TV18 Broadcast Ltd Management Discussions.

TV18 is the broadcast arm of Network18 Group, a pan-India, pipe and screen agnostic, full portfolio Media & Entertainment conglomerate.

FORWARD-LOOKING STATEMENTS

Statements in the Management Discussion and Analysis, which describe the Companys objectives, projections, estimates, expectations, may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could di_er materially from those expressed or implied. Important factors that could influence the Companys operations include economic developments within the country, demand and supply conditions in the industry, input prices, changes in Government regulations, tax laws and other factors such as litigation.

COMPANY OVERVIEW

‘TV18 Broadcast Limited, a subsidiary of Network18, manages its primary business of broadcasting. Network18 Media & Investments Limited is one of Indias most diversified Media & Entertainment conglomerates, with interests across television, digital content, filmed entertainment, digital commerce, print and allied businesses.

TV18 runs the largest news network in India, spanning business news (4 channels with market leadership), general news (1 each in English and Hindi), and regional news (14 channels across India, including joint venture News18-Lokmat). Marquee brands that are a part of this news bouquet are CNBC-TV18, CNBC Awaaz, and CNN-News18. For the Indian diaspora and others across the globe, News18 international delivers definitive Indian news.

TV18s entertainment subsidiary, Viacom18 (a joint venture with Viacom Inc.), operates an array of entertainment channels. The entertainment portfolio comprises Hindi general entertainment channels, English entertainment, movies, youth and musical entertainment, kids genre, and nine regional entertainment channels. This includes leading properties such as Colors, MTV, and Nickelodeon. Besides this, through Viacom18 Motion

Pictures, the Group has a presence in the movies business too. TV18s infotainment subsidiary, AETN18 (a joint venture with A+E Networks), operates factual entertainment and lifestyle channels such as History TV18 and FYI TV18, respectively.

TV18 and Viacom18 have formed IndiaCast, a multi-platform content asset monetisation entity. This drives domestic and international channel distribution, placement services, and content syndication for the Groups channels as well as for other broadcasters. Viacom18 also operates VOOT, an OTT (Over the Top) distribution platform o_ering Video On-Demand.

BROADEST PORTFOLIO OF MEDIA & ENTERTAINMENT ASSETS

TV18 is a pan-India, pipe and screen agnostic, full portfolio Media & Entertainment conglomerate. The Company has evolved into an ambitious, nimble, digital-first behemoth with consolidated growth engines. TV18 can today boast of relatively young properties which resonate with media consumers across platforms and socio-economic strata – whether its homegrown umbrellas like News18 and Colors, global brands like Nick, CNBC and MTV married with the Indian context, or digital powerhouses like Voot. The group has successfully managed to combine corporate sensibilities and processes to startup-style agility and innovation, intermesh depth of content and reportage with the breadth of consumers, and employ a balanced approach to growth and profitability.

Channel-agnostic Approach

TV18 strives to be channel agnostic to ensure its content reaches seamlessly to consumers through their platform of choice.

Reach for Impact

TV18 is future-ready with its relentless focus on the identified axes of growth: regional content and digital delivery. This two-pronged approach enables the Company to reach its audiences regardless of geography, language or demography.

Thought Leadership

TV18 is steered by a professional and experienced team that helps it to consistently strive to host thought leadership on-air, online and on-ground.

Network Synergy

TV18s spread of properties facilitates cross-promotion and cross-pollination of content and expertise across its network, enabling enhanced advertising and subscription revenue generation.

Strategic Collaborations

TV18 has a track record of building successful strategic alliances with international media companies such as Viacom in entertainment, CNN in English general news, CNBC in business news and A+E Networks in factual entertainment.

Brand Excellence

At TV18, the focus is on driving the highest standards of creative excellence by fostering a culture of innovation to build new content formats across platforms, thereby creating strong brands across diverse media.

VALUE CHAIN

TV18 is spread across content creation and distribution, thereby delivering the best of Indian and global content and brands to discerning audiences across Indias vast demographic diversity. TV18 and its a_liates across the media, telecom and cable/broadband value chain are stitching together a compelling value proposition for its viewers in a pipe agnostic manner. Synergies in content creation and e_ciency in distribution serve to amplify the reach of TV18s brands, delivering impactful ideas and immersive imagery in class-leading packaging.

