As its TV ad revenue drops, Corus says ad tech is the future

Corus Entertainment Inc. executives emphasized their optimism about future plans in the advertising technology and programmatic ad space as the company reported quarterly results Wednesday that showed its television advertising revenues fell to the tune of four per cent in the first quarter of 2018. The dip pulled ad revenues down to $272.3 million in the first quarter of 2018 from $283.2 million a year earlier. Desjardins Capital Markets analyst Maher Yaghi characterized the results as “disappointing” in a Wednesday note, writing that they “point to a deteriorating advertising market beyond what we had seen in recent quarterly results.” That followed “continued improvement in TV advertising revenue” over the previous five quarters, he said in a later note. Corus has stated in the past that it has seen some ad money shift from digital to traditional platforms. “Management indicated that December sales showed some improvement and that it continues to see this line item turning positive in the medium term, but we believe this will be a difficult task. Another consideration in 2018 are the multiple important sporting events that are likely to sway advertisers to push spending toward other broadcasters and away from Corus,” Yaghi added. Scheduled for later this year are both the FIFA World Cup, the rights to which are held by BCE Inc.’s media division, and the Olympics, which will be broadcast by CBC/Radio-Canada, Bell and Rogers Communications Inc. RBC Capital Markets analyst Drew McReynolds said in his Wednesday note that he had expected some weakness in TV ads, but not to the extent that Wednesday’s results showed. Corus reported overall revenues of $457.4 million for the three-month period ending Nov. 30, down from $468 million in the same quarter a year ago. Net income was $85 million, compared to $80.7 million in the first quarter of 2017. Overall TV revenues stood at $415.5 million, compared to $425.6 million. The decline was largely due to the drop in TV advertising, given subscriber fees only dropped slightly, from $126.5 million to $126.3 million. Radio revenues were also down to $41.9 million from $42.4. All figures are compared to the equivalent period last year. In a conference call with analysts on Wednesday morning, Corus president and CEO Doug Murphy said that initially, heading into the fall TV season, things looked promising. “Longer-term booking were pacing well and we appeared to be on track for modest growth in television advertising for Q1,” he said. “However, as the quarter progressed, we saw a shift toward shorter-term buys, such that visibility became increasingly limited. As we approached the end of the calendar year, it also became apparent that certain advertising commitments would not be fulfilled as forecast.” He pointed to the company’s emphasis on advertising innovation, stating that he is confident that’s the “right direction for our company.” “In Canada, we were the first to test and learn from a broad range of emerging new products, including advanced audience segmentation, dynamic ad insertion in video-on-demand content, automation and artificial intelligence,” he said. He noted that that the company will double its investment in data analytics and advanced advertising, aiming "to become a more data-driven, consumer-centric company. This is an exciting area for us, and we are firmly committed to staying on the leading edge of advertising technology innovation.” Corus promised to launch programmatic ads on linear TV nearly two years ago, and on Wednesday’s call, Murphy said the company plans to roll out programmatic on TV in the 2018 fiscal year. He noted that programmatic is “already a key part of our digital business.” He added: “This will allow us to make better use of our inventory, improve revenue yield on every impression, and create a more efficient process for Corus and our agency partners. We plan to introduce beta trials with the five major agencies this year.” Corus isn’t the only Canadian company to be looking at ad tech, with Bell CEO George Cope saying recently his company needs to do more in the space, and the company launching programmatic ads on billboards. Murphy said the company is seeing more advertisers integrate audience segmentation data to target campaigns more effectively, and is working with TV service providers on dynamic ad insertions on video-on-demand content, which works directly through the set-top box. “Today, this technology is available at Rogers, and we are working with and others on a broader national roadmap. We already have a growing group of advertisers who are taking advantage of this technology and it is scaling quickly. As with any new product, there is an awareness and adoption growth curve, which we expect to see as new technology and platforms such as the X1 and IPTV enhancements roll out into the market.” Rogers, Shaw, Quebecor Inc.’s Videotron, are all moving to Comcast Corp.’s X1 IPTV platform. During the call, Murphy noted that part of the reason the company is so focused on ad tech and data analytics is the competition from Facebook Inc. and Alphabet Inc.’s Google. Canaccord Genuity analyst Aravinda Galappatthige said in a note that ad tech is critical for the medium- to long-term outlook for Corus’ TV advertising. RBC’s McReynolds also wrote that he supports Corus’ strategy to “increasingly lean on content and ad tech to drive revenue growth.” However, McReynolds also noted that in order to become more positive on the stock, he’d like to see, among other developments, more progress among Canadian broadcasters in adopting ad tech, something that could “begin to gain traction as X1 is deployed.” Murphy also touched on the company’s views on making a move in the over-the-top (OTT) space. “We’ve been pretty consistent in saying that we’re so focused financially on … our core that we’re reticent at the moment to invest in businesses that do not return cash-on-cash in the year. We continue to take that view, but increasingly we’re also looking hard at the merits of what I would describe as a fast follower would look like,” Murphy said. “The longer we wait, the cheaper these platforms get for us to deploy, there’s increasingly some interesting partner opportunities presenting themselves.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Ahmad Hathout atahathout@thewirereport.ca CORRECTION: This story has been updated to correct a misquoted word in the second-last paragraph.

As its TV ad revenue drops, Corus says ad tech is the future

Broadcast | January 10, 2018

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As its TV ad revenue drops, Corus says ad tech is the future

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