ANNUAL REPORT 2010 For the Year Ended March 31, 2010 2244 Meeting the Expectations of Our Viewers and Advertisers 8 3366 Meeting the Expectations Meeting the of Our Shareholders Expectations of Society and Investors
Contents
1 Consolidated Financial Highlights 42 Eleven-Year Summary 2 NTV’s Business Activities 44 Management’s Discussion and Analysis 4 Highlights of the Year 56 Consolidated Balance Sheets 8 Meeting the Expectations of Our Shareholders 58 Consolidated Statements of Income and Investors 59 Consolidated Statements of Changes in Equity 60 Consolidated Statements of Cash Flows 24 Meeting the Expectations of Our Viewers 61 Notes to Consolidated Financial Statements and Advertisers 77 Independent Auditors’ Report 36 Meeting the Expectations of Society 78 NTV Group and Affiliated Companies 79 NTV Network 80 Investor Information
Cautionary Statements with Respect to Forward-Looking Statements: Statements made in this annual report with respect to NTV’s plans and benefits, as well as other statements that are not historical facts, are forward-looking statements, which involve risks and uncertainties. Potential risks and uncertainties include, without limitation, general economic conditions in NTV’s markets, exchange rates and NTV’s ability to continue to win customers’ acceptance of its products, which are offered in highly competitive markets characterized by continual new product introductions and rapid developments in technology. CConsolidatedonsolidated FinancialFinancial HighlightsHighlights Nippon Television Network Corporation and Consolidated Subsidiaries Years Ended March 31
Net Sales
¥2296,9396,934 mmillionillion
Net sales in the year to March 31, 2010, fell 8.5% year on year to ¥296,934 million, with the television broadcasting business hit by a sluggish advertising market and the cultural activities segment also seeing a drop in income. Down 8.5% 324,563 296,934 78,703 73,567
80,874 79,053
84,733 75,226
80,252 69,086
2009 2010 (Millions of yen)
First quarter Second quarter Third quarter Fourth quarter
Operating Income Net Income
¥¥23,56323,563 mmillionillion ¥¥16,59516,595 mmillionillion
Owing to cost cuts through administrative Although we began recording loss on sales of stock improvements, operating expenses, comprising of subsidiaries, net income for the year to March 31, cost of sales and selling, general and administrative 2010, grew 195.2% year on year, to ¥16,595 million. expenses, fell 12.5%. As a result operating income in the year to March 31, 2010, totaled ¥23,563 million, up 92.9% compared to the preceding fiscal year.
Up 92.9% Up 195.2% 16,595 23,563 4,321 6,823
12,214 5,622 5,804 8,517 7,098 4,345 2,593 3,481 3,819 2,498 3,875 2,874 4,719 1,505 (1,588) (2,726)
2009 2010 (Millions of yen) 2009 2010 (Millions of yen)
First quarter Second quarter Third quarter Fourth quarter First quarter Second quarter Third quarter Fourth quarter
NIPPON TELEVISION NETWORK 1 ANNUAL REPORT 2010 NTV’s Business Activities
Through the creation of marketable “product capabilities,” we develop multiple contacts centered on terrestrial broadcasting.
Merchandise sales, publishing Events Videos, DVDs
Video Films,Films, Terrestrial on demand rightsrights managementmanagement broadcasting (VoD)
Program format Television shopping, sales in Japan BS, CS, e-commerce and overseas CATV
NIPPON TELEVISION NETWORK 2 ANNUAL REPORT 2010 Zoom In!! SUPER A show with such a large national viewership that it is no exaggeration to say that morning television in Japan is synonymous with Zoom In!! SUPER. Now in its 31st year, the program continues to evolve by delivering “compact” news, useful lifestyle tips and in-depth entertainment information.
24-Hour Television This is a live, 24-hour charity program that broadcasts each year in August. In recent years, the program has raised approximately ¥1 billion annually for charity, totaling ¥29.0 billion over the past 33 years. The most popular segment is the 24-hour, 100-km charity marathon involving popular television personalities.
Anpanman A popular animated program that recently aired its 1,000th episode. Primarily popular with children, the program has spawned related merchandise with outstanding salability, and a movie is produced each year. The program, which began broadcasting in October 1988, has introduced 1,768 characters, an achievement that was recently recognized by Guinness World Records. ©TAKASHI YANASE / FRÖEBELKAN · TMS · NTV
KarigurashiK no Arrietty Planning/Script:P Hayao Miyazaki Director:D Hiromasa Yonebayashi StudioS Ghibli’s home-grown newcomer Hiromasa YYonebayashi directs the film version of this creation of HHayao Miyazaki (planning, screenplay) that he has sat oon for the last 30 years. Painting a fresh picture of the ““meeting and parting” of Arriety and a youth, the movie hhit the top spot in box-office revenues following its release tthis summer. ©2010© GNDHDDTW
NIPPON TELEVISION NETWORK 3 ANNUAL REPORT 2010 Highlights of the Year
Higher Viewer Ratings Across All Time Slots
NTV is the only key station in Tokyo that enjoyed year-on-year increases in viewer ratings for all time slots: all day, golden time, prime time and non-prime time.
While viewer ratings were flagging at other stations term without becoming obsolete, while replacing in Japan, NTV’s rose in the fiscal year ended programs that fell short of these criteria with new March 31, 2010. I believe we owe this result to our content immediately, rather than waiting for the approach toward revising timetables on an ongoing regularly scheduled timetable reorganization period. basis. We strove to ensure that programs meeting On May 14, 2010, the National Congress of Parents our expectations were successful over the long and Teachers Association of Japan published the results of a survey asking what television programs parents wanted their children to watch. NTV’s The Most Useful School in the World ranked number one, and Shimura Zoo came in fourth. This suggests that our efforts to improve the quality of our programs have been successful.
Higher Viewer Ratings Across All Time Slots Only1 See details Page26
Akira Ishizawa Director General, Programming
Nippon Television Network 4 Annual Report 2010 Spot Advertising Market Share Expands
NTV’s spot share rose substantially compared to increases at other stations, growing 1.1% over the previous year, as advertisers and advertising agencies embraced the concept of timetable restructuring.
Spot Share % 24.See2 details Page30
Although spot advertising revenue in the fiscal year ended March 31, 2010, decreased 0.9% compared with the previous fiscal year, NTV was quicker than other stations to turn a profit as the market recovered in the second half. Our spot share grew by 1.1%, which expanded our overall share to 24.2%. This result reflects the high evaluation of NTV’s product power by advertisers and advertising agencies as an effective outlet for spot advertising media resulting from our ongoing promotion of timetable restructuring and acquisition of core target viewers between the ages of 13 and 49. We are targeting further growth through closer relationships with advertisers and advertising agencies, promotion of timetable restructuring and introduction of new initiatives.
Kimio Maruyama Operating Officer, Director General, Sales
Nippon Television Network 5 Annual Report 2010 Film Business Surges Ahead
Revenues have increased for the fourth straight year, contributing significantly to our non-broadcasting businesses. We achieved this growth by strengthening our planning and production power, reinforcing the connections between Group companies.
Film Business Revenue Growth Rate % 16.0See details Page32
In the fiscal year ended March 31, 2010, 20th Century Boys –Chapter 3– was a hit, generating box office revenue of ¥4.4 billion. Other hits included GOKUSEN: THE MOVIE, and the Japan Academy Prize–winning animated feature Summer Wars. For the past few years, the film business has been investing in existing projects and foreign film production rights in an attempted shift toward in-house planning and production. Four straight years of revenue growth is an expression of the amalgamation of Group company characteristics and strengths. In addition, media commerce business sales increased 26.3%, while revenues from our event business grew 13.4%. These operations, along with the film business, contributed to the expansion of the Group’s non-broadcasting business.
Hiroshi Miyazaki Operating Officer, Director General, Content Business
Nippon Television Network 6 Annual Report 2010 Emerging Quickly from the Market Doldrums
Although we recorded an operating loss of ¥1.6 billion in the fiscal year under review, we were able to avoid even greater losses by being among the first in the industry to implement cost-cutting measures amid a rapidly worsening DVD and CD market.
VAP Inc. is a core NTV Group company engaged in the production and sales of music CDs, DVDs and Net Sales in the Fiscal Year Ended original software containing program and film content March 31, 2010 produced by NTV. In the year under review, profits fell significantly due to a considerable reduction in the number of CD titles sold by the audio division, higher royalties on ¥ billion film DVDs and the resulting cost of sales increases as 22.2 we amortized these royalties. See details
Fumihiro Hirai Page34 Representative Director, President VAP Inc.
Net Sales Grow
Owing to our new business model that fuses television, Internet and retail operations, we recorded net sales in the year under review of ¥2.5 billion, reflecting increases in both revenue and profit.
NitteleSeven is a joint venture established by NTV, Seven & i Holdings Co., Ltd., and Dentsu Inc., which represent Net Sales in the Fiscal Year Ended the broadcasting, distribution and advertising industries, March 31, 2010 respectively. It is engaged in product development, operating a shopping portal website, advertising and marketing. Within the product development segment, healthy sales in the product development and discovery ¥2.5billion business boosted both revenue and profit to help generate net sales of ¥2.5 billion. See details
Page35 Hiroyuki Shiraiwa Representative Director NitteleSeven Co., Ltd.
Nippon Television Network 7 Annual Report 2010 Meeting the Expectations of Our Shareholders and Investors
Wave Crest Pattern The wave crest pattern was originally used for the costumes of ancient court music (gagaku) dancers, and is renowned as a symbol of good luck. The arching shape represents the swell of the waves and expresses “prosperity,” spreading out like an open fan, and the repeated pattern expresses an infinite propagation of “ceaseless felicity.”
NIPPON TELEVISION NETWORK 8 ANNUAL REPORT 2010 NIPPON TELEVISION NETWORK 9 ANNUAL REPORT 2010 Interview with the President
Noritada Hosokawa Representative Director, President
Income levels are At the start of the year, we envisioned severe conditions that would impede significantly up for the recovery for the advertising market. Accordingly, NTV formulated the 2009 year. What measures did Management Policy and initiated various measures to attain income levels that you implement to would enable the Company to secure funds to meet dividend commitments achieve these results in and for other uses. Although this did not facilitate a reversal of the trend the face of the current toward shrinking revenue, it led to dramatic growth in income. harsh operating environment?Q The Japanese advertising market has been gradually shrinking since 2005, specifically in terms of television advertising expenditure. Moreover, last year advertisers stepped up cost restraints, causing expenditures to fall 10.2% year on year. For NTV, this was manifest in a 15.3% decline in time sales for the year under review. At the start of the year, we faced a backlash from such large-scale single-episode programs as those for the Beijing Olympics during the previous year and anticipated even more difficult conditions for recovery in the advertising market. Although we no longer had to contend with year-on-year decreases of 5% or more in time sales, the drop was still larger than we had anticipated. Furthermore, NTV’s consolidated subsidiary, VAP Inc., which had hitherto contributed to results, suffered drastic falloffs in revenue and income. This, in turn, was a factor in the Company’s revenue decline. Amid these circumstances, the NTV Group worked to strengthen its product capabilities and profit base under the 2009 Management Policy, while calling for two key emergency measures for survival. The first of these measures involves strengthening our products while continuing to control costs. This is not merely a matter of implementing companywide cost reductions; we aim to gain the core target viewer ratings that our sponsors most need, while
NIPPON TELEVISION NETWORK 10 ANNUAL REPORT 2010 controlling overall costs and transforming to a cost structure appropriate to the current market and sales scale by injecting funds into the most needy business areas. The results of measures have already exceeded our expectations. Steps toward cost control have driven down operating expenses—the sum of cost of sales and selling, general and administrative expenses—by 12.5% compared with the previous year, to ¥38,977 million. This includes a decrease of 15.7%, or ¥17,507 million, in program production costs, to ¥93,726 million. These gains more than offset the decline in broadcasting revenue for the term, evidencing our steady progress in transforming to an income-generating cost structure. With regard to strengthening our product capabilities, we have achieved a clear improvement in core target viewer ratings compared with other television stations. Spot advertising showed signs of recovery in the second half of the year, during which NTV led other stations by turning around spot sales to positive profitability. This can be construed as further evidence of the success of our approach. In addition, by March 2010 spot sales had more than bounced back, up year on year after two consecutive years of serious declines. The second of these measures involves expanding non-broadcasting revenue. Television advertising revenue comprises 69.2% of the Group’s net sales, which is relatively high. As these revenues are linked to fluctuations in the business climate, there is a strong risk that future trends in the Japanese economy and advertising market will affect these figures. Accordingly, NTV has a pressing need to fortify its revenue base by expanding earnings from sources other than broadcasting. Non-broadcasting revenue advanced steadily during the year under review, notably from film, media commerce and events businesses. Through the exceptionally favourable results achieved by these two measures, we were able to boost the year’s income levels significantly and to attain the targets of the 2009 Management Policy that were set at the start of the year. Nevertheless, net sales diminished
NIPPON TELEVISION NETWORK 11 ANNUAL REPORT 2010 Interview with the President
for the fifth consecutive year, sliding 8.5% year on year. I believe that the Company needs to increase both revenue and income, and that measures to enhance cost control and strengthen product capabilities serve as an effective first step toward this goal.
What measures are you The environment for the advertising market is forecast to remain severe considering to ensure throughout the term, so results for the year ending March 31, 2011, are sustainable income expected to feature falling revenue and increased income. Needless to say, our growth? Are there any objective is to achieve growth on both these fronts. We aim to attain this by management indicators on steadily pursuing the agenda laid out in our 2010 Management Policy. which NTV is focusing to propel it toward future Essentially, the NTV Group is pursuing future growth through the implementation of its Q medium-term management plan, but the huge disparity between the envisioned and growth? actual business environments has put a freeze on this directive, and we have substituted management policies that are formulated and executed on an annual basis as emergency measures. Through the measures stipulated in the 2009 Management Plan, the NTV Group targeted ongoing transformation to a cost structure that presents easy generation of profits. Accordingly, expansion of net sales becomes more simply linked to income growth, which then renders increasing sales as the key point in achieving future growth for the Group. Although spending on advertising is anticipated to rise in certain sectors of the advertising market in the future, it is difficult to foresee an uptrend in overall advertising expenditure in television advertising in Japan within the next few years. Moreover, although the outlook for the NTV Group for the year ending March 31, 2011, is for lower revenue but rising income, this is by no means our objective. I believe that as a corporation we have to aim for increases in both revenue and income. As such, I have laid out the measures I believe we need to achieve these gains in the 2010 Management Policy. First, with respect to the broadcasting business, we enjoyed the fruits of an aggressive programming overhaul and strengthened programming during the year under review,
Key Measures of the NTV 2010 Management Policy
Regain the leading position in Improve profitability and household viewer ratings by improving develop new income sources ratings among core target viewers Broadcasting business Continue with various n Gain top share of spot revenue among cost-control initiatives n Secure the leading position in five key broadcasting stations non-prime time viewer ratings 3 n Increase time revenue in various ways, n Gain highest all-day viewer ratings such as through cross-program n Improve viewer ratings in the 19:00 promotions slot and attain best ratings in Non-broadcasting businesses golden time and prime time slots n Further improved existing n Develop compelling programs to obtain non-broadcasting businesses Boost NTV Group’s overall excellent core target viewer ratings and profit by leveraging high household12 viewer ratings n Develop and promote new businesses core competencies of to maximize NTV Group strengths each Group company in anticipation of the transition 4 to full digitalization
NIPPON TELEVISION NETWORK 12 ANNUAL REPORT 2010 facilitating improvements in both core target viewer ratings and household viewer ratings. NTV improved its golden time, prime time and all day viewer ratings, earning the top spot in weekly viewer ratings. On a weekly basis, where we already hold the most viewing slots, we maintained our leading position for non-prime time viewing for the second consecutive year. Furthermore, the Company has boosted its share of spot sales by reducing the gap between NTV and other leading broadcasters. During the year ending March 31, 2011, we anticipate that time sales, which underpins broadcasting sales, will fall 5.0%, while spot sales increase 6.6%. This much-awaited spot sales recovery trend should compensate for any reductions in time sales and slow the overall revenue decline to some degree. To achieve these results, we need to gain the top slot in core target viewer ratings and household viewer ratings by strengthening our product capabilities. In addition, within non-broadcasting revenue, media commerce sales climbed 26.3% during the year, aided by programs such as the POSHLET late-night department store. Film business sales outstripped expectations, rising 16.0%, led by high box office revenue from such titles as 20th Century Boys –Chapter 3– and GOKUSEN: THE MOVIE. NTV aims to further expand non-broadcasting revenue during the fiscal year ending March 31, 2011. Moreover, NTV‘s consolidated subsidiary, VAP Inc., posted negative income during the year, but we anticipate a steady recovery, spurred by thorough cost control and stronger alliances within the Group. If costs grow in proportion to gains in net sales, no meaningful progress is achieved. With the exception of airwave fees paid to local stations, agency commissions and other expenses that increase in proportion to net sales, we are conducting ongoing measures to control production and other broadcasting costs to avoid relapsing to our former high-cost structure. As such, we are strengthening our capacity to generate products that maintain a competitive edge through low costs, which we have built up over the past two years. In terms of management indicators, we are fundamentally continuing to target a recurring profit margin of 10% or more, but with a pronounced emphasis on raising our top line during the next year. Furthermore, NTV is also striving to raise return on equity (ROE), which serves as a benchmark for efficiency of deployed funds invested by shareholders and for profit performance.
Television Advertising Expenditures in Japan Net Sales Recurring Profit and Recurring Profit Margin (Calendar Years) (Years Ended March 31) (Years Ended March 31)
(Billions of Yen) (Billions of Yen) (Billions of Yen) (%) 2,500 400 40 12.0
346.6 343.7 342.2 34.1 2,041 2,016 1,998 324.6 2,000 1,909 9.9 9.2 296.9 30.0 300 30 9.0 1,714 8.7 27.2 7.8 1,500 26.7 200 20 6.0
1,000 5.0 16.2
100 10 3.0 500
0 0 0 0 2005 2006 2007 2008 2009 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 g Recurring profit g Recurring profit margin
(Source: Dentsu, Inc., Advertising Expenditures in Japan)
NIPPON TELEVISION NETWORK 13 ANNUAL REPORT 2010 Interview with the President
The broadcasting business The advent of new media is a natural development, and does not necessarily is likely to be affected by have negative connotations. I believe that the NTV Group can respond flexibly, the full transition to digital even in the multimedia age, by leveraging its content development capability. terrestrial broadcasting in July 2011. How do you New media are generated in step with the development of new technologies, bringing view NTV’s response to radical changes to the business environment. I consider this to be the natural course of the projected new progress. However, not all of these changes have a negative impact on the Group. The Q increase in the number of channels that will accompany the start-up of BS digital business environment? broadcasts, scheduled for 2011, is negative in terms of intensified competition for eyeballs, but as the new BS broadcasts will be paid programming, they represent a different business model than ours, which is in the domain of free terrestrial broadcasting. Furthermore, the Japanese system of digital terrestrial broadcasting enables one-segment (“1-SEG”) broadcasting to mobile telephones and other devices. Accordingly, 1-SEG broadcasting, which is already underway, provides an expanding field for content delivery for NTV as a television broadcaster. The number of Internet users in Japan as of December 2008 was estimated at 90.91 million; improvements to the broadband environment have boosted demand for video content among the public. I think that this trend can raise our presence as a content provider as well as stimulate competition between different media. For example, the Company currently delivers variety programs of its own production to the United States via video distribution sites Joost and Hulu. This is a step toward developing an overseas presence for NTV’s program content in a bid to cultivate international content and expand the fan base for NTV-produced content. In addition, as an initial trial in distributing NTV lead-managed films and drama series via the Internet, we plan to launch online delivery of the movie The Sky Crawlers and the drama Hotaru no Hikari (It’s Only a Little Light in My Life). Through such initiatives, we have pushed the number of unique users of the NTV- operated video portal site NTV2 beyond the one million mark, helping this service back to positive profits on a non-consolidated basis during the fourth quarter of the year. In these ways, NTV will remain responsive to transformation in the business environment, including the advent of new technologies, by leveraging its superior content development capability.
NTV aims to boost the contribution of non-broadcasting revenue to net sales NTV’s media commerce to 40% by cultivating its film business, media commerce and new income and film businesses have sources through optimal utilization of its accumulated content production expanded. What new capacity and rights management expertise. measures do you have in mind to foster growth The NTV Group is fostering non-broadcasting businesses that enable it to deploy the in non-broadcasting content production capacity and the rights management expertise that it has accumulated revenueQ in the current through its broadcasting activities. In order to establish an income structure that is not environment? overly dependent on broadcasting sales, with its vulnerability to fluctuations in the business environment, we have instigated a drive to diversify income and improve our revenue portfolio. As part of this initiative, we are positioning non-broadcasting revenue as a key business focus, with a target of raising its contribution to net sales to 40% over the medium term, while continuing to expand broadcasting revenue. During the year under
NIPPON TELEVISION NETWORK 14 ANNUAL REPORT 2010 review, NTV’s film and media commerce businesses posted exceptional results, making major contributions to the Group’s results. We are aiming to boost non-broadcasting revenues in the short term, centered on media commerce and the film business, but I think that it will be difficult to continue to expand these two business areas significantly over the long haul. Media commerce contributes greatly to income if selling our own innovative products, but we simply enter into price competition when selling the same products as mass retailers. In the film business, it will be difficult to keep up the current pace of income expansion because of the limited number of opportunities that the Group can pursue and the sheer volume of works already being handled by television stations in the Japanese movie market. Accordingly, in the current environment the Group is aiming to increase its dividend share as a lead manager in the production of movies. Although still small in terms of volume, we have high expectations for steady growth of new businesses. One such leading case is NitteleSeven, a company that operates an unprecedented new shopping portal site that fuses Internet and retail services based around television programs. This subsidiary was established in December 2007 through funding by three companies: NTV; Seven & i Holdings Co., Ltd., a company with product development and sales prowess; and Dentsu Inc., with specialist knowledge in the field of advertising communications and marketing. The business model for NitteleSeven’s operations uses television programs as a starting point from which to direct viewers to the company’s portal site. Consumers can purchase merchandise showcased in television programs and originally developed products via the Internet, in addition to buying at stores nationwide run by Seven-Eleven Japan Co., Ltd., and Ito-Yokado Co., Ltd. Although NitteleSeven was established as a trial, it was operating in the black from its first fiscal year, leading to high expectations for the project in the future. NTV plans to reinforce its format sales of programs for overseas markets in the future through such initiatives as the establishment of specialist sections. During the term under review, this business faced a harsh operating environment, affected by the global economic recession, but already has gained high acclaim through sales of television format rights for Masquerade to major French commercial television station TF1 and to the Italian key media group, Mediaset S.p.A. Moreover, NTV has sold television format rights for the popular variety program Money no Tora in approximately 20 countries and regions, including the United Kingdom, Australia and Canada. Local versions of this program have been produced and broadcast under the title Dragon’s Den. It was also launched in the United States during the year by ABC, one of the three nationwide U.S. networks, under the title Shark Tank. In the future, we aim to extend beyond format sales of popular programs to content development that targets worldwide broadcasting from the planning stage. To realize this goal, we formed a tie-up with Lighthearted Entertainment, Inc., of the United States for the joint planning, development and sales of original program formats for the global content market. The company has begun joint development of the television format for its maiden program, entitled All or Nothing. In addition to these measures, we again demonstrated our lead over other broadcasting stations by launching NTV2, which provides network-led streaming content on the Internet, content merchandising rights and a variety of other promising businesses. However, NTV’s drive for long-term growth hinges on optimal distribution of management resources based on the content production capabilities that epitomize the excellence of the entire Group.
