Today's Top Gainer
Note:Top Gainer - Nifty 50 More
A. INDUSTRY STRUCTURE AND DEVELOPMENT
During the current year 2018, the Indian Media and Entertainment (M&E) sector reached INR1.67 trillion (US$23.9 billion), a growth of 13.4% over previous year. With its current trajectory, we expect it to grow to INR2.35 trillion by 2021 (US$33.6 billion). The M&E sector is seeing the fruits of continued economic growth and Indias rising per capita nominal GDP which is estimated to have grown by 10.6% in 2018, a five year high growth rate. According to the FICCI-EY Report 2019 (the Report), the M&E Industry is expected to grow at a CAGR of 12% to Rs. 2,349 billion over the next three years, with growth in all the segments.
The M&E sector continue to show great potential and we can expect to see stable, sustained growth over the next few years. Indias thirst for knowledge and escapism will ensure the M&E product remains a necessity. Digital consumption will grow and monetization avenues will see great innovation increasing power availability in rural and small towns, India is growing to boost television viewership. Though rising speculation of global recession is not factored into this growth projection.
INDUSTRY SIZE AND PROJECTION Television
With more than 880 TV channels and over 17,000 newspapers, the country is one of the most diverse and vibrant media markets globally. Yet the headroom for future growth is significant. Advertising, the lifeline of Indias M&E industry, remains amongst the lowest in terms of spend as a percentage of GDP. As per Ministry of Information and Broadcasting (MIB) website, the number of channels in India increased to 885 in 2018, of which 43% were news channels.
India is the second largest Pay -TV market in the world in terms of subscribers after China, with 197 million TV households growing at 7.5% y-o-y. While the size of the Indian Pay-TV market in terms of revenue is smaller than its peers, the runway for continued growth provides exciting opportunities for global players.
|Film & Entertainment||156||175||194||236||10.6%|
|Animation and VFX||67||79||93||128||17.4%|
|Out of Home Media||34||37||41||49||9.2%|
All figures are gross of taxes (INR in billion) for calendar years I EY analysis
While television will retain pole position as the largest segment, digital will overtake film entertainment in 2019 and print by 2021.
Television grew 12% in CY 2018 to reach INR740 billion. Growth was led by a 14% increase in advertising revenues and an 11% increase in subscription revenues. We expect growth for the segment to average 9% over the next three years, taking this segment to INR955 billion by 2021. Advertising comprised 41% of segment revenues in 2018 and this is expected to reach 42% by 2021.
During the year, television increased its reach and engagement with the audiance, retaining its position as the default entertainment medium for Indian customers. Growth in online vedio consumption accelerated, helped by the increased availability of affordable data and content on digital platforms.
As per TAM AdEX, there were 10,962 advertisers and 16,857 brands on TV, of which 5,382 advertisers were not on print or radio. While ad insertions increased 15% in 2018, ad revenue grew 14%. Regional advertising outpaced national adverting growth on the back of national brands spending more to grow non-metro markets where GST had created a level playing field between national and regional brands. Advertising, the life line of Indias M&E industry, remains amongst the lowest in terms of spend as a percentage of GDP. In this conductive, macro environment, the emergeie of new advertising categories, increasing share of organised sector and tapping of SME advertisers will drive sustained growth in ad-spends.
Top 10 channel genres contributed 46% share of advertising volumes on Tv
The top 10 channel genres accounted for 47% of total advolumes of these, 30% of all advolumes were on Hindi channels. Hindi movies was the top channel genre with 9% share of ad volumes during 2018.
FreeDish generated an estimated INR20 billion of advertising revenues. In February 2019, large broadcasters removed their channels from this medium and this could impact our ad revenue forecast by INR10- 20 billion in 2019.
Our long-standing relationship with our distribution partners enables us to reach customers and monetize our viewership effectively. As an important stakeholders in the development of Indian broadcast industry, BAG has an in-depth understanding of consumers and intricacies of distribution.
Television owning households increased to 197 million, which is a 7.5% increase over the previous Broadcast India survey. During the same period, total Indian households increased 4.2% to reach 298 million. Correspondingly, TV penetration increased to 66% in 2018 from 64% in 2017. Bihar and Jharkhand showed highest growth in television households on the back of Indias drive towards electrification.
