Ott Report Sample Report

A brief financial analysis of companies
providing over the top content platform in

the entertainment industry
OVER THE TOP

CONTENT
PLATFORMS
GROUP MEMBERS (GROUP 4):
Jitin Arora 14017

Rachit Shah 14028
Samkit Jain 14036
Shubhajeet Sil 14040
Suchandan Chattopadhyay 14044
Contents
I. Introduction .................................................................................................................. 3
II. Motivation .................................................................................................................... 4
A. Choice of Industry .................................................................................................... 4
B. Choice of Players ..................................................................................................... 4
III. Competitive Analysis and Business Model ............................................................. 5
A. Subscription-based versus Advertisement-based ................................................. 6
B. Free to Premium ....................................................................................................... 6
C. Content Comparison ............................................................................................... 7
D. Smartphone enabling ‘on-the-go’ content consumption ................................... 7
E. Eros: A Multi-Platform Model ................................................................................... 8
IV. Major Macro-economic factors affecting the OTT platforms in India ................. 9
A. Factors affecting OTT market in India................................................................... 10
1. Multiple Players ................................................................................................... 10
2. Cultural Structure ................................................................................................ 10
3. Demography & Infrastructure ............................................................................ 10
4. COVID-19 Pandemic .......................................................................................... 11
B. Future of OTT ........................................................................................................... 11
V. Porter’s Five Forces Analysis of OTT Industry............................................................. 12
A. Threat of New entrants .......................................................................................... 12
B. Bargaining Power of Suppliers ............................................................................... 12
C. Bargaining Power of Buyers ................................................................................... 13
D. Threats of Substitute Products or Services ............................................................ 13
E. Competitive Rivalry among the Existing Competitors......................................... 14
VI. User engagement and product services by Disney, Eros Now and Netflix. ...... 14
VII. Emergence of OTT services in India ...................................................................... 15
VIII. Major Accounting Policies..................................................................................... 16
IX. Standards for OTT industry ..................................................................................... 16
A. India ........................................................................................................................ 16
1. Grievance redressal ........................................................................................... 16
2. Content Classification ........................................................................................ 17
B. Singapore ............................................................................................................... 17
C. Australia .................................................................................................................. 17
D. Conclusion .............................................................................................................. 18
X. Financial Statements ................................................................................................. 19
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A. Balance Sheet ........................................................................................................ 19
1. Netflix, Inc ............................................................................................................ 19
2. Disney .................................................................................................................. 20
3. Eros International Media .................................................................................... 21
B. Income Statement ................................................................................................. 22
1. Netflix, Inc ............................................................................................................ 22
2. Disney .................................................................................................................. 23
C. Cash Flow Statement ............................................................................................. 25
1. Netflix ................................................................................................................... 25
2. Disney .................................................................................................................. 26
XI. Financial Ratio Analysis .......................................................................................... 27
A. Liquidity Ratios: ....................................................................................................... 27
1. Current Ratio: ...................................................................................................... 27
2. Acid Test Ratio / Quick Ratio: ............................................................................ 28
B. Solvency Ratios: ..................................................................................................... 29
1. Debt Equity Ratio: ............................................................................................... 29
C. Turnover Ratios: ...................................................................................................... 30
1. Asset Turnover Ratio: .......................................................................................... 30
2. Inventory Turnover Ratio: ................................................................................... 31
3. Debtor’s Turnover Ratio: ..................................................................................... 32
D. Profitability Ratios: .................................................................................................. 33
1. Gross Profit Margin: ............................................................................................. 33
2. Net Profit Margin: ................................................................................................ 34
3. Return On Asset (ROA): ...................................................................................... 35
4. Return on Equity (ROE): ...................................................................................... 36
5. Earnings per share (EPS): .................................................................................... 37
6. P/E Ratio: ............................................................................................................. 38
XII. Market Analysis: ...................................................................................................... 39
A. Netflix, Inc ............................................................................................................... 39
B. Disney ...................................................................................................................... 40
C. Eros International .................................................................................................... 41
XIII. Sources .................................................................................................................... 42
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I. Introduction
An over-the-top (OTT) media service is a media service offered directly to viewers via the Internet.
OTT bypasses cable, broadcast, and satellite television platforms, the types of companies that
traditionally act as controllers or distributors of such content.
In 2020, approximately 2.13 billion people used over-the-top (OTT) video worldwide. OTT platforms
have witnessed a 35 percent growth with 31 million users in February 2021, up from 23 million in April
2020.
Subscriptions per user have gone up by 8 percent, and subscription revenue has shot up by 42 percent
in this period, from $49 million to $68 million.
Figure I-1 Market share of major OTT platforms
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II. Motivation
A. Choice of Industry
With the rapid video streaming growth currently underway across the globe, improvements
in internet speeds, and the addition of improved over-the-top, or OTT video technology, like
adaptive bitrate streaming, conditions for the advancement of OTT video streaming service
providers like Netflix and Hulu have never been better. With new OTT video services popping
up daily, there's fierce competition in the marketplace. Cord-cutting continues in the U.S.,
with just over two-thirds of consumers (67%) reporting pay-TV subscriptions, down from 73%
in 2017 and 77% in 2016.
India's Over the Top (OTT) entertainment industry has the potential to grow to be a $15 billion
industry over the next 9 to 10 years, according to independent transaction advisory firm RBSA
Advisors. The size of the OTT market in FY20 stood in the range of $ 1.7 billion (both Video
and Audio), and it is burgeoning into a multi-billion-dollar industry, cannibalizing into the
established bastion of traditional television, radio, and cinema auditorium forms of media and
entertainment.
The primary motivation of the report is to understand the accounting practices being followed
by the social media firms and how the firms do the accounting of its cost, what are the assets
of the firm etc.
B. Choice of Players
Netflix, Inc. is an American over-the-top content platform and production company. The
company's primary business is a subscription-based streaming service offering online
streaming from a library of films and television series, including those produced in-house. As
of July 2021, Netflix had 209 million subscribers, including 72 million in the United States and
Canada.
Disney+ (pronounced Disney Plus) is an American subscription video-on-demand over-the-
top streaming service owned and operated by the Media and Entertainment
Distribution division of The Walt Disney Company. The service primarily distributes films and
television series produced by The Walt Disney Studios and Walt Disney Television
Eros Now is an Indian subscription-based over the top, video-on-demand entertainment, and
media platform, launched in 2012. It is owned and controlled by Eros Digital, the Indian digital
media management arm of the American multinational media company Eros STX. The
network offers media streaming and video-on-demand services.
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Figure II-1 Content viewership
III. Competitive Analysis and Business Model

The OTT industry in India is populated both with local and global players with heavy
competition. The next OTT revolution is about gaining supremacy in both market share and
revenues in the Indian market. The industry includes traditional media streaming companies,
platforms run by T.V. channels, and production houses. Some of the dominant players holding
the reigns of the sector are Hotstar – with around 300 million active users; ZEE5 – 60 million
active users; Amazon Prime video – 13 million active users; Netflix – 11 million active users.
All these companies, over time, have understood the preferences of consumers and have
invested heavily in original, diverse, and high-quality content focusing on a mix of sports,
movies, and shows in different regional languages. This has been attributed to their success
and continuous growth in the industry.
Figure III-1 Business Model

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Netflix has grown significantly in the Indian OTT video streaming market; however, it is far
behind other OTT players. It is the fifth-largest player in India, behind Hotstar, Voot, Amazon,
etc. As per estimates, the market is currently valued at US$280 million with nearly 100 million
subscribers, and it is poised to grow at 35% YoY. As the industry moves forward, global OTT
players will face many challenges in capturing significant mindshare among Indian consumers.
A. Subscription-based versus Advertisement-based
While Netflix has stuck to its global strategy of a subscription-based revenue model, it
competes with the likes of Hotstar in India with its hybrid revenue or 'freemium' model.
Hotstar India earns through subscriptions as well as advertisements, with the majority of
its revenue coming from ads. It monetizes its new and exclusive content, such as Game of
Thrones and new Bollywood/Hollywood movies, by categorizing them as 'premium' with
access only for paying members.
Figure III-2 Market Positioning
B. Free to Premium
The majority of Indian audiences are still stuck to the free or ad-supported model as of now.
Several options, including web series, stand-up comedies, etc., are already available on
YouTube free of cost. The last two years saw the rising trend of web series in India, with new-
age media houses such as The Viral Fever and Y-Films releasing popular web series such as
The Pitchers, Permanent Roommates, Tripling, Man's World, Bang Baja Baraat, etc. These
media houses identified voids in the mainstream T.V. broadcasts and catered to the young
video content consumers, who became torrent mongers over a short period. In this case, it
becomes more challenging for OTT firms to create interesting enough content that Indian
consumers are willing to pay for it.
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In the case of Hotstar, only 3-5% of the total subscriber base pays for the services, with the
rest sticking with the freely available content. This is comparatively better in Netflix's case,
with around 6% of subscribers paying for the service and the rest taking advantage of 'free
first-month trials through multiple credit and debit cards. A higher percentage of subscribers
paying for the service also reflects that Netflix is more targeted towards the premium
category consumers.
C. Content Comparison
Hotstar offers a variety of local as well as global content at a much lower price. It is ~US$3
(INR 199/-) per month subscription plan that gives access to TV Shows, Movies, Sports, and
News. While these categories appear in Netflix too, Hotstar offers content with mass appeal
and content targeting niche audiences. In case of content with mass appeal, it streams live
cricket matches and offers complete coverage of IPL (Indian Premier League) and new
Bollywood movies. Niche content includes Indian soap operas (shows telecast by parent firm
– Star T.V.) that appeal to young and middle-aged working women and homemakers. Stand-
up comedy groups such as AIB offer appeals to young college students. Hotstar was also quick
to grab the broadcasting rights for 'Game of Throne's earlier this year when the globally
acclaimed T.V. show made headlines among the young audience of India. Meanwhile, Voot is
gaining traction recently through popular T.V. shows such as Big Boss, MTV Unplugged,
Roadies, Splitsvilla, etc.
D. Smartphone enabling 'on-the-go' content consumption
The market is expected to see tremendous growth with increasing smartphone penetration
across India. Video consumption is not restricted to living rooms anymore, with easier access
to video content while traveling or teenagers watching their favorite web series in their
rooms. With the availability of high speed 4G networks coupled with 130 million+ (and
growing) smartphones being sold in India, we can expect consumption of video content to
grow significantly in coming years and come to look similar to video content consumption on
mobile in many other parts of the world where smartphones have become primary content
consumption devices.
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Figure III-3 OTT industry data
E. Eros: A Multi-Platform Model
• Eros International Media Ltd, a part of the Eros Group, is a global player within the
Indian media and entertainment sector that has been in the business for close to three
decades.
• The Eros Group has an extensive film library and is in the business of sourcing Indian
and other film content and exploiting it worldwide through its offices in India, UK USA
UAE Singapore, Australia, the Isle of Man, and Fiji across formats such as theatres
home entertainment television and digital new media.
• Eros has had an average of 3 out of the top 10 India Box Office hits for the past five
years
• Film pre-sales facilitated by long-standing Eros brand, reputation, and industry
relationships
• Cable digitization and rising Pay T.V. penetration drive market growth and demand for
premium content
• Eros film library of over 2,300 films is a stable source of revenue growth with high
margins
• Eros Now is the leading Indian digital content platform with a global reach
They have various rights to over 1000 films that include Hindi Tamil and other regional
language films, including Mughal-e-Azam Om Shanti Om Lage Raho Munnabhai and Love
Aaj Kal, which we consider to be a critical competitive advantage and an integral part of
their business model. They also own rights to certain English language films for home
entertainment distribution within India. The company sources all content primarily through
acquisitions from third parties and through co-productions, and occasionally through their
productions. They mainly acquire films from third-party producers at various stages of a
film's production for an agreed contractual value and also co-produce films from inception
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with certain producers for a pre-agreed fixed budget. The company exploits and distributes
end-to-end Indian film content through multiple formats such as theatres, home
entertainment principally in the form of DVDs, VCDs, and audio C.D.s and television
syndication, which primarily involves licensing the broadcasting rights to major satellite
television broadcasting channels, cable television channels, and terrestrial television
channels. They also exploit and distribute content via digital new media such as mobile ring
tones wallpapers and download IPTV DTH and other Internet channels.
IV. Major Macro-economic factors affecting the OTT

