TORONTO – Deep within the Rogers Communications second quarter results is the performance of the company’s media division.
That division includes the company’s TV properties (OMNI, Sportsnet, etc), radio stations (46 in all), magazine group (Maclean’s, Flare, etc.), the Toronto Blue Jays and the Rogers Centre (formerly SkyDome). It also includes one month’s performance of NOWTV in Vancouver, which Rogers completed the purchase of on June 1st.
Revenue growth in the second quarter, ended June 30th, for the media division was 27.1% over the corresponding period last year to $293.4 million. The increase was mainly due to the inclusion of the Sports Entertainment businesses (the Jays and the Dome). On a pro forma basis, revenue growth was 5.8% for the quarter mainly due to strong sales at The Shopping Channel ("tSc"), Consumer Publishing and Sportsnet, despite the NHL lock-out (the lockout actually allowed the channel to pare its costs during 2005).
Revenue for the six month period increased 14.8% over the prior year to $512.7 million and the increase on a pro forma basis was 3.9%. Strong year to date revenue was generated by tSc, Radio and Consumer Publishing which offset the decrease in sales at Sportsnet caused by the NHL lock-out.
Operating expenses for the quarter increased by $57.1 million, or 29.7%, mainly due to the inclusion of Sports Entertainment. On a pro forma basis, expenses increased $5.7 million, or 2.3%, over the prior year. Lower programming costs at Sportsnet as a result of the hockey lock-out plus cost savings at Radio and Sports Entertainment more than offset higher costs at Publishing which were attributable to the successful launch of the LOULOU consumer shopping magazine.
On a year to date basis, expenses increased by $55.9 million over the prior year primarily due to the inclusion of Sports Entertainment. On a pro forma basis, expenses decreased slightly over the comparable period last year as savings from lower programming costs at Sportsnet more than offset higher costs of goods sold on tSc and increased costs in Publishing caused by the launch of LOULOU.
The 13.9% and 22.5% Media operating profit growth for the three and six months ended June 30, 2005, respectively, reflected contributions from each of Publishing, Radio, Television and The Shopping Channel divisions, partially offset by the inclusion of a seasonal operating loss at Sports Entertainment.
While the Publishing, Radio, Television and The Shopping Channel divisions each delivered increased operating profit margins for the quarter and year to date, the inclusion of the operating loss of Sports Entertainment led to the decline in Media’s operating profit margin from 16.8% to 15.1% compared to the corresponding quarterly period in 2004.
Rogers also added a cautionary note to analysts that radio will soon face satellite competition, but that overall, it figures its impact will be minimal. “These new subscription services have the potential to offer a wide variety of music and spoken word programming channels, and will compete for audiences with the Media radio stations in markets across Canada. However, given that these new services are also prohibited from carrying local programming content and selling local advertising, the Media radio stations expect to sustain their competitive advantage as local broadcasters in their markets.”
