Annual Report

Transcription

1 14 Annual Report th

2 IBF Board of Directors for President Man Jit Singh Multi Screen Media Vice President Vice President Vice President Treasurer Punit Goenka Zee Media Sunil Lulla Times Television Rajat Sharma India TV Rahul Johri Discovery Other Board Members Markand Adhikari Sri Adhikari Brothers Jawahar Goel Zee Network Siddharth Jain Turner International K. Madhavan Asianet K. V. L. Narayan Rao NDTV Uday Shankar Star India N. P. Singh Bangla Entertainment Ranjan Thakur Prasar Bharati Sudhanshu Vats Viacom18 I. Venkat Eenadu Special Invitees M. K. Anand Disney UTV B Sai Kumar Network 18

3 Message from the President-IBF Man Jit Singh I am delighted to present the 14th IBF Annual Report as the television broadcasting industry completes a momentous year of challenges and change. The year started with the implementation of the first phase of digitisation on October 31, Of immediate concern to broadcasters was the disruption that could be caused to the TAM ratings. The IBF worked hard to have its views heard, and in the end was able to bring both ISA and AAAI on board with our proposal to suspend ratings for a period of eight weeks while the veracity and stability of the TAM data could be analysed. I am proud of the unity that IBF Members displayed in supporting this important initiative. Also on digitisation, the IBF worked closely with the Ministry of Information & Broadcasting to ensure the success of Phase I and later Phase II of digitisation. We should all congratulate ourselves on this truly spectacular success, which was achieved in a faster timeframe than anywhere else in the world. IBF Members were instrumental in getting the message out and educating the public on impending digitisation and the need to accept set top boxes. Post implementation, the IBF Members worked to eradicate piracy and I am truly grateful for the efforts of all IBF Members. The IBF Members also displayed leadership in tempering subscription increases and decreases in carriage fees to allow MSOs to earn a return on their investment in boxes. IBF Members showed their willingness to sacrifice in the short run to allow for the long term gains that will come with the success of digitisation. Next came the unprecedented demands from the tax authorities on the delta between gross and net advertising billings. Again the IBF community came together as one and we were eventually able to negotiate a path to implement net billing with AAAI in a manner that was acceptable to all. This has been a long standing industry issue and I am glad that in 2013 it was finally put to rest. IBF has long had reservations about the TAM rating system, and in particular whether TRPs appropriately captured the growing television audience in India. Our concerns revolved around the fact that TRPs almost by definition shrink the television market. In addition, we were concerned about the variability of the data particularly for small channels. The IBF and TAM agreed that a more appropriate measure would be TVTs that provides for reach in thousands and is more in keeping with world standards. Also agreed was the use of monthly data, particularly for small channels where variability in data remains high. Working subsequently with AAAI and ISA led to some compromises but the new TVT measure is now established as the official currency and will, we believe, more accurately reflect the growth in the television market. On a referral from MIB, the regulator TRAI proposed to implement a 12-minute cap on advertising starting July 1, IBF made numerous representations to TRAI indicating that a sudden imposition of the cap would be very harmful to many Members. A compromise was struck whereby the cap on July 1, 2013 was 20 minutes for news channels and 16 minutes for all other channels with 1

4 Message from the President-IBF the 12-minute cap being deferred to October 1, IBF believes that the 12-minute cap is in the public interest and is happy that a compromise that helped Members in the short term could be arrived at with TRAI. The year also saw substantial progress in developing a new measurement system under the auspices of the Broadcast Audience Research Council (BARC). This is one of the single most important initiatives outside digitisation that will impact the industry. In the first step, IBF, AAAI and ISA came together to jointly fund BARC and set up a governance structure and Board. The technical committee of BARC, was set up and has successfully commissioned an establishment study that will underlie the new measure and is nearing completion. RFIs and RFPs have been issued to seek vendors for the next two phases of BARC, which are the placement of boxes and the analysis monitoring and collection of data. I am very pleased to say that BARC is on track and we are committed to a new measurement system being in operation in the first half of Finally, I am delighted to report that in March 2013, we appointed Shailesh Shah as Secretary General of the IBF. We have wanted to build a professional organization dedicated to advocacy for our industry and to creating a forum for developing position papers for a long time. I am happy that we have the leadership to drive these initiatives. Many challenges still remain ahead for our industry. Of particular note are: The continued tendency of the government to seek to regulate content. The industry set up BCCC to self-regulate content, and handle complaints almost two years ago and it has been a resounding success. Not a single channel has refused to comply with the directives of the BCCC. In fact, the IBF Board has further strengthened the punitive actions BCCC can take in 2013 and we need to fight any efforts to subvert or diminish the power of self-regulation and the success of BCCC. Service taxes and entertainment taxes continue to be a challenge and we need to educate the authorities on the detritus impact these will have on the industry. As an industry that provides over 600,000 jobs directly or indirectly, we need to highlight how high taxation can hurt the industry s prospects. Phase III and IV of digitisation are still ahead of us and we as an industry, must continue to support the government in this mammoth endeavour. We must continue to have a constructive dialogue with all participants in the industry: AAAI, ISA, TAM, MSOs/LCOs, MIB, TRAI. Only by working together can we maximize our full potential. We continue to have a major role in addressing societal issues. While strongly supporting the government s anti-smoking and tobacco campaign, we need to find ways to effectively partner with the government to affect positive changes to national health. We need to dismiss the notion of distribution aggregators as being monopolistic and continue the dialogue with TRAI. Despite all the challenges, the state of our industry is improving. I am incredibly optimistic about the growth of the broadcasting business as the number of TV households in India continues to increase. The longterm benefits of digitisation are good for all sectors of the industry including consumers, MSOs/LCOs, the government and all manners of broadcasters. Revenues from subscription will grow with transparency and carriage fees will rationalize. Advertising revenues are a fraction of what they can become and only 0.48% of GDP is spent on television advertising in India versus around 1% in most developed economies. We remain the most effective way for advertisers to reach their audience by a wide margin over any other medium. So I hope you will all join me in celebrating our future. In conclusion, I believe the single biggest learning from this last year is that when we as an industry stand together, we can get virtually anything done. It is critical in the years ahead to show our unity and put aside petty differences and I want to personally thank all the Members for the support they have given the IBF. I want to thank the Board and Office Bearers in particular, for their guidance and for all the hard work they have put in. This last year s achievements would not have been possible without their efforts. Sincerely, Man Jit Singh President-IBF 2

5 Notice Notice is hereby given that the 14th Annual General Meeting of the Members of Indian Broadcasting Foundation would be held on Thursday, 26 September 2013 at 12 noon at STAR House, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel (W), Mumbai to transact the following business: Ordinary Business: 1. To receive, consider and adopt the Audited Balance Sheet as at 31 March 2013 and the Income and Expenditure Account for the period ended on that date together with Auditor s Report and Directors Report thereon and for the purpose, to pass with or without modification(s) the following resolution as an Ordinary Resolution: RESOLVED THAT the Balance Sheet as at 31 March 2013 and Income and Expenditure Account for the period ended on that date, together with Auditor s Report and Directors Report thereon, be and are hereby approved and adopted. 2. To re-appoint M/s S.S. Kothari Mehta & Co., Chartered Accountants, as Statutory Auditors of the Foundation, to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting and to fix their remuneration and for the purpose, to pass with or without modification(s) the following resolution as an Ordinary Resolution: RESOLVED THAT M/s S. S. Kothari Mehta & Co., Chartered Accountants, the retiring Statutory Auditors be and are hereby re-appointed as Statutory Auditors of the Foundation from the conclusion of this meeting until the conclusion of the next Annual General Meeting at a remuneration as may be determined by the Board of Directors of the Foundation. 3. To elect Members of the Board of Directors. Details of directors retiring and nominations received are given below. Clause 25 of the Articles of Association and is eligible for re-election. II. Elect a Member of the Board of Directors in place of Mr. Jawahar Goel, Zee Entertainment, who would retire under Clause 25 of the Articles of Association and is eligible for re-election. III. Elect a Member of the Board of Directors in place of Mr. K.V.L. Narayan Rao, NDTV, who would retire under Clause 25 of the Articles of Association and is eligible for re-election. IV. Elect a Member of the Board of Directors in place of Mr. Rajat Sharma, India TV, who would retire under Clause 25 of the Articles of Association and is eligible for re-election. B. The following Co-opted Members of the Board are retiring as per Clause 23 of the Articles of Association: I. Mr. Ranjan Thakur, Prasar Bharati II. Mr. Rahul Johri, Discovery III. Mr. Markand Adhikari, Sri Adhikari Bros. C. The IBF Secretariat has received valid nomination forms from the following Members for IBF Board of Directors as per Clause 28 of the Articles of Association and are eligible for election: I. Mr. Ranjan Thakur, Prasar Bharati II. Mr. Rahul Johri, Discovery III. Mr. Markand Adhikari, Sri Adhikari Bros. IV. Mr. M. K. Anand, Disney Utv V. Mr. B. Saikumar, Network 18 VI. Mr. Pradeep Guha, 9X Media By order of the Board of Directors of Indian Broadcasting Foundation A. The following Members of the Board are retiring by rotation as per Clause 25 of the Articles of Association of Foundation: I. Elect a Member of the Board of Directors in place of Mr. Man Jit Singh, MSM, who would retire under Place : New Delhi Date : 19 July 2013 Man Jit Singh President-IBF 3

