UK's Eros to triple revenue from Bollywood content sale

Eros International Plc, the biggest UK distributor of Indian movies, plans to triple its revenue from digital services, as more Indians download Bollywood mobile-phone ringtones and order direct-to-home films.

Digital distribution, such as video-on-demand and downloads to wireless handsets, will account for at least 30 per cent of sales in three to five years, Chief Operating Officer Jyoti Deshpande said. Eros made about 10 per cent of its $113 million in 2007 sales from these services.

Eros, based in London, is seeking new ways to make money from its 1,900-film library, by selling mobile-phone games and ringtones and making global releases such as Cheeni Kum and Heyy Babyy available on demand on television. The number of Indian households with direct-to-home subscriptions capable of ordering videos may rise to 25 million by 2012, from 3 million today, Deshpande said. India is the world's fastest-growing major wireless market, adding about 9 million users every month.

"Today the average milkman in India has a mobile phone, which was not the case five years ago,'' he said. "As a content owner, we are able to monetise that content very effectively.''

The film distributor signed a two-year agreement in July for Mumbai-based Hungama Mobile to develop and distribute Eros content to handsets made by Nokia Oyj and Motorola Inc. Other new media partners include Apple Inc, Google Inc's YouTube and British Sky Broadcasting Group.

'Strong position'
"Within the film industry as a whole, it's the distributors that have the strongest position,'' said Patrick Yau, an analyst at Cannacord Adams in London, who recommends buying the shares. Profit in the year ending March 2009 will rise 56 per cent to $61.1 million with TV distribution and film releases accounting for more than 70 per cent of the company's revenue, he estimates.

Eros started trading on London's Alternative Investment Market in July 2006, becoming the first of the three Bollywood movie companies to go public. Indian Film Co, sold shares in June 2007, followed by UMP Plc, a unit of India's UTV Software Communications, a month later.

Box office sales for movies such as Om Shanti Om, which became the highest-grossing Hindi film opening worldwide when released in November, and TV syndication deals were the main drivers of the business last year, Deshpande said. The Indian media and entertainment industry is forecast to grow to $30 billion by 2012, compared with $13 billion today, Eros said in a statement earlier this month.

Last year, Eros opened a visual effects and animation studio to develop films combining elements of Bollywood and Hollywood. The studio's first film — Drona — will premier in Mumbai next week. To reduce reliance on box-office receipts, Eros will be selling merchandise such as magic kits and comic books to coincide with the release, a practice currently uncommon in India, Deshpande said.