TORONTO – Given how Canadians now consume video, and from where, measuring the level of industry consolidation here based on share of linear TV viewing is wrong, Corus Entertainment CEO Doug Murphy told an investors conference in Toronto Wednesday morning.
Appearing at the Scotiabank Telecom, Media and Technology conference, Murphy would not comment on yesterday’s Globe and Mail report which said Shaw Communications and the Shaw family is looking to sell the company. “I’m not prepared to comment on articles, rumours, or speculation,” he said.
What he was prepared to talk about was the bright future he sees, one which will come after it announces what he called its new “capital allocation strategy,” to be unveiled with Corus’ third quarter results on June 27th. That will encompass an adjustment to the quarterly dividend and a focus on cutting costs and paying down debt while maintaining needed investments to fuel organic growth. “Our capital allocation will be focused primarily on de-levering the balance sheet,” he said.
Cost cuts, he added later in his appearance, “will come from programming, marketing, how we resource the business from a people perspective, we’re looking everywhere.”
The review of the Broadcasting Act, now under way (along with the Telecom and Radiocommunication Act – all while the Copyright Act review is ongoing, too) has given Murphy some hope that regulatory help for his company is on the way, too, even though it won’t come soon.
“For the first time in a long time, there are aspects of what we’re hearing that show signs of promise,” he told Scotiabank’s telecom and media analyst Jeff Fan. “The new chair of the CRTC (Ian Scott)is a very pragmatic individual who is willing to talk to us which, frankly, was not the case with the prior guy, so I give chairman Scott a huge shout-out for being available and accessible.”
Murphy also praised the recently released CRTC report on the future of programming and distribution, called Harnessing Change, which says, among other things, Canadian content can’t continue to be supported only by our traditional, regulated, media players.
“I think his recent report was very sensible – that the obligations to fund Canadian content, of which we are a huge believer, can not rest solely on the backs of broadcasters and distributors – and need to be spread across more of the participants in the communications system. I think that’s right,” he said.
“How can consolidation metrics be based on only one aspect of viewer behaviour?” – Doug Murphy, Corus Entertainment
Murphy also added he believes aspects of the 2008 Diversity of Voices policy on cross-media and common ownership of Canadian media and distributors must be abandoned because we can no longer measure the size of the industry based strictly on the consumption of linear media. “Some of the old rules in the CRTC mandate, such as diversity of voices, which meant that consolidation was measured on linear share of audience up to 40% (being the limit when considering corporate mergers in television) doesn’t seem to make sense anymore when Netflix during prime time on many days of the week is bigger than CTV or Global,” he explained.
“How can consolidation metrics be based on only one aspect of viewer behaviour? So, we think the diversity of voice policy is archaic.” Readers will recall, however, that the Competition Bureau didn’t think even transferring two French language TV channels to already large Bell Media was a good idea.
While we’re at it, and considering the size of media players around the world, “we also advocate for scale and foreign ownership is an aspect of that,” Murphy said when asked by Fan. “We aspire to be a winning media company in Canada and build a global content business internationally… In our view, (foreign ownership) is something that should be considered in our space, but I’m not confused about the fact that’s going to be a long way away.”
ALL THAT SAID, MURPHY painted a bright future picture for Corus, whose focus is on kids, lifestyle and drama on the TV front. It’s factual/reality shows such as Masters of Flip, Buying the View and Backyard Builds “sell like crazy” around the world, which allows the company to invest in multiple seasons of shows, knowing international sales will buttress its (required) Cancon spend.
That type of programming, along with its kids content made by animation division Nelvana, will drive international growth. In five years, Murphy envisions 20% of Corus’ annual revenue coming from international sales. Right now, he added, it’s less than half that.
While it’s all-in on kids and works closely with partners through Corus Studios for lifestyle programming, when it comes to the TV drama front, the broadcaster is doing the best it can to buy premium drama for its various channels and BDU-driven premium SVOD platform. “We’ll invest in the drama slate that someone else is going to drive. We’re not in the showrunner game there,” Murphy said.
Simply, it’s hard for a company like Corus to compete with global players such as Netflix and Amazon – to say nothing of Disney and Comcast/NBCU – in the very expensive TV drama game.
“Direct to consumer is not a profitable business. We’ve looked at it seven ways to Sunday over the years and we’ve chosen to continue to be faithful to our core strategies of working with the BDUs within the video ecosystem.” – Murphy
However, its strategic focus helped produce its premium SVOD platform the company has been marketing hard and is now available though traditional BDUs like Rogers and Shaw where views of Corus programming “are going through the roof,” said Murphy. That platform also allows the company to offer more attractive dynamic ad opportunities to clients (fewer ads mean less clutter and happier viewers) in the VOD stream and it is currently testing programmatic audience-based, targeted ad buying. That is in beta now but will be rolled out to all clients come September, said the CEO.
Fan asked Murphy wither Corus has considered taking all that VOD content and going direct to consumer with an over-the-top platform, too. It’s not something he can afford, however. “Direct to consumer is not a profitable business. We’ve looked at it seven ways to Sunday over the years and we’ve chosen to continue to be faithful to our core strategies of working with the BDUs within the video ecosystem,” he explained.
Many OTT players not yet launched in Canada such as YouTubeTV and Sling are instead perfect avenues for Corus to go OTT without having to build their own from scratch. “All those players are looking hard at Canada right now and they’re going to focus on our biggest channels, and they’re going to go direct to those targets that we’re perhaps not getting today – the cord nevers, the digital natives, the transient people, the college students who are accustomed to consuming video online,” he added.
“We may very well be able to get to that piece of the market without having to build a tech stack, without having to make the investments in marketing. It’s a high churn business; these over the top direct to consumer players drop 10% of their subs every month… and that’s quite frankly not a business at this point in time makes much economic sense for us.
“There are more practical and pragmatic ways to be in that space without burning through a whole bunch of cash.”
