10 Seardel Integrated Annual Report 2015 OperationaL OVerVieW Seardel is the owner of 64% of Sabido Investments Proprietary Limited (“Sabido”) which will change its name to E Media Investments (“E Media”) in the current fiscal. Sabido is a media group owned by JSE-listed Seardel and Remgro Limited. Seardel is majority owned by JSE-listed Hosken Consolidated Investments Limited (“HCI”). The Group grew out of the success of e.tv, South Africa’s first and only private commercial free-to-air television channel launched in 1998 and broadcasting to 80,5% of the South African population. The channel is wholly owned by Sabido. The success of e.tv’s eNews Prime Time bulletin led to Sabido launching South Africa’s first and most-watched 24-hour television news channel, the eNews Channel, now branded eNCA, broadcast on DStv Channel 403 in 2008. Sabido also operates the pan-African entertainment channel, eAfrica. This broadcasts in 49 countries across the continent and has direct investments in broadcasting businesses in Botswana and Ghana. The Group continues to consolidate its media business with investments in content production and distribution. BROADCASTING The broadcasting companies of Seardel include two of South Africa’s most well-known television channels, e.tv and eNCA. In October 2013 e.tv launched its free DTH multi-channel offering, OVHD through its sister company Platco. Consumers across South Africa can acquire the channels for a once-off cost for the set-top box and a satellite dish, where required, with no further monthly subscription fees. OVHD provided 15 channels at launch. Seardel Integrated Annual Report 2015 11 e.tv e.tv has established itself as a strong independent entertainment and current affairs television channel, producing a number of local shows that have captivated South African audiences. The channel has consistently exceeded its local production licence obligations of 45%. e.tv has also become well known for its range of international content. Realising that South African audiences want to enjoy the best blockbusters and series, the channel often fills certain prime time slots with Hollywood films. e.tv recorded a net profit of R169 million, with advertising revenue amounting to R1,387 billion (2014: R1,453 billion), a 5% decrease year-on-year. Included in the net profit after tax are losses of R189 million for the e.tv Multichannel business. These channels include: eKasi+, eMovies+, eToonz+, eAfrica+ and Beatlab.tv and are broadcast on the OVHD platform. This is not comparable to the prior year as the multi-channel operations started halfway through the 2014 financial year. This was a challenging period, with the channel suffering a decrease in audience ratings due to a major shift in the television market. The multi-channel, multi-platform market has led to the fragmentation of audiences with viewers having a wider range of options. The loss in audience share has been addressed through a strategic programme schedule change which focuses on a new, local content strategy which was implemented in March 2015. The core entertainment block of Rhythm City, Scandal! and Ashes to Ashes (back-to-back soaps plus telenovela) from 19:00 to 20:30 saw an audience share increase of 31% from February to March. This is an encouraging indication that the new strategy is building steadily in the right direction. The prime time band from 18:00 to 22:00 saw an overall increase of 8,6%. The 24-hour audience share was up by 2,5%. 12 Seardel Integrated Annual Report 2015 OperationaL OVerVieW (continued) eSat.tv (branded as “eNCA”) eNCA supplies television, mobile and online news to various channels in South Africa. The company provided live news bulletins to nearly three million viewers each night on e.tv in English, Zulu and Sotho, on eKasi+ in Zulu (available on OVHD) and on kykNET through eNuus in Afrikaans (available on DStv). eSat.tv continued to grow its profits in the news broadcast sector with a net profit for the year of R147,2 million (2014: R125,3 million). This represents an increase of 17% year-on-year and is driven by increases in both DStv licence fee and advertising revenue. EBITDA for eSat.tv ended the financial year on R216,5 million (2014: R190,7 million), an increase of 14%. Despite downward pressure in advertising revenue in the television sector, eSat.tv’s 24-hour news channel, eNCA, continues to receive the largest share of investment within the news category, followed by CNN. It also attracts the highest market share of viewers on the DStv platform, averaging an approximate share of 46% and a cumulative daily audience in excess of one million viewers. In 2012 eNCA launched its digital division which continues to successfully aggregate content across all its platforms including live streaming, mobile and online. Digital audiences have grown to over one million unique browsers and over half a million active social media followers of the brand. While digital advertising revenues remain modest, these are increasing as