6 Notice 1. Member entitled should provide Board Resolution under Section 187 of the Companies Act, 1956 authorising person(s) who will represent them at the Annual General Meeting (AGM). Such person(s) shall be deemed to be Member present in person. 2. A Member entitled to attend the AGM is entitled to appoint a proxy to attend and vote in the AGM on his/ her behalf and the proxy need not to be a Member. The proxy form, in order to be valid must be deposited at the Registered Office of the Foundation not later than 48 hours before the commencement of the meeting. 3. No person other than the authorised representative of the Member entity or his/her duly appointed proxy as aforesaid shall be entitled to attend the AGM of the Foundation. 4. As per the Article 2(a)(1) of the Articles of Association of the Foundation, only Full (Regular) Members or their proxies are entitled to vote during the AGM. 5. Members are requested to bring their copy of the Annual Report to the Meeting. 6. Members desirous of having any information on Accounts are requested to send their written queries to IBF at its Registered Office, at least seven days before the date of the AGM, to make the required information available at the meeting. 7. No Member shall be entitled to be present or to vote on any resolution or otherwise participate in the proceedings at the AGM or upon a poll, to be reckoned in a Quorum whilst any money due from Member to the Foundation remains unpaid 30 days after a bill or a notice of demand in writing has been sent to Member for explanation. 8. Members/Proxies attending the meeting are requested to bring the attendance slip, as appended to this Notice, duly filled in and present the same at the venue of the Annual General Meeting. No photocopies of the attendance slip will be accepted. 4

7 Directors Report to the Members The Directors are pleased to present the 14 th Annual Report of your Foundation together with Audited Accounts for the period from 1 April 2012 to 31 March Financial Review Your Foundation has reported an Income from Subscription of Rs. 4,10,50,000. Besides that, Contributions Income has been recognised for specific projects, i.e., Self Regulatory Guidelines Fund Rs. 78,02,219 and Broadcast India Survey Fund Rs. 83,77,500. Interest earned from fixed deposits was Rs. 99,15,501. Your Foundation incurred an Expenditure of Rs. 3,01,14,236 (excluding amount utilised from the Self Regulatory Guidelines Fund and the Broadcast India Survey Fund) during the period ending 31 March Out of the excess of Rs. 2,10,04,844, an amount of Rs. 1,05,18,720 (net of Rs. 32,11,391 utilised out of Special Reserve) has been transferred to Special Reserve. Membership of the Foundation The number of Members of the Foundation as at 31 March 2013 was 55. Auditors & Auditors Report M/s S. S. Kothari Mehta & Co., Chartered Accountants, Statutory Auditors of the Foundation, hold office until the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. The Foundation has received letter from them to the effect that their appointments, if made, would be within the prescribed limited under Section 224(1-b) of the Companies Act, 1956 and also that they are not otherwise disqualified within the meaning of sub section (3) of Section 226 of the Companies Act, 1956, for such appointment. The Statutory Auditors Report on the Accounts of the Foundation for the financial year ended 31 March 2013 is self explanatory and does not require further comments in the Directors report. Report on Conservation of Energy, Technology Absorption, Foreign Exchange Earnings, Outgo, etc. Information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 regarding Conservation of Energy and Technology Absorption is not disclosed as the same is not applicable to the Foundation, being a Foundation. Foundation has no foreign exchange earnings and outgo during the period. Particulars of Employees In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the appendix to the Directors Report. However, having regard to the provisions of Section 219 (1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the Members of the Foundation and others entitled thereto. Any Member interested in obtaining such particulars may write to the Deputy Director at the registered office of the Foundation. Directors Responsibility Statement Pursuant to Section 217(2AA) of the Companies Act, 1956, it is hereby confirmed: I. that in the preparation of the annual accounts, the applicable accounting standards had been followed; II. that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Foundation at the end of the accounting year and of the surplus of the Foundation for that year; III. that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Foundation and for preventing and detecting fraud and other irregularities; IV. that the Directors had prepared the annual accounts on a going concern basis. 5

8 Directors Report to the Members Acknowledgements The Board of Directors wish to place on record their appreciation for the support and cooperation extended by every Member of the Foundation, the Secretariat, its Bankers, and valuable contribution made by the Consultants, Counsels and Officials of the Member Companies. For and on behalf of the Board of Directors of Indian Broadcasting Foundation Place: New Delhi Date: 19 July 2013 Man Jit Singh President Sunil Lulla Punit Goenka Rajat Sharma Vice President Vice President Vice President Rahul Johri Treasurer 6

9 Proxy Form Indian Broadcasting Foundation 14th Annual General Meeting Thursday, 26 September 2013 I being a Member of the above named Foundation, representing (Corporate Entity) do hereby appoint Mr./Ms, R/o as my proxy to vote for me on my behalf at the 14 th Annual General Meeting of the Indian Broadcasting Foundation to be held on Thursday, 26 September 2013 at 12 noon at STAR House, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel (W), Mumbai and at any adjournment thereof. Signed this day of Signature of Member Representative Name of Broadcaster Name of the Proxy-holder Attested Signature of Member Representative Re. 1/- Revenue Stamp Note : In order to be effective & valid, the proxy form must be received by the Foundation at its Registered Office not less than 48 hours before the commencement of the Meeting. 7

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11 Attendance Slip Indian Broadcasting Foundation 14th Annual General Meeting Thursday, 26 September 2013 (To be filled in BLOCK LETTERS) Name of the Member Representative I hereby record my presence at the 14th Annual General Meeting of the Indian Broadcasting Foundation held on Thursday, 26 September 2013 at 12 noon at STAR House, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel (W), Mumbai Signature of the Member Representative (To be signed at the time of handing over this slip) Note : Please fill the Attendance slip and hand it over at the entrance of the meeting hall. 9

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13 Broadcasting: An Industry In Transition INDIAN TELEVISION SECTOR MULTIPLE GROWTH DRIVERS Overview of advertising and subscription revenue prospects India is a vast, diverse market. 82,000+ daily newspapers, 650+ active television channels, over 450 AM/FM radio stations, about 1,250 feature films produced/exhibited yearly and the Internet, entertain and inform 122 crore Indians crore Indians are literate. 75+ crore Indians watch television. The Indian subcontinent communicates in dialects, 16 of which are nationally recognised languages. One would think that this large diverse democracy, which, the National Accounts Statistics say, earns a GDP of ~Rs. 88, 000 per capita, would spend 2-3% of its income on media. Not true. India spent an estimated ~Rs. 1 lakh crore on media and entertainment in FY 2013 out of a GDP of Rs. 110 lakh crore. In a nation where consumer spending is ~Rs. 50 lakh crore, television advertising is less than Rs. 15,000 crore. Subscription revenue, in the hands of local cable operators, is in large part not reported and is estimated at less than Rs. 30,000 crore. Even a developing economy such as Indonesia derived Rs. 38,500 crore in television advertising and subscription revenues for a country with a fifth of India s population. Brazil spends about Rs lakh crore on television advertising and subscriptions, for a country about a sixth of India s population. India remains the largest future market for new television households India is the world s third-largest television market with ~15 crore television households. Close to 8 crore households are without television, making it the largest market for new televisions in the world. As trickle down economics take effect, and more villages in this rural-rich populace get access to electricity and connectivity, television penetration will likely see one or two more leaps in the next five to seven years to substantially bridge this gap. Strong growth potential in television households % % % % 64% Total Households (crore) TV Households (crore) TV penetration (%) 61% Source: Ministry of Statistics Government of India, IBF Research India s media industry has significant potential ahead 2012 Media industry as a % of GDP 4% 3% 2% South Korea France Germany UK Japan USA 1% China Brazil Russia Spain Italy Netherlands Canada Australia 0% India 5,000 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Source: United Nations, Department of Census, Planning Commission of India, PwC, IBF Research Annual media spend per capita, Rs 11