INDUSTRY OVERVIEW

SUMMARY

During FY 2020-21, the novel Coronavirus pandemic and related lockdowns substantially impacted the economy in general, and the Media & Entertainment sector in particular. The slowdown in economic activity dragged down advertising sharply by 17.5% Y-o-Y in 2020, as per the Dentsu Digital report 2021. Advertising contributes >50% of the M&E sector revenue, and the rest is largely subscription. The sharp scaleback in ad-budgets, especially in discretionary categories (that bore the brunt of consumers postponing purchasing decisions), were therefore a major blow to the industry. Di_erent segments of the M&E sector faced varied challenges in H1, both logistic and financial. While subscription for TV services remained resilient as viewership soared due to the stay-at-home conditions prevailing, content creation was disrupted due to the lockdown. Print circulation fell sharply due to the logistics of publication and distribution involved, hurting readership. Digital engagement continued to grow despite constraints on fresh content availability, accelerated by consumer habits changing in its favour. However, H2 fared much better as green shoots from economic revival, reduced lockdowns easing logistics, and improved advertiser appetite around festive season boosted the sector. The industry expects a much-improved showing in 2021; though impact from subsequent waves of the pandemic cannot be ruled out. Digital shall continue to grow in salience and TV is expected to revive fully, while print and other mediums are likely to remain under pressure as they cope with ‘the new normal.

India Ad-industry

HIGHLIGHTS

TV viewership soared despite lack of fresh content initially; settled at higher levels than pre-pandemic: During lockdown 1.0, TV viewership spiked up by 35-40%, half of which was due to news genre alone. Other genres such as movies and kids saw an improvement too, led by non-prime-time viewership rising driven by a largely captive homebound audience. A complete lack of fresh content on pay-GECs (both National and Regional) due to shuttering of production and telecast impacted their viewership share. As the lockdowns eased towards the second half of the year, genre shares largely reversed to normalcy. However, TV viewership has settled at slightly higher levels vs pre-pandemic. Importantly, as entertainment programming is back in full swing, pay-TV has clawed back its share from free-to-air channels despite new launches on DD Freedish; indicating the health of the pay-ecosystem.

TV fully recovered led by inherent strength of medium, high-quality content making a comeback: While news advertising recovered by late-Q1 due to viewership tailwinds, entertainment advertising normalised by Q3 as GECs resumed fresh programming in full force around the festive season. A return of high-impact programming and an increased roster of advertisers beyond FMCG drove up ad-yields. GEC viewership drove up ad-volumes, and monetisation remained strong despite sti_ competition, including from Sports (IPL, India-Australia Cricket, and others). TV subscription remained largely resilient, OTT subscriptions accelerating: TV subscriptions in India continued to rise slowly, as penetration rose marginally to 67%; well short of 93% in the US and 99% in China as per BCG. Domestic TV connections in commercial establishments and some low-end connections (cable) saw a temporary dip due to the pandemic; but multi-TV home connections (primarily

DTH) picked up. TV channel pricing remained stable post NTO 1.0, as NTO 2.0 remained sub-judice in FY 2021. Digital subscription revenue continued to grow sharply o_ a low base, both from B2C (direct) and B2B (Telco-driven) distribution of OTT platforms. Multiple global players have created India-specific pricing to push penetration. However, they remain substantially more expensive than broadcaster-led platforms.

2020 2019 2018
OTT Video 100-125 78 49
Subscriptions (mn)
Average ARPU per 56 55 49
Subscription (_ /month)
Subscription Revenue 84 51 29
(_ bn)

 

Source: BCG CII Big Picture Report

TV Subscriptions in India(in million)

2020 2019
Cable 73 75
DTH 56 56
HITS 2 2
Free TV 40 38
Total 171 171

 

Source: EY-FICCI M&E Report

R eturn of major broadcasters re-run channels on DD Freedish: The top four broadcasters re-run GEC and movie channels were re-launched on the Freedish Free-to-Air platform in June 2020. This helped them carve back the share of viewership from other FTA players that had gained from these channels vacating the space post the implementation of New Tari_ Order in 2019. Growth in viewership has helped these channels raise ad-monetisation sharply from rural and mid-tier focussed advertisers; which has been a steadily growing category even amidst a tepid economic scenario.