eNCA’s digital properties increase their market share in this sector. Seardel Integrated Annual Report 2015 13 Platco Digital Yired Proprietary Limited (“YFM”) Platco Digital is a free DTH satellite television platform company. YFM is the Group’s only radio asset. The station Their main objective is to provide multi-channel carriage to broadcasts on FM 99.2 frequency in the Gauteng region, broadcasters in South Africa. They offer the opportunity to in accordance with the terms and conditions imposed broadcast both standard and high definition television channels. by its licence, and it is predominantly skewed towards a youth audience. Platco Digital’s key differentiator in the satellite market is that it offers premium high definition (“HD”) quality entertainment Despite strained market conditions and reduced (television) with no monthly subscription fees. The platform offers marketing budgets across the national spectrum, the 100% signal coverage across sub-Saharan Africa, meaning that 2014/2015 financial year produced the highest revenue all South Africans can access free, quality television. figures since YFM’s inception and closed at R64 million, Platco Digital launched OVHD in October 2013 offering 4% growth from the 2013/2014 financial period. 15 channels on the SES-5 satellite with some in HD. The platform increased the number of channels to 18 across genres covering YFM’s overall financial performance in the 2014/2015 general entertainment, culture and lifestyle, children and period produced a 2% growth from the previous year. education, religion, and music. Growth would have been higher were it not for the provision for new music royalties. This is a result of a In September 2014 OVHD launched its services on the IS-20 July 2014 Supreme Court of Appeal judgment in the satellite. This enabled households who already have IS-20 decade long “Needletime” legal battle, which sought to dishes installed to simply buy a box to enjoy the OVHD offering. formulate the manner in which royalties payable to music This, together with a subsidy, has seen set-top box activations performers are quantified. Payments of such royalties increase. Management is also looking at adding to the offering became effective from 14 March 2014. to make it more compelling. OVHD ended the 2015 financial year with 112 715 active Training and development decoders. At the time of preparing this report activations YFM continues to uphold its “training-ground” reputation had increased to over 190 000. and is forging pathways for young ambitious individuals. The Y Academy is now an accredited programme at NQF 5 under the Media Information and Communication Technologies Sector Education and Training Authority (“MICT SETA”). The Y Academy has the reputation of being the radio industry’s source of young talent and trains 12 young candidates on six-monthly cycles. The students who successfully complete the course are highly sought after by the industry. Programming and audience measurement As measured by RAMS, during the period under review, YFM yielded an average of 1 350 000 listeners per seven-day period. This figure has been reasonably stable year-on-year since 2012. YFM’s success is largely dependent on the content and quality of the broadcast service. This has been hampered to some extent by uncertainty in the reliability of information provided by the South African Advertising Research Foundation in the form of the current radio research currency – Radio Audience Measurement Survey (“RAMS”). During 2015 the RAMS contract was terminated with a view to gear up the new research currency “takeover” in 2016. The appointment of the new radio currency service provider, TNS Research Surveys, is expected to make significant changes in the audience measurement figures directly translating into positive revenue adjustments from 2016. 14 Seardel Integrated Annual Report 2015 OperationaL OVerVieW (continued) PROPERTIES AND FACILITIES Seardel holds a number of property assets across South Africa which are predominantly occupied by companies within the Group as well as film and media facility assets across South Africa. Services offered by this segment include broadcast and television Sabido Properties studios, post-production facilities, equipment rental and sales. Sabido Properties is the property investment company of the Group. Sabido owns a 42,48% stake in Cape Town Film Studios, the first custom-built Hollywood-style film studio complex of its kind in Sabido Properties added two new buildings in the year ended Africa, with state-of-the-art support services. 31 March 2015 in Umhlanga Durban and Gardens Cape Town, increasing its carrying value from R377 million to R553 million. These new premises were custom-built for e.tv and eNCA. As broadcasting hubs the buildings required a high level of technical specification in their design and fit-out. The Durban building took occupancy in September 2014 with the Cape Town staff occupying their new building in September and October 2015.