ofcinema through satellite technology to geographically remote places. This reduces thescope of piracy and more number of people get to see the original print in lesser amountof time. The industry thus, could derive significant economic benefits from thedigitization process.
Indian M&E industry is largely represented by the country's music and films. Whereon one hand, the year 2010 saw structural shift from physical formats to digital ones, theyear 2011 witnessed a wider range of viable options for music consumption throughdifferent digital platforms, on the other. The Indian music industry registered a growthof 5 per cent in 2011 over 2010, achieving revenues of Rs 9 billion (US$ 158.66 million)in the year.
Hindi film industry is also getting experimental and international in its approach. Themomentum gained in 2011 is expected to continue in 2 012 wherein several high budgetreleases are lined up for viewers. The Indian film industry is anticipated to grow at aCAGR of 10.1 per cent to touch Rs 15 0 billion (US$2.63 billion) by 2016. The industry isestimated to have garnered revenues of around Rs 93 billion (US$ 1.63 billion) in 2011,reflecting a growth of 11.5 per cent vis-a-vis 2010.
Entertainment Industry in India has registered an explosive growth in last two decadesmaking it one of the fastest emerging industries in India. Television itself witnessed itstransformation from a single government owned channels to a medium telecasting more than300 national and regional channels. At present Indian film industry or Bollywood is aperfect combination of entertainment and commercial sector, producing close to thousandmovies in a year in various Indian languages. Indian film industry supersedes Hollywood interms of movie production quantity by more than three times.
As per the recent report by Price water house Coopers (PwC), Indians are likely tospend more on entertainment in the coming years with a steady growth in their disposableincome. And as per the combined survey report by KMPG and FICCI, the entertainmentindustry in India is expected to expand by 12.5% every year and is likely to reach US$20.09 billion by the year 2013.
2011-12 was described as the "year of recovery, interrupted." With a somberglobal outlook, sustained slowdown in Indian GDP growth, high inflation, elevated deficitsand low investor confidence, the current year has been testing for the Indian economy.While the GDP achieved of 6.9% was low as compared to that of previous years,comparatively it still put India in the top five economies of the world .In 2011, theIndian Media & Entertainment (M&E) Industry registered a growth of 12 percent over2010, to reach INR 728 billon, says the FICCI-KPMG report. Overall, the industry isexpected to register a CAGR of 15 percent to touch INR 1,457 billion by 2016. Music,radio, digital media are some of the other fastest growing sectors in the Indianentertainment industry. With the Indian film industry having recorded three billionadmissions last year and being boosted by public issues, especially at multiplex cinemas,huge growth was possible in this field.
The Indian movie lovers have handsomely contributed to the cause of Indian cinema,which is targeting not only the Indian diaspora but also international cinema lovers withthe potential to more than double its size in the next five years. The digital cinemaspace is also still waiting to be tapped to its fullest.
Like the rest of the world, in India too, the industry will have to contend with risingdemand for the digital experience. The digital experience goes beyond providing just goodcontent and includes providing it on the device of choice as well as on demand. Theindustry will also have to contend with the modernization across platforms as well as'devices, central to their existence. It is being increasingly recognized that the digitalexperience cannot be delivered without multi party collaboration. As a result, there is anupsurge in collaborative partnering-heralding the transformation of the E&M industryover the next five years into a digital collaborative ecosystem.
Your Company's mission is to best satisfy the customers' needs for digital delivery ofmultimedia information to all forms of display technologies which enhance the multimediaexperience, improve the multimedia communication and reduce the cost of bringing the bestquality multimedia display to the people.
SWOT ANALYSIS OF ENTERTAINMENT INDUSTRY
Media and Entertainment is one of the most booming sectors in India due toits vast customer reach. The various segments of the Media And Entertainment industry liketelevision and film industry have a large customer base.
The growing middle class with higher disposable income has become the strengthof the Media And Entertainment industry.
Change in the lifestyle and spending patterns of the Indian masses onentertainment.
Technological innovations like online distribution channels, web-stores, multi-and mega-plexes are complementing the ongoing revolution and the growth of the sector.
Indian film industry is second largest in the world and the largest in terms ofthe films produced and tickets sold.