Digital engagement and monetisation continued to grow unabated: During the pandemic, digital platforms across News & Entertainment witnessed an increase in consumption. Amidst ad-budgets being rationalised, advertisers sharpened focus on ROI. Hence, they naturally gravitated towards TV and Digital, the mediums which o_ered increased viewership. However, digital advertising continued to additionally benefit from its inherent advantages of targeting audiences, personalisation and lower costs vs many genres of TV. This led to the accelerated migration of ad-budgets from traditional media to digital, especially from Print and Radio. Within digital, the online video sub-category has been

FINANCIAL AND OPERATIONAL PERFORMANCE

OVERVIEW

The business environment was challenging during the first half of FY 2020-21 due to Covid-19-linked lockdowns a_ecting both production of content and advertising appetite. However, with lockdowns easing and continued tailwinds in viewership across both TV and Digital, the group has fully recovered from the e_ects of the pandemic; even as safety measures and innovative solutions to logistical challenges continue to be deployed. News advertising recovered by Q2 and continued unabated even amidst the blackout of BARC ratings during H2, led by the strength of our brands. Entertainment advertising revived fully by Q3, led by a full content roster, strong viewership trends for Hindi GECs (both pay and free-to-air), and high-impact content driving ad-yields up during the festive season. Digital advertising continued to grow led by Covid-19-linked growth in consumer engagement levels and advertiser focus on ROI. Domestic subscription revenue remained strong, o_setting stress in international. Improved distribution tie-ups for TV and Digital continue to drive subscription growth, even amidst some temporary Covid-19-linked headwinds in the cable segment. Over the past two years, we have leveraged our scale, tech expertise and group strength to evolve a cost-conscious business model, which is both sustainable and growth oriented. The improvement in profitability is a result of concerted e_orts to increase annuity-style revenue streams including subscription and syndication.

FY 2020 21 FINANCIALS

STANDALONE CONSOLIDATED
Rs.crore FY21 FY20 Y-o-Y% FY21 FY20 Y-o-Y%
SUMMARY P&L
Operating Revenue 1,104 1,150 -4% 4,498 5,175 -13%
Operating Expenses 927 1,052 -12% 3,690 4,472 -17%
Operating EBITDA 177 97 82% 808 703 15%
Other Income 47 63 -24% 62 82 -24%
Finance Cost 46 65 -30% 88 142 -38%
Depreciation 56 58 -4% 139 166 -16%
Profit of JV/Associates 60 39 52%
Exceptional Items 0 11 NM 0 15 NM
Profit Before Tax 123 26 370% 703 502 40%
Tax 32 4 630% -42 85 -150%
Profit After Tax 91 22 316% 746 417 79%
Minority Interest 290 174 66%
PAT after Minority Interest 91 22 316% 456 242 88%
SUMMARY BALANCE SHEET
Total Equity 2,868 2,778 3% 4,191 3,734 12%
Non-controlling Interest 1,163 871 34%
Total Liabilities 1,226 1,380 -11% 2,868 3,805 -25%
Total Assets 4,095 4,158 -2% 8,222 8,409 -2%
Net Worth 2,883 2,790 3% 4,202 3,741 12%
Capital Employed 3,643 3,613 1% 6,247 6,379 -2%
KEY RATIOS
Current Ratio 1.24 1.01 23% 1.77 1.34 32%
Debt Equity Ratio 0.27 0.30 -10% 0.21 0.48 -55%
Interest Coverage Ratio 4.09 1.45 183% 10.36 4.85 114%
Operating EBITDA Margin (%) 16.0% 8.5% 89% 18.0% 13.6% 32%
Return on Net worth (%) 3.1% 0.8% 303% 10.8% 6.5% 67%
Return on Capital Employed (%) 4.5% 2.4% 90% 12.5% 9.9% 26%

Financials

P andemic impact dragged revenue down by 13% Y-o-Y. While subscription revenue remained resilient, advertising was impacted in H1 by the pandemic, but has bounced back in H2 to growth territory Operating EBITDA rose 15% Y-o-Y as broad-based cost controls across businesses, growth in annuity-style revenue streams, and content cost renegotiations have boosted profitability P AT rose up ~88x Y-o-Y, on improved operating profitability and 33% lower interest costs on significant reduction in debt and softer interest rates Group debt sharply reduced to Rs.893 crore in March 2021, from Rs.1,775 crore in March 2020, driven by sharp focus on working capital management and improved profitability across verticals

Ratios

Current ratio improved to 1.7x from 1.3 last fiscal as a result of lower working-capital debt Debt-Equity ratio reduced to 0.2x from 0.5x last fiscal, as group debt sharply reduced Interest coverage ratio improved to 10.4x from 4.9x last fiscal, led by reduced debt and softer interest rate environment attenuating finance costs; amidst improved operating profitability Operating margin rose to a highest ever ~18% (having improved Y-o-Y for 3 years continuously); driven by cost controls amidst pandemic impact on ad-revenue in H1 RONW improved to 10.8% as PAT swung into positive, and ROCE further improved to 12.5% on reduced working capital

