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Eros Now to launch 3 new originals in FY18, crosses 2 mn paid subs in Q3

MUMBAI: Eros International’s over-the-top (OTT) service Eros Now, which crossed two-million premium subscribers in December last year, is planning to launch three new original shows in FY 2018.

The three originals are ‘Flesh’ by Siddharth Anand, ‘Smoke’ and ‘Side Hero’. Eros Now’s original content offering began with the release of ‘Salute Siachen’, India’s first ever celebrity high endurance expedition to the Siachen Glacier.

Over the past four months, Eros Now has digitally premiered more than 15 films from the Eros International’s new release slate.

Eros Now crossed two million premium subscribers in December 2016, three months ahead of its full-year target. This was a 51% growth over the preceding quarter. Eros Now has over 58 million registered users worldwide across WAP, app and the web.

In the second quarter ended 30 September, the OTT service had added more than 300,000 paid subscribers. This took its total paid subscribers to 1.32 million until 30 September 2016, up from 1.1 million in the trailing quarter.

The company’s target was to cross two-million paid subscribers by the end of FY 2017.

jyoti_deshpande“Next year we will have the benefit of full year contribution from all telcos. So we remain very confident that we should be able to hit a conservative target of at least 5 million to 6 million paying subscribers in fiscal 2018, which is triple our current base. This would be a dream come true to revise up this target during the course of next year as we continue to grow the platform,” said Eros International MD and group CEO Jyoti Deshpande.

A paid subscriber is any subscriber who has made a valid payment to subscribe to a service that includes the Eros Now service either as part of a bundle or on a standalone basis, either directly or indirectly, through a telecom operator or OEM, in any given month either through a daily, weekly or monthly billing pack, as long as the validity of the pack is for more than one month.

Eros Now has integration deals around the world with over 20 different telecom operators and nine different OEMs and connected devices.

Further, it has entered into a strategic partnership in India with several leading electronic payment platforms including Paytm, Mobikwik, SBI Buddy and Freecharge, which enable Eros Now subscribers to make payments using the e-wallet service. On an aggregate basis, these platforms reach over 260 million e-wallets in India.

“We have long-term deals with the telecom operators ranging from five years to nine years with Eros Now. And most of our deals have some kind of minimum guarantee payments or subscriber guarantee, which give us confidence this is a win-win strategy for customer acquisition and brand building,” said Deshpande.

Meanwhile, Eros’ high-margin catalogue sales drove the company to turn around its net income in the third quarter ended 31 December. It posted profit of $11.5 million in the fiscal third quarter compared to a loss of $2.5 million a year ago.

Operating profit increased to $8.2 million compared to $0.5 million in the prior-year period.

Adjusted EBITDA increased 62.9% to $14.5 million, compared to $8.9 million in the prior year period.

Revenue falls 5.3%

Revenues decreased by 5.3% to $57.3 million compared to $60.5 million a year ago.

This is how the company’s revenue by customer location stood. In India, revenue stood at $24.8 million (down 26.2%). In Europe, revenue was $1.46 million (down 76.5%). North America reported a revenue of $4.53 million (down 14%) and rest of world, $26.55 million (up 73%).

The strong increase in margins and profitability vis-à-vis the slight decline in revenue is due to the negative impact of demonetisation on theatrical revenues in the third quarter partially offset by strong high-margin catalogue sales.

For the three months ended 31 December 2016, aggregate theatrical revenues fell 22.9% to $19.9 million from $25.8 million a year ago, mainly due to no high budget films while the comparable period had Bajirao Mastani, the third highest grossing film of 2015, as well as the adverse impact of demonetisation of high-value currency notes by the Indian government in November 2016 resulting in decreased footfalls in cinemas in India.

Aggregate revenues from television syndication grew 61.6% to $20.2 million from $12.5 million in the prior-year period, mainly due to a significant contribution from catalogue sales while in the comparable quarter in 2015, the company had decided to hold back catalogue sales to bring about working capital efficiencies.

For the three months ended 31 December, the aggregate revenues from digital and ancillary decreased by 22.5% to $17.2 million from $22.2 million a year ago, again reflecting the film slate mix in the comparable periods.

Net debt

As of 31 December 2016, net debt increased to $157.9 million from $129.1 million a year ago, mainly due to lower cash flow from operating activities.

Operational highlights as of 31 December 2016

  • Eight films during the third quarter of FY 2017 (vs 15 films in Q3 FY2016). Modest reduction in the number of releases reflects a strategic decision to hold back some releases until negative impact of demonetisation has subsided.
  • Major releases for Q3 FY 2017 included: ‘Rock On 2’ (Hindi), ‘Kahaani 2’ (Hindi), ‘Chaar Sahibzaade 2’ (Punjabi) and ‘Double Feluda’ (Bengali).
  • In January 2017, Eros International Plc announced an industry-leading film production pipeline of more than 50 films across eight languages involving over 40 directors.
  • Eros’ in-house production company, Trinity Pictures, has announced its first franchise film ‘Sniff: I Spy’, a superhero film directed by Amole Gupte, scheduled for release on 5 May 2017.
  • The company’s two Indo–China productions are scheduled for release in FY2018—Kabir Khan’s travel drama, an untitled panda film, and Siddharth Anand’s cross‐cultural romantic comedy, ‘Love in Beijing’.
  • Trinity Writers Room has been established and already developed 15 other franchises and 80 film concepts.

Said Deshpande, “The rapidly evolving digital media landscape in India, including increased competition from western OTT players, for digital rights has underscored the value of digital content in India. It also reinforces our overall strategy to focus on premium content with the widest possible appeal. In the long term, the rising value of digital rights will make our existing content library more valuable and increase the demand for our new release digital content across all platforms, including satellite and cable.

“The demonetisation efforts undertaken by the Indian government in November have clearly had a short-term impact on many aspects of the Indian economy, especially consumer discretionary spending. To that end, while the entire media sector in India has been temporarily impacted by these measures, we feel that the underlying push to digitisation will directly and indirectly benefit our company going forward in many ways. We have been working tirelessly to provide consumers with multiple payment options for Eros Now, from telco billing to digital wallets to mobile payment providers. The push to digitisation reinforces our strategy and we feel we are well positioned to capitalise on this opportunity.

“Finally, our strong upcoming production slate of over 50 films has gone through a stringent green-lighting process for several months. The upcoming line-up includes highly promising projects including five films from Trinity, two Indo–China co‐productions, a Shahrukh Khan film from Color Yellow, two sequels from our own content stable like ‘Vicky Donor 2’, ‘Badlapur 2’, ‘Munna Michael’ starring Tiger Shroff, and ‘Chanda Mama Door Ke’ starring Sushant Singh, among others.”

Eros International group CFO and president of North America Prem Parameswaran said, “Our strong performance in the third quarter was driven primarily by pre-sales across all revenue streams and increased catalogue sales momentum—despite a modest impact of demonetisation on our theatrical revenues. Although certain films released during the third quarter delivered modest box-office performance due to lack of theatre traffic, we firmly believe that demonetisation is a big opportunity for us in the long term. Against this backdrop, we took the opportunity to push out some of our new theatrical releases into the fourth quarter and beyond, avoiding releases in an uncertain environment and instead focusing on our catalogue monetisation. As we look ahead, we are investing smartly for the longer term in line with our portfolio approach across varied budgets and languages.”