The low cost of production and high revenues ensure a good return on investmentfor Indian Media And Entertainment industry.
Bollywood is no more a 'Made in India' brand; Bollywood has become aninternational brand having its global presence in Asia, Africa, Europe, America andAustralia.
Bollywood produces more than 1000 films per year and has more than fourteenmillion viewers who visit theatres daily to watch Bollywood movies all over the world.
Bollywood movies compete with Hollywood movies for their slots in theatres. Thevolume of Bollywood movies released worldwide has become twice the number of Hollywoodmovies
Bollywood gives employment to many lacks of people around the world.
The Media And Entertainment sector in India is highly fragmented.
When referring to "Value vs. Volume" growth, Bollywood has more volumeof movies released every year but very few movies get back their return on investments
Many movies fail to make even a little impact to the audience as the movierelease per month is very high
Repetition of story script and duplication of music tracks seldom makes peopleto lose interest for movies
Bollywood movies spoil the rich Indian values and sentiments and inflict wrongculture in younger generation's mind by influencing western practices and lifestyle.
Small producers can't shell out more money for their movie promotions andadvertisements
The concept of crossover movies, such as Bend It Like Beckham has helpedopen up new doors to the crossover audience and offers immense potential for development.
The increasing interest of the global investors in the sector.
Viewers for Bollywood movie are increasing every year
The overall Indian movie market is expected to grow at a rate of 14% YOY.
Ficci-KPMG report has mentioned in its report that the revenues from Media andEntertainment (M&E) would reach INR 1.3 Trillion by the year 2015.
Marketing in M&E has become very powerful with the help of viral marketing,for instance "Why this Kolaveri" was a straight away success.
Rapid de-regulation in the Industry
Rise in the viewership and the advertising expenditure.
Technological innovations like animations, multiplexes, etc and new distributionchannels like mobiles and Internet have opened up the doors of new opportunities in thesector
Piracy, violation of intellectual property rights pose a major threat to theMedia And Entertainment companies. Pirated CDs and DVDs impose a major threat for thisindustry.
Lack of quality content has emerged as a major concern because of the 'Quick-buck' route being followed in the industry.
Government and sensor board regulations are becoming high due to the increase ofadulthood and violence scenes in movies.
Movies are watched and shared across internet. Many movies face legal issues andthreats from political parties during their releases.
Negative reviews on websites and social media are major threats.
High rates of entertainment tax and lack of uniformity in levy structures acrossstates are inhibiting growth of film industry in India but it could be addressed throughadoption of GST. "Adoption of the goods and services tax (GST], subsuming service taxand entertainment tax, could promote growth of the film industry," according to theEconomic Survey 2011-12.
The Indian entertainment industry is on a high growth path. Domestic majors are findingbetter earnings potential in the huge overseas markets. At the same time, corporatizationis finally starting to emerge in this highly unorganized industry. This is likely toinstill a greater discipline in the functioning of the industry and lead to greaterconsolidation in the future. The domestic consumer will opt for more sophisticatedtechnology in the near future. Consequently, domestic majors will have to redefine theirproduct offerings.
With literacy levels forecasted to increase in the future, the publishing industry willcontinue to witness growth. Advent of new technologies such as e-book etc will take alonger time to have an impact on the domestic market when compared to the global markets.While piracy levels are declining slowly, better copyright laws and the rapidimplementation of the same are imperative to preserve the creative talent in thisindustry. The government needs to implement the same in order to facilitate the highgrowth in this industry.
The Indian Media & Entertainment (M&E) sector is a sunrise industry. Themomentum of spends on leisure and entertainment is higher than the economic growth, owingto favourable demographics and rising disposable incomes. With new media, or ratherdigital media, making a rage, the Indian M&E industry is standing at a new inflectionpoint.
Rise in digital content consumption, launch of innovative content delivery platforms,higher penetration in tier II and tier III cities, enhancing reach of regional media andregulatory shifts are major factors that are driving the growth of the sector. The entireM&E landscape is witnessing a shift; thanks to cable digitisation, wireless broadbandpenetration, increasing direct-to-home (DTH) penetration, digitisation of filmdistribution and growing internet usage.
