Broadcasters moving ahead with more diginets, despite poor performance of existing digital services

Canadian broadcasters are prepping for the launch of yet more digital specialty television channels, even though the roughly 50 services already on air have sustained multi-million dollar losses. CanWest Global Communications Corp., whose six diginets led the broadcasting sector going in the red with a combined pre-interest/tax loss of $29.4 million in the year ended Aug. 31, 2002, is one broadcaster planning to pump out more channels. It plans to go live with the jazz-based digital service CoolTV within the next three months. "We have at least one more channel launching in May," says Don Gaudet, manager of specialty services at Global Television. "There’s a couple more that we’re looking at, but we haven’t yet got the carriage. But we’re looking at least one other that would launch as soon as May. We’re always looking to expand." Gaudet points out that when Global launched its existing digital channels, it was looking at a five-to-seven-year break-even point. "We’re still well within our business plans," he notes. "Because we have the infrastructure in place from our over-the-air (television operations), we can buy programming at bulk rates. Our programming costs are actually lower than what we thought they’d be. Where the losses are coming from is the fact that the subscriber base isn’t where we thought it would be. But everybody assumed that there would be losses." According to the CRTC’s latest annual report on the financial health of Canada’s specialty, pay and pay-per-view television services, released this month, the 47 diginets that launched in 2001 included in the report are money draining. They sustained a pre-tax loss of $148 million on less than $49 million in revenue in the year ended Aug. 31, 2002. The diginets dragged down the overall industry’s pre-tax profitability in 2002 to $128 million from $195 million in 2001, even though the number of specialty and pay services included in the results rose from 61 to 109 (one service did not provide results for 2002). The launch of Bell ExpressVu LP’s Nimiq 2 satellite has broadcasters optimistic that the additional channel capacity will result in the distribution of any of their channels that the satellite TV provider doesn’t currently carrying, and provide space for yet more."A year ago, I would have said ‘wow, this (the take-up rates of the digital channels) is a problem.’ But it really has come on. The paid subscription rate is growing on average by 7% per month," notes Wayne Sterloff, VP of Craig Specialty Networks, which will be launching the Stampede channel. "Finally, a year later, we’re starting to reach some of the early projections that we had made. It was a very slow start, but it has come on strong." The Stampede channel is being billed as a modernized, urban look at the Western lifestyle that will tap into the library of Paramount Studios. It will air Western movies as well as country music videos and extreme sports, such as the rodeo. "The key is quality programming and quality branding and as long as we don’t stray from that…," Sterloff says. "When you do a joint venture with Paramount Studios, you know you are going to have fantastic programming. We just find that as long as the quality is there, then the advertisers and subscribers will be there." Sterloff says Craig is "in the final throes of closing negotiations on affiliation agreements" and is "probably about two weeks away from an official announcement." He expects that Stampede will be part of a new package of digital channels that will launch this spring. "With Bell ExpressVu’s Nimiq 2, they’ve got to put together a package of channels that would warrant subscribers going to the new dish. So I think it’s important to them that there are new services that could drive that launch," he points out. Allan Schwebel, VP of affiliate sales and marketing at CHUM Television, says CHUM will launch more channels this spring, but he would not specify which ones. "I think there is an opportunity for additional choices if marketed