platforms in India
India is a country with a population of around 1.34 billion. About 65% of the population is
below the age of 35, hence considered one of the youngest nations in the world with an
average age of 29. With such demography, the obsession and thirst for entertainment are
huge. The media and entertainment sector has been evaluated at INR 1.82 trillion, with
around 11.8% CAGR in 2019, which is more than the global growth rate of 4.2% CAGR.
Over the Top, OTT is a streaming media service that offers content to viewers online through
the Internet. Over the past decade, this industry has come a long way while disrupting the
traditional television model and has completely changed the way people consume media and
entertainment content.
Five years back, if someone said they had got a Netflix or Amazon Video subscription, it would
have been considered a surprise, while now it is the reverse. Such has been the growth of the
OTT platform in our country that we can say OTT was the reason for the development of the
entertainment sector. Currently, the OTT platform has been valued at INR 35 billion with close
to 500 million internet users (also expected to grow at 8% annually), who spend an average
of 40 mins per day consuming online media content. It has been anticipated that by 2022,
India would be the number one in terms of revenue or valuation of digital and OTT media
content.
In 2012, we had about two OTT media platforms, but now, as of Jan 2020, the number is about
40. In 8 years, this is incredible growth both in terms of a business and an industry. Some of
the critical factors are:
• Urbanization and westernization of the population – Gradual migration to big cities
and the culture shift in method and type of media people consumed
• Access to digital devices – A significant rise in the number of mobile and other digital
device users (around 402 million smartphone users as of Feb 2020)
• Improved infrastructure – Better bandwidth/net connectivity
• Convenience – USPs like limited advertisements and Pause & Play options have
captured the population.
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A. Factors affecting the OTT market in India
1. Multiple Players
The OTT market is segregated between original content creators, content aggregators, and
digital platforms owned by already established Television Broadcasters. For Voot from
Viacom 18, where it is a fiction and reality show of T.V. on one side, they are going equally
strong with tailor-made digital series.
Foreign players like Netflix, Disney Hotstar, and Amazon Prime Video are banking high on
investments made in acquiring videos and movies from across the globe. According to reports,
Netflix has earmarked a whopping amount of $300 million to be invested in India in the
coming times.
2. Cultural Structure
India's social and cultural structure is an added advantage in this OTT content-driven game.
Being a multilingual market, it fuels up the demand for variety and compelling content. SUN
TV Network has already launched its OTT platform, Sun NXT, to facilitate viewers with
portable content. But the early bird has been Viu which partnered with Annapurna Studios
for Telugu originals Pilla and Pelli Gola with a surprise viewership of approximately 40% of
regional language content. Foreign players are also not left behind. Amazon Prime Video is
building a solid base of regional content through various licensing deals. Hooq, a joint venture
of SingTel, Sony Pictures Television, and Warner Bros., strategizes to offer Hollywood movies
and famous US TV shows dubbed in regional languages. Increased investments pouring into
the non-Hindi market are expected to encompass close to 30% of total viewership in the years
to come. As Indian language internet consumers surpass English content consumers,
language-driven content will play a vital role in OTT players' growth.
3. Demography & Infrastructure
With India's urban market saturating slowly, the need to reach out to a broader audience is
obvious to keep the business moving. The government's initiative to connect the country
digitally is just the right thing for OTT owners. The rural sector comprises a significant part of
India's population, and business experts have a significant eye on them.
Roll-out of 4G services, better infrastructure has aided in adding more viewership. According
to statistics, internet use in rural areas, which was 33% of the total internet population in
2013, is fast-growing and is expected to reach approximately 55% by 2025, covering a
significant chunk of viewership. Smartphone users are expected to grow to 520 million by the
end of 2020, which means that individual content watching will outgrow the rest of the
mediums.
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4. COVID-19 Pandemic
The COVID19 pandemic wreaked havoc in businesses and industries across the globe. The
media and entertainment industry, which relies heavily on advertisement spend and
groundwork, was one of the worst affected in the country, staring at losses of about INR
25000 crore. Amid this harrowing experience, respite, if any, was found through the OTT
platforms. With the whole population confined at home due to lockdown, the demand for
quality and diverse content rose, and a subsequent rise was seen in the subscription and
revenues for these platforms. With movie screens and malls closed for more than a year now,
movie production houses are left with no options but to look to OTT platforms for releasing
their films. Some high-profile movies like Gulabo Sitabo, Angrezi Medium, Penguin, Ponmagal
Vandhal, etc., have seen immediate releases on these new platforms. With the disruption
brought about by this pandemic, almost every business is going virtual trying to have their
presence on the digital front. The shift towards digital and quality content is evident that
copywriters and content strategists have replaced specific job roles and profiles, such as ad
executives and marketing consultants.
With some of the state governments announcing the opening of movie screens in theatres
and malls with social distancing norms, it will be interesting to see how the OTT platforms and
the production houses re-strategize their distribution and content models.
The Future of OTT in our country is defined by diverse and quality content. As of 2019, India
had around 150 million OTT platform users, and 50% were from tier-2 cities. Roughly about
220 million consume content from social media and Google. So, these 70 million people who
are not using the platforms but still consume content online are the OTT companies targeting.
India being a young nation, these numbers are bound to increase in the years to come, and
OTT companies are investing heavily to capture this segment. If we summarized the future of
OTT in one word, it would be – OPPORTUNITY!
B. Future of OTT
Globally, OTT business is expected to grow from US$36.7 Bn in 2015 to US$158.4 Bn by 2025.
A major boom is foreseen in India, bringing it closer to the U.S., which has always been the
top contender in the content-driven entertainment market. Video accounts for India's 51%
data traffic which is set to rise to 75% by 2020. In terms of revenue, the Video-on-demand
(VOD) market is anticipated to reach USD 168 million in 2021 from USD 64 million in 2017.
Going by trends, it's an exciting and exciting phase in India. It is the second largest smartphone
market and has the most significant entertainment industry offering an entire ocean of
content. But seeing how fickle-minded the Indian audience is, the onus would be entirely on
content, how original and diversified it can get. Infrastructure and high-quality internet
facilities would also play a significant role in it. Emphasis would be more on interruption-free
viewing at a lucrative price. It would be interesting to see how these entertainment carriers
behave and strategies to capture ever so changing consumer recall value and reach the
winning end.
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V. Porter's Five Forces Analysis of OTT Industry
Porter's five forces analysis reflects the competitive environment of an industry. It is a

strategic tool used to avoid or minimize the risk of losing the competitive edge that the
organization has and to ensure the profitability of the products in the long run.
The company holds its vision closely as it allows them to orientate its innovation regarding
investment and strategies.
Within the industry, the businesses profitability is dependent upon the following forces:
• The threat of new entrants

• Threat of substitutes
• Bargaining power of suppliers
• Bargaining power of customers
• The competitive rivalry among existing firms
A. The threat of new entrants
New entrants in the OTT industry bring innovation, new ways of doing things, and pressure
on existing OTT firms through lower pricing strategy, reducing costs, and providing new value
propositions to the customers. Netflix, Inc., Disney+ Hotstar, and other OTT content providers
in the industry have to manage all these challenges and build practical barriers to safeguard
its competitive edge.
How existing firms can tackle the Threats of New Entrants
• By innovating new products and services. New products bring new customers to
the fold and give old customers a reason to buy your products and services.
• By building economies of scale so that it can lower the fixed cost per unit.
• Building capacities and spending money on research and development. New
entrants are less likely to enter a dynamic industry where the established players
such as Netflix, Inc. keep defining the standards regularly. It significantly reduces
the window of extraordinary profits for the new firms, thus discouraging new
industry players.
B. Bargaining Power of Suppliers
All most all the companies in the OTT industry buy their raw material from numerous
suppliers. Suppliers in dominant positions can decrease the margins existing firms can earn in
the market. Powerful suppliers in the Services sector use their negotiating power to extract
higher prices from the firms in the industry. The overall impact of higher supplier bargaining
power is that it lowers the overall profitability of existing OTT firms.
How existing firms can tackle Bargaining Power of the Suppliers
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• By building an efficient supply chain with multiple suppliers.
• By experimenting with product designs using different materials so that if the
prices go up of one raw material, then the company can shift to another.
• They are developing dedicated suppliers whose business depends upon the firm.
One of the lessons Netflix, Inc. can learn from Wal-Mart and Nike is how these
companies developed third party manufacturers whose business solely depends
on them, thus creating a scenario where these third-party manufacturers have
significantly less bargaining power compare to Wal-Mart and Nike.
C. Bargaining Power of Buyers
Buyers are often a demanding lot. They want to buy the best offerings available by paying the
minimum price possible. This puts pressure on existing firms (such as Netflix, Inc., Disney+
Hotstar, etc.) profitability in the long run. The smaller and more powerful the customer base
is, the higher the bargaining power of the customers and higher their ability to seek increasing
discounts and offers.
How existing firms can tackle the Bargaining Power of Buyers
• By building a large base of customers. This will be helpful in two ways. It will reduce
the bargaining power of the buyers, plus it will provide an opportunity for the firm
to streamline its sales and production process.
• By rapidly innovating new products. Customers often seek discounts and offerings
on established products, so if Netflix, Inc. & Disney+ Hotstar keeps on coming up
with new products, then it can limit the bargaining power of buyers.
• New products will also reduce the defection of existing customers of Netflix, Inc.
& Disney+ Hotstar to its competitors.
D. Threats of Substitute Products or Services
When a new product or service meets a similar customer need in different ways, industry
profitability suffers. For example, services like Dropbox and Google Drive are substitutes for
storage hardware drives. The threat of a substitute product or service is high if it offers a value
proposition that is uniquely different from the present offerings of the industry.
How existing firms can tackle the Treat of Substitute Products / Services
• By being service-oriented rather than just product-oriented.

