GATINEAU – Maybe it’s not so bad yet, after all…
The CRTC on Thursday released three different documents breaking down the 2016 results from conventional broadcast, discretionary and on demand, and broadcast distribution undertaking sectors of the Canadian TV business.
The numbers are all almost a year old (filed by the regulated companies at the end of the regulatory broadcast year, August 31, 2016) – so bear that in mind when perusing these highlights. Also, these figures do not include any revenue from broadband, telephony or wireless streams. (As well, the Commission told us the breakdown for individual pay and specialty channels will be released in August.)
BDUs: Growth, stability, decline – and big set top rental numbers
- Total subscription revenue pulled in by BDUs in 2016 was down 2% compared to 2015, coming in at $8.73 billion – but it is 2% higher than it was in 2012.
- There was a pretty big jump in affiliation payments (wholesale fees paid to specialty and pay services) over the time frame shown in in the CRTC data dump, rising 15.7% since 2012 to $3.48 billion. Stretch it back to 2010 and the 2016 affiliation payments are up 25.6%.
- These rising expenses likely drive the shrinking margin on the video side, which stood at 16% at August 31, 2016. The operating margin been on a steady decline for years (it was 23.1% in 2012 and 25.1% in 2010).
- While affiliation payments to Canadian specialties certainly have risen, increasing 13.4% from 2012 to 2016 to $2.974 billion, there has been a marked jump in the affiliation fees paid to U.S. cable channels, too, which stood at $505 million in 2016. That figure was $385 million in 2012, a 30% increase, coinciding with rate increases and new channels on offer.
- The CRTC in 2014 asked the BDUs to break down the amount of revenue from set top box rental – and it is not exactly chump change. The report notes the companies brought in $790 million in rental fees in 2016, up almost 10% from 2014.
- Put another way though, you could say that STB rental income pays for 8,700 BDU employees – of which there are a total of 26,512 earning a little over $90,000/year on average. BDU staff count has dropped by 8% since 2012, much of that coming from the shrinkage at satellite carriers Shaw Direct and Bell TV.
- Revenues from satellite TV have declined 13.8% since 2012 to $2.15 billion in 2016 while subscribers have dwindled by 22% to a total of 2.2 million. On the plus side, controlling expenses saw the satellite TV margins rise 3.5 percentage points in a year to 31.2%.
- While IPTV has raked in much of the losses in satellite and cable subscribers (cable has endured a drop of 1.25 million customers since 2012, or 16.2%), those services still lose tons of money. The IPTV story is that of huge growth, and huge losses, both of which are slowing. IPTV carriers (mostly Bell and Telus) lost $321.5 million in 2016 on revenues of $1.79 billion from 2.47 million customers. Growth in revenue and customers are still very healthy, but were smaller (14.85% and 13.8% respectively) in 2016 compared to 2015 (21.6% and 21.3%).
- Most of the initial consumer media coverage Thursday noted that the much-ballyhooed cord-cutting phenomenon is not reflected much in the overall numbers, with sub counts down 1.1% from August 2015 and 3.5% from August 2012, to a total of 11.12 million BDU subscribing households. However, we know from some of the quarterly filings from Shaw, Rogers, Bell, Telus, Cogeco and Vidéotron that cord cutting has accelerated a little since then. However, most of the losses incurred by cable and satellite carriers are subscribers switching, as we’ve noted above.
- Of course, 5% of revenues from the carriers’ broadcasting divisions is diverted to Canadian content, be it local expression, the Canada Media Fund or other independent production funds. Total contributions in 2016 were $428.3 million, down 9.8% from two years ago and 15.1% from 2012, most of which was driven by the elimination of the old Local Programming Improvement Fund. While contributions to the CMF from BDUs dipped 2% between 2015 and 2016 to $214.8 million, they are actually up 3% since 2012.
Specialty is still a growth story (#hockey!); conventional is in managed decline
- Total revenue among specialty, pay and video on demand services – which the CRTC is now calling “discretionary and on demand” came in at $4.415 billion in 2016, a 2.94% increase over 2015 – and 11.3% increase since 2012.
- While national ad sales were up 9.2% from 2015 to $1.3 billion in 2016 (reversing years of flat or slightly declining advertising) in the sector, the bulk of the strength in the discretionary and on demand comes from the $2.974 billion in subscription revenues – a 13.4% increase since 2012.
- Total revenue brought in by conventional and discretionary services in Canada (excluding the CBC) was $6.092 billion, essentially flat (+1.4%) since 2012.
- The total spend on Canadian content by Canadian broadcasters (none of this includes the CBC) has risen nicely, jumping 15.4% since 2012 to $2.365 billion , combining the conventional television and discretionary and on demand figures.
- However, looking a little deeper reveals that increase is almost totally due to Rogers Communications’ $5.2 billion, 12-year NHL programming agreement. The spend on Cancon among conventional broadcasters in 2016 dropped 3.42% compared to 2015 to $633.3 million while Cancon spending among discretionary and on demand channels rose 5.9% to $1.732 billion. However, in 2012 and 2013, Cancon spending among Canadian specialties had declined nearly 5% to $1.32 billion. In the first year of Rogers NHL deal, that figure jumped by $177 million.
- Deeper still, the CRTC of course breaks down the spend on categories of programming and the spend among specialties in sports went from $543 million in 2014 to $820.2 million in 2016.
- That increase in sports spending more than offsets overall declines over the prior two years in spending on news, drama, documentaries and other programming segments.
- While revenues climbed for discretionary and on demand services, conventional TV saw continued drops. Total revenues for conventional stations came in at $1.677 billion in 2016, a 4.5% dip, but they are down 17.7% since 2012 as local and national ad sales dwindle. No region was spared declines.
- The lone bright spot (sort of) on the ad sales side was CBC TV. Ad sales fell off a cliff in 2015 when the Corp. lost the NHL rights to Rogers. The CBC’s national ad sales dropped 60% that year to $170.5 million (compounded by the fact 2014 was an Olympic year, too). CBC national ad sales rebounded well in 2016 to $222.5 million in 2016 (helped substantially by the Rio Olympics).
What does all this mean? Generally, this $14.8 billion industry (BDU+conventional+discretionary annual revenues) has been better but is reasonably healthy ($1.26 billion in profit in total), despite daily rumours of its impending death… Some spots are growing and some shrinking while the whole business feels tons of pressure on a daily basis because of the massive changes happening all around the media world (with this kind of cash, it’s no wonder all the new media upstarts want a piece!). For the most part, though, the 43,000 people contributing to all this can think they’re doing a good job, the sky is not falling; the sun will come out tomorrow…
