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Fiscal 2016-17, for the Media & Entertainment (M&E) sector was a mixed bag comprising exciting opportunities like continuing growth in the rural markets and increasing online consumption of our content on the one hand and the impact of demonetization, uncertainty around impending GST and the new TRAI Tariff order on the other.
Standout feature of the year was the increasing penetration of digital ecosystem into the average Indian’s day-to-day lives which has opened up new avenues of consumption of our content although revenue models still remain to be developed.
For the Company, it was a showcase of our ability to retain and improve profitability even as short-term disruptions impeded business growth. The total revenue (standalone) during the year under review increased by about 5.52% over the previous year.
The operating profit margin for the year was extremely healthy at 32.43%. Advertisement revenue during the year increased by 10%, despite the impact of demonetization particularly in the third quarter which demonstrates the dominance of Aaj Tak and increasing popularity of India Today TV.
The performance has been quite satisfactory. While right investments have been made particularly towards technology, content and talent; we have continuously driven efficiency in our business operations which we believe will have a positive impact on growth prospects over the medium term.
Television remains amongst the most important entertainment mediums in the country. The increasing disposable income in the hands of the average Indian is fueling aspirations - driving demand for branded products and services, television being a part of this basket. Credible estimates suggest that India’s TV households will reach 203 million by 2021, implying a total TV penetration of 67% - majority of the additions are expected to be in rural India.
To expand our reach in the rural market we entered the Free Dish platform with our flagship AajTak channel in November 2015. This has helped us maintain and expand our lead over our competitors and hence improve advertising yields.
Our English channel India Today, which was rebranded in May 2015 continues to grow and improve its market position as expected. Sizeable investments made towards this in the areas of content, marketing and distribution have helped the channel get to enhanced viewership and revenues. Channel’s advertising yields are expected to strengthen further although the English news television space is witnessing severe competitive pressures.
Your Company made an application to Ministry of Information and Broadcasting (MIB) for migration of its three FM radio stations located at Delhi, Mumbai and Kolkata, from Phase II policy regime to Phase III policy regime applicable to private radio broadcasters. In April, 2017, the Company received an offer from MIB for the said migration subject to, inter-alia, the execution of Grant of Permission Agreement (GOPA) and payment of migration fee and other charges including interest.
The Company paid migration fee and other charges including interest and executed the GOPA on May 23, 2017. Consequently, the three FM radio stations of the Company have now been migrated to Phase III. The radio channels were rebranded as Radio ‘ISHQ’ and successfully re-launched.
Looking at the current year, there is considerable apprehension as India rolls out its most significant tax reform since independence - Goods and Services Tax (GST). While the introduction of GST is likely to have varied levels of impact across the various media segments on an overall basis, the impact on Media & Entertainment industry is not expected to be significant- primarily due to the availability of input credit across the board.
However, the GST rules appear complex particularly from administrative and documentation point of view. The Company has and will continue to take advice in this matter and optimize the impact to the best extent possible.
It is expected that in 2017, there could be an initial adverse impact on advertising spend as organizations across the board focus their energies on realigning business systems and processes to the requirements mandated by the GST law. However, in the medium-term, with the formalization of the economy and the widening of the tax base, GST should have a positive impact on the country’s GDP and consequently on advertising spends.
The TRAI Tariff order is expected to have a significant impact on economics of distribution of Television channels .
All competitors of AajTak are Free To Air (FTA) channels. Implementation of the Tariff order is likely to pose a challenge for the Company and will have an impact on subscription revenue as well as distribution related costs.
I would like to thank the employees at all levels, for their commitment and remarkable contribution in the Company’s success. I appreciate the valuable guidance provided by my colleagues on the Board. I also heartily thank our shareholders for their cooperation and support.