• By understanding the core need of the customer rather than what the customer is
buying.
• By increasing the switching cost for the customers.
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E. Competitive Rivalry among the Existing Competitors
If the rivalry among the existing players in an industry is intense then it will drive down prices
and decrease the overall profitability of the industry. The media and entertainment industry
has intense level of competitive rivalry, thus pressurizing the companies to strive to retain
customers through offering affordable prices. Netflix is facing severe competition from
traditional broadcasters & rival companies such as Disney+ Hotstar & Amazon Prime Video
providing videos on demand and original content. This competition does take toll on the
overall long-term profitability of the existing firms in the industry.
How existing firms can tackle Intense Rivalry among themselves
• By building a sustainable differentiation

• By building scale so that it can compete better
• Collaborating with competitors to increase the market size rather than just
competing for small market.
VI. User engagement and product services by Disney,

Eros Now and Netflix.
Disney's overall structure comprises of products within the consumer products represented
by the cartoon characters. The world theme parks and resorts, media networks and studio
entertainment are also included within the company's product lines. As compared to Disney,
Eros Now consists of movies, originals, T.V., Stars, music and playlists. It has a strong capital
structure and have about 39.9 million total paid subscribers (including both premium paid
subscribers and base paid subscribers). There are about 224 million registered users
worldwide. It uses a geo-sensitive pricing model for a product in each market. Average
revenue per user for India is $0.3 and international is $10.01. These OTT platforms are
focusing on OTT content delivery to provide customers with exclusive services, while there
exist national level players as well. For example, Disney recently acquired Hotstar, a
subsidiary of Star India.
National level players extend their services globally however have different channels and
subscription models for each region and country demographic. This facilitates cutthroat
competition between many players and results in high quality content being streamed
frequently while competing in prices at an all-time low cost. This has resulted in high quality
content to increase their share in the market. The competitive companies have together
recorded a 29 million number of subscriptions only within India as of April 2020.
The Indian OTT market is set to reach Rs 237 billion by FY25 from Rs 42.5 billion (US$576
million) in F.Y. 19. Such markets have attracted big players like Disney, Netflix, Sony to move
from regular broadcast television to Over-the-top streaming. A recent report states that
Eros Now is currently the second largest OTT platform in India in terms of market share of
24%. This is behind the leader Disney + Hotstar, which is completely owned by Disney.
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VII. Emergence of OTT services in India
Hotstar, as discussed above is the market leader in India. It streams exclusive international
movies and T.V. shows for a price affordable to many. It downloads crossed 400 million in
2019 and recorded 300 million active viewers. It had over 100 million viewers during India vs
Pakistan match and had 25.3 concurrent viewers during the semi-finals. Netflix entered
India in 2016. Its USP is again the exclusive content it offers on its platform.
It has one of the highest outreaches globally and has a market cap of 230 billion USD. Its
competitors such as Roku, Discover communications, Sirius XM holdings have a market cap
of $56B, $29B, $26B and $20B respectively.
Another research has valued the Indian television industry with a business of 13,314 million
USD in 2017 and poised to grow to 22,003 million USD in 2022 at an annual rate of 10.6%.
The global growth average rate is at 1.4%. Deloitte has maintained its expectations that
Indian television industry will continue to grow for another 10 years because of the
favorable macroeconomic trends, wide adoption of Internet and extremely affordable
goods.
The rise of OTT also invites the need of regulations within the country. Telecoms regulatory
authority of India (TRAI) has stated specifically that such streaming services have disturbed
the social aspect of the nation. The GOI has affirmed that OTT platform providers do not
need any specific license to provide video on demand. The broadcasting services have been
determined as vital source for cultural expression and democratic practice. It regularly
receives support from the government. It is also regularly regulated for the public interest.
Therefore, there exists a need to regulate such platforms.
According to KPMG report, within the Digital vision and strategy phase, The organization has
to go through a thorough understanding of the vision that needs to be implemented. The
macro and micro trends that cover the digital infrastructure within the desired segments
need to be determined.
We selected these companies as it is the most recent broadcast technology available to the
masses. The data for representation and analysis is limited. And that is why, there exists an
underlying need within the industry to understand the reach of such platforms and
therefore implement it. Limited data exists within the company choice and so, we selected
with whatever we could go forward with. For instance, Disney is a multinational, multi-
product brand and on the other hand Netflix is a single product but has multiple service
types associated with it. Even though Netflix might have better content and reach globally,
Disney still has diversified products and customer segments. Similarly, there are limited
companies which only participate in the competition with one single type of offering like
Netflix.
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VIII. Major Accounting Policies
The principal accounting policies are based on the Financial Accounting Standards Board
(NETFLIX and Disney) and Indian Accounting Standards (Eros International) for film and
television content and conform with generally accepted accounting principles (GAAP).
Some of the significant policies specific to the OTT platforms are as follows
• Subscription fees charged to customers/subscribers for our streaming services are
recognized chargeable over the subscription term.
• For NETFLIX and Disney, the U.S. dollar is the functional currency. All other foreign
currencies are measured into U.S. dollars at end-of-period exchange rates. All non-
monetary balance sheet accounts, which are estimated at historical exchange rates.
• In the case of Eros International, Indian Rupee is the functional currency and all
other foreign currency are remeasured into Indian Rupee at end-of-period exchange
rates, except for non-monetary balance sheet accounts remeasured at historical
exchange rates.
• Production costs are amortized based upon the ratio of the current period's
revenues to the estimated remaining total revenues (Ultimate Revenues). If the
estimate of Ultimate Revenues decreases, amortization of costs may be accelerated
or result in an impairment. Conversely, if the assessment of Ultimate Revenues
increases, cost amortization may be slowed.
• Produced content costs are amortized based on projected usage, typically resulting
in an accelerated or straight-line amortization pattern. Projected use is reviewed
periodically for changes. If projected usage changes, we may need to accelerate or
slow the recognition of amortization expenses.
• The allowance for doubtful accounts is estimated based on our analysis of trends in
overall receivables aging, specific identification of certain receivables at the risk of
not being paid, past collection experience, and current economic trends.
IX. Standards for OTT industry
A. India
The Ministry of Information and Broadcasting held consultations with several stakeholders
and made guidelines (Guidelines for Intermediaries and Digital Media Ethics Code Rules) for
the industry.
1. Grievance redressal
OTT platforms are required to set up a three-tier grievance redressal mechanism.