NIPPON TELEVISION NETWORK 15 ANNUAL REPORT 2010 Interview with the President
Non-Broadcasting Revenue and Non-Broadcasting Revenue to Net Sales (Years Ended March 31)
(Millions of Yen) Non-Broadcasting Revenue Non-Broadcasting Revenue to Net Sales (%) 50.0 100,000 Medium-term Target
80,293 40.0% 76,191 78,351 80,000 40.0 69,430 71,780
60,000 30.0
40,000 23.4 24.1 24.1 20.0 22.1 20.0
20,000 10.0
0 0.0 2006 2007 2008 2009 2010 Non-broadcasting revenues exclude intersegment sales and transfers.
50
40
30 Kimi ni Todoke: From Me to You © 2010 From Me to You Film Partners © Karuho Shiina / Shueisha 20 Shodo Girls EXIT © NTV
10
0
HUMAN ARCADE
Shark Tank © Sony Pictures Television / Craig Sjodin
Nippon Television Network 16 Annual Report 2010 As part of our commitment to shareholders, we are maintaining a lower limit Please elucidate on your for the annual dividend per share of ¥180. However, major changes may be approach to shareholder afoot in the market environment as a result of the full transition to digital returns. Your dividend terrestrial broadcasting. Accordingly, I believe that greater freedom of cash policy for the year ending will allow more flexible investment in the Group’s future growth. March 31, 2011, maintains a lower limit for dividends per NTV recognizes the return of profits to shareholders as an important management share of ¥180, but what is priority. Formerly, the Company’s dividend policy established a target payout ratio of Q your intention in terms of 50%* on an individual basis, with an annual dividend of ¥180 per share as a lower limit. discontinuing the 50% As a consequence, we paid out an annual dividend of ¥290 per share for the year under payout ratio? review based on this policy. For the year ending March 31, Cash Dividends Per Share and Payout Ratio (Non-consolidated) Years ended March 31 2011, we plan to implement a (Yen) (%) 400 160 dividend policy that stipulates a lower 138 limit for annual cash dividends of ¥180 300 290 120 per share, but without a target payout 200 165 170 180 180 80 ratio as was hitherto the case. This 70 52 49.8 decision was reached based on the 100 40 33 concept that greater freedom of cash 0 0 would allow more flexible investment 2006 2007 2008 2009 2010 in the Group’s future growth. At this g Cash Dividends Per Share g Payout Ratio point, it is difficult to predict the actual Note: Dividend figures include a ¥60 per share dividend in the changes to the market environment year ended March 31, 2006, to celebrate NTV2’s launch; and a ¥30 per share dividend in the year ended March 31, 2008, that will result from the full transition to to commemorate NTV’s 55th anniversary of establishment. digital terrestrial broadcasting in July 2011. However, it should lead to an abundance of new business opportunities. During the year under review, in a drive for active asset utilization we purchased land surrounding the Kojimachi office building (former head office) for ¥23.3 billion as a real estate investment. These funds were all sourced from retained earnings. Securing cash reserves that facilitate flexible investment to take advantage of business opportunities is indispensible to such an approach. I would like to focus on responding to the new market environment, cultivating new businesses and on such other measures as mergers and acquisitions, which will lead to the future growth of the NTV Group. With regard to purchases of treasury stock, NTV’s status as a licensed broadcasting company under the Radio Law will be revoked if voting rights held by foreign entities as stipulated in the Broadcast Law rise to 20% or more. We are encouraging this ownership as far as current circumstances allow. Consequently, if the shareholding ratio of foreign entities falls in response to market changes arising from digitization, we will consider continuing with purchases of treasury stock. For the year ending March 31, 2011, we are committed through our dividend policy to a lower limit for annual cash dividends of ¥180 per share. We aim to maintain shareholder returns through various means, including investment geared to the NTV Group’s growth and effective utilization of assets and purchases of treasury stock. I would like to thank our shareholders and investors for their continued understanding and cooperation and look forward to your future support.
* Annual cash dividends per share of common stock (non-consolidated basis)/net income per share
NIPPON TELEVISION NETWORK 17 ANNUAL REPORT 2010 Board of Directors, Auditors and Corporate Officers (As of October 1, 2010)
Directors
Seiichiro Ujiie Noritada Hosokawa Katsuhiro Masukata Representative Director, Executive Chairman Representative Director, President Board Director, Vice President Chairman of Internal Audit Committee, Sales, Content Business Programming, Drama, Variety, Infotainment, Sports Chairman of Remuneration Committee 1963 Joined NTV 1965 Joined NTV 2009 Appointed Executive Chairman and Representative 2009 Appointed President and Representative Director 2010 Appointed Executive Vice President and Board Director Director Served as Director General, Network Strategy Planning, and Served as Director General, Network Strategy Planning, and Director General, Finance. Appointed Board Director in 2000 Director General, Corporate Administration. Appointed and President and Representative Director in 2009. Board Director in 2003 and Executive Vice President and Board Director in 2010.
Shinichi Tamura Hime Miura Hiroshi Watanabe Board Director, Senior Managing Officer Board Director, Managing Officer Board Director, Operating Officer Engineering & Technology Sales, Media Strategy Planning & Development Director General, News, Chief Commentator, 1969 Joined NTV 1968 Joined NTV Commentators Committee and Chairman of News 2010 Appointed Senior Managing Officer and 2010 Appointed Managing Officer and Board Director Code Committee, Compliance and Standards, Board Director Served as Director General, Public Relations, and Director Executive Manager of Personal Information Served as Director General, Engineering & Technology. General, Content Business. 1976 Joined NTV Appointed Board Director in 2007 and Senior Managing Appointed Board Director in 2007 and Managing Officer 2009 Appointed Operating Officer and Board Director Officer and Board Director in 2010. and Board Director in 2010. Served as Director General, Programming, Director General, Production, and Director General, News. Appointed Operating Officer and Board Director in 2009.
Hirotaka Kobayashi Yasuhiro Nose Yoshio Okubo Board Director, Operating Officer Board Director, Operating Officer Board Director, Operating Officer Director General, Human Resources, Labor Relations, Director General, Finance, Corporate Administration, Assistant to Vice President, Programming, Drama, Assistant to Chairman of Internal Audit Committees and Executive Auditor of Personal Information Variety, Infotainment, Sports 1977 Joined NTV 1968 Joined NTV 2010 Appointed Operating Officer and Board Director 2009 Appointed Operating Officer and Board Director 2010 Appointed Operating Officer and Board Director Served as Director and Director General, Media Strategies, at Served as Director General, Human Resources. Served as Director General, Accounting. the Yomiuri Shimbun. Appointed Operating Officer and Appointed Operating Officer and Board Director in 2009. Appointed Operating Officer and Board Director in 2010. Board Director in 2010.
NIPPON TELEVISION NETWORK 18 ANNUAL REPORT 2010 Auditors Operating Officers
Toru Shoriki Seiji Urushido Kazuo Gomi Board Director Standing Statutory Auditor Senior Operating Officer Director and Owner, The Yomiuri Shimbun Holdings 2008 Appointed Standing Statutory Auditor Executive Director, Programming Planning 1970 Appointed Board Director Tomonari Doi Eiji Yamaguchi Tsuneo Watanabe Statutory Auditor** Operating Officer Board Director* Representative Director and Supreme Advisor, Director General, Corporate Administration Representative Director, Chairman and Chief Editor, Yomiuri Telecasting Corporation The Yomiuri Shimbun Holdings 1988 Appointed Standing Auditor Hiroshi Miyazaki 1991 Appointed Board Director of NTV Operating Officer Kenji Kase Director General, Content Business Hiroshi Maeda Statutory Auditor** Board Director* Certified Public Accountant Kazuyuki Sakurada Attorney at Law 2009 Appointed Standing Auditor Operating Officer 2005 Appointed Board Director of NTV Director General, Variety Hitoshi Uchiyama Seiji Tsutsumi Statutory Auditor** Jun Hiroe Board Director* Representative Director and President, Operating Officer Chairman, The Saison Foundation The Yomiuri Shimbun Holdings Secretary General, 2010 Appointed Standing Auditor 2006 Appointed Board Director of NTV Internal Audit Committee Management Office
Takashi Imai ** Outside auditors pursuant to Article 2.16 of Kimio Maruyama Board Director* the Companies Act Operating Officer Honorary Chairman, and Colleague of Nippon Steel Director General, Sales Corporation 2007 Appointed Board Director of NTV Mitsuyoshi Azuma Operating Officer Kiyonori Tsubota Director General, Engineering & Technology Board Director* Representative Director and Chairman, Fukui Broadcasting Corporation Tomoko Jyo 2009 Appointed Board Director of NTV Operating Officer Director General, Infotainment
* Outside directors pursuant to Article 2.15 of the Companies Act
NIPPON TELEVISION NETWORK 19 ANNUAL REPORT 2010 Corporate Governance
The NTV Group recognizes that stable growth of corporate value over the long term and greater contributions to society lead to increased shareholder value. The Company strives to further develop its corporate governance for swift decision-making and operational execution in response to changes in the business environment and to facilitate transparent and sound management.
General Meeting of Shareholders
Appointment/ Appointment/ Appointment/ Reporting Reporting Dismissal Dismissal Dismissal Reporting Board of Directors (Supervision of operational execution) Board of Statutory Auditors Counsel Oversight Reporting Independent Compliance Auditors Committee Four statutory auditors Reporting 15 Directors (including five outside appointments) (including three outside auditors) Direction/ Appointment/ Independent Supervision Reporting Audit Reporting Supervision audit
Business Execution Framework Full-Time Directors Council (Decision-making regarding execution of operations) Appointment/ Internal Supervision Direction/ Supervision Audit Nine Directors Audit Committee Direction/ Deliberation and Group Supervision reporting on NTV Counsel Law important matters Management Council Whistle Offices Assignment Internal Direction/ Control Board of Executive Officers Supervision (Business execution) Committee Reporting
System Charges preparation Programming Governance/ Deliberations Council Supervision
Business Divisions Affiliated Companies
(As of October 1, 2010)
Corporate Governance Framework NTV has a Board of Statutory Auditors with a management of Directors and stronger auditing functions related to the structure under which the Board of Directors oversees execution of duties. Outside auditor Kenji Kase is a certified the operational execution of the representative directors. public accountant and is endowed with a considerable Meanwhile, the statutory auditors and Board of Statutory degree of finance and accounting knowledge. Auditors audit the operational execution of the directors. During the year under review, the Board of Directors met The Company appoints several highly independent eight times to decide important duties and to supervise the outside directors and outside auditors. The governance execution of directors’ duties. Also, the Board of Statutory framework is designed to ensure effective supervision over Auditors met nine times to audit the directors’ execution the execution of duties by directors. Outside directors help of duties. Each auditor, in conformance with the auditing to provide appropriate supervision, thereby enhancing the standards determined by the Board of Statutory Auditors, management oversight function. attends Board of Directors and other important meetings, The Company has also emphasized external monitoring inspects important end-of-period financial documents and of management, incorporating five outside directors pursuant carries out investigations into the state of business operations to Article 2, Paragraph 15, of the Companies Act into the and finances. 15-member Board of Directors for greater management The Internal Audit Committee is in place under the Board integrity and more transparent decision-making processes. of Directors firstly to monitor internal control systems, The four-member Board of Statutory Auditors includes three risk management, compliance and so on, as well as to outside auditors pursuant to Article 2, Paragraph 16, of the independently and from a third-party perspective audit Companies Act for greater independence from the Board the systems and processes of operating departments.
NIPPON TELEVISION NETWORK 20 ANNUAL REPORT 2010 The Remuneration Committee, charged with fielding preservation initiative, with a keen awareness of the inquiries about compensation for directors, has also been Company’s responsibility as a corporate media leader in formed under the Board of Directors. The Company has prevention of destruction of the global environment. additionally set up a Compliance Committee to reinforce Regarding the issue of the incorrect report about corporate governance and ensure thorough compliance kickbacks in Gifu Prefecture aired on November 23, 2008, on and a high degree of transparency in NTV’s activities, thus the program Bankisha!, on March 1, 2009, NTV broadcast striving to reinforce society’s trust and earn its support. a correction in line with the Broadcasting Law Article 4 (1). The Executive Officer System is a means of delegating An in-house team conducted a study of the situation and authority, accelerating decision-making and clarifying reported the results to the external discussion council, responsibilities for the execution of operations. In addition, which were later announced publicly. Furthermore, in oversight and auditing functions are conducted by the Board August 2009, in accordance with the Broadcasting Ethics of Directors, statutory auditors and the Board of Statutory & Program Improvement Organization’s (BPO) Broadcast Auditors, all of which include outside officers, as explained Ethics Verification Committee’s recommendation, we aired above. The Company’s Internal Control Committee, chaired a follow-up program and posted the final report on our by a representative director, periodically checks and website. Meanwhile, on top of a permanently installed crisis promotes operational controls to strengthen internal control management team within the News division, throughout the systems across the entire Group. Company we hold frequent training sessions on coverage Concerning third-party contribution to NTV’s corporate and broadcasting ethics in order to prevent any recurrence. governance framework, the Company has reinforced its legal Among other compliance efforts, since January 2010 risk management system by concluding advisory agreements NTV has been promoting the revised regulations prohibiting pertaining to corporate management and daily business insider trading and related Group company rules to further tasks with multiple law offices, and by seeking advice as enhance internal information management systems. necessary. We have also concluded audit agreements Furthermore, in April and May 2010, we supplemented these concerning audits relating to the Companies Act and the efforts by conducting a Web-based training program on Securities and Exchange Law with audit corporations, which insider trading regulations for all officers, employees and conduct audits from an independent standpoint. cooperating staff and held group training sessions.
Progress on Implementation of Initiatives to Organization of Internal Audits and Mutual Enhance Corporate Governance in the Past Year Cooperation with Independent Auditors In response to the Personal Information Protection Act, NTV Statutory auditors receive explanations from independent advances daily information management by designating auditors on the outline of the audit plan before the a person responsible for control of personal information independent audit is carried out. Statutory auditors also in each department. To ensure appropriate handling of exchange information with independent auditors on the personal information, the Company also provides detailed progress of audit procedures and issues arising during the training to managers, general employees, new employees course of the audits performed by the independent auditors, and cooperating staff, and steadily implements audits for and receive explanations on the results of the independent each department based on the audit plan. In addition, audit following completion of the audit. Statutory auditors can concerning the Act against Delay in Payment of Subcontract also order employees who belong to the Board of Statutory Proceeds, etc., to Subcontractors, owing to periodic internal Auditors Management Office to investigate matters necessary training sessions and the implementation of an order for auditing duties. Employees working for the Board of management system, we have made subcontracting more Statutory Auditors Management Office concurrently work as appropriate and legally compliant. a secretariat for the Internal Audit Committee and assist the NTV Sustainability is our corporate management statutory auditors with their duties. The statutory auditors program encompassing activities aimed at contributing maintain close contact with the Internal Audit Committee. to sustainable development of the environment, global society and business. As part of the program, we have actively advanced our NTV Eco environmental
NIPPON TELEVISION NETWORK 21 ANNUAL REPORT 2010 Corporate Governance
Independent Auditing Regarding executive remuneration, according to a NTV has concluded an audit agreement with audit resolution of the General Meeting of Shareholders, limits corporation Deloitte Touche Tohmatsu LLC to have are imposed to the total compensation for directors and independent audits carried out pursuant to the Companies for statutory auditors. Each director’s remuneration is Act and the Securities and Exchange Law. For the fiscal determined by the Board of Directors upon consideration year ended March 31, 2010, audit duties were performed by of business conditions and the Company’s performance, certified public accountants Akihide Fukuda and Tsutomu and for Statutory Auditors is determined according to Hirose, who executed independent audit duties, and 14 consultation with Statutory Auditors. assistants—six certified public accountants and eight others. Compensation to the audit corporations employed by Basic Philosophy and Development Progress on NTV and its consolidated subsidiaries in the fiscal year Internal Control Systems ended March 31, 2010, is as follows. (Millions of yen) 1. System to ensure that the execution of duties of Compensation based Compensation directors and employees conforms to laws and the on Audit Certification based on Non-Audit Articles of Incorporation Activities Activities NTV promotes compliance with laws and regulations, NTV ¥ 58 ¥ 0 as well as highly transparent corporate activities, by NTV and Consolidated 8—maintaining a Compliance Committee consisting of Subsidiaries lawyers and other outside professionals to serve as Total ¥ 66 ¥ 0 directors and observers. The Company has formulated the NTV Compliance Executive Compensation Charter, to which all full-time officers and employees pledge, to ensure that corporate activities conform to Executive compensation for the Company’s directors and laws, the Articles of Incorporation and corporate ethics. statutory auditors in the fiscal year ended March 31, 2010, Furthermore, with this objective in mind, the Company was as follows. conducts employee education centered on the Human (Millions of yen, persons) Total Remuneration, Resources, the Corporate Administration and the by Category Number of Compliance & Standards divisions. Total Officers Remuneration Basic Retire- In addition, the NTV Whistle is in place as an internal Compen- Bonuses ment Applied to sation Benefits reporting hotline to enable employees to report directly Directors on legally doubtful acts inside the Company and request (Excluding Outside ¥ 427 ¥ 384 — ¥ 43 13 an investigation. Directors) To ensure the compliance of directors’ execution of Statutory Auditors (Excluding Outside 25 25 —— 1 duties, the Company emphasizes the supervisory function Auditors) of the outside directors and outside auditors and works External Officers ¥ 105 ¥ 96 — ¥ 8 10 to activate the Board of Directors to pursue higher corporate governance. Notes: NTV has established an Internal Audit Committee to 1. The number of officers as of March 31, 2010, was 16 directors and three statutory auditors. prevent fraudulent acts through internal audits. 2. The remuneration amounts listed above do not include the employee Furthermore, we resolutely confront any antisocial portion of salary or bonuses for those officers who are also employees. 3. At the 75th Ordinary General Meeting of Shareholders, a resolution was elements and ensure that such elements play no part in passed that revised the yearly limit on the amount of remuneration to our business relationships or transactions. There will be ¥950,000,000 for directors (of which, up to ¥110,000,000 may be paid to outside directors) and ¥72,000,000 for statutory auditors. no offer of illegal profits: any unjust demands or wrongful 4. Besides the amounts listed above, NTV posted ¥18,000,000 in the fiscal intervention will be reported to the police and other year ended March 31, 2010, as provision for liability for retirement benefits authorities concerned as part of an organized response for directors and statutory auditors, allotted for the payment of executive retirement allowance. However, at the close of the 76th Ordinary General based on close liaison with such agencies. Meeting of Shareholders held in June 2009 it was decided to abolish retirement benefits for directors and statutory auditors.
NIPPON TELEVISION NETWORK 22 ANNUAL REPORT 2010 2. System relating to retention and management of management and business content, and handles information concerning directors’ execution of duties general operations-related tasks, to enforce groupwide Pursuant to the document handling regulations, compliance with laws and regulations and to maintain information related to directors’ execution of duties the risk management system. Compliance-related is recorded in writing or via electromagnetic media training is given to officers and employees of the Group (hereinafter “documents, etc.”) and retained for a as necessary. The Company also maintains a Group specified period. Under the supervision of the Corporate Management Council—consisting of representatives of Administration Division, such documents, etc., are the Group companies—to share information, thereby retained at each division, at which a person in charge reinforcing the appropriateness of operations. of and a person responsible for retaining them are 6. Matters concerning employees who are to assist designated. The directors and statutory auditors are able statutory auditors upon statutory auditors’ request to view such documents at any time. Statutory auditors can order employees who belong to 3. Regulations and other risk management systems for losses the Board of Statutory Auditors Management Office to The Company has established an Internal Control investigate matters necessary for auditing duties. Such Committee to manage risk on a companywide basis employees shall assist the statutory auditors with their and a Risk Management Committee to manage newly auditing duties and concurrently work as a secretariat for emerging risks in an expedient manner, with each the Internal Audit Committee. committee being chaired by a representative director. 7. Matters concerning the independence of the employees Various committees throughout the Company address who assist statutory auditors from directors risks related to disasters, information management, Directors are not allowed to give orders different from program production, copyright contracts, broadcasting those of the statutory auditors to the employees who and fraudulent acts, thereby improving each system and assist the statutory auditors. Directors must obtain the updating regulations. Broadcasters such as NTV have approval of the statutory auditors for transfer of and a special obligation to conduct emergency broadcasts disciplinary actions against employees who assist the following earthquakes and other disasters. The Company statutory auditors. therefore maintains equipment and systems to enable 8. A system that requires directors to report to the Board uninterrupted broadcasting after such emergencies and of Statutory Auditors, and a means for employees to has created the Metropolitan Area Anti-Disaster Manual report to statutory auditors as the basis for training simulations. Directors must report to the Board of Statutory Auditors 4. System to ensure efficient execution of directors’ duties on matters stipulated by law that could have a substantial The Company maintains a system to ensure that directors impact on the Company or the Group, as well as on the execute their duties appropriately and efficiently by status of internal auditing. In case employees find matters clarifying their administrative authority and establishing stipulated by law that could have a substantial impact decision-making rules based on internal regulations on on the Company or the Group, or facts that violate laws division of duties and rules for ringi (circulating agendas or the Articles of Incorporation, they can directly report and seeking approval before or without holding a meeting). such instances to the statutory auditors through the NTV Moreover, we have introduced an Operating Officer System Whistle, which is an internal reporting system. to streamline directors’ execution of duties and created 9. Other systems to ensure effective auditing systems to encourage more dynamic execution of duties. by statutory auditors We also strive to enhance corporate governance by having Standing statutory auditors shall attend the Full-Time outside directors, who have no interest-based relationships Directors Council and exchange opinions with the full- with the Company, supervise the execution of duties in a time directors. Statutory auditors may attend the Group working system of checks and balances. Management Council, which consists of representatives 5. System to ensure the appropriateness of duties from the Group companies. conducted by the Company and the corporate group Statutory auditors may receive advice regarding consisting of the parent company and its subsidiaries auditing duties from lawyers, Certified Public The NTV Group Strategy center formulates and Accountants and other professionals if necessary. implements comprehensive strategies for Group
NIPPON TELEVISION NETWORK 23 ANNUAL REPORT 2010 Meeting the Expectations of Our Viewers and Advertisers
NIPPON TELEVISION NETWORK 24 ANNUAL REPORT 2010 Full-House Bonus Bag By way of celebrating a full house at the theater, this bag would be distributed as a congratulatory gift. The bag would often be filled with lucky coins to further attract good fortune.
NIPPON TELEVISION NETWORK 25 ANNUAL REPORT 2010 Message from the Director General of Programming
Timetable Restructuring NTV has garnered the highest household viewer ratings for nine straight years—since the fiscal year ended March 31, 2002. At that time, sports content—and Yomiuri Giants baseball games in particular—was popular, as were dramas and variety shows. Attracting viewers aged fifty or older in the F3 and M3 segments typically generates higher household viewer ratings, but pricing tends to decline on timetables that do not match sponsor needs. Accordingly, despite having high household viewer ratings targeting the F3 and M3 segments, we have shifted our priority to media targeting younger age segments. To this end, NTV restructured its timetable in an aim to appeal to its core target—the younger (13–49 year old) segment. However, Akira Ishizawa the resulting timetable did not fully utilize NTV’s strength in meeting the needs of F3 Director General, Programming and M3 viewers. To meet sponsor needs and capture household viewer ratings, NTV restructured its timetable to acquire core target viewers and developed content that appealed to families and younger viewer segments in an attempt to raise household viewer ratings. Through repeated trial and error, we achieved the successful position we enjoy today.
Initiatives This Period n 7 p.m. Weekday Time Slot At one timetable reorganization in April 2009, we executed a major reform with the principle objective of controlling costs by developing one-hour live broadcast variety programs in our 7 p.m. weekday time slot. In accordance with this decision, existing programs in the 7 p.m. time slot were moved to the 8 p.m. time slot. The change in broadcast start times affected viewing habits, which negatively affected the timetable and failed to achieve the expected viewer ratings. In January and April of 2010, we discontinued the live broadcast of variety shows and replaced them with distinctive variety programs that differ nightly at the beginning of golden time and prime time. As a result, household viewer ratings improved, and we were particularly successful at attracting viewers in the C (4–12) and T (12–19) segments. We will continue our ongoing timetable maintenance to further improve household viewer ratings.
n Dramas Recognizing that dramas can significantly affect a station’s image, NTV cultivates this genre carefully. We have two drama time slots in our timetable, Wednesdays at 10 p.m. and Saturdays at 9 p.m., and recently we have had a string of productions that have succeeded in achieving viewer rating targets. In the 10 p.m. Wednesday time slot, drama programs that pay tribute to working women, such as Obstetricians and Gynecologists, Aishiteru –KAIYO– and Mother, have captured the targeted F (women aged 20 or older) segment as well as viewers in the M (men aged 20 or older) and T segments. In the 9 p.m. Saturday time slot, we broadcast programs such as Samurai High-School, Left-Eye Detective and Kaibutsu-kun that target the C and T segments, edited to appeal to family audiences. Kaibutsu-kun was originally a hit animation, and at first only comparatively older viewers were familiar with the story, but the drama version has helped popularize it among family viewers and successfully attain ideal viewer ratings consisting of the T, F1 and F2 segments.
NIPPON TELEVISION NETWORK 26 ANNUAL REPORT 2010 Viewer Ratings by Time Period Years Ended March 31
All Day (6:00–24:00) Golden Time (19:00–22:00)
NTV Company A Company B NTV Company A Company B Company C Company D Company C Company D (%) (%) 12.0 20.0
Sekai no Hate Made Itte-Q!
9.0 15.0
6.0 10.0
3.0 5.0
It’s Only a Little Light in My Life 2
0 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
Prime Time (19:00–23:00) Non-Prime Time (6:00–19:00, 23:00–24:00)
NTV Company A Company B NTV Company A Company B Company C Company D Company C Company D (%) (%) 20.0 12.0
Shabekuri 007
15.0 9.0
10.0 6.0
5.0 3.0
0 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
NIPPON TELEVISION NETWORK 27 ANNUAL REPORT 2010 Furthermore, in terms of single-episode special drama programming, we broadcast two consecutive weeks of content including Shodo Kyoju and Kiri no Hata, special dramas commemorating the 100th anniversary of Japanese writer Seicho Matsumoto’s birthday, and the Taichi Yamada drama special Embrace of the Rain, for which lead actor Ken Watanabe won this year’s Japanese Academy Award for Best Actor. Going forward, NTV plans to continue regular broadcasts of these kinds of single-episode dramas.
n Large-Scale Single-Episode Programs We stage NTV Eco Week each spring. The eco-themed regular and special programs broadcast during this week are held in high esteem by viewers, sponsors and advertising agencies. Every summer, we broadcast 24-Hour Television: “Love Saves the Earth,” a charity program benefitting the physically disabled and people affected by natural disasters. In the autumn of 2010, we will launch new seasonal programs themed on food. In the same vein as Eco Week in the spring, we will broadcast food- themed regular and special programs and increase viewer expectations by holding various events as part of this highly entertaining project. Rather than simply adding large-scale single-episode programs to the timetable, we find that developing these programs as an extension of the timetable to be a more effective means of appealing to viewers, and we will continue to develop innovative ideas along these lines.
Full Transition to Digital Terrestrial Broadcasting By July 24, 2011, all Japanese terrestrial television will have transitioned to digital broadcasting. Little time remains to facilitate the adoption of television sets that can display digital broadcasting. Also, viewer ratings currently incorporate analog and digital samples, but their makeup will change once the transition occurs. Unless viewers who are now using analog televisions acquire digital sets by the time analog broadcasts end, viewer ratings and the number of television viewing households may decline. It is difficult to predict accurately how the digitalization of broadcasting will change the market; some pundits believe that competition with other media will intensify, causing the relative value of television to decline. At the same time, television programs are a frequent topic of young people’s emails and Twitter “tweets,” so web traffic increases in line with rises in television-viewing households. The converse is also true. The indication is that people use other media while watching television. In terms of the digitalization of television broadcasts, we must consider these factors in our initiatives to enhance the way television coexists with other types of media.
NIPPON TELEVISION NETWORK 28 ANNUAL REPORT 2010 Viewer Ratings Trends in the Fiscal Year Ending March 31, 2011 As of the 28th week since April 1, 2010, NTV held the top share of Golden and Prime Time Weekly Average Viewer Ratings golden and prime time weekly average viewer ratings 11 times, (%) Golden Time Prime Time already surpassing the eight times recorded in the previous year. 16.0 In the past, when NTV had top viewer ratings in all time slots for nine consecutive years, it had a solid foundation in the all-day 14.0 and non-prime time slot, and reached the top position only after intense competition in golden and prime times. The present situation is the reverse; we are in the lead in terms of golden and 12.0 prime times, earning core target and household viewer ratings. In the all-day and non-prime time slots, we are acquiring core target viewer ratings in morning and afternoon programs 10.0 spanning contiguous days while reaffirming their attractiveness as spot advertising slots for sponsors and advertising agencies. 8.0 We will continue to improve household viewer ratings in the MarApr May Jun Jul Aug Sep Oct week ------all-day and non-prime time slots and look to acquire top viewer 29 5 12 19 26 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9 16 23 30 6 13 20 27 4 (day) ratings in all time slots.
New Reorganization Initiatives in 2010 In October 2010, we launched a new two-hour program Super Prime content with the scheduled movie, we attract beginning at 7 p.m. on Fridays called Friday Super Prime. Rather viewers for the full four hours. For example, if a movie is than simply broadcast a two-hour single-episode program, this scheduled for 8 p.m., the content of the one-hour program change reflects a strategic approach to timetable reorganization. preceding it from 7 p.m. will be related to the movie. Even in cases where other stations surpass our ratings for golden Furthermore, the programs shown in this time slot will be time and prime time content on weekdays, we manage to retain a different special program each week, enabling a variety of our weekly ratings through highly competitive programming on planning. This also facilitates soft development by giving rise Thursdays, Saturdays and Sundays. Despite strong competition to content that we can develop into regular programming. For on Mondays, we still manage to achieve a solid performance. special programs in particular, flexibly developing new programs For these reasons, we developed the new Friday Super Prime delivers stronger benefits than does expanding the content of to enhance our Friday showings. By leveraging the strength of regular programs. The solid skills of NTV’s creators, including our Thursday through Sunday offerings, we aim to extend this producers who have experience with programs boasting viewer momentum through to Monday. ratings of over 20%, give us confidence that we can continue to Also on Fridays, we broadcast movies during Friday Road produce interesting programs that viewers will want to watch. Show, a two-hour slot beginning at 9 p.m. By linking Friday
List of programs in October 2010 Monday Tuesday Wednesday Thursday Friday Saturday Sunday
Fukashigi The Tetsuwan 19:00 Tuesday SurpriseEXIT A Million Dice Shimura Zoo 19:00 Tanteidan DASH Friday Super Prime Sekai Maru Mie! Dancing Waratte The Most Useful Sekai no 20:00 TV Special Sanma Palace Koraete! Guruguru 99 School Hate Made 20:00 Investigative Unit in the World Itte-Q!
Life-Changing Different Places One-Minute The! Sekai Saturday Drama LINE-UP Different Habits 21:00 Deep and KOREARI? Gyoten News “Q10” LAW OFFICE 21:00 Good story (The Local Secrets) Friday Road Show Wednesday OSHAREISM Majotachi no ARASHI NI 22:00 Shabekuri 007 Drama DOWN TOWN DX 22:00 22:00 SHIYAGARE “Ougon no Buta” nigra varieteo
NIPPON TELEVISION NETWORK 29 ANNUAL REPORT 2010 Message from the Director General of Sales
Basic Sales Policy
Participate in Offer Make Progress in Corporate Marketing Plans Short- and Long-Term Cross-Program Promotion from the Drafting Stage Approaches (CPP)
g Make appeal based on g Provide flexible support to g Take a solution-based necessity of television meet sponsors’ emerging approach to commercials to advertising as part of short-term needs boost time sales sponsors’ growth strategies g Ensure television commercials g Employ unique commercial g Create strategy whereby the are appropriate for plans and multiple-program selection of television promoting long-selling rollouts commercials is the highest products incrementally by g Ensure link between priority developing long, ongoing advertising messages and commercial advertisements Kimio Maruyama program content Operating Officer, Director General, Sales Responding to the Changing Needs of Sponsors Amid five straight years of declining television advertising revenue, although spot advertising revenue is recovering, time advertising revenue shrank 15.3% compared with the previous year as a result of fewer large-scale single-episode programs such as the 2008 Beijing Olympics. Also, monthly advertising revenue growth was significantly lower in year-on-year comparisons owing to major changes in sponsor needs. Specifically, these changing Business Business Business Business Year-on-Year Comparison of Monthly Growth Rates of NTV Division Division Division Division needs involved sponsor corporations Time Advertising Revenue in the Fiscal Year Ended March 31, 2010 promoting the delegation of authority (%) -5 -6.6 Publicity to various business segments as -9.8 -10.1 -10 -12.3 part of their management structure -13.3 -13.5 Sponsors and execution on a quarterly -15 -14.8 earnings basis. Up to now, corporate -15.7 -20 NTV -18.8 -18.4 advertising activities were included in -20.4 -25 the Publicity department’s calculation -26.8 -30 of total Company advertising Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar expenditures and adjusted for in- Business Business Business Business Division Division Division Division house product campaign television advertisements. In recent years, however, delegation of authority has resulted in the formulation of advertising plans by individual business segments, which has led to promotional activities that are limited to the length of Sponsors product campaigns. In addition, increased promotional planning and activities based on three-month quarterly terms has resulted in a mismatch with the traditional method of selling time advertising in six- or 12-month segments. NTV Another factor is the expansion of sponsor companies’ business domains. Companies that traditionally did not compete with one another have expanded their business domains and are now in competition, making it impossible for both to sponsor the same program. NTV is promoting various initiatives in response to these circumstances. First, we must reaffirm the role of time advertising in terms of product value. To achieve this, we are making an appeal based on the merit of program purchasing rather than the idea of spot sales as an effective means of publicity. Our aim is to target a high rate of viewership in terms of promoting sales of traditional time advertising in six- to 12-month segments. One tactic NTV is engaged in involves the development of single-sponsor time sales. With a single-company sponsor, programs can be created in accordance with the sponsor’s desired image and direction, resulting in a precise
NIPPON TELEVISION NETWORK 30 ANNUAL REPORT 2010 appeal made possible through a unified and effective message comprising the program and commercials. Also, by enabling the development of advertisements in line with promotional planning, we can advance proposals in response to the expected increase in sponsor needs. In terms of the short-term needs of sponsors, we are promoting responses to changing sales slots and methods, as well as strengthening sales of short-term special programming. These special programs include our charity broadcast 24-Hour Television: The “Connect Our Eco Hearts” “Love Saves the Earth,” which is now in its 33rd year; programs promoting environmental environmental campaign conservation aired during NTV Eco Week, which incorporates environmental themes into regular programming; and special programming that focuses on the environment. Also, this autumn we will launch a series of programs themed on food. These initiatives enable us to offer advertising proposals to sponsors that meet their changing short-term promotional needs, and as these programs have a clearly defined theme, they provide the sponsors with the effective image and messaging they seek.
Efficient Timetable Sales With regard to timetable sales, it is important to always consider the most effective allocation in terms of local and net time, spot and late night slot and one-company time slot sales. Just because spot advertisements seem to be in recovery does not mean that we should simply increase the number of spots. This would raise volatility and lower sales effectiveness. On the other hand, we must change our sales method to reflect the modern realities, and for this reason it is necessary to consider reconstructing sales slots. At present, net time on NTV starts with golden time from 7:00 p.m. until NEWS ZERO, with all times after that being spot sales, and late night slots being local time sales. Changes in lifestyles have resulted in target viewers returning home at later times, lowering the overall percentage of household viewers at 7:00 p.m. Conversely, performance of the NEWS ZERO broadcast starting at 10:54 p.m. is extremely strong, indicating that many more viewers are now watching television at this later time than in the past. NTV is currently evaluating whether it should continue traditional net time sales in the 7:00 p.m. slot, whether local time and spot sales are more effective, or whether it should expand net time after NEWS ZERO to midnight.
Spot Advertising Revenue in the Year Ending March 31, 2011 In terms of spot advertising revenue in the fiscal year ending March 31, 2011, increasing advertising Year-on-Year Comparison of Monthly Growth Rates of NTV Spot Advertising Revenue expenditure in the Kanto region and market recovery (%) in the Fiscal Year Ended March 31, 2010 continue along with the year-on-year growth of spot 20 15.6 15.3 13.5 11.8 12.3 13.2 advertising revenue on a monthly basis. At the same
10 5.7 time, spot shares are increasing and the outlook overall 3.6 4.1 4.8 8.7 is positive. In addition to improved viewership in both
0 -5.2 golden and prime time, the year-on-year declines -11.3 -2.2 ended in August and have reversed relatively easily. -10 -8.4 On the other hand, from September 2009 growth -10.8 -13.4 continues to be positive, and although it remains to -20 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug be seen whether this growth will continue through 2009 2010 September 2010, the present indications are favorable.
NIPPON TELEVISION NETWORK 31 ANNUAL REPORT 2010 Message from the Director General of the Content Business
NTV’s Non-Broadcasting Businesses Broadcasting is the main pillar of NTV’s business, which is largely dependent on television advertising revenue for its earnings. Given this situation, in an attempt to diversify earnings, NTV makes use of its strengths and expertise in the broadcasting business to expand its non-broadcasting business, thereby establishing another pillar of business. The content business, which handles non-broadcasting businesses, develops business in three main categories. First are the rights business, which promotes the secondary usage of terrestrial broadcast content; fee-based services; and the publishing business. All of these seek to improve earnings by promoting multiple usage of programs by enhancing production staff awareness of this objective and more Hiroshi Miyazaki thoroughly integrating their activities. Next are the film and event businesses, which Operating Officer, Director General, Content Business create content. Third is the media commerce business.
Film Business NTV produces and releases about 12 films each year. In the fiscal year ended March 31, 2010, film business revenues rose 16.0%, to ¥15,416 million. In terms of film production, we focus on low-cost projects that are highly likely to turn a profit, while funneling investment toward big productions designed to become box office hits. We also modulate production expenses, which we seek to recover entirely through box office revenue, and augment film earnings through sales of DVDs and overseas development.
n Unique Aspects of NTV’s Film Business Films directly funded or produced by NTV comprised half of the top 10 films in the 2009 Japanese box office revenue rankings. This was a result of using terrestrial broadcast drama directors as film directors and leveraging our strengths and expertise in content production, as well as initiatives to enhance Group film production and cultivate producers through the exchange of staff and film production collaboration between Group company AX-ON Inc. and equity-method affiliate Nikkatsu Corporation, a film company. NTV also organizes production committees consisting of various corporations that invest in film production, and as the leader of these committees, we direct planning and production and control the various rights involved in the process. The production committee embodies a uniquely Japanese system that makes use of each company’s strengths and shares risks among all members.
Film Content Released During the Fiscal Year Ending March 31, 2011
Karigurashi no Arrietty BECK GANTZ Release date: July 17, 2010 Release date: September 4, 2010 Release date: January 2011 (Part I), Spring 2011 (Part II) Director: Hiromasa Yonebayashi Writer: Harold Sakuishi Director: Yukihiko Tsutsumi Writer: Hiroya Oku Director: Shinksuke Sato Planning/Script: Hayao Miyazaki ©HAROLD SAKUISHI · KODANSHA ©Hiroya Oku / Shueisha ©2010 GNDHDDTW ©2010 BECK Film Partners ©2011 GANTZ FILM PARTNERS
NIPPON TELEVISION NETWORK 32 ANNUAL REPORT 2010 n Films Directed by NTV Employees As one effort to improve its film content production capabilities, NTV has had tremendous success employing directors of television dramas as film directors. In addition to Toya Sato, director of GOKUSEN: THE MOVIE, which earned ¥3.4 billion at the box office, and KAIJI, which earned ¥2.2 billion at the box office, and Nobuo Mizuta, director of Nakumon Ka and 252: Signal of Life, we are employing such in-house directors as Taro Otani, who will debut in directing the Japanese version of the 1990 hit Ghost, released in November 2010.
Media Commerce Business GOKUSEN: THE MOVIE © 2009 “GOKUSEN THE MOVIE” In the period under review, media commerce business sales increased 26.3%, to Film Partners ¥10,577 million. The Japanese media commerce market continues to expand, and earnings contribution from this business is expected to make it one of the main pillars of our non-broadcasting business. NTV limits its media commerce business to products with proven track records. This minimalist approach allows us to optimize the business by focusing on shipping and product management efficiency. Our competitive sales strategy emphasizes maximizing revenue from popular items, rather than regularly churning our product portfolio. We combine this approach with redoubled efforts involving information programming on PON! PON! POSHLET terrestrial broadcasts and NitteleSeven, our shopping portal. At present, NTV media commerce programs are relatively few in number, compared to other stations, and we have no regular weekend media commerce program. We plan to expand these broadcasts on NTV and local stations. Leveraging our strong bonds of trust with these stations, we aim to expand our media commerce business by increasing time slots with high viewership. Our top-selling product, developed in-house
Event Business Our event business is engaged in art exhibitions, concerts and theater performances. In the period under review, event business revenues grew 13.4%, to ¥6,185 million. In commemoration of NTV’s 55th anniversary, in Tokyo and Kyoto we held exhibitions of 17th century European art from the Louvre Museum. Of the 71 pieces on exhibit, about 60 were in Japan for the first time, and some 30 were on display outside the Louvre for the first time ever. The exhibit was extremely popular, attracting 1,472,554 visitors. Also, in July 2010, coinciding with the Karigurashi no Arrietty release, we held the Karigurashi no Arrietty x Yohei Taneda exhibit, which incorporated a large set showcasing the world depicted in this animated film. At present, NTV holds exhibits Brochure announcing exhibition of 17th century once per year, but we are making preparations to double this frequency. European art from the Louvre Museum In February 2010, the NTV production of Patrick Marber’s Closer was performed in five locations across Japan. In May, the NTV production of Robert Thomas’ Trap was performed at seven locations throughout the country. Both plays were very successful. Although the event business is gradually bearing fruit, at present its share in each industry is extremely low. At the same time, this is an area with tremendous development potential, and we have high expectations for this non-broadcasting business.
Karigurashi no Arrietty x Yohei Taneda exhibit ©2010 GNDHDDTW Production Design Yohei Taneda
NIPPON TELEVISION NETWORK 33 ANNUAL REPORT 2010 Message from the President of VAP
Quick Emergence from Lackluster Market for Packaged Programs Although profits were down significantly year on year during the fiscal year under review, the situation improved gradually throughout the year. In the first quarter, we posted an operating loss of ¥1,000 million, but extensive cost reduction and structural improvement initiatives launched during the first quarter helped cut this loss to ¥500 million in the second quarter, falling to ¥200 million in the third quarter. In the fourth quarter, we returned to profitability on a non-consolidated operating basis. In the fiscal year ending March 31, 2011, we will continue to implement these cost control measures and promote profit-focused management. DVDs released in the year under review included BANDAGE, a film lead-managed Fumihiro Hirai by NTV, Shodo Girls, a film funded entirely by the NTV Group, and Kaibutsu-kun, an Representative Director, President VAP Inc. NTV drama, and sales of these titles were favorable. Sales of Kaibutsu-kun, which was released as a box set, were particularly brisk. In the music business, which has been in overall decline, sales of a concert DVD featuring the pop group Mr. Children were strong, boosting sales in the first half of the Overview fiscal year ending March 31, 2011. Second-half performance, however, will depend on Company: VAP Inc. whether or not popular artists release new CDs. Location: Yonbancho Bldg. No. 1 5-6, Yonbancho, Chiyoda-ku, Business Strategy Tokyo 102-0081, Japan Our future business development emphasizes profit-focused management of the film Established: January 24, 1981 and distribution businesses. Capital: ¥500 million Specifically, we will strengthen our connection to NTV by increasing the funding we provide to films lead-managed by NTV, acquiring theme music from NTV programs and utilizing television media as a means of promotion, all of which we believe will be linked to increased sales. In the distribution business, we will develop business that incorporates production and other expenses into total income and expenditure calculations, on the basis of secondary and tertiary usage. In the music business, we aim to focus our investment on promising projects and artists by reducing the number of artists under contract and narrowing our business scope.
Efforts to Promote Multiple Usage of Content
V.F. Partners combines the content planning and development skills that VAP has cultivated through the packaging business with the Internet business expertise of Forecast Communications Inc. With the aim of developing on-demand content distribution, the joint venture invests in content and handles distributor licensing of animations involving NTV investment, as well as VAP-owned content. In these ways, the company is working to invigorate the market for streaming video and maximize content viewing opportunities. We aim to bolster non-broadcasting revenue as a result. V.F. Partners website (Japanese only): http://www.vfp.co.jp/index.html
NIPPON TELEVISION NETWORK 34 ANNUAL REPORT 2010 Message from the President of NitteleSeven
A Unique Business Model At present, NitteleSeven’s forte is product development, which focuses on developing original products linked to NTV programs. The products are introduced on the informative shopping and variety program Le Marché de la Déesse and sold at stores operated by Seven & i Holdings Co., Ltd., Japan’s largest distribution and retailing group. The aim is to provide consumers with appealing and unique products by developing a business that draws on NTV’s strengths in planning and production capabilities as a media company and Seven & i Holdings’ retail distribution networks and sales capabilities. NitteleSeven’s original product development business involves projects featuring on-show product introductions by well-known celebrities. The products are based on proposals made to Seven-Eleven, Ito-Yokado and manufacturers. The show is broadcast Hiroyuki Shiraiwa Representative Director, President as an information commerce program in an approach that differs from television NitteleSeven Co., Ltd. shopping shows by providing the viewer with product information, and has proved to be a great success. Product discovery involves selecting attractive products for viewers from the perspectives of broadcasting, distribution and advertising. We carefully introduce Overview the product benefits and attractions within the context of the program in a way that Company: NitteleSeven Co., Ltd. would not be possible within the limited time frame of television commercials. Our Location: 25F, Shiodome NTV Tower viewers appreciate this approach, which generates numerous purchases. 1-6-1 Higashi Shimbashi, Minato-ku, Future Business Strategy Tokyo 105-7407, Japan NitteleSeven’s core strength lies in its creative planning production capability, and Established: December 3, 2007 we are currently developing the portal website business, product development Capital: ¥480 million and program production with this in mind. Looking ahead, however, we will launch initiatives aimed at making product development the next pillar in our profit structure by focusing our efforts on advertising and marketing. Through comprehensive cross- media development involving television commercial production, websites, retail outlets and events we will coordinate corporate sales promotions designed to take advantage of client budgets earmarked for sales promotion activities, as well as advertising. We believe this will help the NTV Group expand its non-broadcasting revenue.
NitteleSeven’s Product Development Business Model
Own-program production Physical store sales
Celebrity guests Original Joint Program product development introductions development (Ito-Yokado) 174 stores throughout Japan Manufacturers
Infomercial program Le Marché de la Deésse Fridays Attracting viewers by portraying the product development process 12,771 stores throughout Japan 15:50 to 16:20 as entertainment differentiates this show from shopping programs (As of June 30, 2010)
Leverage NitteleSeven’s product planning and Leverage retailers’ distribution directorial strengths as a media company and sales expertise
NIPPON TELEVISION NETWORK 35 ANNUAL REPORT 2010 Meeting the Expectations of Society
Mutsumi character on a hanten (short winter coat) The hanten was worn as work clothes by common people and artisans, and is also still worn today by people carrying omikoshi portable shrines at festivals. The characters on the back of the hanten are called daimon, and are dyed in the material in the Edo- period calligraphic style. The mutsumi character shown here has the meaning of “good friends” and “harmony.”
NIPPON TELEVISION NETWORK 36 ANNUAL REPORT 2010 NIPPON TELEVISION NETWORK 37 ANNUAL REPORT 2010 Corporate Social Responsibility (CSR)
To what extent can environmental destruction be prevented? What are the best uses for limited natural resources? How can the media help leave behind a beautiful world for future generations? Since the creation of the NTV Eco Committee in March 2003, we have engaged in environmental protection initiatives through NTV programs, events, PR, publicity and IR activities, sales and internal activities. In August 2005, we formulated the NTV environmental management system (EMS), and in November 2005, the Shiodome NTV Tower (Minato-ku, Tokyo) was awarded ISO 14001:2004 certification—the international standard for such systems. This achievement marked the first time that a key commercial broadcaster in Tokyo received certification on a companywide basis. Human society will continue to grow and develop. To protect the environment that sustains our lives, NTV is committed to communicating the importance of environmental conservation through its programs and events.
NTV’s Basic Policy on Sustainability Preventing the destruction of the environment is This policy targets the three key areas of financial, the central global issue of this century. As a corporate environmental and social sustainability. In addition to striving media leader, we have a strong awareness of our to produce quality programs that attract high viewer ratings, responsibility to society. In addition to formulating the NTV NTV works to remain financially viable in the new digital era Environment Policy, our NTV Eco Committee and NTV through efficient use of the cutting-edge capabilities of the Environmental Management Office are engaged in the NTV Tower. For the environment, the Company promotes aggressive development of Nittele Eco, our environmental ecology through its programming and works to reduce the preservation initiative. This involves making a wide appeal environmental footprint of its business activities, and thus for environmental conservation through our programs and leave behind a beautiful world for future generations. Socially, events as well as reducing the environmental impact from we aim for swift decision-making and business execution in our business activities. We will continue to promote these response to changes in the business environment, to achieve and other efforts to protect our beautiful planet. sustainable growth in corporate value and to enhance our contributions to society. NTV Environmental Policy g Serve as a Source of Information Through its programming and various events, NTV will spread the importance of environmental protection to the general public, which will fulfill our social responsibility as a media company and serve as our contribution toward preserving the environment.
g Establish and Continuously Improve the Environmental Management System NTV has been selected as a member of the FTSE4Good Index series of environmental sustainability indices, provided by FTSE International Limited NTV established an appropriate environmental management of the United Kingdom, for seven consecutive years. system as part of its corporate activities, promoting the reuse of natural resources and energy as well as reducing Environmental Activities waste and encouraging recycling. We will do our utmost to NTV’s Basic Policy on Sustainability is a corporate maintain our ongoing efforts and to prevent pollution. management program targeting the sustainable development of the environment, global society and g Comply with and Implement Social Responsibility business. An environmental perspective is one of the three We will uphold environmental laws/regulations and any pillars of our activities, the others being economic and other requirements while fulfilling our social responsibility. social considerations.
NIPPON TELEVISION NETWORK 38 ANNUAL REPORT 2010 g Achieve Our Environmental Policy Objectives NTV teamed up with NHK’s long-running environmental • Establish our environmental purpose and goal, and work campaign to get the environmental message out to an even towards achieving our environmental policy. greater number of television viewers. • Ensure that all employees thoroughly familiarize To protect the environment that sustains our lives, NTV will themselves with the environmental policy and unite as continue to communicate the importance of environmental a company toward implementation. conservation through its programs and events to perpetuate • Make this environmental policy publicly and widely known the beauty of our planet and our society. as well as attempt to conserve the environment while communicating with the local community. Social Activities Having established a Compliance Committee chaired g NTV Original Environmental Activities through by the Representative Director and Executive Chairman Television Programs in December 2003, NTV strives to promote compliance NTV Eco Week “Connect Our Eco Hearts. and highly transparent corporate activities. In June 2004, Make the Future 2010—Know, Protect, Create” we established a Compliance and Standards Office, NTV is engaged in various environmental preservation strengthened our operational audit system and on July 1 initiatives to leave behind a beautiful world for future of that same year, formulated and put into effect The NTV generations. Since 2005, we have conducted NTV Eco Week Compliance Charter*. The Compliance Charter defines in conjunction with the United Nations World Environment basic internal standards that must be observed by all NTV Day on June 5th. Our previous theme was “Touch! Eco,” directors, executive officers and employees. The NTV which meant that people be considerate and sensitive to Group pledges to observe the Compliance Charter and the environment, but our new theme focuses on knowing strives to ensure that all NTV directors, executive officers the actual condition of the Earth, protecting it for future and employees read, understand and observe all standards generations and creating a better future. From May 30th contained therein. to June 6th, 2010, we conducted NTV Eco Week, featuring * For more information regarding NTV corporate ethics, a variety of original environmentally themed programs please see http://ntveco.jp/ntvcsr_en/rinri.html and events, including Zoom In!! SUPER, a live information program, regular golden time and prime time programs, Human Resources Development NEWS ZERO and other news programs, live sports NTV believes the further enrichment of content is broadcasts and a host of other NTV program genres. indispensible for the continuation of a broadcast station Special programs included the environmental entertainment supported by many people. mystery Beat Takeshi to 7 nin no Kenja—Mirai e no People are the driving force behind our content creation sentaku— Jinrui wa horobirushikanainoka and eco- capabilities. NTV strives to foster a working environment information program Make the Future 2010—Chikyu wo where employees can maximize their potential by hiring and sukuu?!—Tondemo nai hito Grand Prix. We also held events employing a diverse array of talented new graduates and and posted environment-related content on the Internet. experienced mid-career personnel. We have also introduced In an expansion of our regular environmental activities, an employee evaluation system to provide a fair assessment of job performance, as well as career design and job request systems to ensure appropriate employee training. In August 2003, we revised our salary system from one based on age and job seniority to a performance-based structure focused on employee achievements. Through a “cafeteria-style” welfare system, we enable personnel to select from a menu of measures that target self-development and are designed to help them achieve enjoyable lifestyles. In our view, this approach is a way to NTV Eco Week “Connect Our Eco Hearts” truly build corporate value.
NIPPON TELEVISION NETWORK 39 ANNUAL REPORT 2010 Corporate Social Responsibility (CSR)
Social Contribution vehicles for public service activities—an ongoing activity g NTV Original Social Contribution Activities through that started from the first broadcast—the funds go toward Television Broadcasts popularization of assistance dogs for the disabled, support 24-Hour Television: “Love Saves the Earth” for people with visual and hearing disabilities, environmental This year marked the 33rd annual broadcast of this program conservation, disaster relief and other social causes. In since its inception in 1978. The theme of this year’s 2010, we used donated funds for additional special vehicles program, which broadcast from August 28-29, 2010, was for public service activities; cleanup activities around the “Saying Thank You to That Special Person.” Guided by the Arakawa riverside and at Mt. Fuji; and the popularization of principle “Love Saves the Earth,” Aeon Group shops and assistance dogs for the disabled. other participants collected donations from viewers at the In 2010, 24-Hour Television collected ¥974,028,568 in event venue which were used in charitable, environmental donations, bringing the cumulative total for the past 33 and disaster-relief causes through the 24-Hour Television years to ¥29,173,524,055 (as of October 2010). Charity Committee. In addition to donating special
Collecting donations at the event venue in tandem with Implementing the Cleanup Japan Project 24-Hour Television: “Love Saves the Earth” broadcast in Arakawa, Edogawa-ku, Tokyo
g Cleanup Projects Conducted in 2010
FUKUI BROADCASTING Akita Broadcasting System RAB Aomori Broadcasting TV IWATE Kehinomatsubara, Tsuruga, Hamadahama Beach, Akita, Kodomari, Nakadomari-machi, Nakatsugawa, Morioka, Fukui Prefecture, June 6 (Sun.) Akita Prefecture, July 4 (Sun.) Aomori Prefecture, July 8 (Thr.) Iwate Prefecture, June 5 (Sat.)
Yamagata Broadcasting MIYAGI TELEVISION YOMIURI TELECASTING Tobishimanishi Coast, Sakata, BROADCASTING Shiga Prefecture, Yamagata Prefecture, May 29 (Sat.) Yoshidahama Coast, Watari-cho, Mihama Obase Beach, Miyagi Prefecture, July 3 (Sat.) Maizuru, May 23 (Sun.) TELEVISION NIIGATA NETWORK Shore of Lake Biwa, Fukushima Central Television Awashimaura, Iwahune, Niigata Hikone, June 27 (Sun.) Tenjinhama Coast, Inawashiro, Prefecture, June 20 (Sun.) Fukushima Prefecture, May 15 (Sat.)
NIHONKAI TELECASTING KITANIHON Broadcasting Yamanashi Broadcasting Tottori Prefectures, Taikoyama Land, Imizu, Mt. Fuji, Yamanashi Prefecture, Tottori Dune, June 6 (Sun.) Toyama Prefecture, August 7 (Sat.) Sanin Kaigan Geopark, July 25 (Sun.) May 5 (Wed.) NTV Arakawa, Edogawa-ku, Tokyo, Yamaguchi Broadcasting May 29 (Sat.) Marihu Beach, Tabuse-cho, Kumage, Yamaguchi Prefecture, July 18 (Sun.) Shizuoka Daiichi Television Along Prefectural Road 24, Fuji City, Along National Highway 469, NAGASAKI INTERNATIONAL Shizuoka Prefecture, June 26 (Sat.) TELEVISION BROADCASTING Ikuchihama Beach, Tsushima, CHUKYO TV BROADCASTING Nagasaki Prefecture, May 29 (Sat.) Omotehama Coast, Toyohashi, Aichi Prefecture, Aug. 2 (Mon.) NISHINIPPON BROADCASTING KKT Furukogawa, Marugame, Amakusa, Kumamoto Prefecture Kagawa Prefecture, July 29 (Thr.) Shirougahama Coast, July 8 (Thr.) Shiratsuruhama Beach, Nankai Broadcasting Ushibuka, Satsuki Beach, July 19 (Mon.) Goshikihime Beach Park, Iyo, Ehime Prefecture, July 18 (Sun.) OKINAWA TELEVISION Kagoshima Yomiuri Television Television Oita System BROADCASTING Nagata-Inakahama Beach, Yakushima-cho, Motosaru Coast, Saiki, Kaichu-doro, Uruma, Kagoshima Prefecture, June 6 (Sun.) Oita Prefecture, July 25 (Sun.) Okinawa Prefecture, July 31 (Sat.)
NIPPON TELEVISION NETWORK 40 ANNUAL REPORT 2010 Implementing the Cleanup Japan Project 24-Hour Television is the main pillar in support of n Sign language school environmental preservation that aims to leave behind a Sign language classes are conducted in Kojimachi, beautiful world for future generations. During the past located in Tokyo’s Chiyoda-ku, every Saturday for roughly three years, 3,117 volunteers have removed approximately 100 students in the hope that sign language will become 68 tons of illegally dumped garbage on Mt. Fuji, and 3,700 more widely used. volunteers have pitched in to clean up the shores of Lake Biwa. Since 2007, we have been involved in the removal of n Sign language newscast drifting ocean trash, a serious problem for Japan. Last year, We provide sign-language interpretation on our Sunday over 14,000 volunteers joined the Cleanup Japan Project in morning nationwide news program. 23 locations across Japan to carry out cleanup activities. n Distribution of Braille calendars g Free Access to Information In response to the wishes of visually impaired citizens In August 2001, NTV launched Japan’s first full-length, real- across Japan, we distribute a unique Braille photo time closed-captioned news programs. Closed captions are calendar to the visually impaired. Our photographic theme provided for the audio portion of all news content, press for 2010, “Japan’s Lighthouses,” features lighthouses all conferences and interviews broadcast during the afternoon across Japan and their coastal scenery. Expecting that this Straight News and evening News Every programs. Not only concept will catch on overseas, for the first time in 2007 we is the service regarded highly by the hearing impaired, also created an English-language Braille calendar with but it also contributes to the promotion of free access to contributions to the U.S. Library of Congress in information advocated by the Japanese government. Washington, D.C. NTV also offers closed-captions for a variety of other programs in an aim to provide opportunities to communicate information. g NTV “Dove of Love” Public Welfare Foundation NTV strives to bridge gaps in information accessibility across an array of programs. Such efforts include sign language interpretation and on-screen text display of closed-captioning for the hearing impaired, as well as audio narration tracks of drama series scenes for the visually impaired. NTV has long worked to eliminate differences in access to information. In 1974, the NTV “Dove of Love” Welfare Foundation project group was established in collaboration and funding from Yomiuri Telecasting, Sapporo Television Broadcasting, Chukyo TV and Fukuoka Broadcasting. For these 36 years, the foundation has supported those who cannot fully enjoy television due to visual and hearing disabilities. It primarily supports early detection and treatment of disabilities, rejuvenation of functionality, and cooperative activities to raise public understanding of such conditions. Current business activities are as follows.
NIPPON TELEVISION NETWORK 41 ANNUAL REPORT 2010 Eleven-Year Summary
Market Data Calendar years (Source: Dentsu, Inc., Advertising Expenditures in Japan) 2000 2001 2002 2003 2004 Nominal GDP ¥ 502,989.9 ¥ 497,719.7 ¥ 491,312.2 ¥ 490,294.0 ¥ 498,328.4 Total advertising expenditures*1 6,110.2 6,058.0 5,703.2 5,684.1 5,857.1 Television advertising expenditures 2,079.3 2,068.1 1,935.1 1,948.0 2,043.6 Advertising expenditures as a percentage of nominal GDP (%) 1.21 1.22 1.16 1.16 1.18
Financial Summary Nippon Television Network Corporation and Consolidated Subsidiaries
Years ended March 31 2000 2001 2002 2003 2004 Years ended March 31: Net sales ¥ 328,014 ¥ 352,409 ¥ 358,683 ¥ 336,299 ¥ 328,375 Television broadcasting segment revenue*3 283,142 310,242 304,392 294,517 285,016 Non-broadcasting revenue*3 ————— Operating income 54,351 67,303 63,574 47,407 35,937 Net income 34,003 36,008 34,648 20,296 19,359 Depreciation 6,269 6,521 6,045 5,854 12,676 Capital expenditures 9,017 11,157 34,364 30,044 49,761
At March 31: Total assets ¥ 364,896 ¥ 410,042 ¥ 443,798 ¥ 476,634 ¥ 513,430 Total equity*4 253,912 291,501 323,319 327,116 354,046
Cash Flows: Cash flow from operating activities ¥ 42,152 ¥ 45,549 ¥ 38,891 ¥ 25,981 ¥ 30,520 Cash flow from investing activities 19,241 (21,701) (48,773) (37,393) (41,596) Cash flow from financing activities (24,900) (2,432) (3,165) 22,464 7,131 Cash and cash equivalents, end of year 62,754 84,065 70,951 81,944 77,930
Per share data (Yen, U.S. dollars): Net income*5 ¥ 1,341.04 ¥ 1,419.96 ¥ 1,366.34 ¥ 801.99 ¥ 771.74 Equity 20,025.50 11,495.33 12,750.14 13,102.25 14,183.02 Cash dividends*5,*6 80.00 120.00 120.00 120.00 120.00
Ratios (%): Return on assets (ROA) 10.0 9.3 8.1 4.4 3.9 Return on equity (ROE) 14.7 13.2 11.3 6.2 5.7 Operating margin 16.6 19.1 17.7 14.1 10.9 Equity ratio 69.6 71.1 72.8 68.6 69.0 Television broadcasting segment revenue ratio 86.3 88.0 84.9 87.6 86.8
Others: Total shares issued 12,682,274 25,364,548 25,364,548 25,364,548 25,364,548 Employees — 2,465 2,635 2,714 2,829
Notes: *1. The scope of estimates was revised in 2007, with figures revised retroactively to 2005. *2. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥93.04 to $1, the approximate rate of exchange at March 31, 2010. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate. *3. Television broadcasting and non-broadcasting revenues include intersegment sales and transfers. *4. From the fiscal year ended March 31, 2007, NTV adopted the Accounting Standard for Presentation of Net Assets in the Balance Sheet (Accounting Standards Board of Japan Statement No. 5) and the Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheet (Accounting Standards Board of Japan Guidance No. 8).
NIPPON TELEVISION NETWORK 42 ANNUAL REPORT 2010 (Billions of yen) 2005 2006 2007 2008 2009 ¥ 501,734.4 ¥ 507,364.8 ¥ 515,804.9 ¥ 507,371.3 ¥ 474,924.0 6,823.5 6,939.9 7,019.1 6,692.6 5,922.2 2,041.1 2,016.1 1,998.1 1,909.2 1,713.9
1.36 1.37 1.36 1.32 1.25
(Millions of yen) (Thousands of U.S. dollars*2) 2005 2006 2007 2008 2009 2010 2010
¥ 357,614 ¥ 346,642 ¥ 343,652 ¥ 342,188 ¥ 324,563 ¥ 296,934 $ 3,191,466
289,810 277,977 267,904 262,370 247,009 225,942 2,428,439 — 77,557 83,947 89,144 87,714 79,288 852,193 34,325 28,551 30,344 23,077 12,215 23,563 253,257 16,846 13,701 18,332 10,625 5,622 16,595 178,364 21,060 17,561 14,361 12,939 11,528 9,622 103,418 9,214 6,266 6,043 5,200 5,491 26,809 288,145
¥ 493,558 ¥ 519,952 ¥ 529,265 ¥ 512,507 ¥ 498,457 ¥ 513,788 $ 5,522,227 366,646 398,018 411,995 407,668 400,417 416,367 4,475,140
¥ 49,286 ¥ 32,683 ¥ 31,458 ¥ 26,791 ¥ 23,948 ¥ 40,131 $ 431,331 (23,046) (24,358) (24,596) (17,301) (28,331) (46,847) (503,515) (37,275) (15,921) (4,714) (4,124) (4,803) (5,697) (61,232) 66,878 59,369 61,524 66,863 57,630 45,219 486,017
¥ 671.08 ¥ 545.40 ¥ 741.60 ¥ 430.27 ¥ 227.70 ¥ 676.43 $ 7.27 14,688.07 15,945.74 16,363.52 16,153.34 15,853.59 16,661.03 179.07 165.00 165.00 170.00 180.00 180.00 290.00 3.12
3.3 2.7 3.5 2.1 1.1 3.2 4.7 3.6 4.6 2.6 1.4 4.2 9.6 8.2 8.8 6.7 3.8 7.9 74.3 76.6 76.3 77.8 78.5 79.4
81.0 80.0 78.0 76.7 76.1 76.1
25,364,548 25,364,548 25,364,548 25,364,548 25,364,548 25,364,548 2,797 2,869 2,886 3,126 3,291 3,339
*5. Calculations for the fiscal years ended March 31, 2000, are retroactively restated for later stock splits. *6. Dividend figures include an extraordinary dividend of ¥35 per share in the fiscal year ended March 31, 2000; extraordinary dividends of ¥70 per share in the fiscal years ended March 31, 2001 and 2002; a ¥70 per share dividend in the year ended March 31, 2003, to commemorate NTV’s 50th anniversary of establishment; a ¥70 per share dividend in the year ended March 31, 2004, to commemorate the relocation of NTV’s head office; a ¥60 per share dividend in the year ended March 31, 2006, to celebrate the launch of NTV2; and a ¥30 per share dividend in the year ended March 31, 2008, to commemorate NTV’s 55th anniversary of establishment.
NIPPON TELEVISION NETWORK 43 ANNUAL REPORT 2010 Management’s Discussion and Analysis
Nippon Television Network Corporation and Consolidated Subsidiaries Years Ended March 31
Overview
Net Sales Operating Environment (Billions of Yen) In the fiscal year ended March 31, 2010, economic conditions in Japan remained 400.0 severe. Exports expanded gradually on the back of improvements in overseas 346.6 300.0 343.7 342.2 324.6 296.9 economies, particularly within Asia. The Japanese economy also benefited from 200.0 government economic stimulus measures, and consumer spending and corporate 100.0 manufacturing activity improved to some extent. Nevertheless, consumer prices fell 0 2006 2007 2008 2009 2010 slightly amid harsh employment and personal income conditions.
Net Sales Operating Income During the year, the NTV Group posted consolidated net sales of ¥296,934 million, a (Billions of Yen) 40.0 ¥27,629 million, or 8.5%, decrease from the previous fiscal year. This decline stemmed from significantly lower income from the mainstay television broadcasting business— 30.0 30.3 28.6 hit by sluggishness in advertising due to the economic downturn—and worsening 20.0 23.1 23.6 conditions in the music and video software markets. Meanwhile, performance remained 10.0 12.2 favorable for film and media commerce within the cultural activities segment. 0 2006 2007 2008 2009 2010 Operating Income Operating expenses, comprising cost of sales and selling, general and administrative Net Income (SG&A) expenses, amounted to ¥273,371 million, down ¥38,977 million, or 12.5%. The (Billions of Yen) 20.0 Group sought to reduce program production costs through timetable restructuring. 18.3 15.0 16.6 We also worked to overhaul administrative activities to reduce expenses in other areas. 13.7 10.0 Further factors included a decrease in agency commissions stemming from lower 10.6 sales from the television broadcasting segment. As a result, operating income totaled 5.0 5.6 ¥23,563 million, up ¥11,348 million, or 92.9%, compared with the preceding fiscal year. 0 2006 2007 2008 2009 2010
Income Before Income Taxes and Minority Interests During the year, income before income taxes and minority interests increased ¥11,160 ROA and ROE million, or 78.5%, to ¥25,368 million. The gain was primarily due to significantly higher (%) 8.0 operating income, despite other income–net falling ¥188 million, or 9.4%, to ¥1,805 6.0 4.6 million on increased sales of investment securities and losses on devaluation of 4.2 3.6 4.0 investment securities, and as a result of appropriating a ¥1,115 million loss on sales of 2.6 3.5 1.4 3.2 2.0 2.7 stocks of subsidiaries. 2.1 1.1 0 2006 2007 2008 2009 2010 ROA ROE Net Income During the year, tax expenses grew ¥801 million, or 9.6%, to ¥9,117 million. During the previous fiscal year, NTV and certain of its consolidated subsidiaries liquidated deferred EBITDA tax assets, but for the year under review, tax expense rose, owing to higher income (Billions of Yen) 60.0 before income taxes and minority interests. 46.8 43.9 0 Furthermore, minority interests in net loss of consolidated subsidiaries came to ¥344 45.0 0 14.4 17.6 35.0 32.0 0 million during the year, up from ¥270 million in the previous period. This was largely 30.0 0 25.7 9.6 32.4 12.9 0 26.3 11.5 25.4 attributable to net losses at VAP Inc. 15.0 19.1 14.2 Owing to these factors, net income increased ¥10,973 million, or 195.2%, to 0 2006 2007 2008 2009 2010 ¥16,595 million. Interest expense Depreciation and amortization Income before income taxes and minority interests
NIPPON TELEVISION NETWORK 44 ANNUAL REPORT 2010 Segment Information
Net Sales (Billions of yen) 2006 2007 2008 2009 2010 Television broadcasting ¥ 278.0 ¥ 267.9 ¥ 262.4 ¥ 247.0 ¥ 225.9 Cultural activities 62.5 69.4 74.0 71.2 66.3 Other 15.1 14.5 15.1 16.5 13.0 Elimination/Corporate (8.9) (8.2) (9.3) (10.2) (8.3) Total ¥ 346.6 ¥ 343.7 ¥ 342.2 ¥ 324.6 ¥ 296.9
Operating Income (Billions of yen) 2006 2007 2008 2009 2010 Television broadcasting ¥ 36.0 ¥ 33.8 ¥ 27.7 ¥ 21.6 ¥ 29.5 Cultural activities 5.2 8.2 6.3 3.2 4.2 Other 2.4 1.3 2.3 1.4 1.3 Elimination/Corporate (15.0) (13.0) (13.2) (14.0) (11.5) Total ¥ 28.6 ¥ 30.3 ¥ 23.1 ¥ 12.2 ¥ 23.6
Television Broadcasting Trends in Advertising Expenses in Japan J Operating Environment (Billions of Yen) (%) In 2009, total advertising expenditure in Japan came to ¥5,922.2 billion, down 11.5% 8,000 40.0 7,019.1 year on year and recording the biggest drop since estimates for advertising 6,692.6
5,922.2 expenditure in Japan began. Advertising expenditure grew steadily throughout the 6,000 30.0 country from 2004 to 2007, in line with overall economic expansion, but 2009 marked 28.5 28.5 29.0 the second consecutive year of decline due to the global economic downturn and 4,000 20.0 deteriorating corporate performance, although buoyed by government campaigns, such as those accompanying the Lower House election, tax breaks for eco-friendly cars 1,998.1 1,909.2 2,000 1,713.9 10.0 877.3 865.6 and the launch of an eco-point system. 759.6 Advertisers’ suppression of costs resulted in a 10.2% decline in television advertising 1,120.8 1,043.5 954.3 0 0 2007 2008 2009 expenditure, to ¥1,713.9 billion. These cost reductions were particularly apparent for (calendar year) spot advertising during the January–March quarter, as such advertisers can adjust this Total advertising expenditures Program advertising expenditure expenditure relatively easily midterm. Furthermore, during the timetable restructuring Spot advertising expenditure Television advertising expenditure ratio period in April, advertisers extended their cost-cutting activities to time advertising. As a result, both spot and time advertising expenditures fell substantially. Nevertheless, moving into October, economic conditions gradually began to pick up, causing spot advertising to recover to previous-year levels. As a result, program advertising expenditure (time advertising expenditure) was ¥759.6 billion, down 12.2% year on year, while spot advertising expenditure was down 8.6%, to ¥954.3 billion. By industry, advertising expenditure grew in the Government/Organizations, Foodstuffs and other lifestyle segments, and placements in Distribution/Retailing were firm. On the other hand, placements fell for Automobiles, Hobby/Sporting Goods and the Finance segment.
Source: Advertising Expenditures in Japan (Dentsu, Inc.)
NIPPON TELEVISION NETWORK 45 ANNUAL REPORT 2010 Management’s Discussion and Analysis
Television Broadcasting Sales J Performance Overview (Billions of Yen) 400.0 During the fiscal year ended March 31, 2010, sales from the television broadcasting business fell ¥21,067 million, or 8.5%, to ¥225,942 million. 300.0 278.0 267.9 262.4 247.0 We worked aggressively to promote time sales for major program events such as the 200.0 225.9 2010 Winter Olympics in Vancouver and high-rating shows like Ponyo on the Cliff by the 100.0 Sea on the Friday Movie Special and Odoroki no Arashi! Seiki no Daijikken!!, as well as 0 2006 2007 2008 2009 2010 NTV annual staples such as 24-Hour Television 32: Love Saves the Earth and the 86th Hakone Ekiden. However, in addition to a worsening advertising market, due to the Television Broadcasting effect of fewer major single-event programs such as the previous year’s Beijing Operating Income Olympics, time sales fell ¥20,425 million, or 15.3%, to ¥112,840 million. (Billions of Yen) 40.0 In terms of spot sales, in addition to seeing the impact of timetable restructuring 36.0 30.0 33.8 and continued solid household viewer ratings, viewer ratings for the core target age 29.5 27.7 range from 13 to 49 years old, for which client demand is high, improved substantially 20.0 21.6
10.0 as the Company succeeded in improving programs that support spot sales. Sales by industry fell nearly across the board during the previous year, but the Box Office and 0 2006 2007 2008 2009 2010 Entertainment and Service categories posted significant year-on-year increases. Also, Cosmetics/Toiletries, Alcohol and Pharmaceutical were firm. Nevertheless, spot sales Program Production Costs shrank ¥810 million, or 0.9%, to ¥92,585 million, due to a drop in spot advertising (Non-Consolidated Basis) (Billions of Yen) expenditure in the Kanto region compared with the previous term. 120.0
111.5 109.5 114.1 111.2 90.0 Breakdown of NTV’s Spot Advertising Sales by Industry (%) 93.7 2010 2009 60.0 Industry Share Growth Industry Share Growth 30.0 1 Cosmetics/Toiletries 9.0 8.9 Electronic Equipment 9.0 (0.5) 0 2 Alcohol 7.5 1.4 Cosmetics/Toiletries 8.2 (9.3) 2006 2007 2008 2009 2010 3 Pharmaceutical 7.3 2.2 Transportation, 8.1 (15.4) Telecommunications 4 Electronic Equipment 7.1 (22.2) Automobiles 7.4 (11.4) 5 Automobiles 7.0 (6.9) Alcohol 7.3 0.5 6 Transportation, 6.9 (15.8) Pharmaceutical 7.1 (8.7) Telecommunications 7 Box office and 6.3 26.7 Non-Alcohol 5.6 (16.9) Entertainment 8 Service 6.1 19.8 Service 5.1 (5.3) 9 Non-Alcohol 4.6 (19.7) Box office and 4.9 (6.7) Entertainment 10 Finance 4.5 (0.5) Finance 4.5 (21.4) Other 33.9 2.3 Other 32.8 (15.6) Total 100.0 (0.9) Total 100.0 (11.5)
Operating expenses, comprising cost of sales and SG&A expenses, amounted to ¥196,428 million, a year-on-year decline of ¥28,997 million, or 12.9%. We strove to Sekai Maru Mie! TV Special Investigative Unit reduce program production costs through timetable restructuring and lower costs in all other areas through administrative improvements. Other factors included a decrease in agency commissions stemming from lower sales from the television broadcasting segment. As a result of the above factors, year on year television broadcasting operating income rose ¥7,930 million, or 36.7%, to ¥29,514 million.
NEWS ZERO
NIPPON TELEVISION NETWORK 46 ANNUAL REPORT 2010 Cultural Activities Cultural Activities Sales
J (Billions of Yen) Overview of Results 80.0 74.0 The NTV Group’s sales from cultural activities fell ¥4,874 million year on year, or 6.8%, to 69.4 71.2 60.0 66.3 ¥66,294 million. 62.5 40.0 In the film business, sales were up owing to the hit 20th Century Boys–Chapter 3– 20.0 (released August 29, 2009), with box office revenue of ¥4,400 million, and other 0 successes that included Gokusen: The Movie (released July 11, 2009), Kaiji (released 2006 2007 2008 2009 2010 October 10, 2009) and Japan Academy Prize–winning animated feature Summer Wars
(released August 1, 2009). Cultural Activities Operating Income (Billions of Yen) National Overview (Calendar Year) 10.0
2005 2006 2007 2008 2009 7.5 8.2 Attendance (thousands) 160,453 164,585 163,193 160,491 169,297 5.0 6.3 5.2 Box office sales (millions of yen) 198,160 202,934 198,443 194,836 206,035 4.2 Japanese films 81,780 107,944 94,645 115,859 117,309 2.5 3.2 Theatrical releases 731 821 810 806 762 0.0 2006 2007 2008 2009 2010 Japanese films 356 417 407 418 448 Theaters (total screens) 2,926 3,062 3,221 3,359 3,396
Box-Office Sales Ranking: Top 10 Titles for 2009 Box-Office Sales Rank Released Title (Billions of Yen) 1 May Rookies the Movie: Graduation ¥ 8.6 2 July Pokémon: Arceus and the Jewel of Life 4.7 3 August 20th Century Boys–Chapter 3–* 4.4 4 June Evangelion: 2.0 You Can (Not) Advance* 4.0 5 July Amalfi: Rewards of the Goddess 3.7 6 April Detective Conan The Raven Chaser* 3.5 7 July Gokusen: The Movie* 3.5 8 May April Bride 3.2 9 March Yatterman* 3.1 10 April Crows Zero II 3.0 20th Century Boys–Chapter 3–
*Film in which NTV was the head organizer or an investor Source: Motion Picture Producers Association of Japan, Inc., 2009 Comparison of Growth Rates by Business Category In the music and video software business, harsh market conditions remained, with (%) 15.0 10.5 the CD market continuing to contract and the calendar 2009 video software market 9.0 9.5 10.0 shrinking 8.9% (according to a survey by the Japan Video Software Association). 6.7 6.7 5.0 2.3 5.4 Given these conditions, despite the success of the Summer Wars DVD (launched in 0.6 1.3 0.6 0.5 -0.5 -0.3 0 -0.2 -0.7 -1.0 March 2010), consolidated subsidiary VAP, which engages primarily in the production -1.4 -0.7 -0.6 -2.6 -2.7 -5.0 and distribution of film and television drama DVDs and Blu-ray discs and music CDs, -4.3 -4.3 -10.0 experienced a major revenue decline. -10.1 -15.0 2005 2006 2007 2008 2009 Video Software (DVD, Blu-ray) Market (Millions of Yen) (calendar year) 2005 2006 2007 2008 2009 Direct marketing Home centers Supermarkets Convenience stores Department stores Video Software Sales ¥ 670.2 ¥ 669.5 ¥ 664.2 ¥ 630.1 ¥ 574.1 Sources: Direct Marketing Sales (fiscal year data), The Japan Source: Video Software Market and User Trend Survey 2009, Japan Video Software Association Direct Marketing Association; Japanese DIY Market (calendar year data), Japan In the media commerce business, sales were firm on special shopping programs DIY Industry Association; Sales Statistics (calendar year data), Japan Chain such as Zenkoku Otoriyose! Oseibo Special. NTV posted record-high sales by actively Stores Association; developing the business and extending broadcasting time for television shopping Convenience Store FC Statistics (calendar year data), Japan Franchise Association; programs and broadcasting special shopping programs on network stations. Nationwide Department Store Annual Sales (calendar year data), Japan Department Stores Association
NIPPON TELEVISION NETWORK 47 ANNUAL REPORT 2010 Management’s Discussion and Analysis
Trends in Direct Marketing Sales (Billions of Yen) 2005 2006 2007 2008 2009
Direct Marketing Sales ¥ 3,040.0 ¥ 3,360.0 ¥ 3,680.0 ¥ 3,880.0 ¥ 4,140.0
Source: Direct Marketing Business Survey Report, Vol. 27, Japan Direct Marketing Association
NTV2, the Company’s video-on-demand (VoD) service, enjoyed a sharp increase in NTV2 Website users associated with a shift to completely free services and benefited from cross- media advertising, which draws on the strengths of both television and the Internet. Other Sales NTV2 moved into the black in the fourth quarter of the year ended March 31, 2010, and (Billions of Yen) 20.0 is now in a growth phase. Meanwhile, expenses dropped ¥5,900 million, or 8.7%, to ¥62,068 million, owing to 15.0 16.5 15.1 14.5 15.1 13.0 falling cost of sales on DVDs, Blu-ray discs and CDs accompanying lower sales at VAP. 10.0 As a result of these factors, operating income grew ¥1,026 million year on year, or 5.0 32.1%, to ¥4,226 million. 0 2006 2007 2008 2009 2010 Other Other Operating Income During the year under review, sales from this segment totaled ¥12,994 million, down (Billions of Yen) ¥3,552 million, or 21.5%. Factors included poor first-half performance by Nippon 4.0 Television Football Club Co., Ltd., which manages a professional soccer team, and the 3.0 company’s exclusion from the scope of consolidation in the second half due to stock 2.0 2.4 2.3 transfer (all stock transferred by the Company to Tokyo Verdy Holdings on September 1.0 1.4 1.3 1.3 30, 2009), as well as to a significant drop in sales from this segment. Operating income 0 2006 2007 2008 2009 2010 was ¥1,304 million, down ¥87 million, or 6.3%, from the previous year.
Financial Position
Total Assets Assets (Billions of Yen) Current assets as of March 31, 2010, were ¥140,770 million, down ¥42,363 million from a 600
529.3 year earlier. This decline was due to a reduction in cash and cash equivalents through 450 520.0 512.5 498.5 513.8 deployment of a system to manage cash on an integrated, groupwide basis and a 300 decrease in the redemption of marketable securities. 150 Net property, plant and equipment expanded ¥16,935 million, to ¥201,026 million, 0 2006 2007 2008 2009 2010 owing to the acquisition of land surrounding the Kojimachi office building (former head office) to make more active use of the area. At term-end, due to an increase in investment securities, total investments and other assets were up ¥40,759 million compared with the previous term-end, to ¥171,992 million. Consequently, total assets stood at ¥513,788 million on March 31, 2010, up ¥15,331 million from the end of the preceding fiscal year.
Liabilities Total current liabilities stood at ¥65,473 million, a decrease of ¥2,754 million, reflecting a decline in other payables. Total long-term liabilities were ¥2,135 million higher than a year earlier, at ¥31,948 million, owing to an increase in deferred tax assets, reflecting the rise in market prices of investment securities.
NIPPON TELEVISION NETWORK 48 ANNUAL REPORT 2010 Equity Equity Ratio (%) Total equity amounted to ¥416,367 million, up ¥15,950 million from a year earlier, 100 as a result of posting net income surpassing the amount of expenditures targeting 76.6 76.3 77.8 78.5 79.4 75 shareholder returns, such as dividends paid and the acquisition of treasury stock, as 50 well as a rise in market prices of investment securities, prompting an improvement in 25 unrealized losses on available-for-sale securities. 0 2006 2007 2008 2009 2010
Cash Flows Cash and cash equivalents on March 31, 2010, stood at ¥45,219 million, down ¥12,411 million compared with a year earlier. (Billions of Yen) 2006 2007 2008 2009 2010 Net cash provided by operating activities 32.7 31.5 26.8 23.9 40.1 Net cash used in investing activities (24.4) (24.6) (17.3) (28.3) (46.8) Net cash used in financing activities (15.9) (4.7) (4.1) (4.8) (5.7) Net (decrease) increase in cash and cash equivalents (7.5) 2.2 5.3 (9.2) (12.4) Cash and cash equivalents, end of year 59.4 61.5 66.9 57.6 45.2
Net Cash Provided by Operating Activities Cash and Cash Equivalents, End of Year (Billions of Yen) Net cash provided by operating activities amounted to ¥40,131 million, compared with 80.0 ¥23,948 million provided by these activities in the previous fiscal year. Major sources 60.0 66.9 61.5 of cash were ¥25,368 million in income before income taxes and minority interests and 59.4 57.6 40.0 ¥9,622 million in depreciation and amortization. Uses of cash included a ¥3,589 million 45.2 decrease in trade notes and accounts payable and income taxes paid. 20.0 0 2006 2007 2008 2009 2010 Net Cash Used in Investing Activities Investing activities used ¥46,847 million in cash during the year, compared with ¥28,331 million used in the previous fiscal year. Purchases of property, plant and equipment, marketable securities and of investment securities were the principal uses of cash.
Net Cash Used in Financing Activities During the year, net cash used in financing activities amounted to ¥5,697 million, mostly because of treasury stock acquisitions and dividends paid. In the preceding term, net cash used in these activities came to ¥4,803 million.
