Eros International is setting up an inhouse ‘Digital Asset Management’ initiative to digitize and catalog its movie library. The company will invest Rs. 5 crore to 7 crore on digitization, a process it expects will be completed by Q2 or Q3 of FY 2012. The company’s film library will be hosted in a searchable central repository. “Once the library is encoded, you could exploit it on 3G, 4G, DTH, and all those initiatives work on 90-95% EBITDA margin deal,” CEO Kishore Lulla said on the Eros’ Q3-FY11 conference call.

Eros’ catalog content currently accounts for 10-15% of its revenues, and digitization will make more content available for distribution, and ready the company for opportunities in digital. Execs on the call said that Eros is in talks with mobile operators and digital cable companies for content partnerships. It has signed deals with handset, OEM and device manufacturers to embed full length movies on their products, and launched its own branded Subscription Video On Demand channels on DTH, IPTV and Digital Cable platforms.

On the call, Lulla said that “The broadband pickup in India is very slow, but the Eros YouTube channel has crossed 1 billion views. It’s become the largest Indian player on YouTube.” Eros International also utilizes the music videos on its own digital platforms, and has a tie up with EMI music publishing to administer its western catalogue in India. In its earnings press release, Eros has said that it will focus on ‘Made for digital’ content in the coming quarters.

Financials

Eros has reported an increase of 86.8% year-on-year in its earnings for Q3 FY 2011, which stands at Rs 279.8 crore over last year’s Rs 149.78 crore. The company’s net profit (PAT) for the quarter also went up by 167.2% from Rs 16.1 crore to Rs 42.8 crore, while PAT margins increased to 15.3%. According to the company’s earnings release, operating profits increased mainly because of margin expansion which was driven by satellite rights, bundling new releases with existing ones, music and new media licensing, brand tie-ups and increased use of digital distribution.

The company had successful domestic and global releases such as Golmaal 3, No Problem,Toonpur Ka Superhero and Aakrosh in Q3 FY 2011. It has a formal relationship agreement with Eros International Plc, its parent company to distribute its films outside India, Nepal and Bhutan. This guarantees a certain profit to the company as it is able to utilize the strengths of its International arm to distribute films globally.

On the call, Eros said that its revenue split for Hindi films is as follows: 40% revenue from theatrical, 25% from satellite and 30% from overseas, and balance is music/new media

Home Entertainment and Music Business

Eros tied up with T-Series in a strategic alliance to co-distribute the music of films from the Eros stable. These deals ensured minimum revenue from music as and when films get released and help in covering 10%-15% of the total film costs. It released new films and bundled old ones in compilations to generate sustained cash flows. According to the company, VCDs are on the decline and DVD sales are growing; Blu Ray is also catching up. Eros released titles like Golmaal 3, Housefull, Hey Babyy amongst others on Blu Ray. It also plans to leverage the 3D DVD format.

Satellite Rights & TV Syndication

The company continues to monetize through preselling new and catalogued movies. The company signed syndication deals worth Rs 240 crore for film content and music on TV. It also signed various deals with satellite channels for syndication of its movie titles. It also syndicated satellite licensing agreements for several movies using the ‘bundled’ model for broadcast on a range of channels.

Visual effects Studio

Eros International’s VFX studio EyeQube got several international projects, including the Oscar nominated Tron Legacy and the television project “Moby Dick”. It is also working on big Indian projects including hindi films RA.1 and Desi Boyz and other regional projects.