14 Broadcasting: An Industry In Transition Indians do not use television enough Indians spend less time on being entertained/informed by television as compared with many countries. In a market where alternative media such as the Internet and mobile telephony will take time to impact the consumer, television should stay dominant in informing and entertaining consumers. ability to populate every television household with digitalready set-top-boxes and has in fact been one of the causes for the delay in digitisation. Pay TV penetration is successfully high 98% 84% Indians spend less time watching television than many countries TV viewing time (minutes per day) 54% 50% 48% USA % 35% 20% UK 240 INDONESIA 175 SOUTH KOREA INDIA MALAYSIA UK CHINA AUSTRALIA THAILAND VIETNAM Source: PwC CII Media Industry Reports, Asia Television Advertising, IBF Research INDIA CHINA Source: PwC CII Media Industry Report, IBF Research Low subscription fees have helped penetration In 1993, India had about 27 lakh telephone landlines. Half these lines were in Mumbai and Delhi at the time. The STD booth had successfully penetrated almost every part of the country. By the early 2000s, mobile phone calls became cheaper than postage stamps. This created a revolution in telephony. India will likely become the single largest subscriber base on the planet by the end of FY2014. Of the less than Rs. 30,000 crore in subscription fees, little trickles back to broadcasters, and with advertising revenues at less than Rs. 15,000 crore, India is one of the largest and yet, poor television broadcasting markets. Digitisation will provide necessary fillip to subscription fees and better revenue sharing. Advertising space will reduce as the government is imposing its twelve-minute time restriction to a clock hour on advertising. Time will tell how a new equilibrium between reduced space availability and advertising rates will evolve. India pays less to watch television than most countries Monthly subscription, Rs. USA 4,400 On similar principles and to ensure sufficient penetration, pay television has been made available thus far at deepdiscounted rates. It has in fact been governed by a strict tariff regime. Terrestrial television is defined as being essential and must be accessible to all. However, government s intervention in television wholesale rates has kept subscription rates artificially low. UK Brazil Thailand Malaysia China ,100 3,025 3,850 The low subscription rate and the wide variety of programming available on cable and satellite television have ensured an adoption rate of over 80% of television households, higher than most countries. Most cable and satellite television is broadcast as a paid service. The insignificant average Rs. 150 consumers pay to subscribe to ~100 pay channels helps penetration. The resulting insufficient revenue is an impediment to investment access for the distribution networks. This hinders their India 150 Source: PwC Media Industry Report, IBF Research 12

15 Broadcasting: An Industry In Transition Broadcaster economics continue to be dependent on advertising About 65% of revenues accruing to the television broadcasting supply chain comes from subscription. Broadcasters get to see a very small fraction of these fees as most of the fees continue to be retained by local cable operators that under-declare their subscriber base. In fact, broadcasters get less than 15% of their revenues from subscription and are accordingly dependent on paid advertising for their economic mainstay. Subscription revenues drive over 65% of TV revenues in India 21,340 23,540 26,950 Hindi stays significant while Regions rise Tamil 10% Hindi 50% English 10% Telugu 8% Others 7% Marathi 5% Kannada 4% Bengali 4% Malayalam 2% 17,380 18,590 Source: KPMG FICCI Frames 2013, IBF Research 15,400 7,810 9,020 9,680 11,330 12,760 13,750 Genre Share English movies, 1% Infotainment, 1% Regional channels, 27% News, 3% Sports, 3% Music, 3% Children, 7% Others, 13% Subscription revenue (Rs. crore) Source: KPMG FICCI Frames 2013, IBF Research Advertisement revenue (Rs. crore) Hindi movies, 12% As digitisation is firming up with its completion in Delhi, Mumbai and Kolkata, and close to 70% in 38 more cities, the dynamics of subscription revenue sharing are showing signs of changing. In the coming year, subscription revenues should increasingly be based on subscriber numbers. By the time digitisation is nationally complete, subscription revenues will likely be a little more equitable between local cable operators, multi-service operators and broadcasters. Hindi general entertainment attracts the largest audience. Regional markets also form a significant portion of total viewership. With its reliance on advertising revenues, broadcasters have been mainly focused on increasing reach and providing improved content at relatively cheap rates. With digitisation s increased channel carrying capacity, viewers can expect more differentiated niches, broader and richer content and bundles of channels catering to all wallets. Source: KPMG FICCI Frames 2013, IBF Research Hindi GEC, 30% DTH distribution firms up Direct-to-home distribution has grown rapidly in the past few years and has perhaps been the biggest growth story in the broadcasting sector. The number of DTH households has grown from just 0.4 crore active subscribers in FY2008 to over 3.5 crore active subscribers in FY2013 according to Media Partners Asia. Net additions in DTH have outpaced cable in the past few years by a wide margin. DTH inherently has an advantage in reaching out to rural areas where cable infrastructure is either not available or is poor in quality. With 7 crore of the 8 crore non television households in rural India, DTH has an edge in reaching out to future consumers. 13

16 Broadcasting: An Industry In Transition Consolidating cable distribution continues to be dependent on the local cable operator Cable networks remain grossly fragmented to date. An estimated 50,000 + LCOs operate across India to provide last-mile connectivity. Of the estimated ~6,000 MSOs, about 6-10 have a pan-india presence. The market share of these larger MSOs has increased from ~25% in FY2007 to ~60% in FY2013. The majority of last mile ownership remains with LCOs. Their dominance hinders investment in cable infrastructure and has caused under-declaration of subscribers by LCOs. This leads to lower realisation for broadcasters. As digitisation flourishes, consolidation will firm up in parallel and under declaration of subscribers will start declining resulting in increased realisation to MSOs and broadcasters. Subscription revenue sharing needs to be more equitable LCOs own most consumer relationships. Their last mile ownership has continued the tendency for underdeclaration. Overall, LCOs retain about 75% of distribution revenues while broadcasters see a trickle as MSOs retain the rest. In DTH distribution, however, the numbers are a little more equitable. India will digitise faster than any place else in the world When the Indian Parliament passed the Digitisation Bill in 2011, it started a revolution in the television ecosystem. India s rapid digitisation process is well underway, and in all likelihood, will complete digitisation to every village in India by By ensuring capacity, several new broadcast possibilities will come about and for television broadcasters it will provide better access to subscription fees. Pay TV subscription compared with movie ticket prices 3,850 The first phase of digitisation covering Delhi, Mumbai and Kolkata has already been completed and benefits should start being realised soon. Chennai s decision rests with the Madras High Court at this point in time. The second phase to be fully implemented by March 2013 is also well underway. Reasonable progress in this monumental task has been achieved although there is still slight delay in full implementation. Including DTH penetration, 35 cities have achieved over 75% digitisation. The third and fourth phases covering smaller towns and rural areas will also pose a monumental challenge. Phase Coverage Digitisation deadline Estimated television homes** Phase I 4 metropolitan cities 30 October crore Phase II 38 cities* 31 March crore Phase III Other urban areas 30 September crore Phase IV Rest of India 31 December crore *Population more than 10 lakh; ** the estimated 12.9 crore TV homes is more likely to be 16.5 crore TV homes by Source: Ministry of Information and Broadcasting Realisation should see an upward trend Low subscription fees continue to hurt broadcasters. Pay television ARPUs in India are much less than in other countries. An average multiplex movie ticket costs the same amount in India as monthly pay television ARPU, while in developed markets ARPUs are 5-6 times a multiplex movie ticket. In spite of being priced high relative to television, multiplex as a medium continues to grow well, with a robust increase in domestic theatre revenues driven by multiplexes. This shows that the consumer is willing to pay more for quality entertainment but television rates have been kept artificially low. Post digitisation, not only will ARPUs grow, but MSOs and broadcasters will get a better share of the subscription pie. Gross ARPUs should improve, tax collections will also improve, and viewers will be thrown open to a whole new vista of programming and content that was hitherto cost-ineffective. 4,400 3, , INDIA THAILAND UK USA AUSTRALIA Source: PwC CII Media Reports, IBF Research Pay TV ARPU (Rs.) Movie ticket price (Rs.) 14

17 Broadcasting: An Industry In Transition Digitisation will help reduce carriage fees India has 650+ operating channels. Analogue cable can carry ~100 channels, creating a war for space. Broadcasters end up paying carriage fees to MSOs and cable operators as a result. Carriage fees are important revenue for MSOs and are needed to earn a return on their investments in set top boxes in the short term. Once content moves to a digital platform, capacity will be less of a constraint, as both, platform and connectivity can carry more than 500 channels. Also, once a set top box is connected, it needs only one television channel slot and hence the number of channel slots available on a television is no longer a consideration again resulting in elimination of the need to be on prime and colour bands. While the first phase of digitisation has been successfully implemented technically in the sense that set-top boxes have been seeded, we are some ways from commercial value creation. Set top boxes have been installed, but consumers pay just a little more than before. Subscriber application forms are also becoming mandatory, giving greater visibility to television households. As addressability issues begin to resolve, broadcasters will get to know more about their viewers and a whole new broadcasting game is in store as a consequence. Advertising has reached the tipping point In most parts of the world, broadcasters realise as much from subscription as from advertising. Digitisation will help, although, significant effort is necessary and will take time. Until then, broadcasters will still be advertising dependent. However, in India, spending for advertising on television remains relatively low. TV advertising revenues still to reach potential Advertising spend in FY 2013, Rs. 35,750 crore After two years of double-digit growth in FY2010 and FY2011, advertising revenue growth slowed to 9% in FY2012 due to high inflation and waning consumer sentiment. Advertising growth closely follows GDP with a lag of one year. With India s GDP falling to ~5% in FY2014, the advertising sector growth may remain muted. In the longer term, advertising revenues should return to double digit growth. Advertising spend and GDP growth % 4% 25% % % 16% % 7% % GDP (Rs lakh crore) Advertising growth YoY GDP growth YoY Source: KPMG FICCI Frames, World Bank, IBF Research IT IS TIME TO APPRECIATE INDIA S REGIONAL MARKETS THEY ARE BIGGER THAN MOST COUNTRIES While Hindi general entertainment and movies remain the dominant genres in India s television sector with ~42% viewership, regional channels are also sizeable, accounting for ~27% viewership. Tamil and Telugu are the biggest regional markets accounting for 45% of regional channel viewership. Tamil, Telugu, Bangla, Kannada and Malayalam spearhead the regional game, closely followed by Marathi. Tamil dominates in advertising revenues, receiving much higher revenue as a proportion to homestate GDP. In contrast, the Marathi market is smaller in proportion to Maharashtra s state GDP. 9% 35% 30% 25% 20% 15% 10% 5% 0% Print 46% OOH 5% Radio 4% Digital 7% Within regions too, while general entertainment is the most prominent genre, other niche genres such as children and comedy are beginning to anchor well. Regional markets have grown faster than the Indian average in the past few years. TV 38% Source: KPM FICCI Frames 2013, IBF Research 15

18 Broadcasting: An Industry In Transition South Indian states are the biggest regional advertisement markets Households in home-states, crore Advertising revenue, Rs. crore 1,400 1,200 1, Tamil Telugu Bangla Malayalam Kannada Marathi Punjab Bhojpuri* Oriya Gujarati - Households (crore in home states) (LHS) C&S households (crore in home state) (LHS) Television Households (crore in home state) (LHS) Advertisement market size (Rs. crore) (RHS) Note: *Bhojpuri market consists of the states of Uttar Pradesh, Bihar and Jharkhand Source: KPMG FICCI Frames 2013, IBF Research Advertising spend in comparison with state - GDP State GDP for FY , Rs. crore 1,400,000 1,200,000 Maharashtra 1,000, , , , ,000 Gujarat Punjab Odisha West Bengal Karnataka Kerala Andhra Pradesh Tamil Nadu ,000 1,100 1,200 1,300 1,400 1,500 Advertisement market size, Rs. crore Note: State GDP for FY Source: Planning Commission of India, KPMG FICCI Frames 2013, IBF Research 16

19 . MEDIA AND TAXATION Withholding tax for production of television programmes paid to content creators and withholding tax for carriage fees/placement charges paid to MSOs/ LCOs is 2% for work done, while tax authorities claim it is for service/royalty provided and should be 12.36%. Subscription revenues of foreign broadcasters is being treated as royalty by tax authorities suggesting it is subject to 10% tax on a gross basis, and have further enhanced it to 25%. This also applies to royalty on content from overseas and for satellite services bought from companies overseas. Foreign broadcasters pay an arm s length remuneration to their Indian Associated Enterprises (AEs), which act as agents for advertising sales however, tax authorities see this differently, and want to dispute this. Foreign broadcasters AEs sell advertising space to agencies in India on channels downlinked into India; AEs show related sales and marketing expenses as operating cost whereas, tax authorities contend it is assisting in strengthening the brand of foreign parents, and accordingly AEs in India should recover such expenses from foreign parents even though AEs receive an arms-length payment toward such sales. DTH companies give a discount to distributors for the sale of set top boxes or provide recharge coupons. This discount is again being treated as a commission by the tax authorities, and they want to charge it like the 15% agency commission on gross billings. Payment to foreign companies for uploading and displaying banner advertisements on their portals are being subjected to withholding tax in India. VAT is being revisited. Transfer pricing issues continue to fester. Service tax issues are seeing new avatars. Set top boxes are charged 10% additional import duty. The impact of all these taxes can be a negative for the industry s prospects. NET BILLING Several broadcasters in Mumbai, and a few in Delhi received show cause notices and penalty orders from Income Tax Departments regarding the difference between gross and net billing. IBF and AAAI jointly architected a plan and implemented net billing to avoid tax liabilities. DIGITISATION CHALLENGES Broadcasters continue to support digitisation campaigns All Members have shown advertisements for DAS I and DAS II completion, subscriber application forms (SAFs) submission tickers and reminder tickers several times a day on all channels. Some Members have been instrumental in creating the actual campaigns. Broadcasters now need to gear up for DAS III/IV implementation. Challenging stay orders in several states seeking postponement of DAS The Karnataka, Andhra Pradesh, Gujarat and Madhya Pradesh High Courts agreed to stay DAS II implementation in Bangalore, Hyderabad, Vijayawada, Visakhapatnam, Ahmadabad and Jabalpur and IBF chose to challenge each of these. In parallel, IBF challenged these pleas at the Supreme Court. All High Courts have rejected the stay orders. THE ADVERTISING MINUTES CAP TRAI has mandated that advertising time by the clock hour be restricted to twelve minutes under the quality of service clause starting 1 July IBF has worked with TRAI to reach a compromise on implementation timing. Phased implementation has commenced and for the months of July through September, broadcasters have been asked to limit advertisements and promotions to less than 20 minutes for news channels and 16 minutes for all others. Starting 1 October, broadcasters will adhere to twelve minutes of advertising. This will be both, difficult and economically challenging to execute but is recognised to be in the interest of consumers. IBF has dropped contesting TRAI s jurisdiction in TDSAT after this agreement was reached. OUTSTANDINGS IMPROVE The IBF Credit and Collections Committee and IBF-AAAI Sub Committee have continued their task and mandate to mitigate late payments by clients/agencies and improved collections. This is reflective in the analytical graph based on comparative billing figures for March March

20 Broadcasting: An Industry In Transition Advertisement outstanding comparison Rs. crore Disputed Ageing 0-30 Ageing Ageing Ageing days days days days Ageing >120 days Undisputed outstanding Total outstanding March 2012 March 2013 Source: IBF Credit and Collections Committee Although there has been a marginal increase in the disputed figures, the overall figures show an encouraging trend as the outstanding dues have come down. The total amount reported by channels in March 2012 was Rs. 502 crores which has come down to Rs. 423 crores for the corresponding year. Similarly, the undisputed outstanding for the same period has come down from Rs. 488 crores to Rs. 407 crores. The delay in number of days has diminished as far as the outstanding ageing is concerned. The Committee has been able to achieve its mandate of streamlining payments considerably. From the comparisons made from the replies received from AAAI Members, the undisputed amount reported in March 2013 has come down to Rs. 158 crore from Rs. 186 crore last year. The timely implementation of various directives of the IBF-AAAI Sub Committee has also resulted in improved collections within 65 days and reduced outstanding as indicated above. Timely dispute management and resolution by the Committee has helped reduce agency-reported disputes by nearly 50%. AAAI agencies outstanding Rs. crore Undisputed outstanding Paid within 65 days Amount not paid on due date Disputes reported Bills not received from channels March 2012 March 2013 Source: IBF Credit and Collections Committee 18

21 Broadcasting: An Industry In Transition INTENT TO IMPLEMENT ASPIRE THIS YEAR The IBF Board wants Members to implement the Ad Spot Payment and Invoice Reconciliation Engine, ASPIRE. The long-term benefits to broadcasters far exceed the cost of implementation. Every single transaction would come at a very low price and the system would reduce process time. New members We welcome Pioneer Channel Factory, Star Entertainment, Pride East Entertainment and Business Broadcast as the new Ad-Hoc Members of IBF. We are pleased to upgrade Bangla Entertainment and Asianet News as the Full (regular) Members of the Foundation. 19

22 Broadcasting: IBF COMMITTEES An Industry In Transition BARC WELL ON ITS WAY The BARC Board completed appointing its CEO in June The BARC Board comprising ISA, AAAI and IBF Members has worked closely together and taken several steps to launch the new advertising measurement system. Its technical committee, TechCom, has appointed MRUC, the national organisation that conducts the Readership Survey for newsprint, to conduct its first baseline study. The MRUC baseline study is being conducted pan-india. It will cover 235,000 respondents representing India s urban and rural diversity. MRUC will complete the baseline study by November 2013 and based on its findings, BARC will arrive at a prototype design panel. BARC is working to ensure it is able to launch its first audience measure in the first half of The TechCom issued Requests for Information worldwide toward the end of 2012 to help understand who could possibly provide audience meters and who could help in data collection and analysis. The intent is to keep these functions separate. The kinds of vendors who have provided information included technology, IT services and market research companies. In response to BARC requests for technology and research panels proposals, it has received several responses from across the world. The TechCom has been evaluating these responses. The TechCom also appointed an expert who has been associated with the setting up of BARB, UK, and brings rich experience and expertise to guide them. Once the TechCom recommendations are received, discussed and approved by the BARC Board, the Commercial Committee will negotiate and reward contracts to prospective vendors. IBF-AAAI SUB COMMITTEE IMPROVES COLLECTIONS The credit and collections committee shields broadcasters from payment delays and bad debts. The collective strength of IBF Members provides the committee with effective wherewithal to deal with agencies and clients defaulting on or delaying payments. A thorough review of dues to channels is conducted by the Foundation on behalf of its Members in regularly conducted monthly meetings. The outstanding list is compiled after cross checking with agencies and an analysis of when payments have been affected is placed before the committee. This enables the committee to take informed decisions. The committee recommends action against defaulters and their payment terms get upgraded/ downgraded based on payment history. The committee chairman said, Members of the committee have set new parameters and yardsticks by being completely impartial and unbiased and their thought process reflects their resolve to mitigate outstanding advertising dues. I would also place on record the commendable work done by the Foundation in setting the agenda of the meetings and establishing a robust enforcement mechanism to implement decisions by the committee. They work backstage to make this committee truly effective. THE DISTRIBUTION COMMITTEE IS KEY The Distribution Committee is important in dealing with MSO relationships. Contextually, the committee s primary goal is to help improve returns from digitisation. The committee works with its Members and suggests a road map for all IBF Member channels on issues related to distribution. It leaves the final decision on commercial matters to the respective channels. Its ongoing responsibility is to ensure the creation of an atmosphere amongst constituents in the distribution chain, the government and the regulator to work in unison and create an environment and working relationship for the betterment of the sector. The committee liaises with the government on digitisation implementation. It apprises the government on sector concerns and has been proactively suggesting remedial and corrective steps where necessary. The MIB taskforce on digitisation includes a distribution committee member as the Foundation s nominee. The committee, through IBF members advertising support has helped the Regulator and MSOs in subscriber application form collection. The committee has also helped in subscriber management reports and common audits. The distribution committee, the Foundation and select broadcasters helped create advertisements for assisting the digitisation process. These commercials have been successful in improving awareness and are helping viewers align with digitisation needs. Member channels continue to display these advertisements to ensure deadlines in different stages of digitisation are brought to the public s attention. The committee has also engaged itself actively against those MSOs and LCOs who are involved in piracy activities such as theft, redistribution, re-transmission and copying of channel content. It has lodged FIRs in certain cases of theft and piracy. 20

23 Broadcasting: IBF COMMITTEES An Industry In Transition The committee chairman says, The issues that confront digitised broadcasting are complex and there are no simple or common answers. We have to work our way to come to a common ground where all stakeholders feel included and protected. Creating such a win-win situation for all is a prodigious exercise. The committee works to achieve this through dialogue and negotiations, and actively tries to follow due process. BCCC: ENTERTAINMENT GENRE COMPLAINTS MANAGEMENT GETS EVEN BETTER In June 2013, the Broadcasting Content Complaints Council (BCCC) completed two years of successful operation under the Chairmanship of Justice (Retired) A P Shah. For the period 1 August 2012 to 20 June 2013, the Council received a total of 5,690 complaints and suggestions, including 590 specific complaints down from 782 in the previous year. The number of specific complaints has shown a clear declining trend, indicating much higher compliance by Member channels with IBF s self-regulatory guidelines as well as with the various advisories issued by BCCC. Member channels without fail have adhered to every single advisory and ruling by BCCC. Taking forward the process of holding sensitisation sessions, the Council successfully conducted an interactive session on the depiction of women in TV programmes in Mumbai on 14 March The session was well attended by the creative and programming teams of various channels. The Council intends to hold a similar session for southern channels in the coming months. In July 2013, the IBF Board empowered the Council with the power to impose financial penalty up to a maximum of Rs. 30 lakh for violations of the self-regulation guidelines. BCCC advisories are effective in making channels aware of their responsibility as content broadcasters. Six new advisories were added to the earlier list of four issued last year, taking the total to ten. The advisories are about: Acid attacks 6. Content sensitive to minorities 7. Content on cartoon and children-channels 8. Comedy shows 9. The participation of children in sexually expressive content 10. The health and safety of children During the year, the Judiciary recognised BCCC as the competent body to deal with complaints related to telecast of content on general entertainment channels. In fact, the Delhi High Court and the Nagpur Bench of the Bombay High Court directed the Council to take decision in specific cases. LEGAL AND REGULATORY AFFAIRS COMMITTEE The committee was constituted to deal specifically with legal and regulatory issues arising out of legislative intervention in broadcasting and also litigations filed in various courts. The committee has advised on impact of digitalisation, changes in the Copyright Law, changes in the proposed Cinematograph Act, ad-spots time regulation, legislation on surrogate advertising, engagement with TAM on audience measurement and inclusion of financial penalty for content violation. The Legal and Regulatory Affairs Committee chairman says, It is indeed a matter of immense satisfaction to the IBF Board that the Legal & Regulatory Affairs Committee which represents the best legal minds in the sector unanimously suggests elegant solutions to any impasse on legal and procedural matters of the sector. The ability of these minds to comprehend legal issues and present it to the IBF Board simplifying these challenges is trustworthy and their synergy in dealing with the most complex issues is contagious. By order of the Board of Directors of Indian Broadcasting Foundation The depiction of animals and wildlife 2. Awards functions 3. The participation of children in reality shows 4. The portrayal of women Place : New Delhi Date : 19 July 2013 Man Jit Singh President-IBF 21

24 IBF COMMITTEES IBF High Powered Committee Chairman: Mr. Man Jit Singh (MSM) Members: Mr. Uday Shankar (STAR India) Mr. I. Venkat (ETV) Mr. Punit Goenka (Zee) IBF Credit and Collections Committee Chairman: Mr. Raj Nayak (Viacom18) Members: Ms. Ameeta Jog (MSM) Mr. Ashok Soni (STAR India) Mr. I. Venkat (ETV) Ms. Laxmi Shetty (Zee) Mr. R. Rikhy (TV Today) Ms. Sudha Rao (Network 18) Mr. Sunil Pasricha (ESPN) Mr. Suhas Kokate (Disney) Mr. S. Rajaraman (Asianet) Mr. Yogesh Aggrwal (NDTV) IBF Legal and Regulatory Affairs Committee Chairman: Mr. Sudhanshu Vats (Viacom 18) Members: Mr. A. Mohan (Zee) Mr. Ashok Nambissan (MSM) Mr. Deepak Jacob (STAR India) Mr. Himavat Chaudhuri (Turner) Mr. Rohit K. Chopra (Times Television) Mr. Sujeet Jain (Viacom 18) Mr. Mukul Sharma (Neo Sports) IBF Distribution Committee Chairman: Mr. Siddharth Jain (Turner) Members: Mr. A. Mohan (Zee) Mr. Anuj Gandhi (Network 18) Mr. Deepak Jacob (STAR India) Mr. Gurjeev Singh (MediaPro) Mr. Rahul Sood (NDTV) Mr. Raj Mohan Nair (India TV) Mr. Rajesh Kaul (MSM Discovery) Mr. Rohit K. Chopra (Times Television) Mr. Vijay Rajput (ESPN) IBF HR Committee Chairman: Mr. N. P. Singh (Bangla Entertainment) Members: Ms. Smriti Singh (MSM) Mr. Rohit Suri (Turner) Ms. Shruti Aggarwal (Disney) Mr. Srivathsan (Times Television) Ms. Vidya Tulsidharan (Discovery) Mr. Rishi Gaind (STAR India) Mr. Rajendra Mehta (Zee) Mr Gagan Bhargava (NDTV) Mr. Abhinav Chopra (Viacom 18) 22

25 INDEPENDENT AUDITOR S REPORT To the Members of Indian Broadcasting Foundation Report on the Financial Statements We have audited the accompanying Financial Statements of Indian Broadcasting Foundation as at 31 March 2013 which comprise the Balance Sheet as at 31 March 2013 and Income and Expenditure Account for the year then ended and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation of these Financial Statements that give a true and fair view of the financial position and financial performance of the company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956( the Act ). This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of the Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks from the material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company s preparation and fair presentation of the Financial Statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion and to the best of our information and according to the explanations given to us, the Financial Statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: a. In the case of the Balance Sheet, of the state of affairs of the Company as at 31 March 2013 and b. In the case of the Income & Expenditure Account, of the Surplus for the year ended on that date. Report on Other Legal and Regulatory Requirements This report does not include a statement on the matters specified in paragraph 4 of the Companies (Auditor s Report) Order, 2003 [as amended by the Companies (Auditor s Report) (Amendment) Order, 2004] issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956, since in our opinion and according to the information and explanations given to us, the said Order is not applicable to the company. As required by section 227(3) of the Act, we report that: a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; b. in our opinion proper books of account as required by law have been kept by the company so far as it appears from our examination of those books; c. the Balance Sheet and Statement of Profit and Loss dealt with by this Report are in agreement with the books of account; 23

26 COMMITTEES INDEPENDENT AUDITOR S REPORT d. in our opinion, the Balance Sheet and Statement of Profit and Loss comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; e. on the basis of written representations received from the directors as on 31 March 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; For S.S. Kothari Mehta & Co. Chartered Accountants Firm s Regn. No N Place: New Delhi Date: 19 July 2013 Naveen Aggarwal Partner (Membership No ) 24

27 Balance Sheet As At 31 March 2013 Particulars Note No As at 31 March 2013 I. EQUITY AND LIABILITIES (1) Member s Funds As at 31 March 2012 (a) Entrance Fee 2 12,750,000 9,750,000 (b) Reserves and Surplus 3 76,534,670 55,029,826 (2) Non-Current Liabilities (a) Long Term Provisions 4 2,181,336 2,828,241 (3) Current Liabilities (a) Other Current Liabilities 5 49,988,096 52,580,225 (b) Short-Term Provisions 6 16,603 34,092 Total 141,470, ,222,384 II. Assets (1) Non-Current Assets (a) Fixed Assets (i) Tangible Assets 7 25,636,134 26,119,675 (ii) Intangible Assets 8 19,396 22,926 (b) Non-Current Investments 9 1,500,000 1,500,000 (c) Long Term Loans and Advances 10 10,300 12,800 (d) Other Non-Current Assets 11 28,025,387 9,965,746 (2) Current Assets (a) Cash and Bank Balances 12 73,244,909 68,980,681 (b) Short-Term Loans and Advances 13 7,903,034 7,982,024 (c) Other Current Assets 14 5,131,545 5,638,532 Total 141,470, ,222,384 The notes are an integral part of the Balance Sheet. This is the Balance Sheet referred to in our attached report of even date. For S.S. Kothari Mehta & Co. Chartered Accountants Firm s Regn. No N For and on behalf of the Board of Directors of Indian Broadcasting Foundation Naveen Aggarwal Partner Membership No Place : New Delhi Date : 19 July 2013 Man Jit Singh President Rajat Sharma Vice President Sunil Lulla Vice President Rahul Johri Treasurer Punit Goenka Vice President C. Radhakrishnan Deputy Director 25

28 Income & Expenditure Account for the year ended 31 March 2013 Particulars Note No For the Year ended 31 March 2013 Income: For the Year ended 31 March 2012 I. Subscription 15 57,229,719 28,340,588 II. Other Income 16 9,919,680 7,706,869 III. Total Revenue (I +II) 67,149,399 36,047,457 Expenditure: Employee Benefit Expense 17 11,951,602 7,118,369 Depreciation and Amortisation Expense , ,657 Other Expenses 19 33,363,562 27,931,095 IV. Total Expenses 46,144,555 35,914,121 V. Surplus/(Deficit) Before Tax(III-IV) 21,004, ,336 VI. Tax Expense: Current Tax - - Deferred Tax - - VII. Surplus/(Deficit) for the Year (V-VI) 21,004, ,336 The notes are an integral part of the Financial Statements. This is the Income & Expenditure Account referred to in our attached report of even date. For S.S. Kothari Mehta & Co. Chartered Accountants Firm s Regn. No N For and on behalf of the Board of Directors of Indian Broadcasting Foundation Naveen Aggarwal Partner Membership No Place : New Delhi Date : 19 July 2013 Man Jit Singh President Rajat Sharma Vice President Sunil Lulla Vice President Rahul Johri Treasurer Punit Goenka Vice President C. Radhakrishnan Deputy Director 26

29 Notes to Financial Statements Notes 1: SUMMARY OF significant Accounting POLICIES: 1. BASIS OF PREPARATION These Financial Statements have been prepared in accordance with the generally accepted Accounting Principles in India under the historical cost convention on accrual basis based on going concern. These Financial Statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, All assets and liabilities have been classified as current or non-current as per the company s operating cycle and other criteria set out in the Revised Schedule VI to the Companies Act, Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the purpose of current non current classification of assets and liabilities. 2. REVENUE RECOGNITION Subscription from the Members is recognised on accrual basis considering the reasonable certainty for the ultimate collection. Additional contribution received for specific projects have been recognised as income to the extent the same has been utilised for the respective projects and balance unutilised portion has been shown as other current liability. 3. FIXED ASSETS AND DEPRECIATION Tangible Assets a. Tangible Assets are stated at acquisition cost inclusive of all related and other incidental expenses net of accumulated depreciation. b. Depreciation on Tangible Assets is provided on Straight Line Method on pro-rata basis at the rates specified in Schedule XIV (as amended) to the Companies Act, In the case of assets costing up to Rs. 5,000, depreciation is charged at the rate of 100% in the year of purchase. Intangible Assets a. Intangible Assets are stated at acquisition cost inclusive of all related and other incidental expenses net of accumulated amortisation. b. Intangible Assets are amortised over a period of 5 years from the date of acquisition on straight line basis. 4. INVESTMENTS Investments are classified into long term or current. Long term investments are stated at acquisition cost. Provision for diminution in the value of long term investments is made only if such a decline is other than temporary. Current investments are valued at lower of cost and market rate on individual investment basis. 5. RETIREMENT BENEFITS a. Retirement benefits in the form of Provident Fund / Pension Schemes is defined contribution schemes and the contributions are charged to the Profit & Loss Account of the year when the contributions to the respective funds are due. b. Leave Encashment liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of each financial year. c. Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of each financial year. d. Actuarial gains / losses are immediately taken to Profit & Loss Account and are not deferred. 6. TAXATION The company is exempt from tax on income under Section 11 of the Income Tax Act, 1961; hence no provision has been made for the same. 27