Financing and Capital Expenditure Policy In the context of its ongoing content investment, the NTV Group utilizes retained earnings and determines the optimal method of funds procurement based on a variety of factors, including future operating conditions, financial market trends and the impact on the Company’s corporate value. Capital Expenditures and Depreciation In specific terms, the Group’s estimates for capital expenditures over the next seven- (Billions of Yen) year period are determined in line with forecast profits and cash flows. Group 32 companies formulate their own capital plans, but NTV makes adjustments to ensure 24 26.8 there is no overlap among plans. In the fiscal year ended March 31, 2010, the Group’s 16 17.6 14.4 12.9 11.5 total capital expenditures were ¥26,809 million, centered on capital outlay for digital 8 9.6 6.3 6.0 5.2 5.5 terrestrial broadcasting in the television broadcasting segment as well as acquisition of 0 2006 2007 2008 2009 2010 land in Yonbancho, Chiyoda-ku, Tokyo (around the Kojimachi former head office). Capital expenditures Depreciation
NIPPON TELEVISION NETWORK 49 ANNUAL REPORT 2010 Management’s Discussion and Analysis
For the fiscal year ending March 31, 2011, the NTV Group budgets capital expenditures of ¥5,231 million, to be funded primarily through retained earnings. Capital expenditures by business segment during the year under review were as follows.
J Television Broadcasting
LINE-UP LAW OFFICE Seven years after relocating our head office to NTV Tower in Shiodome, we upgraded mastering and CG-related IT equipment to maintain operational stability. With regard to transmission equipment, we have been promoting the construction of relay stations and mini-satellite stations to further expand the area covered by digital terrestrial broadcasting. As a result of the above, capital investment in the television broadcasting segment amounted to ¥2,535 million.
J Cultural Activities
Hakone Ekiden Capital expenditure in the cultural activities segment was ¥101 million, which was mainly used to purchase IT equipment at consolidated subsidiaries.
J Other Capital expenditure in the cultural activities segment reached ¥492 million, which was mainly used to construct systems at consolidated subsidiaries.
J Companywide To make active use of the Kojimachi office building (former head office), the Company
Shoten acquired surrounding land with the objective of annexing buildings to the Kojimachi office building. As a result, companywide capital expenditure during the year totaled ¥23,681 million.
Other than this, the Company recorded a loss on retirement of property, plant and equipment of ¥220 million for equipment replacement, centered on the machinery and equipment category.
Important Operational Contracts Purchase of Land The Company is working to augment non-broadcasting revenue in order to diversify its revenue sources. To make more active use of the Kojimachi office building (former head office), the following property was acquired with the objective of annexing buildings to the Kojimachi office building. OBA,THE LAST SAMURAI © 2011 OBA,THE LAST SAMURAI Film Partners Contractor: Nippon Television Network Corporation (NTV) Counterparty: Chiyoda Yonbancho Kaihatsu TMK Acquired asset: Land Amount (millions of yen): 23,300 (including ancillary expenses) Area (registered; m2): 2,628.25 Location: 5-97-10, Yonbancho, Chiyoda-ku, Tokyo Contract date: December 16, 2009 Improved land transfer date: March 31, 2010
NIPPON TELEVISION NETWORK 50 ANNUAL REPORT 2010 Equity Participation in Yoshimoto Kogyo The Company acquired a stake in Quantum Entertainment Corporation in September 2009 in connection with a tender offer (de-listing) for Yoshimoto Kogyo Co., Ltd., a business partner involved in program and DVD/Blu-ray disc production, etc. Quantum Entertainment merged with Yoshimoto Kogyo on June 1, 2010, which resulted in the Company becoming the principal shareholder in the new Yoshimoto Kogyo, the amalgamated company, with a stake of 8.09%. The new Yoshimoto Kogyo is taking advantage of de-listing to aggressively develop its business. It will accelerate the process of converting content to multiple uses and is considering developing operations in other parts of Asia. NTV will strengthen its partnership with the company and pursue synergies.
Earnings Outlook for the Year Ahead For the fiscal year ending March 31, 2011, the NTV Group forecasts net sales of ¥293.5 billion, operating income of ¥25.1 billion and net income of ¥18.0 billion. Concerning net sales, we expect the television advertising market to remain lackluster and for performance in the film business to drop following the previous fiscal year’s solid results. Accordingly, we expect these revenues to fall ¥3,434 million, or 1.2%, compared with the previous year. In respond to the harsh economic environment, we are enacting strict cost controls, which we expect to hold down expenses. Consequently, we forecast growth in both operating income and net income, of 6.5%, to ¥1,537 million; and 8.5%, to ¥1,404 million.
Dividend Policy NTV recognizes return of profits to shareholders as an important task of management. Our basic policy is to make continuous and stable returns to shareholders, while building a corporate structure able to flexibly adapt to changes in market conditions and strengthen our revenue base. At the same time, we are focusing on the period after the shift to fully digital terrestrial broadcasting, set for July 2011, and harmonizing these endeavors with the maintenance of internal reserves for aggressive future Cash Dividends per Share expansion. and Payout Ratio NTV’s basic policy is to pay dividends twice each year, once at midterm and once (Non-Consolidated Basis) (Yen) (%) at year-end. The General Meeting of Shareholders determines the year-end dividend, 320 200 290 while midterm dividends are resolved by the Company’s Board of Directors. In terms of returns to shareholders, we set a lower limit of ¥180 per share for full-year 240 138 150 180 180 cash dividends. Going forward, we will work to raise returns via such measures as the 165 170 160 100 acquisition of treasury stock. 70 For the fiscal year ending March 31, 2011, in line with the lower limit of our basic policy, 52 50 80 33 50 we plan to pay out a midterm dividend of ¥90 per share and a year-end dividend of ¥90.
0 0 2006 2007 2008 2009 2010
Cash dividends per share Dividend payout ratio
Note: Dividend figures include a ¥60 per share dividend in the year ended March 31, 2006, to celebrate NTV2’s launch; and a ¥30 per share dividend in the year ended March 31, 2008, to commemorate NTV’s 55th anniversary of establishment.
NIPPON TELEVISION NETWORK 51 ANNUAL REPORT 2010 Management’s Discussion and Analysis
Business Risks Risk factors deemed to have the potential to significantly affect the NTV Group’s business activities are given below. The many items regarding the future described in the following have all been evaluated as of the time of publication of this Annual Report, and are provided from the standpoint of active disclosure to investors. Recognizing that these risks exist, the NTV Group aims to avoid such risks and to minimize their impact if they do materialize. Note that the following statements do not comprehensively identify all possible risks related to investing in the Company’s stock.
Risk Factors as a Broadcaster J Worsening Advertising Market and Dependence on Advertising Revenue The television broadcasting segment, which forms the core of the NTV Group’s operations, is dependent on television advertising revenues from time and spot sales, with such revenues comprising 69.2% of total net sales in the fiscal year ended March 31, 2010. Television advertising revenues, centered on net time sales, have continued to decline. The NTV Group recognizes the continued dominance of the media value of television broadcasting and remains committed to enhancing that value. However, future macroeconomic trends in Japan and shifts in the advertising market could impact the Group’s business performance and financial position.
J Legal Regulations for Television Broadcasters The NTV Group’s core television broadcasting business is regulated by Japan’s Broadcast Law and Radio Law. The objective of the latter is to promote robust development of broadcasting by stipulating freedom of program editing and establishing broadcast program deliberative bodies. The Radio Law also aims to enhance public welfare by ensuring the fair and efficient usage of the airwaves. Article 4 of the Radio Law stipulates that parties seeking to open radio stations for the transmission of radio waves must receive a license from the Minister of Internal Affairs and Communications. Article 13 of the Radio Law specifies that the validation period of such a license is five years. On July 31, 1952, the Company was the first in Japan to be authorized for television broadcasting. We have subsequently continued to renew our status as a licensed broadcasting company. Under the authority to the Minister of Internal Affairs and Communications in the event of prescribed circumstances, the Radio Law provides stipulations for discontinuance of radio transmissions (Article 72) and revocation of status as a licensed broadcasting company (Article 75 and Article 76). Continued television broadcasting is the linchpin for the NTV Group’s future existence, so the Group is ever-conscious of and vigilant toward the emergence of such circumstances in the fulfillment of its social mission of broadcasting. However, if the Company’s status as a licensed broadcasting company was revoked under the Radio Law, or current considerations concerning broadcasting and communications that may cause legal revisions and other changes were enacted, the Group’s business performance and financial position could be seriously affected.
NIPPON TELEVISION NETWORK 52 ANNUAL REPORT 2010 Risk Factors Regarding Competition with Other Companies J Competition with Other Forms of Media Since the rollout of digital terrestrial broadcasting in December 2003, single receivers that enable viewing of any of terrestrial, BS and CS digital broadcasts have steadily gained popularity. Accelerating this proliferation are plans to discontinue analog terrestrial broadcasting in Japan, scheduled for July 2011. In addition, new BS digital broadcasts and multimedia broadcasts targeting mobile devices are expected to commence. This popularization of digital media is drawing the interest of many people, rapidly raising the advertising value of such forms of media. The NTV Group is responding to the increasing diversity of digital media in a variety of ways. We deliver digital BS broadcasts via BS Nippon Corporation, offer the NTV G+, Nittele NEWS24 and Nittele Plus digital CS broadcasts, and provide Internet content via NTV2. However, it is possible that growing diversity of digital multimedia offerings will reduce the amount of time that viewers spend watching digital terrestrial broadcasting, which could reduce the advertising value of our media. This situation could affect the Group’s business performance and financial position.
Risk Factors Regarding Content J Surging Licensing Fees With television broadcasting as its core business, the NTV Group has carried out its mission as a television broadcaster by covering the Olympics, baseball, soccer and other sporting events closely watched by Japan’s citizens. At the same time, it is difficult to secure advertising revenues sufficient to offset the high television licensing fees charged for these sporting events, which is eroding profits for television broadcasters. The Group remains committed to airing sporting events, to execute its mission as a television broadcaster of continuing to provide citizens with entertainment. However, price hikes on licensing fees have the potential to negatively influence the Group’s business performance and financial position.
J Copyrights and Other Intellectual Property Rights The television programs produced by the NTV Group intimately combine copyrights and neighboring rights (hereinafter “copyrights, etc.”) that represent the results of the creative intellectual and cultural efforts of authors, screenwriters, musical lyricists and composers, record producers, performers and many others (hereinafter, “authors, etc.”). Japan’s Copyright Act states in its first Article that it is intended to spell out the rights of such authors, etc. who engage in creative activities, protect the rights of such authors, etc., and contribute to cultural development, while giving due regard to fair use. In recent years, demand has arisen for multiple uses of content to supplement conventional terrestrial broadcasting, including content distribution via BS and CS satellite broadcasts, cable television and the Internet; packaging in the form of DVDs, Blu-ray discs and other physical media; and merchandising and publishing related to program characters. While carefully considering the rights of the various authors, etc., the Group plans to continue aggressively pursuing multiple uses for the television programs and other content it produces. However, the rights for use of television programs produced by the Group from the authors, etc. are premised on terrestrial broadcasting usage as a general rule, leaving
NIPPON TELEVISION NETWORK 53 ANNUAL REPORT 2010 Management’s Discussion and Analysis
the Group with numerous television programs for which rights premised on uses other than terrestrial broadcasting have not been adequately obtained. In deploying content for multiple uses on the Internet and in other new media, it will therefore be essential to re-acquire permission from the authors, etc., in advance of such use either in parallel with or subsequent to terrestrial broadcasting. Such rights handling could require large amounts of time and expenditures. At the same time, in the event that the Group fails to properly accommodate the authors, etc., it may face broadcast cancellation orders or claims for damages. In such cases, the Group’s business performance and financial position may be affected.
Risk Factors Regarding Investment in New Businesses J Film Business The NTV Group is actively engaged in the film business in the pursuit of revenue outside of television broadcasting, and contributes capital to approximately 15 films each year. Our capital participation in the film business is determined based on careful simulations of potential income and outlay during the planning stages of each film. However, there is no guarantee that actual box office receipts and secondary usage revenues after theatrical release will generate the projected earnings. Failure to secure the amount of revenue initially planned may impact the Group’s business performance and financial position.
J Media Commerce Business To secure non-broadcasting revenues, the Group is actively engaged in the media commerce business, which is growing in scale each year. We select products carefully, using a thoroughly comprehensive checking system. Sale by the Group of defective or faulty products could result in the obligation to accept returns of or replace such products. In such cases, failure to secure the amount of revenue initially planned may impact the Group’s business performance and financial position.
J VoD Business and NTV2 In October 2005, the Group launched NTV2, Japan’s first Internet-based video distribution (VoD) business operated by a television broadcaster. After relaunching NTV2 as a free service in fiscal 2007, the number of users grew dramatically. Business is growing steadily; after recording its first fully profitable month in January 2009, NTV2 also posted profits for the 4th quarter of the year ended March 31, 2010. However, Internet-based businesses, and specifically VoD businesses, may be affected by major fluctuations in market demand, owing in particular to the increasing sophistication of network infrastructure and mobile terminals. Furthermore, advertising revenues may not grow if the business is unable to provide content that fulfills sponsors’ needs. These factors may result in the business being unable to recover its expenses, thereby affecting the business performance and financial position of the Group.
Other Risk Factors J Handling of Shares Purchased by Foreign Entities NTV’s status as a licensed broadcasting company under the Radio Law will be revoked if the voting rights held by foreign entities (defined as (1) an individual without Japanese citizenship, (2) a foreign government or its representatives, (3) a foreign
NIPPON TELEVISION NETWORK 54 ANNUAL REPORT 2010 juridical person or organization or (4) a juridical person or organization the ratio of voting rights of which to be held directly by the entity described in items (1) to (3)) reach a ratio of 20% or more of the Company’s shares with voting rights, such ratio being defined by the Ministry of Internal Affairs and Communications Ordinance as the sum of the ratios of the rights held directly by entities described in (1) through (3) and held indirectly through the entities described in (4). In this situation, the Company may refuse to describe or record the name or address of such foreign entities on the shareholders’ register in accordance with the provisions of the Broadcast Law Article 52(8)(i) and 52(8)(ii). Furthermore, based on Article 52(8)(iii) of the Broadcast Law, the Company may also restrict exercise of voting rights.
J Large-Scale Acquisitions of NTV’s Shares Many large-scale acquisitions of shares benefit neither the corporate value of the target company nor the common interests of its shareholders. Such large-scale acquisitions include those with a purpose that would obviously harm the corporate value of the target company and the common interests of its shareholders; those with the potential to substantially coerce shareholders into selling their shares; those that do not provide sufficient time or information for the target company’s board of directors and shareholders to consider the details of the large-scale acquisition, or for the target company’s board of directors to make an alternative proposal; and those that require the target company to discuss or negotiate with the acquirer in order to procure more favorable terms for shareholders than those presented by the acquirer. NTV obtained shareholder approval for and carried out a renewal of its plan for countermeasures to large-scale acquisitions of shares in the Company with necessary amendments (takeover defense measures) effective period of the plan for countermeasures to large-scale acquisitions of shares in the Company (takeover defense measures) at a meeting of the Board of Directors on held on June 29, 2010 and its 77th Ordinary General Meeting of Shareholders held on June 29, 2010, as a measure (Article 118, Item (iii)(b) of the Ordinance for Enforcement of the Companies Act) to prevent decisions on the Company’s financial and business policies from being controlled by persons viewed as inappropriate under the basic policy regarding persons who control decisions on the Company’s financial and business policies (defined in the main clause of Article 118, Item (iii) of the Ordinance for Enforcement of the Companies Act). The Group strives to ensure and enhance its corporate value, whose source lies in particular in its superior content development capability. The bedrock of our content development capability is founded mainly on acquisition and development of high- caliber personnel, preservation of mutual trust relationships with external parties involved in content production, sustainment of relationships of cooperation and mutual trust with network companies, maintenance of a corporate culture with a mid- to long- term outlook that encourages the development of high-quality content, assurance of stable business results and financial structure, and fulfillment of the Company’s public responsibilities as a broadcaster. Unless the acquirer of a proposed large-scale acquisition of shares in the Company understands the source of the corporate value of the Company and would ensure and enhance these elements over the medium- to-long term, the corporate value of the Company and, in turn, the common interests of its shareholders would be harmed, which could have a considerable impact on the Company’s management.
NIPPON TELEVISION NETWORK 55 ANNUAL REPORT 2010 Consolidated Balance Sheets
Nippon Television Network Corporation and Consolidated Subsidiaries March 31, 2010 and 2009
Thousands of U.S. Dollars Millions of Yen (Note 1) ASSETS 2010 2009 2010 Current Assets: Cash and cash equivalents (Note 13) ¥ 45,219 ¥ 57,630 $ 486,017 Marketable securities (Notes 3 and 13) 1,853 13,892 19,916 Short-term investments (Notes 4 and 13) 500 2,065 5,374 Receivables (Note 13): Trade notes 163 2,847 1,752 Trade accounts 68,825 72,199 739,736 Other 3,596 3,486 38,650 Allowance for doubtful accounts (63) (69) (677) Inventories (Note 5) 10,294 12,208 110,641 Deferred tax assets (Note 11) 4,679 7,587 50,290 Prepaid expenses and other 6,402 11,986 68,808 Allowance for doubtful accounts (698) (698) (7,502) Total current assets 140,770 183,133 1,513,005
Property, Plant and Equipment (Notes 6 and 7): Land 138,631 115,330 1,490,015 Buildings and structures 89,126 89,153 957,932 Machinery, vehicles and equipment 94,719 95,226 1,018,046 Lease assets (Note 12) 51 45 548 Construction in progress 48 438 516 Total 322,575 300,192 3,467,057 Accumulated depreciation (121,549) (116,101) (1,306,416) Net property, plant and equipment 201,026 184,091 2,160,641
Investments and Other Assets: Investment securities (Notes 3 and 13) 116,396 83,385 1,251,032 Investments in and advances to unconsolidated subsidiaries and associated companies 35,374 29,722 380,202 Long-term deposits (Note 13) 8,000 9,500 85,985 Deferred tax assets (Note 11) 1,874 1,264 20,142 Other assets 10,455 7,477 112,370 Allowance for doubtful accounts (107) (115) (1,150) Total investments and other assets 171,992 131,233 1,848,581
Total ¥ 513,788 ¥ 498,457 $ 5,522,227
See notes to consolidated fi nancial statements.
NIPPON TELEVISION NETWORK 56 ANNUAL REPORT 2010 Thousands of U.S. Dollars Millions of Yen (Note 1) LIABILITIES AND EQUITY 2010 2009 2010 Current Liabilities: Short-term borrowings (Note 8) ¥ 697 $ 7,491 Payables (Note 13): Trade notes 1,293 ¥ 1,692 13,897 Trade accounts 45,057 48,813 484,276 Other 5,915 10,883 63,575 Income taxes payable 6,774 1,392 72,807 Accrued expenses and other 5,737 5,447 61,662 Total current liabilities 65,473 68,227 703,708
Long-Term Liabilities: Liabilities for retirement benefi ts (Note 9) 6,037 7,630 64,886 Guarantee deposits received (Note 6 and 13) 20,226 20,148 217,390 Deferred tax liabilities (Note 11) 4,213 1,975 45,282 Other 1,472 60 15,821 Total long-term liabilities 31,948 29,813 343,379
Commitments and Contingent Liabilities (Notes 12 and 14)
Equity (Notes 10 and 15): Common stock—authorized, 100,000,000 shares; issued, 25,364,548 shares in 2010 and 2009 18,576 18,576 199,656 Capital surplus 17,928 17,928 192,691 Retained earnings 384,489 370,666 4,132,513 Unrealized loss on available-for-sale securities (651) (5,457) (6,997) Foreign currency translation adjustments (347) (332) (3,730) Treasury stock—at cost, 879,760 shares in 2010 and 675,446 shares in 2009 (12,053) (9,970) (129,546) Total 407,942 391,411 4,384,587 Minority interests 8,425 9,006 90,553 Total equity 416,367 400,417 4,475,140
Total ¥513,788 ¥498,457 $5,522,227
NIPPON TELEVISION NETWORK 57 ANNUAL REPORT 2010 Consolidated Statements of Income
Nippon Television Network Corporation and Consolidated Subsidiaries Years Ended March 31, 2010 and 2009
Thousands of U.S. Dollars Millions of Yen (Note 1) 2010 2009 2010 Net Sales ¥296,934 ¥324,563 $3,191,466
Cost of Sales 207,598 240,046 2,231,277 Gross profi t 89,336 84,517 960,189
Selling, General and Administrative Expenses 65,773 72,302 706,932 Operating income 23,563 12,215 253,257
Other Income (Expenses): Interest and dividend income 2,672 2,667 28,719 Interest expense (11) (3) (118) Gain (loss) on sales of investment securities 4 (119) 43 Loss on sales of stock of subsidiaries (1,115) (11,984) Loss on devaluation of investment securities (229) (1,387) (2,461) Other—net 484 835 5,201 Other income—net 1,805 1,993 19,400
Income before Income Taxes and Minority Interests 25,368 14,208 272,657
Income Taxes (Note 11): Current 7,299 2,013 78,450 Deferred 1,818 6,303 19,540 Total income taxes 9,117 8,316 97,990
Minority Interests in Net Loss (Income) 344 (270) 3,697
Net Income ¥ 16,595 ¥ 5,622 $ 178,364
Yen U.S. Dollars Per Share of Common Stock (Note 2. l): Basic net income ¥676.43 ¥227.70 $7.27 Cash dividends applicable to the year 290.00 180.00 3.12
See notes to consolidated fi nancial statements.
