MUMBAI: Eros International has inked a four movie output deal with Goldie Behl’s Rose Movies, which will commence with with Drona, a costume drama starring Abhishek Bachchan and Priyanka Chopra in December 2006. Eros’ association with Rose began when it distributed Bhel’s first film Bus Itna Sa Khwab Hain.
What’s more, following on from the association on Omkara, Eros has taken a 64 per cent stake in Big Screen. Big Screen has signed up Ajay Devgan for future projects as well as directors like Rohit Shetty, Soham and Anil Devgan.
Two productions are already underway, one of which titled No Smoking starring John Abraham. The movie is expected to be premiered at the Cannes Film Festival in May 2007.
Eros announced its interim results for the six months ended 30 September 2006 and its turnover was up 48 per cent to $21.8 million from $14.7 million in 2005.
The company’s EBITDA before IPO costs were up 38 per cent to $14.5 million as compared to $10.5 million in 2005. Profit before tax, goodwill amortisation and IPO costs were up 102 per cent to $9 million vis-a-vis $4.4 million in 2005.
Eros’ gross profit margin increased to 58.3 per cent as compared to 51.9 per cent in 2005.
“Since our flotation we have focused on pursuing our key strategic objectives as a vertically integrated group within the Indian media and entertainment arena. The success of these initiatives has contributed to strong organic growth and coupled with the phenomenal growth in the Indian media sector, we believe that Eros is well positioned to take advantage of the opportunities presented by the sector,” said Eros International chairman and CEO Kishore Lulla.
In a company statement, Eros stated that the Indian entertainment industry is worth $4.5 billion growing at 18 per cent CAGR and expected to cross $10 billion by 2010. A mere 13,000 cinemas across the length and breadth of India service some 3.1 billion tickets sold every year with ticket prices on the rise on account of the growing multiplexes. Out of the 100 odd films released every year, not more than three-four come from any single production house, such is the level of fragmentation. To compound this, the distribution and exhibition arenas are heavily localised as well.
The statement further added that in many ways, the Indian film industry is in a position that Hollywood was in the 1930s, before the consolidation and emergence of the vertically integrated studios.
Eros has enjoyed an aggregate market share1 of 35 per cent over the last decade especially in the international space and as per IBOS reports, every year for the last 10 years, over a third of the top 50 grossing titles have been Eros films.
Having acquired over 1300 leading titles over the last thirty years, the Eros business model is built on owning valuable content and exploiting it across the world on all possible formats including cinema, DVD, television syndication, rights licensing and new media in USA, Europe, Australia, South Africa, the Middle East to South East Asia. The company has also inked alliances with Comcast and Intel.
Eros has taken an active lead in the first phase of consolidation of the fragmented Indian film industry by locking up content through output deals, acquisitions and co-productions (both catalogue and new releases) as well as signing up talent (actors, directors, technicians) and leveraging it across its extensive distribution network globally.
This is already giving Eros a sustainable competitive advantage and making it one of the first and few companies in the fragmented sector to operate along the lines of a true “studio” model.
The releases that are now lined up from Eros are Salaam-e-Ishq, Provoked, Speed, I See You and Nanhe Jaisalmer.
The company will continue to focus on its strategic priorities including ensuring the steady availability of quality film content for distribution through its global network. Initiatives may involve growth enhancing acquisitions or joint ventures where appropriate.
In the six months to 30 September 2006 the group released two major films, Omkara and Lage Raho Munna Bhai. Omkara, a powerful Indian adaptation of Shakespeare’s Othello, received critical acclaim and grossed over $3.1 million at the box office internationally. The film has been selected for the Cairo Film Festival, Palm Springs festival and is being screened for the Golden Globes.
Lage Raho Munna Bhai, a comedy, has grossed $5.6 million internationally since its release in September. It also received tax-free status from the Government of India. The film has been entered as an independent entry to the 2007 Academy Awards.
The group is actively pursuing its strategy to syndicate its film catalogue across a number of platforms around the world. In addition to cinema distribution, the group continues to focus on expanding the home entertainment mainstream distribution network. Eros titles are now available through HMV, Virgin, Tesco, Asda, Sainsbury and Amazon amongst others channels.
Eros plans to launch its first set of high definition titles in the near future with current successful box office releases and digitally remastered Classic titles from the catalogue.
The group also continues to focus on developing new markets and has made a modest but successful beginning in licensing part of its catalogue content in separate deals for China, Romania, Spain and Egypt.
India Division
In India, Eros International recently entered into the Indian theatrical distribution and music distribution business with the release of Omkara.
The Group has also continued to enhance and augment its existing catalogue of 1300 titles and has made several key catalogue acquisitions in the period including securing a movie deal of blockbuster hits from the 1980s across formats. This will continue to offer leverage for home entertainment including high definition, new media and television syndication.
In line with the Group’s overall strategy as stated at the time of IPO, Eros has set out to consolidate the fragmented Indian film production industry by entering into a number of output deals with production houses like K Sera Sera and industry talent. This will lock up content for the Group’s distribution channels both internationally and within India on a long-term basis. The Indian market is evolving from quasi-film finance model to co-production model in order to secure content for the distribution pipeline.
The Indian operations continue to drive the content acquisition activities for the Group including output deals with established production houses.
In light of the increasing corporatisation of the Indian film industry, Eros is progressively moving towards a model where it will effectively become a co-producer of a film and, in return for the provision of some of the film’s production cost, it will receive not only international distribution rights but also a share of those rights traditionally and previously retained by the film’s production company.
India Distribution
Indian theatrical distribution in the period to March 2007 is planned for Mr Black Mr White, Salaam-e-Ishq, Chinni Kum, and Provoked.
Music
In line with the Group’s strategy to take advantage of the opportunities offered in the era of digital convergence, Eros has now established a music publishing and digital distribution division. Eros Music Division will utilise the Group’s existing home entertainment distribution and online and new media technology infrastructure, resulting in minimal upfront investment. It is a logical business extension for Eros as part of its overall value chain integration strategy. With the lucrative mobile music downloads market and other avenues of ‘licensed’ digital revenue being built on the rapid wireless uptake growing at 80 per cent CAGR in India, the Group believes that the timing is suitable to enter this sector. The music industry is already estimated at $160 million, double that of the radio market in India.
In the period music contributed to the group’s results for the first time with turnover of $310,000 and EBITDA of $30,000.
The Film Music albums and soundtrack planned for release by Eros during the financial year ending March 2007 include I See You, Kudiyon Ka Hain Zamana, Mr Black Mr White, Chinni Kum and Provoked.
The Group plans to focus on expanding its extensive global distribution network with special focus on syndication, new media while tapping into the growing Indian market.
