ONE UNINTENDED HAZARD of deregulation is that all other news outlets will be under-reporting the size of the Canadian cable industry this morning.
On Wednesday, the CRTC released the Canadian broadcast distribution industry’s statistical and financial summaries. But the report doesn’t include all distributors.
From 2004 to 2005, revenues, as well as number of subscribers, remained more or less constant for Class 1 cable carriers. However, with growing investments in voice over IP, for example – as evidenced in Shaw Communications’ third quarter report that said capex will rise at a good clip for the next 24 months at least – profits have dipped for cable.
In 2005, total revenues for the majority of the cable industry climbed to $4.575 billion, compared with $4.555 billion in 2004, said the Commission. Profits before interest and taxes (PBIT) totalled $926.2 million in 2005, down from $1.1 billion in 2004. This decrease is largely due to the 7.1% increase in total expenses over the same period, says the release. The number of basic service subscribers decreased by 0.4%, from 6,641,569 in 2004 to 6,617,378 in 2005.
However, the Commission counts only Class 1 cable systems for this report, leaving out 900,000 or so additional Canadians who are served by Class 2 or 3 – smaller – cable systems. (It’s not a difficult count, really. Basic subscriber numbers reported by the cable industry are as follows: Rogers, 2.2 million; Shaw, 2.1 million; Videotron, 1.5 million; Cogeco, 820,000; Canadian Cable Systems Alliance member companies [almost all of the rest], 900,000; for a total of 7.5 million cable subscribers in Canada).
A quick calculation (assuming all things are equal, and we know they’re not quite, because rural cablecos don’t earn as much per subscriber as the urban ones) means that the customers missing from this release could comprise up to another $622 million in revenue, edging cable’s top line for 2005 to nearly $5.2 billion (assuming $691.36 of revenue per customer per year). PBIT might then be up to about $1.05 billion.
The CRTC’s report also shows that the direct to home satellite business is still growing. The market segment even showed, for the first time, positive PBIT. From 2004 to 2005, the number of subscribers to basic DTH and MDS (fixed wireless) services grew by 7.3%, going from 2,316,714 to 2,486,372 (most of which flowed directly to Bell ExpressVu. BCE doesn’t break out ExpressVu numbers but said in 2005 it added 224,000 video customers, which includes satellite and new MDU subscribers. Shaw-owned Star Choice added about 16,000 customers in calendar 2005).
Total revenues from basic and non-basic services for DTH and wireless video grew by 8.1%; from $1.4 billion in 2004 to $1.5 billion in 2005. DTH and MDS undertakings recorded PBIT of $44.9 million in 2005 – compared with losses before interest and taxes in previous years.
In 2005, Canadian cable, DTH and MDS undertakings spent $247.3 million for the creation and production of Canadian programming. Of that total, $125.2 million went to the Canadian Television Fund, and $29.7 million to independent funds. Contributions from cable undertakings rose to $176.5 million in 2005, compared with $173.3 million in 2004, an increase of 1.9%.
Contributions from DTH and MDS undertakings went from $66.6 million in 2004 to $70.8 million in 2005, an increase of 6.3%.
The report also did not factor in the growing presence of telco-delivered digital television which, judging from the most recent public statements of SaskTel and MTS, who the largest players – and industry best-guesses on Aliant – is most likely now past the 100,000 subscriber mark.
Using the same per-sub revenue number as cable, $691.36 a year, that’s about another $70 million in revenue.
All this makes the size of the TV distribution industry in Canada a $6.76 billion industry – or nearly twice the size of the TV broadcasting industry.