NIPPON TELEVISION NETWORK 58 ANNUAL REPORT 2010 Consolidated Statements of Changes in Equity
Nippon Television Network Corporation and Consolidated Subsidiaries Years Ended March 31, 2010 and 2009
Thousands Thousands Millions of Yen Unrealized Number of Number of Gain (Loss) Foreign Shares of Shares of on Available- Currency Common Treasury Common Capital Retained for-Sale Translation Treasury Minority Total Stock Issued Stock Stock Surplus Earnings Securities Adjustments Stock Total Interests Equity Balance, April 1, 2008 25,365 669 ¥18,576 ¥17,928 ¥369,909 ¥ 2,411 ¥ (19) ¥ (9,904) ¥398,901 ¥8,767 ¥407,668 Net income 5,622 5,622 5,622 Cash dividends, ¥195 per share (4,865) (4,865) (4,865) Increase in treasury stock—net 6 (66) (66) (66) Net change in the year (7,868) (313) (8,181) 239 (7,942) Balance, March 31, 2009 25,365 675 18,576 17,928 370,666 (5,457) (332) (9,970) 391,411 9,006 400,417 Net income 16,595 16,595 16,595 Cash dividends, ¥180 per share (4,475) (4,475) (4,475) Increase in treasury stock—net 192 (2,044) (2,044) (2,044) Change of scope of equity method 1,703 1,703 1,703 Change in equity in affi liates accounted for by equity method —treasury stock 13 (39) (39) (39) Net change in the year 4,806 (15) 4,791 (581) 4,210 Balance, March 31, 2010 25,365 880 ¥18,576 ¥17,928 ¥384,489 ¥ (651) ¥(347) ¥(12,053) ¥407,942 ¥8,425 ¥416,367
Thousands of U.S. Dollars (Note 1) Unrealized Foreign Loss on Currency Common Capital Retained Available-for- Translation Treasury Minority Total Stock Surplus Earnings Sale Securities Adjustments Stock Total Interests Equity Balance, March 31, 2009 $199,656 $192,691 $3,983,942 $(58,652) $(3,568) $(107,158) $4,206,911 $96,797 $4,303,708 Net income 178,364 178,364 178,364 Cash dividends, $1.93 per share (48,098) (48,098) (48,098) Increase in treasury stock—net (21,969) (21,969) (21,969) Change of scope of equity method 18,305 18,305 18,305 Change in equity in affi liates accounted for by equity method —treasury stock (419) (419) (419) Net change in the year 51,655 (162) 51,493 (6,244) 45,249 Balance, March 31, 2010 $199,656 $192,691 $4,132,513 $ (6,997) $(3,730) $(129,546) $4,384,587 $90,553 $4,475,140
See notes to consolidated fi nancial statements.
NIPPON TELEVISION NETWORK 59 ANNUAL REPORT 2010 Consolidated Statements of Cash Flows
Nippon Television Network Corporation and Consolidated Subsidiaries Years Ended March 31, 2010 and 2009
Thousands of U.S. Dollars Millions of Yen (Note 1) 2010 2009 2010 Operating Activities: Income before income taxes and minority interests ¥ 25,368 ¥ 14,208 $ 272,657 Adjustments for: Income taxes—paid (1,937) (6,871) (20,819) Depreciation and amortization 9,622 11,528 103,418 (Decrease) Increase in liabilities for retirement benefi ts (1,569) 619 (16,864) (Gain) loss on sales of investment securities (4) 119 (43) Loss on sales of stock of subsidiaries 1,115 11,984 Loss on devaluation of investment securities 229 1,387 2,461 Equity in earnings of unconsolidated subsidiaries and associated companies (273) (266) (2,934) Changes in operating assets and liabilities: Decrease in trade notes and accounts receivable 5,968 7,288 64,144 Decrease in inventories 1,914 2,705 20,572 Decrease in trade notes and accounts payable (3,589) (6,002) (38,575) Other—net 3,287 (767) 35,330 Total adjustments 14,763 9,740 158,674 Net cash provided by operating activities 40,131 23,948 431,331
Investing Activities: Increase in long-term deposits (449) (4,235) (4,826) Decrease in long-term deposits 3,519 3,380 37,822 Purchases of marketable securities (10,790) (24,976) (115,972) Proceeds from redemption of marketable securities 21,200 31,019 227,859 Purchases of property, plant and equipment (26,521) (4,605) (285,049) Proceeds from sales of property, plant and equipment 8 60 86 Purchases of intangible assets (993) (816) (10,673) Purchases of investment securities (36,056) (31,698) (387,532) Proceeds from sales of investment securities 197 190 2,117 Proceeds from redemption of investment securities 4,020 4,001 43,207 Payments of loans receivable (1,565) (1,029) (16,821) Payments for sale of investments in subsidiaries resulting in change of scope of consolidation (5) (54) Other—net 588 378 6,321 Net cash used in investing activities (46,847) (28,331) (503,515)
Financing Activities: Increase in short-term borrowings—net 697 7,491 Dividends paid (4,380) (4,778) (47,077) Purchases of treasury stock (2,002) (4) (21,518) Other—net (12) (21) (128) Net cash used in fi nancing activities (5,697) (4,803) (61,232)
Foreign Currency Translation Adjustments on Cash and Cash Equivalents 2 (47) 22
Net decrease in Cash and Cash Equivalents (12,411) (9,233) (133,394)
Cash and Cash Equivalents, Beginning of Year 57,630 66,863 619,411
Cash and Cash Equivalents, End of Year ¥ 45,219 ¥ 57,630 $ 486,017
See notes to consolidated fi nancial statements.
NIPPON TELEVISION NETWORK 60 ANNUAL REPORT 2010 Notes to Consolidated Financial Statements
Nippon Television Network Corporation and Consolidated Subsidiaries Years Ended March 31, 2010 and 2009
1. Basis of Presenting Consolidated Financial Statements The accompanying consolidated fi nancial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards. In preparing these consolidated fi nancial statements, certain reclassifi cations and rearrangements have been made to the consolidated fi nancial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifi cations have been made in the 2009 fi nancial statements to conform to the classifi cations used in 2010. The consolidated fi nancial statements are stated in Japanese yen, the currency of the country in which Nippon Television Network Corporation (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥93.04 to $1, the approximate rate of exchange at March 31, 2010. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
2. Summary of Signifi cant Accounting Policies a. Consolidation—The consolidated fi nancial statements as of March 31, 2010 include the accounts of the Company and its 13 signifi cant (14 in 2009) subsidiaries (collectively, the “Group”). Under the control or infl uence concept, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise signifi cant infl uence are accounted for by the equity method. In addition, Nippon Television Football Club Co., Ltd. has been excluded from the scope of the consolidation because the Company sold all of its stock. Investments in 12 (13 in 2009) unconsolidated subsidiaries and 17 (17 in 2009) associated companies are accounted for by the equity method. In September 2006, the Accounting Standards Board of Japan (the “ASBJ”) issued Practical Issues Task Force No. 20, “Practical Solution on Application of Control Criteria and Infl uence Criteria to Investment Associations.” The practical solution clarifi es how the control and infl uence concept should be practically applied to the consolidation scope of collective investment vehicles, such as limited partnerships, Tokumei- Kumiai, and other entities with similar characteristics. The Company applied this task force guidance and consolidated three such collective investment vehicles in 2010 (three in 2009). The excess of the cost of an acquisition over the fair value of the acquired subsidiary or affi liate at the date of acquisition is being amortized within 20 years on a straight-line basis. However, if the amount is minor, it is fully amortized in the fi scal year in which it occurs. All signifi cant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profi t included in assets resulting from transactions within the Group is eliminated.
b. Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignifi cant risk of changes in value. Cash equivalents include time deposits and mutual funds investing in bonds that represent short-term investments, all of which mature or become due within three months of the date of acquisition.
c. Inventories—Program rights (costs incurred in connection with the production of programming and the purchase of rights to programs that are capitalized and amortized as the respective programs are broadcast) and most of work in process were stated at the lower of cost, determined by the specifi c identifi cation method or market. As well, fi nished merchandise, products, raw materials and supplies were mainly stated at the lower of cost, determined by the fi rst-in, fi rst-out method or market.
NIPPON TELEVISION NETWORK 61 ANNUAL REPORT 2010 d. Marketable and Investment Securities—Marketable and investment securities are classifi ed as trading securities, held-to-maturity debt securities, or available-for-sale securities depending on management’s intent. The Group classifi es securities as held-to-maturity debt securities and available-for-sale securities. Held-to-maturity debt securities are reported at amortized cost. Marketable available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. The cost of securities sold is determined based on the moving-average method. Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For other-than-temporary declines in fair value, nonmarketable available-for-sale securities are reduced to net realizable value by a charge to income.
e. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation is computed by the declining-balance method over the estimated useful lives of the assets, while the straight-line method is applied to buildings acquired after April 1, 2000 and to lease assets. The range of useful lives is from 3 to 50 years for buildings and structures and from 2 to 20 years for machinery, vehicles and equipment. The useful lives for lease assets are the terms of the respective leases.
f. Long-lived Assets—The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash fl ows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash fl ows from the continued use and eventual disposition of the asset or the net selling price at disposition.
g. Retirement and Pension Plans—The Company has a defi ned contribution pension plan, an unfunded lump- sum retirement benefi ts plan, and a prepaid retirement plan. Subsidiaries have a defi ned contribution pension plan, an unfunded lump-sum retirement benefi ts plan, and a noncontributory funded pension plan. Effective April 1, 2000, the Group adopted a new accounting standard for employees’ retirement benefi ts and accounted for the liability for retirement benefi ts based on the projected benefi t obligations and plan assets at the balance sheet date. The Company’s transitional assets, determined at the beginning of the year, are being amortized over 10 years. The annual provision for retirement benefi ts for directors and corporate auditors is calculated to state the liability at the amount that would be required if all directors and corporate auditors retired at each balance sheet date. Retirement liabilities for directors and corporate auditors—Effective June 26, 2009, the Company terminated its unfunded retirement allowance plan for all directors and corporate auditors. The outstanding balance of retirement liabilities for directors and corporate auditors as of March 31, 2009 was reclassifi ed to long-term liabilities—other in the year ended March 31, 2010.
Accounting Change Partial Amendments to Accounting Standard for Retirement Benefi ts (Part 3) On July 31, 2008, the ASBJ issued ASBJ Statement No. 19, “Partial Amendments to Accounting Standard for Retirement Benefi ts (Part 3).” The Group has adopted this statement beginning this fi scal year. This had no material effect on the 2010 consolidated statement of income.
NIPPON TELEVISION NETWORK 62 ANNUAL REPORT 2010 h. Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” which revised the previous accounting standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions is effective for fi scal years beginning on or after April 1, 2008, with early adoption permitted for fi scal years beginning on or after April 1, 2007. Under the previous accounting standard, fi nance leases that were deemed to transfer ownership of the leased property to the lessee were to be capitalized. However, other fi nance leases were permitted to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the notes to the lessee’s fi nancial statements. The revised accounting standard requires that all fi nance lease transactions be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the accounting standard permits leases which existed at the transition date and do not transfer ownership of the leased property to the lessee to be accounted for as operating lease transactions. The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company accounted for leases which existed at the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions. All other leases are accounted for as operating leases. i. Income Taxes—The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently- enacted tax laws to the temporary differences. j. Foreign Currency Translations—All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses are recognized in the consolidated statements of income. k. Foreign Currency Financial Statements—With the exception of equity, which is translated at the historical rate, the balance sheet and revenue and expense accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rates as of the balance sheet date. Differences arising from such translation were shown as “Foreign currency translation adjustments” in a separate component of equity. l. Per Share Information—Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share is not disclosed because the Group has not issued dilutive securities for the years ended March 31, 2010 and 2009. Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years, including dividends to be paid after the end of the year. m. New Accounting Pronouncements Business Combinations—In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No. 21, “Accounting Standard for Business Combinations.” Major accounting changes under the revised accounting standard are as follows: (1) The current accounting standard for business combinations allows companies to apply the pooling of interests method of accounting when certain specifi c criteria are met such that the business combination is essentially regarded as a uniting-of-interests. The revised standard requires such business combinations to be accounted for by the purchase method, with the pooling of interests method of accounting no longer allowed. (2) The current accounting standard accounts for research and development costs to be charged to income
NIPPON TELEVISION NETWORK 63 ANNUAL REPORT 2010 as incurred. Under the revised standard, in-process research and development costs (IPR&D) acquired in a business combination are capitalized as an intangible asset. (3) The current accounting standard accounts for a bargain purchase gain (negative goodwill) to be systematically amortized within 20 years. Under the revised standard, the acquirer recognizes a bargain purchase gain in profi t or loss on the acquisition date after reassessing whether it has correctly identifi ed all of the assets acquired and all of the liabilities assumed with a review of such procedures used.
This standard will be applicable to business combinations undertaken on or after April 1, 2010, with early adoption permitted for fi scal years beginning on or after April 1, 2009.
Asset Retirement Obligations—In March 2008, the ASBJ published a new accounting standard for asset retirement obligations, ASBJ Statement No. 18 “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21 “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defi ned as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fi xed asset and is associated with the retirement of such tangible fi xed asset. The asset retirement obligation is recognized as the sum of the discounted cash fl ows required for the future asset retirement, and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fi xed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash fl ows are refl ected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost. This standard is effective for fi scal years beginning on or after April 1, 2010, with early adoption permitted for fi scal years beginning on or before March 31, 2010. Asset Retirement Obligations—In March 2008, the ASBJ published a new accounting standard for asset retirement obligations, ASBJ Statement No. 18 “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21 “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defi ned as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fi xed asset and is associated with the retirement of such tangible fi xed asset. Accounting Changes and Error Corrections—In December 2009, the ASBJ issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error Corrections,” and ASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments under this standard and guidance are as follows: (1) Changes in accounting policies When a new accounting policy is applied with revision of accounting standards, a new policy is applied retrospectively unless the revised accounting standards include specifi c transitional provisions. When the revised accounting standards include specifi c transitional provisions, an entity shall comply with the specifi c transitional provisions. (2) Changes in presentation When the presentation of fi nancial statements is changed, prior period fi nancial statements are reclassifi ed in accordance with the new presentation. (3) Changes in accounting estimates A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods.
NIPPON TELEVISION NETWORK 64 ANNUAL REPORT 2010 (4) Corrections of prior period errors When an error in prior period fi nancial statements is discovered, those statements are restated.
This accounting standard and the guidance are applicable to accounting changes and corrections of prior period errors which are made from the beginning of the fi scal year that begins on or after April 1, 2011.
Segment Information Disclosures—In March 2008, the ASBJ revised ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and issued ASBJ Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures.” Under the standard and guidance, an entity is required to report fi nancial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specifi ed criteria. Operating segments are components of an entity about which separate fi nancial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. This accounting standard and guidance will be applicable to segment information disclosures for the fi scal years beginning on or after April 1, 2010.
3. Marketable and Investment Securities Marketable and investment securities as of March 31, 2010 and 2009 consisted of the following: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Current—Government and corporate bonds ¥ 1,853 ¥13,892 $ 19,916 Non-current: Equity securities ¥ 54,302 49,261 $ 583,641 Government and corporate bonds 58,440 31,412 628,118 Trust fund investments and others 3,654 2,712 39,273 Total ¥116,396 ¥83,385 $1,251,032
The costs and aggregate fair values of marketable and investment securities at March 31, 2010 and 2009 were as follows: Millions of Yen Unrealized Unrealized March 31, 2010 Cost Gains Losses Fair Value Securities classifi ed as: Available-for-sale: Equity securities ¥30,168 ¥6,178 ¥1,837 ¥34,509 Government and corporate bonds 40,547 118 4,011 36,654 Trust fund investments and others 56 17 73 Held-to-maturity 23,638 25 130 23,533
Millions of Yen Unrealized Unrealized March 31, 2009 Cost Gains Losses Fair Value Securities classifi ed as: Available-for-sale: Equity securities ¥29,540 ¥3,727 ¥3,628 ¥29,639 Government and corporate bonds 51,033 25 6,503 44,555 Trust fund investments and others 76 4 72 Held-to-maturity 749 4 753
NIPPON TELEVISION NETWORK 65 ANNUAL REPORT 2010 Thousands of U.S. Dollars Unrealized Unrealized March 31, 2010 Cost Gains Losses Fair Value Securities classifi ed as: Available-for-sale: Equity securities $324,248 $66,401 $19,744 $370,905 Government and corporate bonds 435,802 1,268 43,110 393,960 Trust fund investments and others 602 183 785 Held-to-maturity 254,062 269 1,397 252,934
Available-for-sale securities whose fair value is not readily determinable as of March 31, 2009 were as follows. Similar information for 2010 is disclosed in Note 13. Carrying Amount March 31, 2009 Millions of Yen Available-for-sale: Equity securities ¥19,622 Trust fund investments and others 2,640 Total 22,262
Proceeds from sales of available-for-sale securities for the year ended March 31, 2009 were ¥190 million. Computed on the moving-average cost basis, gross realized gains and losses on these sales were ¥0 million and ¥120 million, respectively, for the year ended March 31, 2009. The information on available-for-sale securities which were sold during the year ended March 31, 2010 was as follows: Millions of Yen Realized Realized March 31, 2010 Proceeds Gains Losses Available-for-sale—Equity securities ¥197 ¥4
Thousands of U.S. Dollars Realized Realized March 31, 2010 Proceeds Gains Losses Available-for-sale—Equity securities $2,117 $43
The Company has included Sapporo Television Broadcasting Co., Ltd. in the range of application of equity method as an associated company since the year ended March 31, 2010. As a result, investment securities decreased by ¥872 million ($9,372 thousand) and investments in and advances to unconsolidated subsidiaries and associated companies increased by ¥2,708 million ($29,105 thousand). The impairment losses on available-for-sale equity securities for the years ended March 31, 2010 and 2009 were ¥192 million ($2,064 thousand) and ¥1,379 million, respectively.
4. Short-Term Investments Short-term investments as of March 31, 2010 and 2009 consisted of the following: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Time deposit ¥500 ¥2,065 $5,374
NIPPON TELEVISION NETWORK 66 ANNUAL REPORT 2010 5. Inventories Inventories at March 31, 2010 and 2009 consisted of the following: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Program rights ¥ 6,736 ¥ 8,728 $ 72,399 Finished products and merchandise 2,532 2,217 27,214 Work in process 470 726 5,052 Raw materials and supplies 556 537 5,976 Total ¥10,294 ¥12,208 $110,641
6. Collateralized Property At March 31, 2010, land of ¥101,031 million ($1,085,888 thousand) was pledged as collateral for guarantee deposits received of ¥19,000 million ($204,213 thousand).
7. Investment Proper ty On November 28, 2008, the ASBJ issued ASBJ Statement No. 20, “Accounting Standard for Investment Property and Related Disclosures,” and ASBJ Guidance No. 23, “Guidance on Accounting Standard for Investment Property and Related Disclosures.” This accounting standard and guidance are applicable to investment property and related disclosures at the end of fi scal years ending on or after March 31, 2010. The Group applied the new accounting standard and guidance effective March 31, 2010. The Group holds some rental properties such as offi ce buildings and land in Tokyo. Net of rental income and operating expenses for those rental properties was ¥556 million ($5,976 thousand) for the fi scal year ended March 31, 2010. In addition, the carrying amounts, changes in such balances, and market prices of such properties are as follows: Millions of Yen Carrying Amount Fair Value April 1, 2009 Increase/Decrease March 31, 2010 March 31, 2010 ¥55,445 ¥22,950 ¥78,395 ¥96,481
Thousands of U.S. Dollars Carrying Amount Fair Value April 1, 2009 Increase/Decrease March 31, 2010 March 31, 2010 $595,926 $246,669 $842,595 $1,036,984
Notes: 1. Carrying amount recognized in the consolidated balance sheets is net of accumulated depreciation, if any. 2. Increase during the fi scal year ended March 31, 2010 primarily represents the acquisition of land of ¥23,300 million ($250,430 thousand), and decrease primarily represents depreciation of ¥493 million ($5,299 thousand). 3. Fair value of major properties of the Group as of March 31, 2010 is measured by outside real estate appraisers in accordance with the Real Estate Appraisal Standard. The fair value of other assets is measured by the Group with indexes which are considered to refl ect their market value appropriately. Additionally, the properties purchased in this fi scal year ended March 31, 2010 are measured by their purchase cost, because fl uctuation of the market value is assumed to be minor.
8. Short-term borrowings Short-term borrowings at March 31, 2010 were collected from unconsolidated subsidiaries by the Cash Management System. The interest rate applicable to the short-term borrowings was 0.784% at March 31, 2010.
NIPPON TELEVISION NETWORK 67 ANNUAL REPORT 2010 9. Retirement and Pension Benefi ts Plan The Company and certain consolidated subsidiaries have severance payment plans for employees, directors and corporate auditors. Retirement benefi ts for employees are determined on the basis of length of service, basic rate of pay at the time of termination, and certain other factors. If a termination is involuntary, the employee is usually entitled to a larger payment than that in the case of voluntary termination. The liability for employees’ retirement benefi ts at March 31, 2010 and 2009 consisted of the following: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Projected benefi t obligation ¥5,975 ¥6,483 $64,220 Fair value of plan assets (49) (320) (527) Unrecognized net transitional assets 64 Net liability ¥5,926 ¥6,227 $63,693
The components of net periodic benefi t costs for the years ended March 31, 2010 and 2009 are as follows: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Service cost ¥ 800 ¥ 814 $ 8,598 Interest cost 77 69 828 Recognized actuarial gain (281) (14) (3,020) Amortization of net transitional assets (64) (64) (688) Defi ned contribution pension plan premium cost 722 686 7,760 Net periodic benefi t costs 1,254 1,491 13,478 Loss on revision of retirement benefi t plan 91 978 Total ¥1,345 ¥1,491 $14,456
Assumptions used for the years ended March 31, 2010 and 2009 are set forth as follows: 2010 2009 Discount rate 2.3% 2.3% Recognition period of actuarial gain 1 year 1 year Amortization period of net transitional asset 10 years 10 years
Retirement benefi ts for directors and corporate auditors are paid subject to approval of the shareholders in accordance with the Companies Act of Japan (the “Companies Act”). Retirement benefi ts as of March 31, 2010 and 2009 included those for directors and corporate auditors in the amount of ¥111 million ($1,193 thousand) and ¥1,403 million, respectively.