correctly, you get the right amount of distribution, and you can lever some efficiencies in your organization," he tells Canadian Communications Reports. "If you’re going as a standalone or a brand new company with no track record, you’ve probably reached saturation. But if you’ve got the opportunity to extend your brands into sub genres and leverage those efficiencies that you have in place, I think there’s still room for more." He downplays the CRTC figures. CHUM’s seven diginets lost significantly less in their first year of operation than those of other broadcasters – losing a combined $4.75 million before interest and taxes, or an average of about $680,000 each. "You also saw among the CRTC stats that CHUM has been more efficient at being able to launch channels, and limit the losses in the early going," Schwebel notes. The smaller broadcasters are clearly struggling, with Headline Media Group Inc.’s gay and lesbian channel PrideVision TV reporting a pre-interest/tax loss of $9.8 million on revenue of $1.2 million in its first year. It had the largest loss of any diginet. The poor performance has led Headline to shop the channel around. Stornoway Communications Inc.’s must-carry i channel lost $4.7 million before interest and taxes on revenue of $950,703. Its sister dance station, bpm:tv, had a pre-interest/tax loss of $1.28 million on revenue of $61,436 from 251,240 subscribers and $8,000 from advertisers. LeafsTV, the regional channel that represents the foray into broadcasting by Maple Leafs and Entertainment, had a pre-interest/tax loss of $4.9 million on revenue of $722,205. It had just 57,000 subscribers at Aug. 31, 2002. The Green Channel reported a loss of $1.1 million before interest and taxes on revenue of $46,489 from 45,398 subscribers and just $790 from advertisers. But even those channels backed by the big players haven’t matched the business projections filed in licence applications. The CanWest digital channels lost an average of $4.9 million before interest and taxes. Alliance Atlantis Communications Inc., a company that has consistently remained publicly positive about the new digital channels (CCR, Aug. 15/02), reported a pre-interest/tax loss of $32 million from its seven diginets. Alliance Atlantis’ much-coveted Independent Film Channel Canada lost about $4.4 million before interest and taxes on revenues of about $1.6 million and garnered 249,887 subscribers. CTV Inc.’s five digital channels lost about $9.6 million before interest and taxes, or an average of about $1.6 million each. Overall sector sees growth in 2002 Despite the large losses sustained by the digital channels, most analog specialty channels improved financially between 2001 and 2002. As a whole, analog specialty channels garnered $1.3 billion in revenues in 2002, up 9.6% from 2001’s $1.2 billion. Between 1998 and 2002, analog specialty revenues increased an average of 16.5%. Pre-tax profit increased to about $194 million in 2002, up 52.6% from $127 million in 2001. Between 1998 and 2002, the average annual growth of pre-tax profit for analog specialty channels was 47.8%. The phenomenal growth is largely due to an increase in the number of channels launched over that period. The figures below are contained in the CRTC report, Individual Pay, Pay-Per-View and Specialty Television Services: Statistical and Financial Summaries 1998-2002. Top 10 Digital Specialty Channels by Revenue(Year Ended Aug. 31, 2002)Service & Licence CategoryMajority OwnerRevenue CourtTV Canada (2)CHUM$2,654,474Showcase Action (2)Alliance Atlantis$2,338,647Showcase Diva (2)Alliance Atlantis$1,881,956MTV Canada (1)Craig Broadcast Systems$1,781,916Independent Film Channel Canada (1)Alliance Atlantis$1,595,922National Geographic Channel (2)Alliance Atlantis$1,580,227Mystery (1)Global / TVA$1,532,936Tech TV (1)Rogers / Shaw$1,493,359Raptors NBA TV (2)Maple Leafs Sports & Entertainment$1,463,164Men TV (1)Global / TVA$1,458,153 Bottom 10 Digital Specialty Channels by Revenue(Year Ended Aug. 31, 2002)Service & Licence CategoryMajority OwnerRevenue The Green Channel (2)WETV Canada$46,489MuchLoud (2)CHUM$58,021bpm:tv (2)Stornoway Communications$61,436MuchVibe (2)CHUM$97,059SSTV (2)Asian Television Network$199,385MTV2 (2)Craig Broadcast Systems$251,448EdgeTV (2)Corus Entertainment$299,237MSNBC (2)Rogers / Shaw$507,890BBC Kids (2)Alliance Atlantis$529,937ESPN Classic Canada (2)Bell Globemedia$601,837MTV2 (2)Craig Broadcast Systems$251,448EdgeTV (2)Corus Entertainment$299,237MSNBC (2)Rogers / Shaw$507,890BBC Kids (2)Alliance Atlantis$529,937ESPN Classic Canada (2)Bell Globemedia$601,837 Top 10 Digital Specialty Channels by Profitability(Year Ended Aug. 31, 2002)Service & Licence CategoryMajority OwnerP.B.I.T.*SSTV (2)Asian Television Network$-10,257Animal Planet (2)Bell Globemedia$-262,308Festival Portuguese (2)1395047 Ontario Inc.$-266,757MuchLoud (2)CHUM$-286,316MuchVibe (2)CHUM$-418,874Drive-In Classics (2)CHUM$-526,821Discovery Civilization Channel (2)Bell Globemedia$-563,969Book Television: The Channel (1)CHUM$-699,112CourtTV Canada (2)CHUM$-816,633FashionTelevisionChannel (1)CHUM$-964,087 Bottom 10 Digital Specialty Channels by Profitability(Year Ended Aug. 31, 2002)Service & Licence CategoryMajority OwnerP.B.I.T.*PrideVision TV (1)Headline Media Group$-9,792,478The Racing Network (2)Woodbine Entertainment Group$-8,293,946Fox Sports World Canada (2)Global$-6,323,672National Geographic Channel (2)Alliance Atlantis$-6,301,404MTV Canada (1)Craig Broadcast Systems$-6,031,271DejaView (2)Global$-5,197,104Discovery Health Channel Canada (1)Alliance Atlantis$-5,183,612BBC Canada (2)Alliance Atlantis$-5,062,854Leafs TV (2)Maple Leaf Sports & Entertainment$-4,935,320i channel (1)Stornoway Communications$-4,741,703* Profit before interest and taxesSource: Individual Pay, Pay-Per-View and Specialty Television Services: Statistical and Financial Summaries 1998-2002, CRTC Diginets by Number of Subscribers(Year Ended Aug. 31, 2002)Service & Licence CategoryMajority OwnerSubscribersCourtTV Canada (2)CHUM735,252Showcase Action (2)Alliance Atlantis707,700Animal Planet (2)Bell Globemedia625,327Scream (2)Corus Entertainment606,269Showcase Diva (2)Alliance Atlantis548,500One: the Body, Mind & Spirit channel (1)Vision TV529,517Independent Film Channel Canada (1)Alliance Atlantis520,700Men TV (1)Global / TVA498,719BBC Canada (2)Alliance Atlantis498,100The Biography Channel (1)Rogers / Shaw486,950Discovery Health Channel Canada (1)Alliance Atlantis486,000Mystery (1)Global / TVA474,197TV Land CanadaCraig Broadcast Systems473,664Tech TV (1)Rogers / Shaw467,601National Geographic Channel (2)Alliance Atlantis465,500The Documentary Channel (1)Corus Entertainment464,171MTV Canada (1)Craig Broadcast Systems463,962DejaView (2)Global460,728i channel (1)Stornoway Communications460,500Lonestar (2)Global450,456Discovery Kids (2)Corus Entertainment438,500Discovery Civilization Channel (2)Bell Globemedia417,638FashionTelevisionChannel (1)CHUM409,656Country Canada (1)CBC373,737Book Television: The ChannelCHUM372,510CTV Travel (1)Bell Globemedia350,808SexTV: The Channel (2)CHUM347,297Drive-In Classics (2)CHUM342,877Fox Sports World Canada (2)Global341,904NHL Network (2)Bell Globemedia328,930ESPN Classic Canada (2)Bell Globemedia318,108Raptors NBA TV (2)Maple Leafs Sports & Entertainment318,000WTSN (1)Bell Globemedia317,866Xtreme Sports (2)Global314,651EdgeTV (2)Corus Entertainment255,056bpm:tv (2)Stornoway Communications251,240MuchVibe (2)CHUM250,782BBC Kids (2)Alliance Atlantis228,500MSNBC (2)Rogers / Shaw220,898MTV 2 (2)Craig Broadcast Systems212,439The Racing Network (2)Woodbine Entertainment Group175,925Leafs TV (2)Maple Leafs Sports & Entertainment57,000MuchLoud (2)CHUM45,836The Green Channel (2)WETV Canada45,398PrideVision TV* (1)Headline Media Group19,682Festival Portuguese* (2)1395047 Ontario Inc.4,092SSTV* (2)Asian Television Network3,717* Premium-priced channelSource: Individual Pay, Pay-Per-View and Specialty Television Services: Statistical and Financial Summaries 1998-2002, CRTC

Broadcasters moving ahead with more diginets, despite poor performance of existing digital services

News | 02/28/2003 5:00 am EST

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us