TELEVISION HOUSEHOLDS IN MILLIONS : BARC, EY ANALYSIS
Bihar and Jharkhand showed highest growth in television households on the back of Indias drive towards electrification. According to BARC, 31% of TV viewing households had paid DTH, 13% had free DTH and 44% had digital cable.
The time spent increased marginally to 3 hours 46 minutes per day, led by megacities, which had 4 hours 32 minutes and south markets, at 4 hours 14 minutes. Around one trillion man minutes were spent per week on television, which is at an all-time high. While 53% of total content consumed was on general entertainment, another 24% was on films. News viewership remained at around 7% despite 43% of TV channels in India being classified as news channels.
Viewership growth was led by regional channels, with the highest growth being recorded by Oriya (34%), Assamese (26%), Marathi (25%), Bhojpuri (22%) and Urdu (20%), that compared to a 15% growth for Hindi and an overall growth of 13%.
This number indicates a 15% growth over 2016 and has contributed significantly to the growth in end-subscriber pricing. HD channels grew from 78 in 2017 to 92 in 2018 (18% growth). HD viewership has grown at the rate of 57% in CY 2018 to reach 874,000 impressions.
Broadcaster share of subscription revenues increased to INR110 billion. This is around 25% of the total ground collections. However, once the subscribers migration from old tariff regime to the new tariff order regime is implemented across India, the broadcasters share is expected to go up significantly, especially from cable subscribers.
Wrestling generated the most impressions on TV, overtaking cricket, though cricket led with 69% of total viewership. Volleyball more than doubled its viewership. Together, wrestling, cricket and kabaddi contribute to over 50% of all sports viewership. Football continued to remain out of the top five sports, coming in at number seven overall.
Large broadcasters continue to keep their content off FreeDish, television advertising revenues would be impacted and FreeDishs future will be determined by the number of new channels which come on the platform. We can expect more regional, news and niche channels - particularly those impacted negatively by the TRAI order - to try building audiences through FreeDish subject to auction base prices being feasible.
Television broadcasters will focus on customer database creation and experiment more with combined selling of impact properties across TV + OTT platforms. The measure for the industry will become ad impressions, with the CPM rate being a function of the quality of the audience and closeness to purchase points. We can expect to see data being used to upsell channels, sell sports and niche channels, as well as provide segmented audiences to advertisers, which should increase advertising rates.
Indian broadcasters will continue to expand their global footprint, either on their own platforms or through partnerships with telcos and international OTT platforms, to target not just Indian diaspora, but global audiences interested in Indian content. International revenues could reach 15% of the top line by 2021.
Broadcasters have started combined selling of ads across OTT and linear platforms. This enables better monetization of marquee properties, and increases utilization of digital inventory. Advertisers can provide separate messaging to segmented audiences and also enable trails, sales and connect with viewer. We believe this will be the trend going forward for flagship properties across fiction, nonfiction and sports.
Radio grew 7.5% in CY 2018 to reach INR31.3 billion, taking its share in total advertising to 4.2%. Growth was driven by a 3% ad volume growth, inventory growth from newly operationalized Phase-III stations and non-FCT revenues from digital, content production, events, etc. India reached 386 operational private FM stations. 47 new radio stations were operationalized in 2018 across 35 cities, taking the total private FM stations count in India to 386 India.
There were over 10,467 advertisers on radio comprising 13,710 brands. 4,262 advertisers were on radio, but did not advertise on TV or print. Services, retail, food and beverage, auto and BFSI were the top five categories advertising on radio, with services comprising 30% of the total volumes.
In addition, AIRs home service comprises 420 stations today located across the country, reaching nearly 92% of the countrys area and 99.19 % of the total population. AIR originates programming in 23 languages.
Private FM was finally permitted to air news, but only in the form or replays of news broadcasts created by Prasar Bharti, without any modifications. No such restrictions exist on other media like television, digital or print in India.
Digital media grew 42% in 2018 and continued to grow at a fast pace, across both advertising and subscription. In 2018, digital media grew 42%, with advertising growing by34% and subscription growing 26%. Subscription, which was 3.3% of the segment in 2017, increased to 8.4%in 2018.
The number of wireless subscribers grew from 1,167 million in December 2017 to 1,171 million in November 2018. This growth primarily came from rural subscribers who grew from the number of active wireless subscribers grew by just 15 million from 1,015 million in December 2017 to 1,031 million in November 2018. However, there are several subscribers with dual Sims, and the number of unique subscribers is estimated at 650-700 million. The tele density number in India is now 91%.