Level 1 - regulation of the OTT Platform itself through a grievance officer.
Level 2 - An institutional self-regulatory body formed by publishers of content and their
associations. This self-regulatory body will comprise industry experts headed by a retired
Supreme Court/ High Court judge /eminent personality in the relevant field.
P a g e 16 | 42
Level 3 - An inter-department committee constituted by the MIB that will provide oversight
and hear appeals for decisions taken at level two or if a complaint is referred to the inter-
department committee by MIB.
2. Content Classification
Content should be classified based on viewer's age, themes, range, tone and impact, and
target audience into the following categories
• U (suitable for all ages)
• U/A 7+ (suitable for a person aged seven years and above)
• U/A 13+ (applicable for persons aged 13 and above)
• U/A 16+ (suitable for persons aged 16 and above)
• A (restricted to adults)
Also, OTT platforms should have control mechanisms for U/A13+ or Higher
B. Singapore
The Infocomm Media Development Authority (IMDA), the media regulatory body of
Singapore, has a code of practices for OTT and video-on-demand services and classify their
as follows
• G: for general
• PG: for parental guidance
• PG13: for parental guidance for children below 13
• NC16: for no children below 16 years of age
• M18 for mature audiences (18 and above) only,
• R21 for content restricted to people of 21 years and above only.
Service providers can offer content rated NC16 and above only if they provide for a parental
lock function on their platform. Also, the programs hosted by them should comply with the
prevailing laws of Singapore.
C. Australia
It has an online content co-regulatory scheme with regulations for complaints and detailed
guidelines on the kind of content that may be hosted online. The content classification is as
mentioned
• R.C. (or refused classification) - content that cannot be sold, advertised, or imported
in Australia
• X 18+ - restricted to adults due to its sexually explicit nature
• R 18+ - restricted to adults as it is considered high in impact for the audience
• M.A. 15+ - limited to people over the age of 15 and is considered high in impact for
the audience below that age
Also, the guidelines prohibit hosting of and access to R.C. content. Further, it restricts access
to content that has been classified as X 18+, R 18+, or M.A. 15+.
P a g e 17 | 42
D. Conclusion
OTT content market is still in a very nascent stage in the market, and most of the other
countries are creating and implementing laws for the platforms. The local censorship laws
currently regulate most platforms, and these are pretty vague for the most part. As the
popularity of the platforms increases, more and more countries will start making specific
laws for the same. The growth of these platforms will depend on the rules and regulations
and too much restriction and freedom of expression, which may hamper the development
of the media in the future.
P a g e 18 | 42
X. Financial Statements
We would look into the balance sheets, income statement and cash flow statements of the
companies we are analysing. Further financial ratio analysis is based on the following
financial statements.
A. Balance Sheet
1. Netflix, Inc
Netflix, Inc
Consolidatd Balance Sheets
(in thousands, except share and per share data)
As of December 31,
2020 2019 2018 2017 2016
Assets:
Current assets:
Cash and cash equivalents $ 82,05,550 $ 50,18,437 $ 37,94,483 $ 28,22,795 $ 14,67,576
Short-term investments $ 2,66,206
Current content assets, net $ 51,51,186 $ 43,10,934 $ 37,26,307
Other current assets $ 15,56,030 $ 11,60,067 $ 7,48,466 $ 5,36,245 $ 2,60,202
Total current assets $ 97,61,580 $ 61,78,504 $ 96,94,135 $ 76,69,974 $ 57,20,291
Content assets, net $ 2,53,83,950 $ 2,45,04,567 $ 1,49,51,141 $ 1,03,71,055 $ 72,74,501
Property and equipment, net $ 9,60,183 $ 5,65,221 $ 4,18,281 $ 3,19,404 $ 2,50,395
Other non-current assets $ 31,74,646 $ 27,27,420 $ 9,10,843 $ 6,52,309 $ 3,41,423
Total assets $ 3,92,80,359 $ 3,39,75,712 $ 2,59,74,400 $ 1,90,12,742 $ 1,35,86,610
Liabilities and Stockholders’ Equity
Current liabilities:
Current content liabilities $ 44,29,536 $ 44,13,561 $ 46,81,562 $ 41,73,041 $ 36,32,711
Accounts payable $ 6,56,183 $ 6,74,347 $ 5,62,985 $ 3,59,555 $ 3,12,842
Accrued expenses and other liabilities $ 11,02,196 $ 8,43,043 $ 4,81,874 $ 3,15,094 $ 1,97,632
Deferred revenue $ 11,17,992 $ 9,24,745 $ 7,60,899 $ 6,18,622 $ 4,43,472
Short-term debt $ 4,99,878
Total current liabilities $ 78,05,785 $ 68,55,696 $ 64,87,320 $ 54,66,312 $ 45,86,657
Non-current content liabilities $ 26,18,084 $ 33,34,323 $ 37,59,026 $ 33,29,796 $ 28,94,654
Long-term debt $ 1,58,09,095 $ 1,47,59,260 $ 1,03,60,058 $ 64,99,432 $ 33,64,311
Other non-current liabilities $ 19,82,155 $ 14,44,276 $ 1,29,231 $ 1,35,246 $ 61,188
Total liabilities $ 2,82,15,119 $ 2,63,93,555 $ 2,07,35,635 $ 1,54,30,786 $ 1,09,06,810
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares
authorized ( None Issued)
Common stock, 0.001 par value; $ 34,47,698 $ 27,93,929 $ 23,15,988 $ 18,71,396 $ 15,99,762
Accumulated other comprehensive income (loss) $ 44,398 $ -23,521 $ -19,582 $ -20,557 $ -48,565
Retained earnings $ 75,73,144 $ 48,11,749 $ 29,42,359 $ 17,31,117 $ 11,28,603
Total stockholders’ equity $ 1,10,65,240 $ 75,82,157 $ 52,38,765 $ 35,81,956 $ 26,79,800
Total liabilities and stockholders’ equity $ 3,92,80,359 $ 3,39,75,712 $ 2,59,74,400 $ 1,90,12,742 $ 1,35,86,610
Figure X-1 Balance Sheet- Netflix
P a g e 19 | 42
2. Disney
Disney
(in millions, except share and per share data)
As of
Oct 3, 2020 Sep 28, 2019 Sep 29, 2018 Sep 30, 2017 Oct 1,2016
Assets
Current assets
Cash and cash equivalents $ 17,914 $ 5,418 $ 4,150 $ 4,017 $ 4,610
Receivables $ 12,708 $ 15,481 $ 9,334 $ 8,633 $ 9,065
Inventories $ 1,583 $ 1,649 $ 1,392 $ 1,373 $ 1,390
Licensed content costs and advances $ 2,171 $ 4,597 $ 1,314 $ 1,278 $ 1,208
Other current assets $ 875 $ 979 $ 635 $ 588 $ 693
Total current assets $ 35,251 $ 28,124 $ 16,825 $ 15,889 $ 16,966
Produced and licensed content costs $ 25,022 $ 22,810 $ 7,888 $ 7,481 $ 6,339
Investments $ 3,903 $ 3,224 $ 2,899 $ 3,202 $ 4,280
Parks, resorts and other property
Attractions, buildings and equipment $ 62,111 $ 58,589 $ 55,238 $ 54,043 $ 50,270
Accumulated depreciation $ -35,517 $ -32,415 $ -30,764 $ -29,037 $ -26,849
Projects in progress $ 4,449 $ 4,264 $ 3,942 $ 2,145 $ 2,684
Land $ 1,035 $ 1,165 $ 1,124 $ 1,255 $ 1,244
Intangible assets, net $ 19,173 $ 23,215 $ 6,812 $ 6,995 $ 6,949
Goodwill $ 77,689 $ 80,293 $ 31,269 $ 31,426 $ 27,810
Other assets $ 8,433 $ 4,715 $ 3,365 $ 2,390 $ 2,340
Total assets $ 2,01,549 $ 1,93,984 $ 98,598 $ 95,789 $ 92,033
Liabilities and Equity
Current liabilities
Accounts payable and other accrued liabilities $ 16,801 $ 17,762 $ 9,479 $ 8,855 $ 9,130
Current portion of borrowings $ 5,711 $ 8,857 $ 3,790 $ 6,172 $ 3,687
Deferred revenue and other $ 4,116 $ 4,722 $ 4,591 $ 4,568 $ 4,025
Total current liabilities $ 26,628 $ 31,341 $ 17,860 $ 19,595 $ 16,842
Borrowings $ 52,917 $ 38,129 $ 17,084 $ 19,119 $ 16,483
Deferred income taxes $ 7,288 $ 7,902 $ 3,109 $ 4,480 $ 3,679
Other long-term liabilities $ 17,204 $ 13,760 $ 6,590 $ 6,443 $ 7,706
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests $ 9,249 $ 8,963 $ 1,123 $ 1,148
Equity Preferred stock
Common stock, $.01 par value, Authorized – 4.6 billion shares,
Issued – 1.8 billion shares $ 54,497 $ 53,907 $ 36,779 $ 36,248 $ 35,859
Retained earnings $ 38,315 $ 42,494 $ 82,679 $ 72,606 $ 66,088
Accumulated other comprehensive loss $ -8,322 $ -6,617 $ -3,097 $ -3,528 $ -3,979
Treasury stock, at cost, 19 million shares $ -907 $ -907 $ -67,588 $ -64,011 $ -54,703
Total Disney Shareholders’ equity $ 83,583 $ 88,877 $ 48,773 $ 41,315 $ 43,265
Noncontrolling interests $ 4,680 $ 5,012 $ 4,059 $ 3,689 $ 4,058
Total equity $ 88,263 $ 93,889 $ 52,832 $ 45,004 $ 47,323
Total liabilities and equity $ 2,01,549 $ 1,93,984 $ 98,598 $ 95,789 $ 92,033
Figure X-2 Balance sheet - Disney
P a g e 20 | 42
3. Eros International Media
EROS INTERNATIONAL MEDIA LIMITED

