channel nine entertainment ltd management bonus Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS

A) INDUSTRY STRUCTURE AND DEVELOPMENT:

The size of the Indian media and entertainment industry will touch Rs.102,800crore in 2014 with an estimated growth of 11.8 per cent and is projected to grow at a healthy compounded annual growth rate (CAGR) of 15.2 per cent to reach Rs.1.66 lakh crore by 2017, says the FICCIKPMG Media and Entertainment 2013 report.

Besides adaptation to high-end digital technology, the entertainment industry is also witnessing rapid development of state-of-the-art studios and post production facilities.

The impetus introduced by digitisation, the continued growth of regional media, the upcoming elections, the strength in the film sector and the fast-increasing new media businesses offered a positive growth chart for the industry.

B) SEGMENTWISE PERFORMANCE:

We are dealing more on the animation front than the regular entertainment companies as we foresee further growth in this segment since Kids are always accompanied by their parents and the repeat value for the same is comparatively much higher.

C) OPPORTUNITIES/OUTLOOK:

Apart from making animation films we are targeting products at the children segment. This age-group is easier to please as they do not have any pre-notions about the products they view. Hence they form an excellent audience. Also all products aimed at this segment have a higher repeat value ensuring better sales in fields of home video and merchandise. If kids like one thing, they would repeatedly want to do the same thing time and over again.

We are using the best of hardware and software apart from specialized man-power. We aim at delivering traditional 2D animation 90 minute films in a span of 9 to 12 months which usually take 25 – 30 months. After the setup of our own animation studio which is one of the best in country in terms of human resources, hardware & software we can now undertake projects for other firms & individuals.

The Company is also in talks with various other media companies to foray more and increase its base into the television industry. With the launch of more television channels, there is an acute shortage of material to telecast increasing our opportunities to exploit better prices for our content.

D) THREATS:

Increased Payouts: With a view to produce differentiated content, the production cost has increased.

Consistency: Consistency of picture quality is essential to maintain targeted revenue.

E) DISCUSSION ON FINANCIAL PERFORMANCE:

The financials of the Company has prepared by ensuring the objectivity, credibility, and correctness through proper financial reporting and disclosure processes, internal control, risk management policies and processes, tax policies, compliance and legal requirements and associated matters.

F) RISKS AND CONCERNS:

CHANGE IN CONSUMER PREFERENCE RISK:

The content developed by the Company need not appeal the target audience always as the target audience preferences are bound to change. The level of creativity required for the audience targeted varies with the available options to the consumers.

ARTIST ATTRITION RISK:

The reason for which the Company’s content is preferred by the audience includes artist attrition also. These artists are an important part for the content produced by the Company.

TECHNOLOGICAL RISK:

Advancement of technology for creation of the picture is necessary with the new technologies being adopted by the competitors.

REGULATORY RISK:

The business may have a positive or a negative impact on the revenues in future due to changes in the regulatory framework and the tax laws as compared to the current scenario.

Management continuously monitors and makes efforts to arrest decline and adverse output on any of these factors.

G) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has customized accounting packages, which has built in security, which prohibits deletions and overwriting once accounting entry is passed. The Company has introduced checks at various levels to monitor the expenses.

H) HUMAN RESOURCES POLICIES:

Human capital is a very important asset in a media company. Over the years, the Company has built up a human resource structure, which has enabled the Company to grow and take up challenges. The Company has a qualified team of professionals.

I) CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis describing the Company’s objectives, projections, estimates, expectations maybe ‘forward – looking statement’ within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include economic conditions affecting demand / supply and price conditions in the domestic and overseas market in which the Company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors.