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UTV Software Communications Ltd, the Ronnie Screwvala-promoted diversified media firm that is now majority owned by The Walt Disney Co. (NYSE: DIS), clarified a host of business-related issues in an earnings release yesterday, when it said net profit for the quarter ended 31 March was down 51% to Rs13 crore. The company attributed the decline to a particularly good comparable quarter, as Q4 last year booked revenues from two blockbuster movies–Jodhaa Akbar and Race. For the year ended 31 March, net profit grew 30% year-on-year to Rs101 crore. Segment-wise revenue contribution for the whole year is in the chart here.
In a useful ‘FAQ’ section, the management explained the company’s strategy and thoughts on various lines of the business. We are reproducing key excerpts below the fold.
This has been a very good year for UTV Motion Pictures where Movies big and small have done well and yet we have not seen that translated to the bottom line?
Some of our Movies are cash profitable in the same year and many of the others are profitable over a longer period because the ancillary rights specially Satellite TV rights has had a deferred revenue model. Simply put, as an illustration, if earlier we used to sell Satellte TV Rights, like all have been doing for many years, outright for 5-7 years for around Rs10 crores then now in the changed model in the first year it would be only around Rs. 5crore but the Total Revenue over a 5 year period would be higher at around Rs. 12-14 crores. The revenue in the first year to be recognized would be Rs5 crore Vs Rs10 crore for outright sale as per past model and therefore the gap in Year One.
You have invested into Gaming across 3 subsidiaries but the model is not so well understood in India since a majority of the activity is overseas. Also how big can this business truly be for UTV and what does UTV bring to the table in Gaming to take on global companies?