MANAGEMENT DISCUSSION AND ANALYSISThe Media and Entertainment industry worldwide is continuing to go through a difficultphase. Company's turnover and profitability also fell in such an adverse market scenarioregistering negative growth. The Management has continued its efforts to combat pressureson the bottom line and tried its best to maximize return.
The Media and Entertainment industry and PNC have enormous potential for growth and thegovernment has been supportive by exempting the temporary transfer of copyright relatingto original literary, dramatic, musical, artistic work and cinematographic films from thelevy of service tax in the Finance Bill 2012. The outlook on the Media and Entertainmentindustry is positive with digitization and telecom expected to provide a boost to theMedia and Entertainment industry and PNC is ready to play a significant role.
1. INDUSTRY SEGMENT-WISE PERFORMANCE, OPPORTUNITIES AND OUTLOOK
a. CONTENT
PNC continues to maintain its presence in almost all areas of the content business.With digitization and the telecom sector opening up a wide range of new delivery systems,Media and Entertainment industry's and PNC's opportunities to create and distribute newcontent products grow. New emerging mediums are set to enhance revenues of theentertainment business. Telecom companies are continuously bringing in new products forhandhelds. Broadband, IPTV and DTH subscriptions are growing exponentially.
The business dynamics of the Media and Entertainment industry continues to change.Indian content is finding appreciation and viewership worldwide. Imported content is alsoenjoying popular viewership in mainstream Indian cinema. PNC continues to maintain itspresence in this space with its content reflecting the youth's vision and aspirations.
The year under review was a period of caution. Active content production continued butabundant caution was exercised in every area of the business to ensure that losses wereminimized. Mobile Telecom Rights were licensed and the feature film Fatso was readied forrelease. To generate revenues PNC divested a share of the IPR in Fatso. PNC continuedconsolidating its production business. PNC also dealt in some content rights. PNC also gotempanelled with Rajya Sabha TV for 60 and 90 seconds spots/ quickies.
PNC will continue to focus on film content with several projects at advancedpre-production stage planned to move into production shortly. PNC aims to grow itspresence in the new emerging platforms for movie content to give brand PNC global reachand visibility.
b. WELLNESS
Moksh, The Wellness Place at Breach Candy, a wholly owned PNC subsidiary, expanded withlaunch of Moksh Zip, their new wellness facility located at Warden Road. Customer serviceoperations began in October 2011. It will continue to look for further expansionpossibilities, through the franchisee model to grow this well established product into achain of wellness places nationwide. Towards this PNC Wellness Ltd signed an agreementwith Franchise India, India's leading franchise developer and marketeer.
2. RISKS, CONCERNS AND THREATS
PNC's model of de-risking the content business by transferring risks to professionaldistribution partners is becoming difficult and a substantial part of the commercial risksnow remain attached to PNC at the time of release. Shifting audience tastes has also madethe market fickle and unpredictable with distributors unwilling to take risks by payingminimum guarantees upfront. PNC is therefore focusing on strategies for first recoveringits investment in content prior to or at the time its release. PNC however plays a vitalrole in designing the marketing and release of its films.
PNC continues its multi-product portfolio approach to minimize and manage the inherentrisks of the business. PNC is also constantly researching audience tastes and creatinginnovative products that can meet the challenge of changing audience expectations throughconstantly evolving technology.
3. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has adequate internal control systems in place. These systems constantlyassess and vet creative ideas. There is collective responsibility at every stage ofdecision making and a Corporate Leadership Team, which includes all the department heads,examines and clears each project for implementation.
4. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
The Company's financial performance viewed in the backdrop of the global slowdown isnot comparable with past years. PNC continues to make movies tailored to meet audiencetastes and expectations. The Company is focusing on returning to growth and profitability.
5. HUMAN RESOURCES AND INDUSTRIAL RELATIONS
The Company is continuously building its talent base. Its Corporate Leadership Team hasqualified and experienced members drawn from different specializations. The middlemanagement cadre is being developed. However, the Company, as a policy, sees its corecontent making business essentially as project management. It prefers to assemble talentteams for each content project and these teams are disbanded once the project is complete.The talent bank that PNC has access to remains independent and is available to PNC atshort notice.
The Company enjoys cordial relations with its employees and the talent that it hires ona project-to-project basis.
6. CAUTIONARY STATEMENT
Statements in the Management Discussion and Analysis describing the Company'sobjectives and expectations may be "forward looking statements" within themeaning of applicable securities laws and regulations. Actual results could differ fromthose expressed or implied.