30 Notes to Financial Statements 7. FORFEITURE OF ENTRANCE FEE Forfeited entrance fee is transferred to Capital Reserve in the case of removal or resignation of any Member. 8. PROVISIONS, CONTINGENT LIABILITY and CONTINGENT ASSETS a. Provisions involving substantial degree of estimation in measurement are recognised when the present obligation resulting from past events give rise to probability of outflow of resources embodying economic benefits on settlement. b. Contingent liabilities are not recognised and are disclosed in notes. c. Contingent assets are neither recognised nor disclosed in financial statements. d. Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. 9. USE OF ESTIMATES The presentation of Financial Statements in conformity with the generally accepted Accounting Principles requires estimates and assumptions to be made that affect reportable amount of assets and liabilities on the date of Financial Statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the year in which the results are known / materialised. 28

31 Notes to Financial Statements 2. Entrance Fee Particulars As at 31 March 2013 As at 31 March 2012 Opening Balance 9,750,000 6,300,000 Add: Received during the year 3,500,000 3,500,000 Less: Forfeited during the year 500,000 50,000 Total 12,750,000 9,750, Reserves and Surplus Particulars As at 31 March 2013 As at 31 March 2012 Capital Reserve: Opening Balance 1,500,000 1,450,000 Add: Transferred from Entrance Fee 500,000 50,000 Closing Balance 2,000,000 1,500,000 Special Reserve: Opening Balance 17,917,751 19,295,173 Add : Transferred from Income & Expenditure Account 10,518,720 - Less : Transferred to Income & Expenditure Account (Net) - (1,377,422) Closing Balance 28,436,471 17,917,751 General Reserve Opening Balance 17,829,800 17,829,800 Add : Transferred from Special Reserve - - Closing Balance 17,829,800 17,829,800 Surplus/( Deficit ) Opening Balance 17,782,275 16,271,517 (+) Net Profit/(Net Loss) for the current year 21,004, ,336 Add : Transferred from Special Reserve (Net) - 1,377,422 Less : Transferred to Special Reserve (Net) (10,518,720) - Closing Balance 28,268,399 17,782,275 Total 76,534,670 55,029,826 29

32 Notes to Financial Statements 4. Long Term Provisions Particulars As at 31 March 2013 Provision for Employee Benefits As at 31 March 2012 Leave Encashment 1,083,989 1,277,570 Gratuity 1,097,347 1,550,671 Total 2,181,336 2,828, Other Current Liabilities Particulars As at 31 March 2013 Other payables As at 31 March 2012 Self Regulatory Guidelines Fund 5,697,575 1,799,794 Broadcast India Survey Fund 39,632,118 48,009,618 Other Payables 2,767,948 2,758,008 Statutory Dues Payable 1,890,455 12,805 Total 49,988,096 52,580, Short Term Provisions Particulars As at 31 March 2013 Provision for Employee Benefits As at 31 March 2012 Leave Encashment 8,296 13,782 Gratuity 8,307 20,310 Total 16,603 34,092 30

33 Notes to Financial Statements 7. Tangible Assets Particulars Balance as at 1 April 2012 Gross Carrying Value Additions # Deductions/ Adjustments Balance as at 31 March 2013 Balance as at 1 April 2012 Depreciation for the Year Depreciation Deductions/ Adjustments Balance as at 31 March 2013 Net Carrying Value Balance as at 31 March 2013 Balance as at 31 March 2012 Computers Hardware 698, , , , , , , ,364 Motor Vehicle 959, , ,010 91, , , ,990 Furniture & Fixture 1,795, ,795, , , , ,331 1,015,694 Office Equipments 867, ,984 28,500 1,018, ,862 74,781 18, , , ,403 Electrical fittings 666, , ,283 31, , , ,842 Office Building 25,555, ,555,612 2,676, ,556-3,092,786 22,462,826 22,879,382 Total 30,541, ,084 28,500 30,865,052 4,421, ,861 18,736 5,228,918 25,636,134 26,119,675 Previous Year 30,660, , ,223 30,541,468 4,017, , ,312 4,421,793 26,119,675 26,642,419 # including additions for Self Regulatory Guidelines Fund of Rs. 149, Intangible Assets Particulars Balance as at 1 April 2012 Gross Carrying Value Additions Deductions/ Adjustments Balance as at 31 March 2013 Balance as at 1 April 2012 Depreciation for the Year Amortisation Deductions/ Adjustments Balance as at 31 March 2013 Net Carrying Value Balance as at 31 March 2013 Balance as at 31 March 2012 Computer Software 210, , ,122 3, ,652 19,396 22,926 Total 210, , ,122 3, ,652 19,396 22,926 Previous Year 210, , ,837 32, ,122 22,926 55,211 31

34 Notes to Financial Statements 9. Non Current Investments Particulars As at 31 March 2013 Other Investments (valued of cost unless otherwise stated) Investment in Equity Instruments (Non Trade, Unquoted) 1,50,000 Equity Shares (Previous yr. 1,50,000) of Broadcast Audience Research Council (100% subsidiary at the time of receipt of shares) As at 31 March ,500,000 1,500,000 Total 1,500,000 1,500, Long Term Loans and Advances Particulars As at 31 March 2013 As at 31 March 2012 Unsecured, considered good Security deposits 10,300 12,800 Total 10,300 12, Other Non Current Assets Particulars As at 31 March 2013 As at 31 March 2012 Other Bank Balances (Refer Note No.12.1) Fixed Deposit 27,000,000 9,700,000 Interest Accrued 1,025, ,746 Total 28,025,387 9,965, Cash and Bank Balances Particulars As at 31 March 2013 As at 31 March 2012 Cash & Cash Equivalents Cash on Hand 8,972 30,974 Cheques on Hand - 250,000 Balances with Schedule banks in : in Saving Account 1,307, ,315 in Deposits Accounts (less than 3 months maturity) - 800,000 Other Bank Balances Fixed Deposits with Bank (Refer Note No.12.1) 71,928,767 67,324,392 Total 73,244,909 68,980,681 32

35 Notes to Financial Statements Particulars As at 31 March 2013 Fixed Deposits with Bank As at 31 March 2012 Upto 3 months maturity from date of acquisition - 800,000 Upto 12 months maturity from date of acquisition 43,728,767 32,500,000 Maturity more than 12 months but within one year from the 28,200,000 34,824,392 reporting date Shown as Current Assets 71,928,767 68,124,392 Maturity more than 12 months but after one year from 12 months 27,000,000 9,700,000 from the reporting date Shown as Non-current Assets 27,000,000 9,700,000 Total 98,928,767 77,824, Short Term Loans and Advances (Unsecured, Considered Good) Particulars As at 31 March 2013 As at 31 March 2012 Loans and Advances to Related Parties Expenses Reimbursements receivable from Subsidiary Company 83,271 - Other Loans and Advances Prepaid Expenses 80,875 7,076,333 Share Application Money 4,500,000 - TDS Recoverable 1,825, ,691 Service Tax input Recoverable 1,413,089 - Others - 6,000 Total 7,903,034 7,982, Other Current Assets Particulars As at 31 March 2013 As at 31 March 2012 Interest Accrued 5,131,545 5,638,532 Total 5,131,545 5,638,532 33

