November 28, 2019 2 weeks 2 days ago

As Corus adapts to change, Murphy challenges regs that don't

CEO hopes Ottawa is watching, listening, and will act

CORUS ENTERTAINMENT PRESIDENT and CEO Doug Murphy may have the toughest job in Canadian media. Or maybe just the least-appreciated.

Go ahead and ask anyone in the TV business (and we’ve asked a lot of them recently). They all say variations of the same thing: “I think he’s doing all he can… but I’d never want his job…”

Not only does Murphy run the biggest independent media company and broadcaster in the country (yes, it’s controlled by the Shaw family – who unloaded their equity interest in May after reportedly looking for a buyer of the whole company – but it’s not vertically integrated like Rogers Media and Bell Media), he has to constantly remind people Corus isn’t dying, and sometimes even justify its very existence in a media landscape where just a few digital giants are now claiming billions in ad revenue, with little of it staying in Canada.

Corus celebrated its 20th year as a public company in 2019, having been spun off from Shaw Communications because the regulations then said BDUs like Shaw Cable weren’t allowed to also own TV channels. Yes, millennials, that was once a rule here. Vertical integration was a no-no.

What else was also born in 1999? The CRTC’s Digital Media Exemption Order, which exempts online media from regulation, But we’ll get to that in a bit.

Murphy has spent the fall on a bit of a media blitz which included a Financial Post op-ed, and after its most recent fiscal year-end (which was pretty good, all things considered. So good, it’s needed to ask for a delay in its CPE spending), he hosted an investor education day to tout the company’s work. This month, he also spoke at the most recent CTAM Canada gathering and then on Monday he keynoted an appearance at the Economic Club of Toronto.

Yes, he has been delivering pointed messages to regulators and government and anyone else listening, but it’s important to reiterate the company is not standing still while demanding regulatory rescue.

The November 18 investor education day was an effective reminder Corus is having a good 2019 in the traditional way (more than 90% of its revenues still come from traditional media, radio and TV ads plus specialty subscriptions, in Canada), but also that it’s expanding in as many ways it can think of and support.

Its social digital agency, so.da, creates original content in concert with brands like CIBC, Stella Artois and Samsung (pictured) and is working with global digital publishers like Vice, Buzzfeed and others to try to standardize social media measurement. So.da has logged over 6 billion views this year and has better social engagement among 18-24 year old men than any of the North American sports media brands, investors were told.

On the advertising side, Corus has built Cynch, which is a self-serve platform for buying TV ads. It is ultra-simple to use and segments advertisers in a way not seen before in television, which for decades has been sold based on simplistic demographics such as “women aged 18-34.”

Cynch makes the ad buying process easy and much more targeted. Corus has identified over 150 different segments of viewers, from “home improvers” and “fashionistas” to “burgeoning families” and “middle-aged achievers”, each with their own markers for the more than 200 active advertisers it wants to use the platform. Clients also get real-time data on the placement and performance of their spots from Cynch.

“I get better yield, they get five times better targeting and everybody's happy.” – Doug Murphy, Corus Entertainment

“In the old days, they would buy the top 20 shows,” but didn’t know how well they hit the consumers they wanted,” said Murphy on stage at CTAM. “Now I can say ‘you want to target empty nesters, you hit shows number one, two, three, five, eight, ten, twelve, and hit it three times as hard.’ I get better yield, they get five times better targeting and everybody's happy.”

Advertisers, however, will only be truly happy if they can use Cynch to buy from all broadcasters – and Corus built it for the system, not just itself. Rogers Media has already told Corus it is on board with Cynch and other smaller broadcasters have indicated they want to use the platform, too. The big holdout is Bell Media. “We’re working on them,” Murphy told us in an interview this week.

Corus is also pushing hard on the distribution side, too, managing the traditional part of the business where cord cutting is having an impact – offset somewhat by new IPTV BDUs coming to market and other growing OTT platforms. Corus’ biggest splash there so far has been StackTV on Amazon, where it has made 12 channels available, by far the largest commitment by any Canadian media company, to the Prime Video Channels service.

Usage there has been above what was expected, said Murphy, and investors were told 53% of the time people are watching Corus’ $12.99 Stack TV shows via Amazon they’re watching live TV, which means they see ads, too. Global TV is also available on Roku, the only major Canadian broadcaster serving up its channel on that platform, where its square tile is right there, ready to be watched, alongside Netflix and Disney+.