(amount Rupees in Crs)
As of March 31,
2021 2020 2019 2018 2017
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital ₹ 95.86 ₹ 95.63 ₹ 95.51 ₹ 94.97 ₹ 93.85
Total Share Capital ₹ 95.86 ₹ 95.63 ₹ 95.51 ₹ 94.97 ₹ 93.85
Reserves and Surplus ₹ 944.09 ₹ 1,150.51 ₹ 2,476.60 ₹ 2,148.03 ₹ 1,915.21
Total Reserves and Surplus ₹ 944.09 ₹ 1,150.51 ₹ 2,476.60 ₹ 2,148.03 ₹ 1,915.21
Total Shareholders Funds ₹ 1,039.95 ₹ 1,246.14 ₹ 2,572.11 ₹ 2,243.00 ₹ 2,009.06
Minority Interest ₹ 13.68 ₹ 14.28 ₹ 10.28 ₹ 12.88 ₹ -4.66
NON-CURRENT LIABILITIES
Long Term Borrowings ₹ 0.03 ₹ 0.67 ₹ 87.24 ₹ 149.52 ₹ 149.40
Deferred Tax Liabilities [Net] ₹ - ₹ - ₹ 179.58 ₹ 245.01 ₹ 224.99
Other Long Term Liabilities ₹ 227.24 ₹ 51.94 ₹ 106.18 ₹ 21.01 ₹ 35.51
Total Non-Current Liabilities ₹ 227.27 ₹ 52.61 ₹ 373.00 ₹ 415.54 ₹ 409.90
CURRENT LIABILITIES
Short Term Borrowings ₹ 473.88 ₹ 461.77 ₹ 452.68 ₹ 468.08 ₹ 430.33
Trade Payables ₹ 217.63 ₹ 367.63 ₹ 310.70 ₹ 323.27 ₹ 295.42
Other Current Liabilities ₹ 441.49 ₹ 354.24 ₹ 486.95 ₹ 324.07 ₹ 535.77
Total Current Liabilities ₹ 1,133.00 ₹ 1,183.64 ₹ 1,250.33 ₹ 1,115.42 ₹ 1,261.52
Total Capital And Liabilities ₹ 2,413.90 ₹ 2,496.67 ₹ 4,205.72 ₹ 3,786.84 ₹ 3,675.82
ASSETS
NON-CURRENT ASSETS
Tangible Assets ₹ 915.13 ₹ 37.96 ₹ 38.31 ₹ 40.92 ₹ 42.03
Intangible Assets ₹ - ₹ 881.86 ₹ 2,508.89 ₹ 2,579.67 ₹ 2,638.81
Capital Work-In-Progress ₹ - ₹ 0.07 ₹ 0.07 ₹ 0.08 ₹ 0.13
Intangible Assets Under Development ₹ - ₹ 88.87 ₹ 90.49 ₹ 70.79 ₹ 25.50
Fixed Assets ₹ 915.13 ₹ 1,008.76 ₹ 2,637.76 ₹ 2,691.46 ₹ 2,706.47
Deferred Tax Assets [Net] ₹ 12.40 ₹ 7.75 ₹ - ₹ - ₹ -
Long Term Loans And Advances ₹ 803.37 ₹ 764.32 ₹ 444.84 ₹ 118.62 ₹ 35.33
Other Non-Current Assets ₹ 107.75 ₹ 75.20 ₹ 76.97 ₹ 61.91 ₹ 72.40
Total Non-Current Assets ₹ 1,838.65 ₹ 1,856.03 ₹ 3,176.92 ₹ 2,884.82 ₹ 2,834.80
CURRENT ASSETS
Inventories ₹ 8.50 ₹ 0.04 ₹ 3.01 ₹ 1.87 ₹ 0.46
Trade Receivables ₹ 478.70 ₹ 552.24 ₹ 793.52 ₹ 698.57 ₹ 630.58
Cash And Cash Equivalents ₹ 54.10 ₹ 47.16 ₹ 201.05 ₹ 180.06 ₹ 176.73
Short Term Loans And Advances ₹ 29.02 ₹ 35.89 ₹ 18.27 ₹ 11.67 ₹ 30.13
OtherCurrentAssets ₹ 4.93 ₹ 5.31 ₹ 12.95 ₹ 9.85 ₹ 3.12
Total Current Assets ₹ 575.25 ₹ 640.64 ₹ 1,028.80 ₹ 902.02 ₹ 841.02
Total Assets ₹ 2,413.90 ₹ 2,496.67 ₹ 4,205.72 ₹ 3,786.84 ₹ 3,675.82
Figure X-3 Balance Sheet - Eros International
P a g e 21 | 42
B. Income Statement
1. Netflix, Inc
Netflix, Inc
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year ended December 31,
2020 2019 2018 2017 2016
Revenues $ 2,49,96,056 $ 2,01,56,447 $ 1,57,94,341 $ 1,16,92,713 $ 88,30,669
Cost of revenues $ 1,52,76,319 $ 1,24,40,213 $ 99,67,538 $ 76,59,666 $ 60,29,901
Marketing $ 22,28,362 $ 26,52,462 $ 23,69,469 $ 12,78,022 $ 9,91,078
Technology and development $ 18,29,600 $ 15,45,149 $ 12,21,814 $ 10,52,778 $ 8,52,098
General and administrative $ 10,76,486 $ 9,14,369 $ 6,30,294 $ 8,63,568 $ 5,77,799
Operating income $ 45,85,289 $ 26,04,254 $ 16,05,226 $ 8,38,679 $ 3,79,793
Other income (expense):
Interest expense $ -7,67,499 $ -6,26,023 $ -4,20,493 $ -2,38,204 $ -1,50,114
Interest and other income (expense) $ -6,18,441 $ 84,000 $ 41,725 $ -1,15,154 $ 30,828
Income before income taxes $ 31,99,349 $ 20,62,231 $ 12,26,458 $ 4,85,321 $ 2,60,507
Provision for income taxes $ -4,37,954 $ -1,95,315 $ -15,216 $ -73,608 $ 73,829
Net income $ $ 27,61,395 $ 18,66,916 $ 12,11,242 $ 5,58,929 $ 1,86,678
Earnings per share:
Basic $ 6 $ 4 $ 3 $ 1 $ 0
Diluted $ 6 $ 4 $ 3 $ 1 $ 0
Weighted-average common shares outstanding:
Basic $ 4,40,922 $ 4,37,799 $ 4,35,374 $ 4,31,885 $ 4,28,822
Diluted $ 4,54,208 $ 4,51,765 $ 4,51,244 $ 4,46,814 $ 4,38,652
Net income $ 27,61,395 $ 18,66,916 $ 12,11,242 $ 5,58,929 $ 1,86,678
Other comprehensive income (loss):
Foreign currency translation adjustments $ 67,919 $ -3,939 $ 975 $ 27,409 $ -5,464
Comprehensive income $ 28,29,314 $ 18,62,977 $ 12,12,217 $ 5,86,937 $ 1,81,421
Figure X-4 Income Statement-Netflix
P a g e 22 | 42
2. Disney
Disney
Consolidated Statement of Income
(in millions, except per share data)
2020 2019 2018 2017 2016
Revenues:
Services $ 59,265 $ 60,579 $ 50,869 $ 46,843 $ 47,130
Products $ 6,123 $ 9,028 $ 8,565 $ 8,294 $ 8,502
Total revenues $ 65,388 $ 69,607 $ 59,434 $ 55,137 $ 55,632
Costs and expenses:
Cost of services (exclusive of depreciation and amortization) $ -39,406 $ -36,493 $ -27,528 $ -25,320 $ -24,653
Cost of products (exclusive of depreciation and amortization) $ -4,474 $ -5,568 $ -5,198 $ -4,986 $ -5,340
Selling, general, administrative and other $ -12,369 $ -11,549 $ -8,860 $ -8,176 $ -8,754
Depreciation and amortization $ -5,345 $ -4,167 $ -3,011 $ -2,782 $ -2,527
Total costs and expenses $ -61,594 $ -57,777 $ -44,597 $ -41,264 $ -41,274
Restructuring and impairment charges $ -5,735 $ -1,183 $ -33 $ -98 $ -156
Other income, net $ 1,038 $ 4,357 $ 601 $ 78 —
Interest expense, net $ -1,491 $ -978 $ -574 $ -385 $ -260
Equity in the income (loss) of investees $ 651 $ -103 $ -102 $ 320 $ 926
Income (loss) from continuing operations before income taxes $ -1,743 $ 13,923 $ 14,729 $ 13,788 $ 14,868
Income taxes on continuing operations $ -699 $ -3,026 $ -1,663 $ -4,422 $ -5,078
Net income (loss) from continuing operations $ -2,442 $ 10,897 $ 13,066 $ 9,366 $ 9,790
Income (loss) from discontinued operations, net of income tax
benefit (expense) of $10, ($39) and $0, respectively $ -32 $ 687 — $ -386 $ -399
Net income (loss) $ -2,474 $ 11,584 $ 13,066 $ 8,980 $ 9,391
Net income from continuing operations attributable to
noncontrolling and redeemable noncontrolling interests $ -390 $ -472 $ -468 — —
Net income from discontinued operations attributable to
noncontrolling interests — $ -58 — — —
Net income (loss) attributable to The Walt Disney Company
(Disney) $ $ -2,864 $ 11,054 $ 12,598 $ 8,980 $ 9,391
Earnings (loss) per share attributable to Disney:
Diluted
Continuing operations $ $ -2 $ 6 $ 8 $ 6 $ 6
Discontinued operations
Basic
Continuing operations $ -2 $ 6 $ 8 $ 6 $ 6
Discontinued operations
Weighted average number of common and common equivalent
shares outstanding:
Diluted $ 1,808 $ 1,666 $ 1,507 $ 1,578 $ 1,639
Basic $ 1,808 $ 1,656 $ 1,499 $ 1,568 $ 1,629
Net income (loss) $ -2,474 $ 11,584 $ 13,066 $ 9,366 $ 9,790
Other comprehensive income (loss), net of tax:
Market value adjustments, primarily for hedges $ -251 $ -37 $ 214 $ -37 $ -359
Pension and postretirement medical plan adjustments $ -1,476 $ -2,446 $ 434 $ 584 $ -1,154
Foreign currency translation and other $ 115 $ -396 $ -289 $ -103 $ -156
Other comprehensive income (loss) $ -1,612 $ -2,879 $ 359 $ 426 $ -1,656
Comprehensive income (loss) $ -4,086 $ 8,705 $ 13,425 $ 9,792 $ 8,134
Net income from continuing operations attributable to
noncontrolling interests $ -390 $ -530 $ -468 $ -386 $ -399
Other comprehensive income (loss) attributable to noncontrolling
interests $ -93 $ 65 $ 72 $ 25 $ 98
Comprehensive income (loss) attributable to Disney $ -4,569 $ 8,240 $ 13,029 $ 9,431 $ 7,833
Figure X-5 Income Statement-Disney
P a g e 23 | 42
Eros International Media