Rollout of fiber to the home and 5G services will improve connectivity from 2020 onwards. This could prove beneficial for video consumption, particularly for longer form content and sports, across cities and rural markets.
Smartphone penetration in India grew to 36% of total phones in 2018, up from 33% in 2017 and is expected to further increase to 39% in 2019. By the end of 2018, there were 340 million smartphone users in India and this number was expected to reach 373 million in 2019 and 442 million by 2022. This is around 14% of the worlds smartphone market. Paradoxically, 35% of the country does not own any mobile phone yet.
A study by the Omidyar Network indicates that Indians spend 30% of their time on mobile phones on entertainment, second only to social media. However, in terms of data, they use upwards of 70% on entertainment. Increased app downloads also resulted in more time spent on apps, with the highest growth being seen in the top 20 music apps - a growth of over 42% in time spent.
Online news subscribers grew between December 2017 and 2018, to reach 245 million, across mobile and desktop users of news sites, portals and aggregators. This is approximately 43% of internet users at the end of 2018. The time spent per user per day on news is around eight minutes. Highest growth was seen in non-English consumers of around 40%.
The key for revenue growth will therefore be innovation around new ad formats, voice search and transactions, better targeting, regional language content, focus on performance advertising, premium content, etc.
BAG MARCHES AHEAD
BAGs production house holds the unique distinction of producing programmes of all genres for a range of channels and audience. Realizing the potential in digital market, we have intensive plans to produce for digital platform.
We plan to create and deliver popular, high-quality programming for catering to not only domestic but also to the demands of international viewership and expect to earn high returns for its stakeholders. We have a strong presence in Hindi General Entertainment Channels (GECs) and Regional GECs across India. We have demonstrated an exceptional ability to consistently create high quality content to excite the Indian audience.
We realized that to scale up in a meaningful way, we would need to make, own and broadcast our own content and be present across the entire value chain of the media and entertainment industry.
We will continue to focus on creating more high impact content for the daily shows as they are more economical and profitable. We produced successful programmes like, U Me aur TV, Jaal, 100Shahar 100 Khabar, Sanjeevni, 5 Ki Panchyat, Aaj Ka Agenda, kalchakra and Jago India, Amne Samne, Sabse Bada Sawal, E
Special, Its Controversial across different channels and strengthened its presence.
As times change, the world-view of people also changes. By aligning ourselves to the aspirations of evolving audiences, we strive to deliver content that grips and entices them. Our legacy is of our stories, expressed to viewers in the most appealing of ways. We continue to deliver the same as we understand what ticks, placing our creative zeal in all that we do.
News24 Broadcast india Limited
News24, a 24 hours National Hindi news channel operating through one of its subsidiary, i.e. News24 Broadcast India Limited has been very well received by the audiences. It is available throughout India on cable and DTH platforms.
Programs like National News Centre, Aaj Ka Raaz, Aamne Saamne, Sabse Bada Sawal, News Shatak, Itihaas Gawah Hai and 100 Shahar 100 Khabrein, Panch Ki Panchyat, amongst others cover a gamut of genres in news reporting and have been received exceptionally well with the audiences across the nation. "Sabse Bada Sawal" and "Aamne Saamne" are most liked program on News 24.
These shows continue to reflect the innovative ways of reporting news that has given the maximum viewership and rating to our channel making its marked presence felt in the whole Media Industry. During the year, News24 organized conclave on different places in India in the name of "Manthan" to cover all segment of current affairs. Special focus has been placed on holding more and more events at different locations across different States. These events have not only added to revenue streams but also added value in brand recall and better marketing.
E24 Glamour Limited
E24 a 24 hours Bollywood Entertainment channel operating through its subsidiary E24 Glamour Limited has seen strong growth.
E24 managed to attract audiences of all age groups and succeeded in creating a new genre in television entertainment. The channel had not only successfully been able to entertain its audience but had also been educating the youth by sending important messages and uplifting the lifestyle up-to to the global standard at same time not forgetting its culture and traditions.
In the past, E24 launched a slew of new shows while continuing with its flagship shows like Bollywood Reporter, E Special, its Controversial, Breaking Beats, E review and U Me & TV, thus strengthening its programming line-up further.
However, rapid growth of digital platforms has hit the growth of music based channels, forcing most of the players in this segment tore strategies their content and sales pitch. The sales growth of the channel remained negative impacted us various extra mess factors such as GST implementation, piracy and onslaught by digital music players. We plan to get overthis de-growth in the coming year with a different road map.