36 Notes to Financial Statements 15. Subscription Particulars For the Year ended 31 March 2013 For the Year ended 31 March 2012 Membership Subscription 41,050,000 16,700,000 Subscription for: Self Regulatory Guidelines Fund 7,802,219 2,400,206 Broadcast India Survey Fund 8,377,500 9,240,382 Total 57,229,719 28,340, Other Income Particulars For the Year ended 31 March 2013 For the Year ended 31 March 2012 Interest Income 9,915,501 7,706,869 Interest on Income Tax Refund 4,179 - Total 9,919,680 7,706, Employee Benefit Expenses Particulars For the Year ended 31 March 2013 For the Year ended 31 March 2012 Salaries and Wages 11,452,178 6,544,960 Contribution to Provident and Other Funds 393, ,172 Staff Welfare Expenses 105, ,237 Total 11,951,602 7,118, Depreciation and Amortisation Particulars For the Year ended 31 March 2013 For the Year ended 31 March 2012 Depreciation of Tangible Assets 825, ,372 Amortisation of Intangible Assets 3,530 32,285 Total 829, ,657 34

37 Notes to Financial Statements 19. Other Expenses Particulars Expenses on Special Projects: For the Year ended 31 March 2013 For the Year ended 31 March 2012 Self Regulatory Guidelines Expenses 7,652,819 2,277,340 Broadcast India Survey Expenses 8,377,500 9,240,382 Frame Support Expenses - 2,214,699 Production cost for digitalisation campaign 3,211,391 1,045,688 Indian Television Fest, Goa - Expenses written off 8,474,616 - IBF Website Expenses 1, ,950 Legal & Consultancy Charges 2,098,305 9,224,075 Travelling & Conveyance Expenses 1,123,816 1,231,668 Repair & Maintenance: Building 866, ,918 Plant & Machinery 48,517 25,716 Auditor s Remuneration Audit fees 125, ,330 Tax Matters 24,663 16,545 Out of Pocket Expense 5,500 6,618 Rates & Taxes 84,505 78,989 Board Meeting Expenses 42, ,160 Conference & Meeting Expenses 135,335 96,003 Books & Periodicals 84, ,046 Loss on Sale of Fixed Assets 9,764 59,908 Car Maintenance Expenses 69,480 75,400 Communication Expenses 246, ,482 Electricity & Water Charges 145, ,138 Printing & Stationery 111, ,077 Miscellaneous Expenses 346,840 43,598 Entertainment Expenses 76, ,365 Total 33,363,562 27,931,095 35

38 Other Notes to Accounts 20. The company is a Small and Medium Sized Company as defined in the General Instructions in respect of Accounting Standards notified under the Companies Act, Accordingly, the company has complied with the Accounting Standards as applicable to Small and Medium Sized Company. 21. A Special Reserve has been created under Section 11 of the Income Tax Act, 1961, by transferring the unutilised amount in excess of 15% of the Total Income for the purpose of construction of the building/office of the company, to carry out research and other works relating to the interest of the company and setting up of branch offices in other parts of India. Further, during the year, company has incurred expenditure of Rs. 32,11,391 for the purpose of doing research on impact of television in India, which is utilised from Special Reserve created under Section 11 of the Income Tax Act, 1961, by transferring the unutilised amount in excess of 15% of the Total Income in the previous years. Accordingly, this amount has been appropriated from Special Reserve after netting off the amount required in above paragraph. 22. In the opinion of the management, the value on realisation of current assets, loans & advances in the ordinary course of activities would not be less than the amount at which they are stated in the Balance Sheet and provisions for all known liabilities has been made. 23. Sundry Creditors include Rs. 25,88,555 collected from IBF Members as contribution towards expense sharing incurred by Joint Working Committee of IBF and AAAI in pursuance to the agreement dated 26 March As per the directions of the Honourable Supreme Court, company has implemented a Self Regulatory Guidelines for content for non-news channels and complete redressal mechanism. Accordingly, the management of the company has started receiving additional contributions from the Members for meeting the cost of the implementation. Similarly, during the year IBF s Committee on Research and Insight proposal has been made functional with the start of Broadcast India Survey. Accordingly, expenditure incurred during the year on the said activity and contribution received to that extent has been shown separately in the Income & Expenditure account. 25. Employee Benefits In accordance with the Accounting Standard on Employee Benefits (AS 15) (Revised 2005) notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures have been made: a. The company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at last drawn salary plus dearness allowance for each completed year of service. The Scheme is unfunded. b. The company has a defined benefit leave encashment plan, which is unfunded. Every employee, from the date of joining gets 12 leaves in a year for each completed year of service subject to maximum of 240 leaves with an encashment capping of 90 days on exit. The following tables summarise the components of net benefit expense recognised in the Profit and Loss Account and the funded status and amounts recognised in the Balance Sheet for the respective plan (as per Actuarial Valuation as on 31 March 2013). Net Employee Benefit Expense (recognised in the Statement of Profit & Loss for the year ended 31 March 2013) Particulars Leave Gratuity Encashment Leave Gratuity Encashment Current Service Cost 1,59,964 2,90,113 1,07,922 1,51,076 Interest Cost on benefit obligation 98,143 1,19,395 79,826 1,08,730 Expected return on plan assets Past Service Cost Actuarial (gain) / loss recognised in the year 4,63,307 10,97,665 53,264 (1,19,483) Net Benefit Expense 7,21,414 15,07,173 2,41,012 1,40,323

39 Other Notes to Accounts Net Asset / (Liability) recognised in the Balance Sheet as at 31 March 2013 Particulars Leave Encashment Gratuity Leave Encashment Gratuity Present Value of Defined Benefit Obligation 10,92,285 11,05,654 12,91,352 15,70,981 Fair Value of Plan Assets Net Asset / (Liability) recognised in the Balance Sheet (10,92,285) (11,05,654) (12,91,352) (15,70,981) Changes in the present value of Defined Benefit Obligation are as follows: Particulars Leave Encashment Gratuity Leave Encashment Gratuity Opening Defined Benefit Obligation 12,91,352 15,70,981 10,50,340 14,30,658 Interest Cost 98,143 1,19,395 79,826 1,08,730 Past Service Cost Current Service Cost 1,59,964 2,90,113 1,07,922 1,51,076 Benefits Paid (9,20,481) (19,72,500) - - Actuarial (gain) / loss on obligation 4,63,307 10,97,665 53,264 (1,19,483) Closing Defined Benefit Obligation 10,92,285 11,05,654 12,91,352 15,70,981 The principal assumptions used in determining leave liability and gratuity liability for the company s plan is shown below: Particulars Discount Rate 7.60% 7.60% Rate of increase in Compensation 10% 10% Rate of Return on Plan Assets - - Average Outstanding Service of Employees upto Retirement (years) The estimates of future salary increases considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Contribution to Defined Contribution Plans: Particulars Provident Fund / Pension Fund 3,93,778 4,11,031 37

40 Other Notes to Accounts 26. Disclosure in pursuance of AS-18 (Related Party Disclosures): A) Name of Parties i) Subsidiary of the Company Broadcast Audience Research Council B) Transactions with Related Parties S.No. Name of Party Nature of Transaction 1. Broadcast Audience Research Council Investment in Shares Nil 15,00,000 Share Application Money given 45,00,000 Reimbursement paid on behalf of 83,271 Broadcast Audience Research Council Closing Balances Investment 15,00,000 15,00,000 Short Term Loan & Advances 45,83, There are no Micro and Small Enterprises, to whom the company owes dues as at 31 March This information as required to be disclosed under Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the company. Further during the year also company has not paid any interest to any such parties. 28. Figures of the previous year have been rearranged/regrouped to conform with those of current year. 29. Financial figures have been rounded off to the nearest Rupee. For S.S. Kothari Mehta & Co. Chartered Accountants Firm s Regn. No N For and on behalf of the Board of Directors of Indian Broadcasting Foundation Naveen Aggarwal Partner Membership No Place : New Delhi Date : 19 July 2013 Man Jit Singh President Rajat Sharma Vice President Sunil Lulla Vice President Rahul Johri Treasurer Punit Goenka Vice President C. Radhakrishnan Deputy Director 38

41 Indian Broadcasting Foundation B-304, 3rd Floor Ansal Plaza Khelgaon Marg, New Delhi , India Tel.: Fax: ibf@ibfindia.com