Consolidated Profit & Loss account
(in Rs Cr) As of March 31,
2021 2020 2019 2018 2017
Income
Sales Turnover ₹ 261.97 ₹ 813.60 ₹ 1,031.30 ₹ 960.16 ₹ 1,399.70
Net Sales ₹ 261.97 ₹ 813.60 ₹ 1,031.30 ₹ 960.16 ₹ 1,399.70
Other Income ₹ 103.75 ₹ -1,433.26 ₹ 108.39 ₹ 49.85 ₹ 45.58
Stock Adjustments ₹ 8.46 ₹ -2.97 ₹ 1.14 ₹ 1.41 ₹ -2.94
Total Income ₹ 374.18 ₹ -622.63 ₹ 1,140.83 ₹ 1,011.42 ₹ 1,442.34
Expenditure
Raw Materials ₹ 267.49 ₹ - ₹ - ₹ - ₹ -
Power & Fuel Cost ₹ - ₹ 0.55 ₹ 0.65 ₹ - ₹ 1.04
Employee Cost ₹ 49.92 ₹ 37.87 ₹ 50.79 ₹ 58.94 ₹ 70.53
Other Manufacturing Expenses ₹ - ₹ 384.39 ₹ 473.19 ₹ - ₹ 784.84
Miscellaneous Expenses ₹ 113.60 ₹ 486.99 ₹ 212.00 ₹ 574.32 ₹ 199.60
Total Expenses ₹ 431.01 ₹ 909.80 ₹ 736.63 ₹ 633.26 ₹ 1,056.01
Operating Profit ₹ -160.58 ₹ -99.17 ₹ 295.81 ₹ 328.31 ₹ 340.75
PBDIT ₹ -56.83 ₹ -1,532.43 ₹ 404.20 ₹ 378.16 ₹ 386.33
Interest ₹ 105.87 ₹ 70.56 ₹ 77.48 ₹ 80.53 ₹ 54.52
PBDT ₹ -162.70 ₹ -1,602.99 ₹ 326.72 ₹ 297.63 ₹ 331.81
Depreciation ₹ 10.31 ₹ 12.47 ₹ 9.09 ₹ 10.28 ₹ 9.58
Profit Before Tax ₹ -173.01 ₹ -1,615.46 ₹ 317.63 ₹ 287.35 ₹ 322.23
PBT (Post Extra-ord Items) ₹ -173.01 ₹ -1,615.46 ₹ 317.63 ₹ 287.35 ₹ 322.23
Tax ₹ 7.85 ₹ -214.25 ₹ 51.15 ₹ 56.13 ₹ 78.94
Reported Net Profit ₹ -180.86 ₹ -1,405.21 ₹ 269.08 ₹ -1,87,770.66 ₹ 243.29
Figure X-6 Income Statement-Eros International
P a g e 24 | 42
C. Cash Flow Statement
1. Netflix
Netflix, Inc
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2020 2019 2018 2017 2016
Cash flows from operating activities:
Net income $ 27,61,395 $ 18,66,916 $ 12,11,242 $ 5,58,929 $ 1,86,678
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Additions to content assets $ -1,17,79,284 $ -1,39,16,683 $ -1,30,43,437 $ -98,05,763 $ -86,53,286
Change in content liabilities $ -7,57,433 $ -6,94,011 $ 9,99,880 $ 9,00,006 $ 17,72,650
Amortization of content assets $ 1,08,06,912 $ 92,16,247 $ 75,32,088 $ 61,97,817 $ 47,88,498
Depreciation and amortization of property, equipment and
intangibles $ 1,15,710 $ 1,03,579 $ 83,157 $ 71,911 $ 57,528
Stock-based compensation expense $ 4,15,180 $ 4,05,376 $ 3,20,657 $ 1,82,209 $ 1,73,675
Foreign currency remeasurement loss (gain) on debt $ 5,33,278 $ -45,576 $ -73,953 $ 1,40,790 —
Other non-cash items $ 2,93,126 $ 2,28,230 $ 81,640 $ 57,207 $ 40,909
Deferred income taxes $ 70,066 $ -94,443 $ -85,520 $ -2,08,688 $ -46,847
Changes in operating assets and liabilities:
Other current assets $ -1,87,623 $ -2,52,113 $ -2,00,192 $ -2,34,090 $ 46,970
Accounts payable $ -41,605 $ 96,063 $ 1,99,198 $ 74,559 $ 32,247
Accrued expenses and other liabilities $ 1,98,183 $ 1,57,778 $ 1,50,422 $ 1,14,337 $ 68,706
Deferred revenue $ 1,93,247 $ 1,63,846 $ 1,42,277 $ 1,77,974 $ 96,751
Other non-current assets and liabilities $ -1,94,075 $ -1,22,531 $ 2,062 $ -73,803 $ -52,294
Net cash provided by (used in) operating activities $ 24,27,077 $ -28,87,322 $ -26,80,479 $ -17,85,948 $ -14,73,984
Cash flows from investing activities:
Purchases of property and equipment $ -4,97,923 $ -2,53,035 $ -1,73,946 $ -1,73,302 $ -1,07,653
Change in other assets $ -7,431 $ -1,34,029 $ -1,65,174 $ -6,689 $ -941
Net cash used in investing activities $ -5,05,354 $ -3,87,064 $ -3,39,120 $ 34,329 $ 49,765
Cash flows from financing activities:
Proceeds from issuance of debt $ 10,09,464 $ 44,69,306 $ 39,61,852 $ 30,20,510 $ 10,00,000
Debt issuance costs $ -7,559 $ -36,134 $ -35,871 32,153) $ -10,700
Proceeds from issuance of common stock $ 2,35,406 $ 72,490 $ 1,24,502 $ 88,378 $ 36,979
Other financing activities — — $ -1,956 $ 255 $ 230
Net cash provided by financing activities $ 12,37,311 $ 45,05,662 $ 40,48,527 $ 30,76,990 $ 10,91,630
Effect of exchange rate changes on cash, cash equivalents and
restricted cash $ 36,050 $ 469 $ -39,682 $ 29,848 $ -9,165
Net increase in cash, cash equivalents and restricted cash $ 31,95,084 $ 12,31,745 $ 9,89,246 $ 13,55,219 $ -3,41,754
Cash, cash equivalents and restricted cash, beginning of year $ 50,43,786 $ 38,12,041 $ 28,22,795 $ 14,67,576 $ 18,09,330
Cash, cash equivalents and restricted cash, end of year $ 82,38,870 $ 50,43,786 $ 38,12,041 $ 28,22,795 $ 14,67,576
Supplemental disclosure:
Income taxes paid $ 2,91,582 $ 4,00,658 $ 1,31,069 $ 1,13,591 $ 26,806
Interest paid $ 7,62,904 $ 5,99,132 $ 3,75,831 $ 2,13,313 $ 1,38,566
Figure X-7 Cash Flow Statement - Netflix
P a g e 25 | 42
2. Disney
Disney
Consolidated Statement of Cash Flows
(in millions)
2020 2019 2018 2017 2016
OPERATING ACTIVITIES
Net income (loss) from continuing operations $ -2,442 $ 10,897 $ 13,066 $ 9,366 $ 9,790
Depreciation and amortization $ 5,345 $ 4,167 $ 3,011 $ 2,782 $ 2,527
Goodwill and intangible asset impairments $ 4,953 — — — —
Net gain on investments, acquisitions and dispositions $ -920 $ -4,733 $ -560 $ -289 $ -26
Deferred income taxes $ -392 $ 117 $ -1,573 $ 334 $ 1,214
Equity in the (income) loss of investees $ -651 $ 103 $ 102 $ -320 $ -926
Cash distributions received from equity investees $ 774 $ 754 $ 775 $ 788 $ 799
Net change in produced and licensed content costs and advances $ 397 $ -542 $ -523 $ -1,075 $ -101
Net change in operating lease right of use assets / liabilities $ 31 — — — —
Equity-based compensation $ 525 $ 711 $ 393 $ 364 $ 393
Other $ 641 $ 154 $ 441 $ 503 $ 674
Changes in operating assets and liabilities, net of business acquisitions:
Receivables $ 1,943 $ 55 $ -720 $ 107 $ -393
Inventories $ 14 $ -223 $ -17 $ -5 $ 186
Other assets $ -157 $ 932 $ -927 $ -52 $ -443
Accounts payable and other liabilities $ -2,293 $ 191 $ 235 $ -368 $ 40
Income taxes $ -152 $ -6,599 $ 592 $ 208 $ -598
Cash provided by operations - continuing operations $ 7,616 $ 5,984 $ 14,295 $ 12,343 $ 13,136
INVESTING ACTIVITIES
Investments in parks, resorts and other property $ -4,022 $ -4,876 $ -4,465 $ -3,623 $ -4,773
Acquisitions — $ -9,901 $ -1,581 $ -417 $ -850
Other $ 172 $ -319 $ 710 $ -71 $ -135
Cash used in investing activities - continuing operations $ -3,850 $ -15,096 $ -5,336 $ -4,111 $ -5,758
FINANCING ACTIVITIES
Commercial paper borrowings (payments), net $ -3,354 $ 4,318 $ -1,768 $ 1,247 $ -920
Borrowings $ 18,120 $ 38,240 $ 1,056 $ 4,820 $ 6,065
Reduction of borrowings $ -3,533 $ -38,881 $ -1,871 $ -2,364 $ -2,205
Dividends $ -1,587 $ -2,895 $ -2,515 $ -2,445 $ -2,313
Repurchases of common stock — — $ -3,577 $ -9,368 $ -7,499
Proceeds from exercise of stock options $ 305 $ 318 $ 210 $ 276 $ 259
Contributions from / sales of noncontrolling interests $ 94 $ 737 $ 399 $ 17 —
Acquisition of noncontrolling and redeemable noncontrolling interests — $ -1,430 — — —
Other $ -1,565 $ -871 $ -777 $ -1,142 $ -607
Cash provided by (used in) financing activities - continuing operations$ 8,480 $ -464 $ -8,843 $ -8,959 $ -7,220
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash provided by operations - discontinued operations $ 2 $ 622 — — —
Cash provided by investing activities - discontinued operations $ 213 $ 10,978 — — —
Cash used in financing activities - discontinued operations — $ -626 — — —
Cash provided by discontinued operations $ 215 $ 10,974 — — —
Impact of exchange rates on cash, cash equivalents and restricted cash$ 38 $ -98 $ -25 $ 31 $ -123
Change in cash, cash equivalents and restricted cash $ 12,499 $ 1,300 $ 91 $ -696 $ 35
Cash, cash equivalents and restricted cash, beginning of year $ 5,455 $ 4,155 $ 4,064 $ 4,760 $ 4,725
Cash, cash equivalents and restricted cash, end of year $ 17,954 $ 5,455 $ 4,155 $ 4,064 $ 4,760
Supplemental disclosure of cash flow information:
Interest paid $ 1,559 $ 1,142 $ 631 $ 466 $ 395
Income taxes paid $ 738 $ 9,259 $ 2,503 $ 3,801 $ 4,133
Figure X-8 Cash Flow Statement - Disney
P a g e 26 | 42
Eros International Media

CONSOLIDATED STATEMENTS OF CASH FLOWS
(amount Rupees in Crs)
As of March 31,
2020 2019 2018 2017 2016
Profit Before Tax ₹ -1,377.84 ₹ 136.77 ₹ 140.43 ₹ 211.00 ₹ 181.30
Net CashFlow-Operating Activity ₹ 126.73 ₹ 428.04 ₹ 258.80 ₹ 230.67 ₹ 1,004.19
Net Cash Used In Investing Activity ₹ -3.82 ₹ -259.29 ₹ -261.97 ₹ -470.18 ₹ -861.22
NetCash Used in Fin. Activity ₹ -124.57 ₹ -169.91 ₹ 5.71 ₹ 223.63 ₹ -152.82
Net Inc/Dec In Cash And Equivlnt ₹ -1.66 ₹ -1.16 ₹ 2.54 ₹ -15.88 ₹ -9.85
Cash And Equivalnt Begin of Year ₹ 2.68 ₹ 3.84 ₹ 1.31 ₹ 17.19 ₹ 27.04
Cash And Equivalnt End Of Year ₹ 1.02 ₹ 2.68 ₹ 3.85 ₹ 1.31 ₹ 17.19
Figure X-9 Cash Flow Statement - Eros International
XI. Financial Ratio Analysis
A. Liquidity Ratios:
1. Current Ratio:
Current ratio reflects a company's ability to pay its short-term liabilities with its short-term
assets. Typically, it is assumed that the higher the ratio, the more protection the company
has against liquidity problems.
Formula to calculate Current Ratio = Current Asset / Current Liabilities
Table XI-1 Current Ratio Analysis
Company 2016 2017 2018 2019 2020

Netflix 1.25 1.4 1.49 0.90 1.25
Disney 0.86 0.87 1 0.8 1.31
Eros International 0.39 0.54 0.66 0.52 0.57
Observations:
1. Netflix started recognizing content assets (licensed and produced) as "non-current content
assets, net" on the Consolidated Balance Sheet from 2019. Before that the same was
considered based on the time (whether one year or more) the streaming was available.
This had caused a sudden decrease in the current asset of Netflix on the year 2019 and
eventually reducing the current ratio for the company
2. Current ratio reflects only the capability of the company to pay the current liabilities. It
doesn't reflect how well the company is performing. Total revenue earned by Disney
P a g e 27 | 42
reduced by almost 4 billion USD. However, Cash reserves increased in the same period
from some financial activities. Which caused its current ratio to increase from 2019 to
2020.
3. Industry current ratio of 'Amusement and recreational services' in the USA was 1.33 for
the year 2020. We can say both Netflix and Disney did fair in terms of current ratio.
2. Acid Test Ratio / Quick Ratio:
This is a measurement of a company's ability to use its quick assets to extinguish its short-
term liabilities. Quick assets are expected to be converted to cash quickly. E.g., Cash, stocks
invested, accounts receivables. Inventories are not considered under quick assets.
Formula to calculate Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Table XI-2 Quick Ratio Analysis
Company 2016 2017 2018 2019 2020