OUTLOOK

The world continues to learn to live with the virus, and the rollout of multiple vaccines bring hope. The Indian media industry has a heavy dependence on advertising revenue, which does get impacted around major lockdowns, but has proved resilient and resurgent when they taper. Subscription is beginning to rise in the revenue mix, as propensity to pay for content increases steadily. The group has treated this as an opportunity to rethink business models, and is emerging stronger and ready for the post-Covid-19 world. As TV consumption remains healthy and Digital adoption grows in tandem, we believe the group is well positioned to straddle the space. We are focussing on creating platform-agnostic content, digital-only original content as well as content-around-content for our biggest TV properties. Vernacular content and Digital outreach continue to be the strategic axes of growth (and consequently, investment), across both News & Entertainment. As long-term players focussed on growing ahead of the market, we continue to push new-age revenue streams such as digital subscription, content partnerships, home-grown IPs and innovative advertising models.

GROWTH AND INNOVATION

Accelerating digital: Subscription-led model Voot Select was launched in March 2020, just before the lockdown hit us. Voot Select is already operating shoulder to shoulder with other broadcaster-backed OTT services with our marquee shows like Asur, Illegal and Crackdown garnering a cumulative ~70+ million views and ~15 million hours of watchtime. Keeping SVOD subscribers in mind, we have started providing fresh content from our TV channels on Voot Select, 24 hours before its telecast. We are also experimenting with Original Shows first premiering on Voot Select and then on TV (‘Indias Most Sansanikhez Kahaniyaan). We have expanded our audience base with strategic partnerships with major telcos, DTH providers and have recently forayed into the US market with Sling TV.

Thrust on localisation of content: We are aggressively localising our content, rooting our channels through not just local language but also local subjects and formats. Ten local IPs in the industry-leading Nickelodeon franchise, homegrown format non-fiction talent shows like Dance Deewane, and earthy successes in fiction like Choti Sardarni all bear testimony to our constant desire and growing long-term capacity to produce fully owned content that resonates with Indian audiences. This also allows us more flexibility in conceptualisation, production and monetisation as well as drives cost e_ciency.

Building a movie channel franchise: As the last entrant in the Entertainment broadcasting space, the group has traditionally lacked a strong movie channel business. The group has launched Colors Cineplex (pay-movie channel) last fiscal, and followed it up with a return to Freedish platform through FTA channel Rishtey Cineplex this year. Additionally, since the last year, the group has launched three regional movie channels (Kannada, Gujarati and Bengali), to beef up its presence in the space. The intent is to steadily create a library, improve viewership and advertiser salience, and sweat existing movie assets across both GECs and these new film channels.

ORGANISATIONAL AND BUSINESS RESILIENCE DURING COVID 19 TIMES

Keeping people informed for a cause…

Braving the Covid-19 surge, the 1,200-strong group of journalists of News18 network continued to report on key issues, including the progress of the pandemic. With timely coverage and relevant social awareness campaigns, our news network ensured that it remained an indispensable source of information and insight for home-bound viewers during the lockdown period.

T ech innovations and solutions were deployed to allow uninterrupted flow of information and news to our viewers. These included seamless integration of physical studios with virtual studios for news anchors working from home, and completely overhauled news gathering systems. Decentralised operations and backup hubs ensured no interruption of operations.

…and entertained without a pause

K eeping all Covid-19 safety protocols in mind, we were the first network to restart original programming in the GEC category. Be it our flagship channel Colors, channels in our regional portfolio such as Colors Tamil or launching the biggest reality TV property Bigg Boss Hindi and Kannada – we were the first one to get fresh content to our viewers. We also successfully created the first ever ‘Made in India season of the popular action-reality show Khatron Ke Khiladi on Colors, which was shot completely in India. A t a time when market sentiments were subdued, we were able to launch Bigg Boss 14 with much show and spectacle. The season came with its own set of unique challenges pertaining to pandemic-related safety guidelines, while shooting an unscripted reality show that had 24-hours live feed from the Bigg Boss house. However, we overcame those challenges and continued to build our fanfare.

Subscription video-on-demand platform Voot Select was launched in March 2020 with the vision of bringing a robust pipeline of original shows. However, as the Covid-19 pandemic halted all shoots and productions worldwide, we innovated to overcome this disruption by creating a 100% conceptualised and shot-from-home web series – ‘The Gone Game. The series was made in 1/10th of the cost of a regular original series, while it resulted in a 3x jump in new customer acquisition percentage for Voot Select.