Executive Vice Chairman & Managing Director’s Message
I am delighted to write to you at the end of another satisfying and exciting year at Eros International. Despite a challenging external environment, FY2017 has been a year in which Eros progressed on its business momentum and strategic initiatives.
Driven by passion
At Eros, we are driven by passion. Not just for entertaining people, but to make wonderful films and bring the best content to viewers in every corner of the world. This passion is evident in the way we run our business and the manner in which our people approach it. We are proud to be a people-led organization, where the collective excitement and energy of our entire team helps bring moments of happiness, joy and unique entertainment to more than a billion people around the world.
We are a company that enjoys a leadership position in markets that continue to be on a long-term growth trajectory. Over the last year, we made targeted investments in content, brands and markets that provide attractive growth opportunities. A glance at the span of our operations will reveal that consistent content innovation, and a robust business model underpin our financial resilience.
Our pursuit of creative and operational excellence is our key competitive advantage. FY2017 continued that tradition and the Company reported an encouraging performance, despite the temporary impact on revenue from theatrical releases in the second half of the year.
This year audiences have been able to choose from a variety of releases. India’s film industry has experienced diverse growth with the exploration of high concept, new genres and relatable stories. Regional content continued to make encouraging headway and engage growing audiences. With the gradual emergence of Tier II and Tier III cities on the multiplex map, the acceptance of niche movies accelerated vis-a-vis traditional commercial cinema.
A significant development during the year was the growing importance of'' Bharat’, i.e. the rural India due to the implementation of the new TV audience measurement system BARC. This has created a surge in the demand for new film releases as well as our film library, as film content is an effective means for satellite channels to penetrate the rural markets.
As additional multiplex screens are added, theatrical revenues have a potential to grow significantly. In addition, the large-scale acceptance and successful theatrical release of our regional movies validates our increasing focus on language diversity in our content. At Eros, we are poised to take advantage of opportune upcoming trends and shifts in the market. As we expand into other regional languages such as Marathi, Bengali, Punjabi and Malayalam, we may see the composition of our film mix changing over time to allow us to successfully scale our business with a diversified portfolio of content.
Theatrical revenues during FY2017 were driven by releases of Ki & Ka, House full 3, Nil Battey Sannata, Dishoom, Happy Bhaag Jayegi, Baar Baar Dekho, Banjo, Rock On 2, Kahaani 2 (overseas), and regional films include 24 (Tamil), Sardaar Gabbar Singh (Telugu), Janatha Garage (Telugu), C/O. Saira Banu (Malayalam), Baghtos Kay Mujra Kar (Marathi), Chaar Sahibzaade2 (Punjabi) and Double Feluda (Bengali), to name a few. We released 44 films, which included 5 high budget, 10 medium budget and 29 small budget fims. The highlight of the year was a steady growth in our profit margins. EBIT margin expanded to 26.1%, compared to 21.8% in FY2016 and our PAT margin improved to 17.8%, compared to 14.7% in FY2016. This growth was majorly driven by higher contribution from catalogue revenues.
In FY2017, our strong regional library, active pre-sales and catalogue monetization of 2000 films’ library continued to serve us well both from a performance and a risk management perspective. 96% of the cost of the total film slate released in FY2017 was recovered through pre-sales across all revenue streams, including theatrical, satellite and overseas, which reflects our disciplined approach to risk management. As a part of our longstanding relationships with the television industry, we signed television syndication deals with several major networks such as ZEE TV, Star TV, Colors and Sony TV,
Leveraging our content strength
As India increasingly becomes the market of choice for global expansion for many International entertainment and digital companies, content will take centre stage. As the prices for film content rise, Eros’ key asset - a market-leading film library - is a major beneficiary of this trend. Not only does our content experience theatrical release, it crosses borders and languages, engages a nation across all screens; from theatrical to your handset.
We had been gearing up to leverage our industry knowledge and understanding to develop our own intellectual properties. Aside from further efficiency across the value chain, this will help to increase the revenue potential through Indo-China co-productions, or bi to tri-linguals i.e. films that are shot simultaneously in two or three India languages, but it will also help optimise content costs. The launch of Trinity Pictures, investments in our joint venture Colour Yellow Productions and leveraging our film library to launch sequels to successful films are concrete steps taken in this direction. We are excited about these developments and are looking forward to FY2018, which will see these plans come to fruition.
We have strong international distribution capabilities through our parent company, Eros International Plc’s, which has a well-established, worldwide and multi-channel distribution network. The network extends over 50 countries across theatrical, television and digital formats to cater to the global film-loving South Asian diaspora as well as crossover audiences.
Today, quality and diversified content has increasing appeal than perhaps any other time in the past. Our parent Eros International Plcs’ OTT platform Eros Now is enabling the wider availability of content on demand and on the go. It is driving innovation in content creation, marketing and distribution through our strategic partnerships with telecom companies, OEMs and payment wallets.
Apple has featured the Eros Now App in its ‘App Store Best of 2016’, which is a testament of our achievement. We are pleased with Eros Now’s progress and are excited about what the future unfolds. Eros Now has over 2.9 million paying subscribers and with 68 million registered users we believe that this is just the tip of the iceberg.
Leading the future
We are drawing upon our core strengths, as we continue to fulfill our aspiration to be The Company people turn to for the stories that shape and enrich their lives.
In FY2018, we continue to be focused on ramping up our own productions and co-productions through Trinity Pictures and Colour Yellow Production. We will also continue to expand our regional presence with 25 releases across Tamil, Telugu, Malayalam, Bengali, Marathi, Kannada and Punjabi languages.
At the heart of Eros International’s consistent performance is the ability to stay agile in the face of a rapidly changing ecosystem. The face of agility at Eros is our talented and driven team. Our people are paving the way towards achieving our long-term objectives.
We continue to upgrade the skills of our employees and bring on board fresh talent from diverse backgrounds to enhance our future readiness. It is their passion to bring clutter-breaking content to the market and distribute globally that helps us chart a market-leading success story,
I am confident that our passion to deliver engaging content with a robust business model will enable us to create value for all stakeholders in the years to come.
I seek your continued support and encouragement in this endeavor.
Executive Vice Chairman &