Netflix 0.38 0.52 0.67 0.87 1.22
Disney 0.8 0.8 0.92 0.75 1.26
Observations:
1. We have seen a steady increase in operating income of Netflix over the period discussed.
As Netflix's service is based on cash payment only, cash provided by operating activity also
increased during this period. This explains the steady increase in its quick ratio.
2. Similar to the current ratio, Disney's quick ratio also increased significantly from 2019 to
2020, although its revenue decreased during this period. It is because of the same reason
that cash inflow increased during this period because of some financial activities.
3. Both the current ratio and quick ratio of Eros International are well below 1 throughout
the period under discussion. In case this trend continues for Eros International, investors
would lose interest in investing in the company, as it would be difficult for them to recover
the money in the event of liquidation of Eros International.
1.45
1.25
1.05
0.85
0.65
0.45
0.25
2016 2017 2018 2019 2020
Current Ratio Quick Ratio
Figure XI-1 Liquidity Ratios - Netflix
P a g e 28 | 42
0.7
1.3 0.65
0.6
1.1 0.55
0.5
0.9
0.45
0.7 0.4
0.35
0.5 0.3
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Current Ratio Quick Ratio Current Ratio Quick Ratio
Figure XI-3 Liquidity Ratios - Disney Figure XI-2 Liquidity Ratios - Eros International
In media and entertainment business, trade receivables are lesser compared to other
industries like manufacturing, steel or travel. This is why quick ratio and current ratio remain
in proportion for the companies in these industries. Both Disney and Eros international
maintained proportionate current ratio and quick ratio. However, this is not the case for
Netflix, Inc. reason for which is already discussed above. As Netflix had a change of policy in
2019, where they started recognising the content assets (licensed and produced) as "non-
current content assets, net". Before that this component made the current asset high but
those were not calculated under quick asset. That is why we saw a disparity between the
current ratio and quick ratio of Netflix before 2019.
B. Solvency Ratios:
1. Debt Equity Ratio:
This ratio measures the amount of liabilities that exists for each unit of money invested by
the owners. It reflects the ability of shareholder equity to cover all outstanding debts in the
event of a business downturn. Higher D/E ratio indicates a company or stock with higher risk
to shareholders.
Formula to calculate D/E Ratio = Total Liabilities / Total Stockholder’s Equity
Table XI-3 Debt/ Equity ratio analysis
Company 2016 2017 2018 2019 2020

Netflix 1.25 1.81 1.98 1.95 1.43
Disney 0.31 0.43 0.32 0.4 0.6
P a g e 29 | 42
2.75
2.25
1.75
1.25
0.75
0.25
2016 2017 2018 2019 2020
Netflix Disney Eros International
Figure XI-4 Solvency Ratios
Observations:
1. Netflix, Inc had a D/E ratio of 1.43 for the year 2020. Which means, the company
derived almost 60% of the capital from debt and 40% from shareholder's equity.
Disney on the other hand, borrowed around 38% from debt and the rest from
shareholder's equity.
2. Netflix, Inc has D/E ratio higher than the industry average of 0.27. However, we see a
steady increase in both revenue and retained earnings from the company's balance
sheet. Also, point to be noted here is that as per company policy, Netflix, Inc hasn't
paid any cash dividend and they do not have any plans to pay the same in near future.
So, it is expected that the D.E. ratio of Netflix, Inc would come down to industry
average if the same trend continues.
3. In case of Eros International, we see there is a huge decrease in profit in the year
ending 31st March' 2020, whereas a small decrease in liabilities. This explains a spike
in the D/E ratio of Eros International. This concludes that the company relied much
more on debt capital rather than shareholder's equity.
4. One of Eros International's competitor in the Indian entertainment industry, Tips
Industries limited had brought down their D/E ratio to 0 in the year 2020 by reducing
their borrowing to zero. We can say that Eros International is lagging far behind its
competitors in this regard.
C. Turnover Ratios:
1. Asset Turnover Ratio:
This ratio captures how efficiently a company is utilizing its assets to generate revenue. The
higher the asset turnover ratio, the more efficient a company is at generating revenue from
its assets.
P a g e 30 | 42
Formula to calculate Asset Turnover ratio = Net Sales Revenue / Average Total Assets
Table XI-4 Asset Turnover Ratio Analysis
Company 2016 2017 2018 2019 2020

Netflix 0.74 0.72 0.7 0.67 0.68
Disney 0.62 0.59 0.61 0.48 0.33
0.85
0.75
0.65
0.55
0.45
0.35
0.25
0.15
2016 2017 2018 2019 2020
Figure XI-5 Asset Turnover Ratio
Observations:
1. Netflix has maintained similar asset turnover ratio over the years. However, for
Disney, the reduction in revenue in 2019 and in 2020 had brought its asset turnover
ratio down. One of the competitors of Netflix and Disney, Fox studio had an asset
turnover ratio of 0.7 for the year 2020.
2. With a decrease in total revenue from 2019 to the year 2020, the asset turnover ratio
of Eros International has reduced drastically. One of Its peer companies, Tips
Industries had an asset turnover ratio of 0.61 for the same period, which is a lot better
in terms of asset utilization.
2. Inventory Turnover Ratio:
This ratio measures how quickly a company sale its inventory in a year. The inventory
turnover ratio is a measure of how well a company generates sales from its inventory.
P a g e 31 | 42
Formula = Cost of Goods Sold / Average Inventory
Table XI-5 Inventory Turnover Ratio Analysis
Company 2016 2017 2018 2019 2020

Netflix - - - - -
Disney 20.26 21.94 23.67 27.63 27.15
Eros International 2491.7 378.43 277.62 16725 28.76
Observations:
1. Netflix, Inc operates solely as video streaming service provider. They do not maintain
any inventory which can be sold to earn revenue. As a result, we cannot calculate the
inventory turnover ratio for the company.
2. Disney, on the other hand maintain a steady inventory turnover ratio. Disney's
inventory primarily includes vacation timeshare units, merchandise, food, materials
and supplies
3. Eros International also had maintained a steady inventory turnover ratio over the
period in discussion. Its inventories primarily comprise of music C.D.s and DVDs
3. Debtor's Turnover Ratio:
This ratio measures how quickly a company collects its accounts receivables. This indicates
how well a company manages its credit extends to customer and how quickly that short-
term debt is collected.
Formula to calculate Debtor’s turnover ratio = Net Credit Sales / Average net receivables
Table XI-6 Debtor's Turnover Ratio Analysis
Company 2016 2017 2018 2019 2020

Netflix - - - - -
Disney 6.13 6.38 6.37 4.5 5.15
Observations:
1. Netflix, Inc, by its business model, collects money from customers upfront for its
streaming services. That is why we are not able to calculate the debtor's turnover
ratio for the company.
P a g e 32 | 42
D. Profitability Ratios:
1. Gross Profit Margin:
Gross profit margin or gross profit percentage reflects gross profit as percentage of sales. It
reflects the money left after the COGS is subtracted from net sales. Sometimes referred to as
the gross margin ratio, gross profit margin is frequently expressed as a percentage of sales.
The gross profit margin shows the amount of profit made before deducting selling, general,
and administrative costs, which is the firm's net profit margin.
Formula to calculate Gross profit margin = (Net Sales – COGS) / Revenue * 100
Table XI-7 Gross Profit Margin Analysis
Company 2016 2017 2018 2019 2020

Netflix 31.72 34.49 36.89 38.28 38.89
Disney 46.09 45.04 44.94 39.6 32.89
Eros International 21.33 27.47 21.73 -12.56 -68.81
60
40
20
-20
-40
-60
-80
2016 2017 2018 2019 2020
Figure XI-6 Gross profit Margin (%)
Observations:
1. Netflix and Disney have maintained a steady gross profit margin around 40%.
Compared to their peer Fox Studio (Gross profit margin at 38% for the year 2020),
both Netflix and Disney are at the same level but a lot behind than Discovery (DISCA),
who had posted a gross profit margin of 63.83% for the same period.
2. On the other hand, gross profit margin of Eros International in Indian media and
entertainment industry has fallen drastically over the years 2019 and 2020. As per
company's financial report publish in the year 2020, they have incurred an amount of
P a g e 33 | 42
127,850 Lakh under the exceptional expense head. This is recognized as impairment
loss for content advances of 109,837 lakhs and film rights advances of 17,251 lakhs.
The company claimed that this had caused because of the restrictive measures taken
by the government to curb the COVID-19 virus outbreak. In the next year, though the
expenses under the same head got reduced, but the total sales further reduced due
to the yearlong effect of the pandemic. Which caused the gross profit margin to drop
further.
2. Net Profit Margin:
Net profit margin, or net margin, is equal to net income or profits divided by total revenue
and represents how much profit each dollar of sales generates. Net income is derived after
subtracting COGS, Operating and other expenses, interest and Taxes from Revenue. When we
divide net income by total revenue, we get Net profit margin. The net profit margin illustrates
how much of each dollar in revenue collected by a company translates into profit.
Formula to calculate Net Profit Margin = (Net Profit or Loss/ Total Revenues) X 100
Table XI-8 Net Profit Margin Analysis
Company 2016 2017 2018 2019 2020

Netflix 2.11 4.78 7.67 9.26 11.05
Disney 16.88 16.29 21.2 15.89 -4.38
50
-50
-100
-150
-200
2016 2017 2018 2019 2020
Figure XI-7 Net Profit Margin (%)
Observations:
1. As evident from the earlier ratios we have analysed, Netflix, Inc's net profit margin
increased over the years. Disney's net profit margin decreased continuously in the
P a g e 34 | 42
year 2019 and 2020. This is a result of decreasing sales and increase in expenses. In
the year 2020 Disney posted a net loss of 2,474 million USD. Whereas, their
competitors Fox and Discovery posted net profit margin of 12.08% and 11.42%
respectively.
2. Eros International had continuous decrease in revenue and gross profit but due to less
other expenses in the year 2020, the net profit margin increased. However, this
doesn't imply the company has done well as the net profit margin is still well under
positive level.
3. Return On Asset (ROA):
Return on assets (ROA) is an indicator of how profitable a company is relative to its total
assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's
management is at using its assets to generate earnings
Formula to calculate Return on asset = Net Income / Total Asset
Table XI-9 Return on Asset Analysis
Company 2016 2017 2018 2019 2020

Netflix 1.57 3.43 5.38 6.23 7.54
Disney 10.42 9.56 12.96 7.56 -1.45
Eros International 5 2.71 2.85 -75.65 -12.71
20
10
0
-10
-20
-30
-40
-50
-60
-70
-80
-90
2016 2017 2018 2019 2020
Figure XI-8 Return on Analysis
Observations:
1. Netflix, Inc depends fully on its content asset. Which has increased over the years
along with net revenue. Observing the ROA of Netflix, it can be said that the company
P a g e 35 | 42
has improved its efficiency in terms of using its assets to earn revenue. Disney, on the
other hand, had increased its total assets over the years but failed to increase the
revenue earned. That resulted in a decrease in ROA over the period. Whereas,
competitors Fox and Discovery posted a ROA of 4.84 and 3.59 respectively. Clearly
Netflix is ahead of both the competitors.
2. Similar to gross profit margin, Eros International's ROA dropped drastically in the year
2019 as net income dropped. Though, it has come up again in the year 2020, the ROA
is still under zero. One of its peers, Saregama India Ltd. has maintained a continuous
positive and increasing ROA over the years. Latest ROA in the year 2020 being 13.8%
4. Return on Equity (ROE):
Amount of net income returned as a percentage of shareholder's equity. It shows how good
a company is in rewarding its shareholders. A higher ROE means that the company
generates a higher profit on the money that shareholders have invested.
Formula to calculate ROE (%) = Net income / Average shareholder’s equity * 100
Table XI-10 Return on Equity Analysis
Company 2016 2017 2018 2019 2020

