Eros stops doing TV syndication deals to increase Eros Now penetration

MUMBAI: Eros International Plc has stopped doing TV syndication deals to increase the penetration of its over the top (OTT) platform Eros Now, which is growing in revenues and subscriber base.

The company has also reiterated its revenue guidance of $200 million and EBITDA of $80-95 million for FY20 despite a lacklustre Q2 performance. The company’s Q2 revenue almost halved due to the absence of big-budget films and the non-monetisation of satellite rights.

“So the first question as already indicated that we are not doing the TV syndication increasing the Eros Now penetration and the revenue guidance of $200 million for the whole year and the EBITDA of $80 million to $95 million, we are reiterating that we will achieve that and there were no medium budget and no theatrical releases this year. There were low budget films of that and that’s where you could see that the revenue of the dip, but this is as per our guidelines and as per our expectation,” Eros International Plc Executive Chairman and Group CEO Kishore Lulla told analysts during Q2 earnings conference call.

Of the $200 million revenue, the company expects the digital division comprising Eros Now to bring in upwards of $55-60 million. The company is also bullish about the studio division as it has some big movies lined up for release in the fourth quarter.

Eros International Plc CFO Prem Parameswaran noted that the company generated $32.3 million in revenues in Q2 FY20 compared to $63.4 million in Q2 FY19 on a like-for-like basis. Adjusted EBITDA for this quarter was $7.8 million compared to $27.5 million last year.

In Q2, the company released 11 lower budget films as compared to four medium and 13 lower budget films last year. We released over 120 films on Eros Now this quarter as well as thousands of new music tracks in new short form content.

The Eros Now business finished the quarter with 177.7 million registered users and 23.5 million monthly paying subscribers.

“On the P&L, we are going to reiterate our guidance of $200 million to $220 million in revenue and $80 million to $95 million in adjusted EBITDA for the fiscal year-end 2020. We are also committed to reaching cash flow positive by this fiscal year-end. Over the following two fiscal years, we expect our top-line growth to be in the 20% plus range,” Parameswaran asserted.

Lulla further stated that 60% of the time spent on Eros Now is coming from outside of the top 10 cities in India. “And our last original Modi was responsible to bring city of Ahmedabad in the top 10 cities in India on the time spent, while Ahmedabad doesn’t feature even on the top 10 metrics for any digital business in the country.”

Eros Digital CEO Rishika Lulla said that the technology is going to play a key role as content in the entertainment revolution in middle India. To get ready for this revolution in September earlier this year, along with Microsoft and Peggy Johnson, the company announced this partnership to build the next-generation video platform.

She further noted that Netflix, Amazon Prime Video and all the new incumbents from Hollywood including Disney+, HBO Max and others have built a platform for English speaking audiences around the world.

“You browse and search the content in English and watch content in English and your recommendation layers are built on that logic. Now, what happens if a subscriber doesn’t speak English, it throws the algorithm off.”

Eros Now‘s partnership with Microsoft addresses the issue of content discovery for the regional audiences. “The new platform is being built, allowing subscribers to leverage voice commands and search to enable index content discovery. A significant amount of R&D and resources and dynamic dubbing allowing for consumers to watch their favorite movies and shows in their chosen language as either subtitle or dubbed and eventually an enhanced data lake exercise to improve the recommendation and machine learning algorithms.”

Breaking down the India viewership, Rishika said that 63% of Eros Now’s Indian viewers came from non-metro cities. “This potentially is the highest penetration for any digital video service in India. Further accentuating our story of developing a video service for middle India. Movies continue to be a dominating contributor to overall viewership on the platform, contributing 65% of the time spent.”

She further stated that the original series is now contributing 28% viewership, which has increased 40% quarter-on-quarter further proving our content strategy. “We look forward to rolling out our next generation video platform early next year and we remain laser-focused on our 50 million subscriber target, while focusing on a higher direct-to-consumer skew. As middle India grows and our subscriber base matures, we are focused on revenue maximization and strive to drive innovation across content and technology every day for our subscriber and community aiming to deliver an experience truly unique to you.”

Rishika also pointed out that Eros Now is the only non-US player to have a deal with Apple TV+. “We are actually only non-US player to have this deal with Apple Plus and it’s across all of the 100 plus countries that they are launching in. So it would be India and international. So as soon as it is live, you will see it in the US, UK etcetera and multiple other markets.”

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