Wednesday, 4 April 2012

Telecom revenue proves Canadians not abandoning pay TV

Telecom revenue proves Canadians not abandoning pay TV

Apr 4, 2012 – 3:45 PM ET | Last Updated: Apr 4, 2012 5:44 PM ET
The death of cable is greatly exaggerated according to the latest financial figures released Wednesday from the country’s broadcast regulator.
If the most recent quarterly income statements from major publicly traded providers such as Rogers Communications Inc., BCE Inc. and Shaw Communications Inc., weren’t enough, the Canadian Radio-television and Telecommunications Commission’s annual roundup confirms television providers remain exceptionally profitable, though margins felt pressure in 2011.

Revenues for the cable industry, which does not include satellite services but does rope in new telco television services sold by Bell and Telus Corp., rose 8.2% to $11-billion through the broadcast year ended August 31, 2011. The rise was fuelled by higher subscription rates on average as well as customer additions of 2.8%.
The far smaller satellite market, which includes services from telecom giant Bell and Calgary cable power Shaw’s Shaw Direct service, grew revenues 5.8% to $2.5-billion. Similarly, rate hikes stoked revenue growth, while subscriber numbers were unchanged at 2.9 million.
The top-line figure includes Internet subscriptions and home-phone services, the CRTC noted. The former is taking on increasing importance for the sector, analysts say, as traditional TV services are pressured from online video viewing.
Still, roughly 11.4 million Canadian homes held a television subscription at the end of August last year, despite the swelling of fears that many consumers are considering cutting their TV subscription in favour of online alternatives such as Netflix Inc. A return to tapping local over-the-air signals through an atennae also received heightened attention last summer as broadcasters switched from analog to digital signal transmission.
While fears of a decline in subscriber numbers may have abated, profitability showed slight strain last year, as profit margins before interest and taxes declined more than two percentage points to 23.1%.
Fees paid by Rogers, Bell, Telus, Shaw, Cogeco Cable Inc. and other TV distributors to broadcasters — the biggest of whom have been acquired by telecom and media giants, led by Bell — rose by 10.2% to $2.1-billion. Analysts say wholesale rates may accelerate in the years to come as conglomerates like Bell use their scale to leverage higher rates from smaller competitors — a tactic that would advantage Bell’s own television distribution business.
Sports content rights are also soaring, as advertisers flock to live-event television, which is resistant to PVR recording and is rarely found via online streaming sources. It means Bell’s TSN service and Rogers’ Sportsnet properties can command significantly higher rates relative to other channels featuring scripted programming, which will stoke rates providers must pay the two higher still.
The need for higher wholesale fees from specialty networks in part stems from the decline in audience share and thus ad revenues at conventional television networks, such as CTV and Global. Revenues for the private networks, which includes the TVA network among other smaller operators but not the CBC, were flat year-over-year, at $2.153-billion. Profitability surged however, as CTV and Global — which were acquired by Bell and Shaw, respectively — and the rest of the sector reduced operating expenses by 7.2% to $1.9-billion, resulting in a $160-million profit (PBIT). Margins soared, relatively, from 0.5% to 7.5%.
The big networks controlled their expenses in their annual pursuit to outbid each other for hit Hollywood programming last year. Expenditure on foreign shows, which predominantly consist of content from U.S. studios, fell 5.8% to $729-million. The decline cuts against some market conjecture that the networks — CTV, Global, CityTV and the CBC — would use the newfound backing of parent telecom providers to stoke spending on U.S. shows higher.

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