Netflix 7.61 17.85 27.46 29.12 29.62
Disney 21.39 21.23 27.97 16.06 -3.32
50
-50
-100
-150
-200
-250
-300
-350
2016 2017 2018 2019 2020
Figure XI-9 Return on Equity
P a g e 36 | 42
Observations:
1. Netflix's ROE has grown continuously over the years as its net income also increased.
It is well over its two peers Discovery and Fox (11.98 and 9.97 respectively in the
year 2020)
2. Due to its net income of the year 2020 in negative, Disney's ROE has also come down
to a negative figure. Opposed to Netflix, Disney is far behind its competitors in
regards to ROE.
3. Eros International has posted negative ROE continuously in the year 2019 and 2020,
which is a result of decrease in income, which we have already discussed above. Its
peer Saregama India Ltd has posted strong ROE of 11.84 and 21 in the year 2019 and
2020 respectively)
5. Earnings per share (EPS):
It is the net profit that a company has made in a given time divided by the outstanding shares
(not including preferred shares and restricted shares). More the value, higher profitable it is
considered. EPS indicates how much money a company makes for each share of its stock and
is a widely used metric for estimating corporate value.
Formula to calculate EPS = (Net income – dividends on preferred stock) / Average shares
outstanding
Table XI-11 Earnings Per Share Analysis
Company 2016 2017 2018 2019 2020

Netflix ($) 0.43 1.25 2.68 4.13 6.08
Disney ($) 5.73 5.69 8.36 6.64 -1.58
Eros International (₹) 27.43 24.15 28.17 -146.94 -18.8
50
-50
-100
-150
-200
2016 2017 2018 2019 2020
Netflix ($) Disney ($) Eros International (₹)
Figure XI-10 Earnings per Share
P a g e 37 | 42
Observations:
1. Eros International's EPS has suddenly taken a negative turn in the year ended 31st
March 2020. In the annual report of the same year the company mentioned that, due
to the sudden restrictions implied by the Govt to restrict the spread of COVID-19 virus
the company has recognized an impairment loss for content advances of 109,837 lakhs
and film rights advances of 17,251 lakhs. And its negative profit continued in the next
year as well because the pandemic situation was not better. This explains the curve of
the EPS of the company. However, its peer, Saregama India Ltd. had posted a positive
EPS of 30.67 and 64.5 for the year 2019 and 2020 respectively.
6. P/E Ratio:
The P/E ratio is calculated by dividing Market value per share by EPS. In addition to showing
whether a company's stock price is overvalued or undervalued, the P/E can reveal how a
stock's valuation compares to its industry group or a benchmark
Table XI-12 P/E Ratio Analysis
2016 2017 2018 2019 2020

Netflix 287.91 153.57 99.87 78.35 88.94
Disney 18.01 14.83 14.82 23.1 0
Fox 26.82 12.45 11.35
Discovery 13.98 0 29.81 11.37 16.62
S&P 500 23.68 24.33 18.94 23.15 38.23
P/E Ratio
350
287.91
300
250
200
153.57
150
99.87 88.94
100 78.35
26.8229.8118.94 38.23
50 18.01 13.9823.68 14.83 24.33 14.82 23.1 12.4511.3723.15 16.62
0 0 11.35
0
2016 2017 2018 2019 2020
Netflix Disney Fox Discovery S&P 500
Figure XI-11 P/E Ratio
P a g e 38 | 42
XII. Market Analysis:
A. Netflix, Inc
Table XII-1 Book Value vs Market Value
31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20

Book Value per share ($) 5.88 7.68 11.47 15.64 23.33
Market Value ($) 124.96 196.1 259.28 326.1 539
Netflix has maintained a quite high market value compared to its book value over the year.
This shows shareholders are willing to pay more from the expectation that the company
would do well in the coming years
Table XII-2 Netflix share price as of 30-07-2021
Previous 52 Week 52 Week

Close Open Low High Mkt Cap
519.3 519.96 458.6 593.29 227.605B
Current ratio and quick ratio are increasing for Netflix. The company is utilising its assets
more effectively. D/E ratio is coming down. The company is increasing its stock holder's
equity in comparison to debt capital. Cash flow from operations has increased as per last
publish annual report.
14000000
560
12000000
10000000 540
8000000 520
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0 460
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Figure XII-1 Candlestick Chart - Netflix
ON SHORT TERM THE SHARE PRICE MIGHT COME DOWN DUE TO PROFIT BOOKING BY
SHAREHOLDERS. HOWEVER, WE RECOMMEND BUY FOR NETFLIX, INC.
P a g e 39 | 42
B. Disney
31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20

Book Value per share
($) 29.49 31.39 26.26 53.21 49.82
Market Value ($) 99 104 108 143 181
Similar to Netflix, Disney also maintained a high market value compared to its book value.
Shareholders have confidence in the company. Also, there is a strong positive outlook
regarding the future projects of the company.
Table XII-4 Disney share price as of 30-07-2021
Previous 52 Week 52 Week

Close Open Low High Mkt Cap
179.10 179.81 113.37 203.02 324.049B
25000000 190
20000000 185
180
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175
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5000000 165
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Figure XII-2 Candlestick Chart - Disney
Based on our analysis of data, we recommend BUY on Disney share
P a g e 40 | 42
C. Eros International
Mar-17 Mar-18 Mar-19 Mar-20 Mar-21

Book Value per share
(₹) 213.57 237.54 270.38 131.8 109.91
Market Value (₹) 298.77 173.87 79.29 17.47 25.35
Table XII-6 Eros International share price as of 30-07-2021
Previous 52 Week 52 Week Mkt

Close Open Low High Cap
24.85 25.60 16.75 36.85 237Cr
500000 35
450000 33
400000 31
350000 29
300000 27
250000 25
200000 23
150000 21
100000 19
50000 17
0 15
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Figure XII-3 Candlestick Chart - Eros International
Based on our analysis of data, we recommend to EXIT for Eros International share
P a g e 41 | 42
XIII. Sources
https://www.investopedia.com/
https://www.macrotrends.net/stocks/charts/NFLX/netflix/current-ratio
https://www.moneycontrol.com/financials/erosinternationalmedia/ratiosVI/EIM
https://www.discoverci.com/companies/NFLX/asset-turnover
https://financials.morningstar.com/ratios/r.html?t=NFLX
https://money.rediff.com/companies/Eros-International-Media-Ltd/17040405/ratio
https://www.valueresearchonline.com/stocks/21007/eros-international-media-
ltd/#snapshot
https://www.readyratios.com/sec/industry/79/
https://www.readyratios.com/sec/ratio/financial-leverage/
https://finance.yahoo.com/quote/NFLX/history?period1=1483142400&period2=1627
430400&interval=1mo&filter=history&frequency=1mo&includeAdjustedClose=true
https://www.zacks.com/stock/chart/DIS/fundamental/pe-ratio-ttm
https://www.goodreturns.in/company/eros-international-media/cashflow.html
https://assets.kpmg/content/dam/kpmg/in/pdf/2017/09/The-Digital-First-
journeyV2.pdf
https://www.researchgate.net/publication/341558182_Emergence_and_future_of_O
ver-the-top_OTT_video_services_in_India_an_analytical_research
https://www.theweek.in/news/biz-tech/2021/02/25/indias-new-social-media-laws-
comparing-regulations-around-the-world.html
https://www.ikigailaw.com/online-content-regulation-how-is-it-done-in-other-parts-
of-the-world/#acceptLicense
https://timesofindia.indiatimes.com/india/government-examines-ott-regulations-in-
foreign-countries/articleshow/80376346.cms
P a g e 42 | 42

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A brief financial analysis of companies

providing over the top content platform in

OVER THE TOP

Jitin Arora 14017

Figure I-1 Market share of major OTT platforms

III. Competitive Analysis and Business Model

Figure III-1 Business Model

A. Subscription-based versus Advertisement-based

Figure III-2 Market Positioning

D. Smartphone enabling 'on-the-go' content consumption

E. Eros: A Multi-Platform Model

IV. Major Macro-economic factors affecting the OTT

3. Demography & Infrastructure

Porter's five forces analysis reflects the competitive environment of an industry. It is a

• The threat of new entrants

A. The threat of new entrants

B. Bargaining Power of Suppliers

C. Bargaining Power of Buyers

D. Threats of Substitute Products or Services

• By being service-oriented rather than just product-oriented.

• By building a sustainable differentiation

VI. User engagement and product services by Disney,

IX. Standards for OTT industry

OTT platforms are required to set up a three-tier grievance redressal mechanism.

EROS INTERNATIONAL MEDIA LIMITED

Eros International Media

Figure X-7 Cash Flow Statement - Netflix

Eros International Media

XI. Financial Ratio Analysis

Company 2016 2017 2018 2019 2020

2. Acid Test Ratio / Quick Ratio:

Company 2016 2017 2018 2019 2020

Current Ratio Quick Ratio

Figure XI-1 Liquidity Ratios - Netflix

Current Ratio Quick Ratio Current Ratio Quick Ratio

1. Debt Equity Ratio:

Company 2016 2017 2018 2019 2020

Netflix Disney Eros International

Figure XI-4 Solvency Ratios

1. Asset Turnover Ratio:

Company 2016 2017 2018 2019 2020

Netflix Disney Eros International

Figure XI-5 Asset Turnover Ratio

2. Inventory Turnover Ratio:

Company 2016 2017 2018 2019 2020

3. Debtor's Turnover Ratio:

Company 2016 2017 2018 2019 2020

1. Gross Profit Margin:

Company 2016 2017 2018 2019 2020

Netflix Disney Eros International

Figure XI-6 Gross profit Margin (%)

2. Net Profit Margin:

Company 2016 2017 2018 2019 2020

Netflix Disney Eros International

Figure XI-7 Net Profit Margin (%)

3. Return On Asset (ROA):

Company 2016 2017 2018 2019 2020

Netflix Disney Eros International

Figure XI-8 Return on Analysis

4. Return on Equity (ROE):