Skyline Radio Network Limited
Your FM radio station, on frequency 106.4 in the name of "Dhamaal24 - Har Khushi hai Jahan" is now the voice of the regions and its many shows are household names in all ten cities where it is operational i.e.Hissar, Karnal, Patiala, Ranchi, Muzaffarpur, Dhule, Jalgaon, Ahemednagar, Simla and Jabalpur.
Dhamaal24 believes that life must be lived to the fullest and celebrated. Dhamaal24 is a channel with a slice of life and approach to the infotainment & entertainment programming. Various programming are purposely aligned for maximum listenership. Our content entices regional listeners.
Your Company has also revamped its radio station Dhamaal24 with revitalized, novel and popular shows like Dil Ke Mareez Hazir Ho, Zindagi Live, Zara Hat Ke Zara Bachke, Omkar, Yad Kiya Dil Ne, Aamne-Saamne, Gee Se Gee, Good Morning, AGOG, Bollywood Reporter, Bollywood Flash Back and Back to Back are aired on Dhamaal24 keeping the regional flavor in each of its programmes offered to its listeners.
B. OPPORTUNITIES AND THREATS
Your Company has a diversified business model in media and entertainment sector and the revenue is expected to come from various segments across various levels of the value chain. The diversified business model of the Company will provide scalability apart from spreading the risk profile of the overall business. The key focus areas would continue to be (1) Television content (2) Broadcasting services (3) FM radio.
Opportunities for Indian Media Industry
Increase in per capita income and growing middleclass;
The expansion of overseas market is expected to drive growth;
Rise in acquisitions of digital content by over-the-top (OTT) platforms;
Increase in regional content depth will uplift the regional markets;
Upcoming regulations that can impact the industry
Industry players are facing various issues due do ambiguity in tax laws, conflicting ruling and retrospective amendments. Some of the key expectations are clarity on applicability of provisions relating to withholding tax (WHT) on various expenses (placement fees satellite transponder payments, discount on set-top boxes, etc.) extending benefit of set-off and carry forward of tax losses, taxes on acquisition of copy-rights on content, etc.
Withholding Tax (WHT) on Various Payments by TV channel companies
Television Broadcasting Companies make significant payments to software production houses towards production of TV programmes. They also pay placement/ carriage fees to DTH operators, multi system operators and cable operators toward placement/carriage of the channels. Broadcasters are of the view that such payments attract WHT under section 194C of the Income Tax at the rate of 2%. However the tax authorities contended that such payments are liable for WHT at 10% on the premise that the payment are towards technical services/royalty. This has resulted in protected litigation.
Taxation on Advertisement Revenues
Under Income Tax Act, 1962, Advertisement Revenues of Foreign Telecasting Companies (FTCs) are taxable in India in case a FTC has a business connection in India. In case a FTC operates from a country with which India has a treaty, the advertisement revenues will be taxable in India only if the FTC has a permanent establishment in India. The taxability in such cases is only on the income which is attributable to the permanent establishment/ operations carried out in India. The circumstances in which FTCs constitute a permanent establishment/ business connection in India and the determination of income attributable to such permanent establishment/ operation carried out in India, continue to be continuous issues between FTCs and the tax authorities.
General Anti-Avoidance Rules (GAAR)
Finally, India is going ahead with the implementation of GAAR from the intended date of April 1, 2017. GAAR will be applicable to arrangements which are regarded as impermissible avoidance arrangements which could result in, amongst others, recharacterisation of such arrangements, denial of tax benefits or treaty benefits etc.
GST legislation provides for principles to determine whether the supply shall be construed to be made within the state or the supply is an interstate supply i.e., supply made by a supplier from one state is provided in another state. This principle is termed as "place of supply" (POS). In case where the POS state for a particular supply is different from the state in which the supplier is located,an integrated GST needs to be paid which is also termed as IGST.
C. SEGMENT WiSE PERFORMANCE
The segment wise performance has been shown elsewhere in the Annual Report.