Your Directors and Management always have the clear views to strengthen the base andconsistent future growth of the Company. The various steps were initiated in current yearof reporting or even in the previous year also to achieve the higher growth of theCompany. The Management has always strived to add more Services in its basket to make itgrand and to expand the Company's reach to most parts of the world.
For the past few years, your company has been working to capture the immenseopportunity of businesses involved in mobile communication. We would further like toinform you that your Company is taking sincere efforts towards growth and developments ofsuch projects and shall be able to add the outputs and benefits from these projects to themain course of business, very soon.
Apart from Digital Cinema, Your Company has focused on Digital Advertising. DigitalAdvertising is a way of promoting brands and products, using various online features. Withthe growing popularity of the Internet, customers began to form communities and discussabout the brands they are interested in. Today most customers either buy their stuffonline or consult a review website or community before making a purchase.
Your Directors by taking such prominent steps have always kept the generous thought fortheir shareholders and their successors to 'Building Tomorrows' for them.
DigiCine is technological version of conventional cinema. Technology improves thetheatrical entertainment experience from the existing boring to new heights of sensationalexperience. The technology developed and used by Interworld is an state of art for highexperience of Indian audience in all Indian climatic and environmental conditions. Theself-explanatory picture will give you a complete idea of Digital Cinema system.
Your company mainly engaged in the Services segment provides a variety of services tothe corporate and class of person. Our Services consists of the following:
Out of Home(OOH)
Digital & Social Media
360 Image Building
Services with Innovation
Mobile communication consisting of
* Mobile Marketing and advertising
* 3G Services and VAS services
* SMS Solution for Brokers and enterprises
* Web based Bulk SMS service
Our risk management approach comprises of three key elements, which are as follows:
Risk identification: External and internal risk events, that must be managed andidentified in the context of nature and its impact on business. These risk events areassessed by management and prioritized for development of risk mitigation.
Risk mitigation: This step comprises developing of a mitigation plan for the risksidentified and to be treated on priority.
Risk monitoring and assurance: Key risks are managed through a structure thatcascades across the corporate and business. At the corporate level, management isresponsible for the risk management process and reviewing the implementation andeffectiveness of mitigation plans.
INTERNAL CONTROL SYSTEM
Your Company's internal audit team comprises professionals, supported by regional teamsat our registered office and our corporate offices. In our company, regular audits ofoperational functions are conducted and quality team has been created for reviewing on aregular basis. This is supported by a team of external auditors whose reports are reviewedby the top management at regular intervals. Your Company has invested in adequate internalaudit and control systems. Operationally speaking, all key functions have an in-builtmaker checker concept.
Our internal control systems are adequate and provide, among other things, reasonableassurance of recording transactions of operations in all material respects and ofproviding protection against significant misuse or loss of company assets.
Your Board believes that to build a sound and growing business in a difficult andcomplex industry, Employees are vital to the Company. The talent base of your Company hassteadily increased and your Company has created a favorable work environment, whichencourages innovation and meritocracy.
The Company's Human Resource processes ensure building a competent team of motivatedemployees. It is the Company's first priority to enrich its employees by promotinglearning and enhancing their knowledge with special emphasis on internal and externaltraining. The proper synchronization between the goals of the individual and that of theorganization is a critical aspect and is delicately managed by the HR department.
The Company has stressed strongly on performance management linked to compensation. Torecognize and reward good performance, the Company has been successfully practicing theconcept of performance-based variable compensation. The reward and recognition system isduly followed through a performance appraisal system on an annual basis.
The Company is into single reportable segment only.
Statement in this Management Discussion and Analysis describing the Company'sobjectives, projections, estimates, expectations or predictions may be "ForwardLooking Statements" within the meaning of applicable securities, laws andregulations. Actual results could differ materially from those expressed or implied.Important factors that could make the difference to the Company's operations includecyclical demand and pricing in the Company's principal markets, changes in GovernmentRegulations, tax regimes, economic developments within India and other incidental factors.
| ||On Behalf of the Board of Directors |
| ||Sd/- |
| ||Man Mohan Gupta |
| ||(Chairman & Managing Director) |
|Place: New Delhi || |
|Place: 01.09.2012 || |