Global TV is also available through AppleTV, too, and the company is quite excited about the new Global TV app, which already has 500,000 active users per month, which will be launching soon. That version will include Food, HGTV, National Geographic, Showcase, W, Slice, History, adult swim and other Corus brands.

On the radio side, Corus has moved into podcasts and made sure its stations can be found via the latest smart speakers.

“It’s frustrating as hell.” – Murphy

There’s more, but suffice to say Murphy has a lot on his plate because Corus can’t stand still as everything changes all around us.

But speaking of things that need changing…

Murphy told CTAM delegates he’s been spending a lot of time in Ottawa trying to convince the politicos that certain rules must change. “It's really hard to get people to pay attention. It’s frustrating as hell,” he said about those trips.

So, his message this fall has been about the need for regulatory upgrades, all while the Broadcast and Telecom Legislative Review (BTLR) panel puts the finishing touches on its report to parliament, coming in January. Corus wants more spending flexibility, for digital giants to start contributing to the system and for looser foreign investment rules.

In this era of peak TV, where close to 600 English language TV shows are in production for all kinds of platforms around the world, Corus has to be able to own its shows, is one of Murphy’s messages for Ottawa. Of course, Corus owns Nelvana and sells content all around the world. Its Corus Studios makes and sells reality shows like Masters of Flip and Buying the View, but when it comes to dramas and comedies, or its programs of national interest (PNI), to use the CRTC vernacular, Corus can’t own what it makes and can’t benefit from export sales.

The regs say Canadian broadcasters must direct 75% of the cash spent on PNI to independent producers.

As well, the foreign platforms Canadians have come to know and love so well like Netflix, Amazon Prime and now Disney+, don’t have to contribute to the Canadian content system at all, while Canadian broadcasters must spend 30% of the prior year’s revenue on Cancon, which includes news, something Murphy quickly adds he loves doing, even though it loses money. BDUs also have to pay 5% of their video revenues into Cancon funds, the major one being the Canada Media Fund.

“I don't think any Canadian broadcaster would have the guts to take a swing like that,” – Murphy

That said, Corus could make its own dramas and comedies – and own them outright – if it wanted to go it alone, without CMF or other such funding. But that’s a risk no Canadian broadcaster would take. In fact, many big budget international productions are co-produced in order to spread the risk of a show not becoming a hit. “I don't think any Canadian broadcaster would have the guts to take a swing like that,” he said in our interview. “It's just is too risky.

“I don't want it to be construed that I wouldn't do a drama. I'd love to do a drama if we had an idea that I really liked,” he added. “The system that we're operating under now is based on rules that have been around for a very long time, and I understand there are a lot of those folks who don't want to change the rules. I get it.

“But just let me control all the money I've got to spend,” he explained. “I know that people think that means I'll never work with an independent producer again. That's fundamentally not true. We had 42 series last year, I can't make them all myself. It's impossible.”

Murphy also said he wants to see the Canadian content points system overhauled and looks to Britain where it changed to a 38-point system (Canada’s is a 10-pointer), and allows foreigners into broadcasting, and to make British content. As long as it looks and feels like British content, just about anyone can make it, he said.

While Murphy wants to see Netflix and others also pay into the system the way he must (30% of Netflix’s Canadian revenues would likely add at least $250 million annually to the CMF, for example), he also wants to see Corus forced to pay less.

However, if Netflix and the others are to pay up, what of the DMEO, born the same year as Corus first rang the bell on the Toronto Stock Exchange?

“We do not need another study. We've had three studies over the last five years and need to be urgent about our decision-making.” – Murphy

“I would cancel the DMEO, and I would apply contributions… then I would look at how the monies in the system are distributed, and I would change a lot of the convoluted, inherited structures we have. I would change the point system. I would really, as I say, let it be market driven.”

There is also the new NAFTA free-trade agreement (the US-Mexico-Canada Agreement), yet to be ratified, to worry about, since we’re not sure what it’s final form might say about taxing digital giants.

“Let us make programing decisions the way we make investment decisions on advanced advertising,” added Murphy. “No one's telling me to create audience segments. I'm just looking around the world, figuring out what's the best way to do that, and making the decision. I think that's what we need to do.”

And, we need to do it now, is the message Murphy said he has for new Heritage Minister Steven Guilbeault. “We do not need another study. We've had three studies over the last five years and need to be urgent about our decision-making.”

Photo by Jenna Muirhead.