10. Equity Since May 1, 2006, Japanese companies have been subject to the Companies Act. The signifi cant provisions in the Companies Act that affect fi nancial and accounting matters are summarized below:
a. Dividends Under the Companies Act, companies can pay dividends at any time during the fi scal year in addition to the year-end dividend upon resolution at a shareholders meeting. In the cases of companies that meet certain criteria such as having: (1) a Board of Directors, (2) independent auditors, (3) a Board of Corporate Auditors,
NIPPON TELEVISION NETWORK 68 ANNUAL REPORT 2010 and (4) a normal term of the director prescribed as one year rather than two years under its Articles of Incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fi scal year if the company has prescribed so in its Articles of Incorporation. The Company meets all the above criteria. The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to certain limitation and additional requirements. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the Articles of Incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defi ned as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
b. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus The Companies Act requires that an amount equal to 10% of dividends be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the amount of common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders determined by specifi c formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.
11. Income Taxes The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 40.7% for the years ended March 31, 2010 and 2009.
NIPPON TELEVISION NETWORK 69 ANNUAL REPORT 2010 The tax effects of signifi cant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities as of March 31, 2010 and 2009 are as follows: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Current: Deferred tax assets: Tax loss carryforwards ¥ 3,582 Devaluation of program rights ¥ 3,217 2,771 $ 34,577 Accrued enterprise taxes 543 160 5,836 Accrued bonuses 487 529 5,234 Other 447 584 4,804 Less valuation allowance (4) (7) (43) Total 4,690 7,619 50,408 Deferred tax liabilities: Unrealized gain on available-for-sale securities (1) (2) (11) Other (10) (30) (107) Total (11) (32) (118) Net deferred tax assets ¥ 4,679 ¥ 7,587 $ 50,290 Non-current: Deferred tax assets: Retirement benefi ts ¥ 2,441 ¥ 3,088 $ 26,236 Devaluation of property, plant and equipment 454 399 4,880 Devaluation of investment securities 1,085 895 11,662 Unrealized loss on available-for-sale securities 4 2,613 43 Other 1,554 453 16,702 Less valuation allowance (1,864) (2,245) (20,034) Total 3,674 5,203 39,489 Offset with deferred tax liabilities (3,674) (5,203) (39,489) Net deferred tax assets Deferred tax liabilities: Tax benefi t from deferred gain on sales of property, plant and equipment ¥(5,878) ¥(5,892) $(63,177) Unrealized gain on available-for-sale securities (114) (5) (1,225) Other (21) (17) (227) Total (6,013) (5,914) (64,629) Offset with deferred tax assets 3,674 5,203 39,489 Net deferred tax liabilities ¥(2,339) ¥ (711) $(25,140)
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates refl ected in the accompanying consolidated statements of income for the years ended March 31, 2010 and 2009 is as follows: 2010 2009 Normal effective statutory tax rate 40.7% 40.7% Increase (decrease) in valuation allowance (1.5) 14.9 Income not deductible for income tax purposes (1.0) (2.1) Expenses not deductible for income tax purposes 1.4 3.2 Equity in earnings of affi liates (0.4) (0.8) Other—net (3.3) 2.6 Actual effective tax rate 35.9% 58.5%
NIPPON TELEVISION NETWORK 70 ANNUAL REPORT 2010 12. Leases a. Finance Lease Transactions As lessee The Group leases certain machinery, vehicles and equipment, offi ce space, and other assets. Total rental expenses including lease payments under fi nance leases for the years ended March 31, 2010 and 2009 were ¥107 million ($1,150 thousand) and ¥191 million, respectively. Obligations under fi nance leases were as follows: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Due within one year ¥16 ¥14 $172 Due after one year 10 21 107 Total ¥26 ¥35 $279
Pro forma information on leased property with a lease inception prior to March 31, 2008 ASBJ Statement No. 13, “Accounting Standard for Lease Transactions” requires that all fi nance lease transactions be capitalized to recognize lease assets and lease obligations in the consolidated balance sheet. However, ASBJ Statement No. 13 permits leases without ownership transfer of the leased property to the lessee in those cases where the lease inception was prior to March 31, 2008 to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the notes to the fi nancial statements. The Company applied ASBJ Statement No. 13 effective April 1, 2008 and accounted for such leases as operating lease transactions. Pro forma information on leased property with a lease inception prior to March 31, 2008 such as acquisition cost, accumulated depreciation, obligations under fi nance leases, depreciation expense, and other information on fi nance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis was as follows: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Machinery, Machinery, Machinery, Vehicles and Vehicles and Vehicles and Equipment Equipment Equipment Acquisition cost ¥254 ¥710 $2,730 Accumulated depreciation 210 566 2,257 Net leased property ¥44 ¥144 $ 473
Obligations under fi nance leases: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Due within one year ¥30 ¥96 $322 Due after one year 14 48 151 Total ¥44 ¥144 $473
NIPPON TELEVISION NETWORK 71 ANNUAL REPORT 2010 Depreciation expense, and other information under fi nance leases: Thousands of Millions of Yen U.S. Dollars 2010 2009 2010 Depreciation expense ¥91 ¥191 $978 Lease payments 91 191 978
Depreciation expense, which is not refl ected in the accompanying consolidated statements of income, is computed by the straight-line method.
As lessor Total lease receipts were nil and ¥123 million for the years ended March 31, 2010 and 2009, respectively. Machinery, vehicles and equipment and receivables under fi nance leases are nil for the years ended March 31, 2010 and 2009. Depreciation expense was nil and ¥31 million for the years ended March 31, 2010 and 2009, respectively. The amount of receivables under fi nance leases includes the imputed interest income portion.
b. Operating Lease Transactions The minimum rental commitments under noncancelable operating leases at March 31, 2010 and 2009 were as follows: Thousands of Millions of Yen U.S. Dollars As Lessee 2010 2009 2010 Due within one year ¥5 ¥14 $54 Due after one year 5 Total ¥5 ¥19 $54
As Lessor Due within one year ¥ 130 ¥ 130 $ 1,397 Due after one year 5,471 5,601 58,803 Total ¥5,601 ¥5,731 $60,200
13. Financial Instruments and Related Disclosures On March 10, 2008, the ASBJ revised ASBJ Statement No. 10, “Accounting Standard for Financial Instruments,” and issued ASBJ Guidance No. 19, “Guidance on Accounting Standard for Financial Instruments and Related Disclosures.” This accounting standard and guidance are applicable to fi nancial instruments and related disclosures at the end of fi scal years ending on or after March 31, 2010, with early adoption permitted from the beginning of fi scal years ending before March 31, 2010. The Group applied the revised accounting standard and new guidance effective March 31, 2010.
(1) Group Policy for Financial Instruments The Group uses fi nancial instruments, primarily its own funds, based on its capital fi nancing plan. Cash surpluses are invested in fi nancial assets, mainly marketable securities, for the purpose of appropriate and safe fund management.
(2) Nature and Extent of Risks Arising from Financial Instruments Receivables such as trade notes and trade accounts are exposed to customer credit risk. Marketable and investment securities, mainly held-to-maturity securities and equity instruments of customers and suppliers of the Group, are exposed to the risk of market price fl uctuations. The payment terms of most payables, such as trade notes and trade accounts, are less than one year. Also, such payables are exposed to liquidity risk.
NIPPON TELEVISION NETWORK 72 ANNUAL REPORT 2010 (3) Risk Management for Financial Instruments Credit risk management Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines, which include the monitoring of the payment terms and balances of major customers by each business administration department to identify the default risk of customers at an early stage. With respect to held- to-maturity fi nancial investments, the Group manages its exposure to credit risk by limiting its funding to high credit rating bonds in accordance with its internal guidelines. The maximum credit risk exposure of fi nancial assets is limited to their carrying amounts as of March 31, 2010.
Market risk management (interest rate risk) Market risk of marketable and investment securities is managed by monitoring market values and fi nancial position of issuers on a regular basis.
Liquidity risk management Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on maturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets, along with adequate fi nancial planning by the corporate treasury department.
(4) Fair Values of Financial Instruments Fair values of fi nancial instruments are based on quoted price in active markets. If quoted price is not available, other rational valuation techniques are used instead. (a) Fair value of fi nancial instruments Millions of Yen Carrying Unrealized March 31, 2010 Amount Fair Value Gain/Loss Cash and cash equivalents ¥ 45,219 ¥ 45,219 Marketable securities 1,853 1,852 ¥ (1) Short-term investments 500 500 Receivables 72,584 72,584 Investment securities 93,021 92,917 (104) Long-term deposits 8,000 7,433 (567) Total ¥221,177 ¥220,505 ¥ (672) Payables ¥ 52,265 ¥ 52,265 Guarantee deposits received 20,226 10,476 ¥9,750 Total ¥ 72,491 ¥ 62,741 ¥9,750
Thousands of U.S. Dollars Carrying Unrealized March 31, 2010 Amount Fair Value Gain/Loss Cash and cash equivalents $ 486,017 $ 486,017 Marketable securities 19,916 19,905 $ (11) Short-term investments 5,374 5,374 Receivables 780,138 780,138 Investment securities 999,796 998,678 (1,118) Long-term deposits 85,985 79,890 (6,095) Total $2,377,226 $2,370,002 $ (7,224) Payables $ 561,748 $ 561,748 Guarantee deposits received 217,390 112,596 $104,794 Total $ 779,138 $ 674,344 $104,794
NIPPON TELEVISION NETWORK 73 ANNUAL REPORT 2010 Cash and Cash Equivalents, Short-Term Investments, Receivables and Payables The carrying values of these instruments approximate fair value because of their short maturities.
Marketable and Investment Securities The fair values of marketable and investment securities are measured at the quoted market price of the stock exchange for the equity instruments, and at the quoted price obtained from the fi nancial institution for certain debt instruments. The fair value information for marketable and investment securities by classifi cation is included in Note 3.
Long Term Deposits The fair value of long-term deposits is measured at the price presented by fi nancial institutions.
Guarantee Deposits Received The fair values of guarantee deposits received are determined by discounting the cash fl ows related to the debt at the Group’s assumed corporate borrowing rate.
(b) Financial instruments whose fair value cannot be reliably determined Carrying Amount Thousands of March 31, 2010 Millions of Yen U.S. Dollars Investments in unconsolidated subsidiaries and associated companies ¥29,178 $313,607 Other investments in equity instruments that do not have a quoted market price in an active market 23,375 251,236
(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities Millions of Yen Due after Due after Due in 1 Year 1 Year through 5 Years through Due after March 31, 2010 or Less 5 Years 10 Years 10 Years Cash and cash equivalents ¥ 45,222 Marketable securities 1,850 Short-term investments 500 Receivables 72,584 Investment securities: Held-to-maturity securities ¥22,830 Available-for-sale securities with contractual maturities 6,340 ¥5,107 ¥31,718 Long-term deposits 2,000 6,000 Total ¥120,156 ¥29,170 ¥7,107 ¥37,718
Thousands of U.S. Dollars Due after Due after Due in 1 Year 1 Year through 5 Years through Due after March 31, 2010 or Less 5 Years 10 Years 10 Years Cash and cash equivalents $ 486,049 Marketable securities 19,884 Short-term investments 5,374 Receivables 780,138 Investment securities: Held-to-maturity securities $245,378 Available-for-sale securities with contractual maturities 68,143 $54,890 $340,907 Long-term deposits 21,496 64,488 Total $1,291,445 $313,521 $76,386 $405,395
NIPPON TELEVISION NETWORK 74 ANNUAL REPORT 2010 14. Contingent Liabilities The Group’s contingent liabilities as guarantor of indebtedness as of March 31, 2010 were as follows: Thousands of Millions of Yen U.S. Dollars Employees ¥401 $4,310 Broadcasting Satellite System Corporation 291 3,128 Total ¥692 $7,438
15. Subsequent Event The following appropriation of retained earnings at March 31, 2010 was approved at the Company’s shareholders meeting held on June 29, 2010: Thousands of Millions of Yen U.S. Dollars Year-end cash dividends, ¥200 ($2.15) per share ¥4,953 $53,235
16. Segment Information Information about industry segments, geographic segments and sales to foreign customers for the years ended March 31, 2010 and 2009 was as follows: (1) Industry Segments 2010 a. Sales and operating income Millions of Yen Television Cultural Elimination/ Broadcasting Activities Other Corporate Consolidated Sales to outside customers ¥225,152 ¥63,913 ¥ 7,869 ¥296,934 Intersegment sales/transfers 790 2,381 5,125 ¥ (8,296) Total sales 225,942 66,294 12,994 (8,296) 296,934 Operating expenses 196,428 62,068 11,690 3,185 273,371 Operating income ¥ 29,514 ¥ 4,226 ¥ 1,304 ¥(11,481) ¥ 23,563
Thousands of U.S. Dollars Television Cultural Elimination/ Broadcasting Activities Other Corporate Consolidated Sales to outside customers $2,419,948 $686,941 $ 84,577 $3,191,466 Intersegment sales/transfers 8,491 25,591 55,084 $ (89,166) Total sales 2,428,439 712,532 139,661 (89,166) 3,191,466 Operating expenses 2,111,221 667,111 125,644 34,233 2,938,209 Operating income $ 317,218 $ 45,421 $ 14,017 $(123,399) $ 253,257
NIPPON TELEVISION NETWORK 75 ANNUAL REPORT 2010 b. Assets, depreciation and capital expenditures Millions of Yen Television Cultural Elimination/ Broadcasting Activities Other Corporate Consolidated Assets ¥243,128 ¥63,119 ¥60,996 ¥146,545 ¥513,788 Depreciation 7,415 225 1,139 843 9,622 Capital expenditures 2,535 101 492 23,681 26,809
Thousands of U.S. Dollars Television Cultural Elimination/ Broadcasting Activities Other Corporate Consolidated Assets $2,613,156 $678,407 $655,589 $1,575,075 $5,522,227 Depreciation 79,697 2,418 12,242 9,061 103,418 Capital expenditures 27,246 1,086 5,288 254,525 288,145
2009 a. Sales and operating income Millions of Yen Television Cultural Elimination/ Broadcasting Activities Other Corporate Consolidated Sales to outside customers ¥246,211 ¥68,583 ¥ 9,769 ¥324,563 Intersegment sales/transfers 798 2,585 6,777 ¥(10,160) Total sales 247,009 71,168 16,546 (10,160) 324,563 Operating expenses 225,425 67,968 15,156 3,799 312,348 Operating income ¥ 21,584 ¥ 3,200 ¥ 1,390 ¥(13,959) ¥ 12,215
b. Assets, depreciation and capital expenditures Millions of Yen Television Cultural Elimination/ Broadcasting Activities Other Corporate Consolidated Assets ¥241,238 ¥65,978 ¥63,414 ¥127,827 ¥498,457 Depreciation 9,159 252 1,101 1,016 11,528 Capital expenditures 3,889 94 1,266 242 5,491
(2) Geographic Segments Sales and total assets of the Company and its domestic subsidiaries for the years ended March 31, 2010 and 2009 represented more than 90% of the consolidated sales and total assets of the respective years. Accordingly, geographic segments are not disclosed.
(3) Sales to Foreign Customers Sales to foreign customers for the years ended March 31, 2010 and 2009 represented less than 10% of the consolidated sales of the respective years. Accordingly, information about sales to foreign customers are not disclosed.
NIPPON TELEVISION NETWORK 76 ANNUAL REPORT 2010 Independent Auditors’ Report
NIPPON TELEVISION NETWORK 77 ANNUAL REPORT 2010 NTV Group and Affiliated Companies (As of March 31, 2010)
Television Broadcasting Cultural Activities Other
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NIPPON TELEVISION NETWORK NIPPON TELEVISION NETWORK NIPPON TELEVISION NETWORK CORPORATION CORPORATION CORPORATION
Program Planning and Production Event Planning and Production Novelty Product Sales NTV Group Holdings Inc.* NTV EVENTS Inc.* NTV Service Inc.* NTV Technical Resources Inc.* AX-ON Inc.* Copyright Management Facility Management Nippon Television Art Inc.* Nippon Television Music Corporation* Nippon Television Work 24 Corporation* NTV America Company* Rights Inn Corporation NTV International Corporation* Internet and Broadband Nippon Television Network Europe B.V. Audio and Visual Content Planning, Forecast Communications Inc.* NTV Personnel Center Corp. Production and Sale NTV IT Produce Corporation J.M.P Co., Ltd. VAP Inc.* Nishinihon Eizo Corporation VAP Music Publishing Inc. Art Exhibition Goods Sales Nagasaki Vision Corp. Kagoshima Vision Corporation Art Yomiuri Co., Ltd. Shopping Portal Site and Other Kanazawa Eizo Center Corporation Businesses Cosmo Space Co., Ltd. Other NitteleSeven Co., Ltd.* Promedia Co., Ltd. SOUND INN STUDIOS INC. RF Radio Nippon Co., Ltd. Art Exhibition Planning Broadcasting Service Radio Nippon Create Inc. Mamma Aiuto Inc. BS Nippon Corporation RF Music Publisher Inc. CS Nippon Corporation Shiodome Urban Energy Corporation Film Production, Studio Operation Sapporo Television Broadcasting Co., Ltd. Yomiuri Telecasting Corporation NIKKATSU Corporation Fukuoka Broadcasting Corporation *Consolidated subsidiary
NIPPON TELEVISION NETWORK 78 ANNUAL REPORT 2010 NTV Network
NTV Network Stations (Japan) • The Sapporo Television Broadcasting Co., Ltd. (STV) • RAB Aomori Broadcasting Corporation (RAB) • TV IWATE CORPORATION (TVI) • MIYAGI TELEVISION BROADCASTING CO., LTD. (MMT)
STV • Akita Broadcasting System (ABS) • Yamagata Broadcasting Co., Ltd. (YBC) • Fukushima Central Television CO., LTD. (FCT) • TELEVISION NIIGATA NETWORK (TeNY) • TV.Shinshu Broadcasting Co., LTD. (TSB) • Yamanashi Broadcasting System (YBS) RAB • Shizuoka Daiichi Television Corporation (SDT) TVI • KITANIHON Broadcasting CO., LTD. (KNB) ABS • TELEVISION KANAZAWA Corporation (KTK)
YBC • FUKUI BROADCASTING CORPORATION (FBC) MMT • CHUKYO TV BROADCASTING CO., LTD. (CTV) TeNY • YOMIURI TELECASTING CORPORATION (YTV) FCT KNB TSB • NIHONKAI TELECASTING CO., LTD. (NKT) KTK • Hiroshima Telecasting Co., Ltd. (HTV) YBS FBC • Yamaguchi Broadcasting Co., Ltd. (KRY) NKT NTV • JRT Shikoku Broadcasting Co., Ltd. (JRT) YTV HTV CTV SDT • NISHINIPPON BROADCASTING CO., LTD. (RNC) KRY RNC • Nankai Broadcasting CO., LTD. (RNB) FBS RNB JRT • Kochi Broadcasting Co., Ltd. (RKC) TOS RKC • Fukuoka Broadcasting Corporation (FBS) NIB KKT • NAGASAKI INTERNATIONAL TELEVISION UMK BROADCASTING, INC. (NIB) KYT • KKT Corporation (KKT) • Television Oita System Co., ltd. (TOS) • Miyazaki Telecasting Co., ltd. (UMK) • Kagoshima Yomiuri Television Corporation (KYT)
NTV/NNN Overseas News Bureaus NTV International Corporation Nippon Television Network Europe B.V.
• London • Paris • Moscow
Moscow • Cairo London Amsterdam • Beijing Paris Beijing New York Seoul Los Angeles • Shanghai Washington, D.C. • Seoul Cairo Shanghai • Bangkok Bangkok • New York • Washington, D.C. • Los Angeles
NIPPON TELEVISION NETWORK 79 ANNUAL REPORT 2010 Investor Information (As of March 31, 2010)
Head Office Number of Employees Nippon Television Network Corporation 3,339 (Consolidated) 1-6-1 Higashi Shimbashi, Minato-ku, 1,159 (Non-consolidated) Tokyo 105-7444, Japan Tel: 81-3-6215-1111 Stock Exchange Listing First Section of Tokyo Stock Exchange Date of Establishment October 28, 1952 Stock Code 9404 Start of Operations August 28, 1953 Common Stock Authorized 100,000,000 shares Capital Issued 25,364,548 shares ¥18,575,997,144 Number of Shareholders Fiscal Year End 42,769 March 31 of each year Transfer Agent and Registrar The Chuo Mitsui Trust and Banking Company, Limited 3-33-1 Shiba, Minato-ku, Tokyo 105-0014, Japan
Major Shareholders Distribution of Shares
Number of Percentage of total shares held shares issued (%) Individuals and others Financial institutions The Yomiuri Shimbun Holdings 3,764,948 14.84 11.68% 19.83% YOMIURI TELECASTING CORPORATION 1,574,836 6.20 Securities firms The Yomiuri Shimbun 1,363,920 5.37 0.87% Japan Trustee Services Bank, Ltd. (Trust Account) 1,321,680 5.21 CBNY-ORBIS FUNDS 1,066,141 4.20 Teikyo University 897,270 3.53 Foreign The Master Trust Bank of Japan, Ltd. (Trust Account) 795,270 3.13 entities NTT DOCOMO, INC. 760,500 2.99 18.58% CBNY-ORBIS SICAV 698,369 2.75 Other domestic firms Recruit Co., Ltd. 645,460 2.54 49.04%
Stock Price Range and Trading Volume (Tokyo Stock Exchange) Stock price (Yen) 25,000
20,000
15,000
Trading volume (Thousands of shares) 10,000 4,000
3,200
2,400 5,000 1,600
800
0 0 4 5 6 7 8 9 10 11 12 08/1 2 3 4 5 6 7 8 9 10 11 12 09/1 2 3 4 5 6 7 8 9 10 11 12 10/1 2 3
NIPPON TELEVISION NETWORK 80 ANNUAL REPORT 2010 This annual report was printed on paper from well managed forests approved by the Forest Stewardship Council using a soy-based 100% vegetable ink, at an ISO 14001 approved plant using a waterless printing process to prevent the emission of hazardous liquids. Further, printing plates were made using CTP to preserve resources. http://www.ntv.co.jp/english/
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