filmcity media ltd Management discussions

COMPANY BACKGROUND

Filmcity Media Limited was incorporated in 1994 as Kavita Prakashan Private Limited. The Company started its journey with publishing its own magazine Filmcity which became the number 1 weekly magazine on Hindi Films at that time. The company later diversified into electronic media by setting up a video studio with complete shooting and post production equipment. Over time the company established recognition and relations within the media industry and went on to produce many programmes for Doordarshan National and its local channels, we were also privileged to count Zee TV, Star Plus amongst some private network as our client base. With the gradual decline in the print media sector, and fierce competition in production media faced by the Company from its competitors, the TV programmes produced by the Company could not be telecasted and due to these reasons, the Company faced difficulty to survive in the market.

MACROECONOMIC AND INDUSTRY OVERVIEW

Over the past decade the media and entertainment industry has witnessed landscape altering changes with the aggressive expansion of OTT platforms, marked by the entry of global giant Netflix in India in 2016. This has altered the economics of an industry once dominated by content distributors such as cable/DTH operators and movie theatres. This is further evident from growth of the Indian OTT industry from $300Million in FY 2014-15 to $2Billion in FY 2020-21 registering a CAGR of 46%, with further growth projected at a CAGR of 25% taking the size of the Indian OTT industry to $15Billion by FY 2029-30 (Source: BCG CII Report 2022). Smaller players with regional focus producing hyper-localised content have also emerged, and further changed the industry dynamic. This was evident from Jio Cinema broadcast of IPL 2023, offering commentary in 12 languages such as Bhojpuri, Marathi, Punjabi amongst others.

OTT providers usually produce content under two models; the first being self-produced, wherein the OTT provider is the sole beneficial owner of the content produced, the second model being a partnership model, wherein the content is produced in syndication with other producers and the revenue is shared by all the producers. Furthermore, independent content creators have also emerged, selling their content to the highest bidder post production.

The economics of OTT platforms is still under experimentation with providers shifting towards a hybrid monetisation model, offering free subscription supported by advertisement revenue and premium add-free subscriptions. This has created a dynamic environment in the content creation space.

WAY AHEAD FOR THE COMPANY

As depicted in tne representation above, we intend to start witn development or stories and content creation, which can then be partially monetised and simultaneously used as a platform for creation of a content library. The initial and second stage of our business plan will allow to establish a revenue stream from partial monetisation of content and create brand value for our company and content, which will be critical in leveraging the complete revenue model through advertisement revenue, content syndication opportunities etc. Also, constant content creation will help in creation of a content library, which is critical for launching an OTT platform.

The timeline towards our ultimate target of launching an OTT platform will depend, firstly, on the market feedback on the content produced and the simultaneous creation of a content library. Secondly, internal revenue generation through sale of content in addition to any future fund raising will be evaluated at the time of initiation of development of the OTT platform.

HUMAN RESOURCES

Your Company recognises the need of talent and nurturing quality staff as a key to success. We will continue to focus on training and motivation of manpower so as to develop teams of qualified and skilled personnel to effectively discharge their responsibilities in a number of projects and activities. It is, in this context, which we have been working towards promoting the skills and professionalism of our employees to cope with and focus on the challenges of change and growth which is important to the segment your Company operates in.

INTERNAL CONTROLS & THEIR ADEQUACY

The company believes in formulating adequate and effective internal control systems and implementing the same to ensure that the interests of the company are safeguarded and reliability of accounting data and its accuracy are ensured with proper checks and balances. The senior management team meets to address issues like operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance with laws and regulation, at regular frequency to discuss various issues that influence the business and to take strategic decisions. The company has an internal audit system, which submits report to the Chairman of Audit Committee periodically.

THREATS RISKS & CONCERNS

The management of risk does not imply risk elimination but prudent risk management. We can withstand the competition despite an increasing number of new players. Due to industry specific high attrition of key professionals the quality of the productions and their consistency could suffer. There is a risk of sourcing software at reasonable acquisition costs and the rapid changing market can be a threat. Your companys management is proactive to recognise risks & threats and make use of opportunity. Piracy is a major hurdle in our segment. Physical format is diminishing to an extent largely due to this. Besides regulatory frame work, subsidies, taxes and related policy can affect our industry.

SIGNIFICANT CHANGES IN KEY RATIOS

Since, there was no business activity in the Company during the year under review therefore the details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, could not be provided.

CAUTIONARY STATEMENT

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 defer 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.