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 FFinancialinancial HHighlightsighlights 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.