We are content producers and innovators. We create content that is relevant to diverse audiences and available across multiple platforms. We continue to make concrete strategies to ensure we leverage our leadership market position. We continue to create capabilities, infrastructure, content and platforms aligned to emerging consumer preferences and audience behavior. We are aligning our strategic priorities and tangible goals that will place us in a different orbit. Actions are geared towards not just thinking of what is, but thinking what can be. Our main businesses are:
1. Creating original and diverse show content;
2. Exploring opportunities across channels, languages;
3. Building our marketing and distribution capabilities;
4. Creating newer show formats for television content;
5. Leveraging opportunities in regional markets by expanding network.
We will leverage our expertise across facets, target the audiences and make a digitally connected society. We will strengthen our existing platforms and building new ones, gauging viewer preferences. We will continue to align our content offerings, making a borderless and seamless world of entertainment, targeting growth in viewership and content consumption.
E. RiSK AND CONCERNS
Being a content driven entity, we are strengthening our intellectual property to ensure cost optimization at all levels. The four key pillars that continue to influence the digital Media and Entertainment space are infrastructure; mobility, government policy and digital technologies. We continue to have a readily available database of our IP, such as scripts, dialogues, clips and other content. The following risks and challenges are affecting our business:
1. PIRACY: The issue of piracy remains a critical issue for the Indian film industry. However, there are some changes that have helped the industry battle this issue aggressively. Also, with the shift in consumer preference to the Internet, the business of piracy has also transformed. The physical format (VCDs and DVDs) is disappearing and pirates are therefore shifting online.
2. COMPLEX IP WITH LICENSING REGIME: As audience fragment and platforms diversify, different content
windows, geography restrictions, formatting terms, character rights, etc. emerge, leading to a very complex rights environment. The IP ownership and royalty definitions between artists, producers, aggregators etc. are also blurring, leading to intermittent litigation.
3. FASTER THAN EXPECTED SHIFT TO DIGITAL PLATFORMS.
With mobile data prices coming down, digital content consumptions has grown exponentially. This can lead to a slower growth of advertising revenues for the profitable television business.
4. Tax and Regulatory concern:
Regulatory changes will be the catalyst to growth in the television and radio space. Digitalization, Phase III licensing for radio and 5G rollout will provide the required impetus to the industry. Higher penetration of internet will, especially in the mobile space, continue to drive the investment in the digital media space. This will have an impact on the advertising as well as print and publishing sector in the coming years.
5. TAX ON CONTENT AND OTHER GOODS PROCUREMENT
Television content procured on licensing/acquisition basis was liable to VAT, generally at 6%. Further, other consumables and goods purchased by broadcasters were liable to excise duty and VAT.
F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Companys internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Companys internal control processes and monitors the implementation of audit recommendations, including those relating to strengthening of the Companys risk management policies and systems.
Your Companys Internal Control system is designed to:
Safeguard the companys assets and to identify liabilities and managed it accordingly.
Prevention and detection of Fraud and Errors
Ensure that transactions are properly recorded and authorized.
Ensure maintenance of proper records and processes that facilitates relevant and reliable information.
Ensure compliance with applicable Laws and Regulations.
The CMD/CFO Certification provided elsewhere in the report discusses about the adequacy of our internal control systems and procedures.
G. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Account and other financial statements appearing separately.
H. MATERIAL DEVELOPMENT IN HUMAN RESOURCES
BAG considers Human Resources to be one of the key elements to sustain competitive advantage in the Media Sector. Media organizations are human driven; its growth depends upon the quality contribution made by the people in the organization. Therefore, your Company recognizes human resources as a key component for facilitating organizational growth. Your Company has continuously worked to create and nurture an organization that is highly motivated, result oriented and adaptable to the changing business environment and that is why that in this slowdown your company has managed to sustain its leadership in the electronic media.
BAG aims to recruit, nurture and retain quality professionals and provide them with a high performance environment. Knowledge and intellectual assets are being strategically shared across BAG. At BAG, we have understood the potential of the human resource and its contribution to the financial standing of your company.
Therefore, the human asset is highly valued and regarded by your company. BAG is reassessing traditional notions about employment and experimenting with broad-based employee ownership.
We would like to thank all our employees for their contribution and we look forward to their continued support in maintaining our leadership position in the industry. We would also like to thank all our shareholders for continuing to trust and believe in the Company and look forward to your continued support as we scale new heights with BAG Network.
Statements in the Management Discussion and Analysis and the annual report describing the Companys objectives, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable securities laws and regulations in India and other countries. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting the domestic market, in which the Company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors and unforeseen circumstances.(*Source of information: FICCI-EY-Reimaging Indian M & E Sector, 2018)