Q3 ‘very tough’ for Corus as ad revenues plummet

The financial impacts of COVID-19 induced lockdowns led to a “very tough quarter” for Corus Entertainment Inc. as advertising revenue dropped dramatically, CEO Doug Murphy told analysts on Friday, with total revenues dropping 24 per cent on the year before to $348.9 million, compared to $458.4 million in 2019. The third quarter, spanning from March 1 to May 31, is the first to reflect the financial impact of the virus and the lockdowns that stemmed from it. TV advertising for the quarter dropped by 31.5 per cent year-on-year, while radio advertising declined by 52.2 per cent. Murphy, who told last month’s TD Securities Telecom and Media Conference that the television advertising market had moved to a period of “modest recovery”, told analysts there was no doubt that advertising would return over time as the economy reopened and Corus was “ready to support them.” He said the company had reviewed and reduced expenses during the pandemic while advancing its strategic priorities through the launch of a streamlined advertising approach called common audience segments, growing its radio and TV audiences and acquiring the rights to the original content of NBC’s Peacock. Murphy told investors Corus had unveiled a “strong” lineup of fall content during its stand-up this week. Responding to a question from National Bank Financial analyst Adam Shine, Murphy said the bulk of its specialty programming had already been filmed, stating the company was “very confident we can maintain audiences even if there’s protracted delays in returning to normal.” Looking at Corus’ Global Television Network, COVID-19 had forced some shows, such as Prodigal Son, New Amsterdam and FBI to be moved to mid-season launches. “Those are still evolving to be honest with you, we’re in constant contact with our U.S. studio partners, everybody’s anxious to get back to production,” Murphy said. “Some shows are already in post, so they’re just being finished up now, anything that was in principal photography is still kind of on hold but to the best of our knowledge we’ve got a pretty good line up secured for fall.” In television, the company reported revenues of $331.3 million, down 21 per cent from the $421.5 million it reported last year, driven mostly by the 31 per cent advertising decline, as well as a 12 per cent drop in merchandising, distribution and other revenues. Radio revenues plunged to $17.6 million, a 52 per cent decrease on the $36.9 million it reported last year, again caused by the COVID-19 driven advertising decline, despite Corus saying in its quarterly report that time spent listening to the radio and ratings had increased in almost all major markets during the spring. Corus recorded a profit of $111.3 million for the quarter, a 34.7 per cent reduction on the $170.5 million profit recorded during the same period in 2019. The company recorded a television section profit of $115.8 million for the quarter, but losses of $1.8 million and $2.7 million in its radio and corporate sections, respectively. Responding to a question from RBC Capital Markets analyst Drew McReynolds, Murphy said Corus was buoyed by recent comments from Heritage Minister Steven Guilbeault that legislation requiring foreign media organizations support the creation and discovery of Canadian content would be tabled in the fall. Corus has campaigned for foreign companies to be subject to the same Canadian content and discoverability rules as their Canadian counterparts, as well as calling for traditional obligations around Canadian content expenditures to be reduced due to the pandemic. “The minister was unequivocal in saying it’s being brought to the house in the fall and there will thereafter be some firm direction to the regulatory body to make more immediate change,” Murphy told analysts. “Our view is that will include both a levelling of the playing field, which will mean more people contributing to the system, principally the foreign-owned internet media broadcasters as I’ve often described them, Apple, Netflix, Amazon etc, and a commensurate understanding that the existing burden on traditional broadcasters are unsustainable. So we still believe that that will be the outcome and obviously it can’t happen soon enough.” Talking about the new advertising segments, Murphy said Canadian broadcasters were working together and innovating, and needed to be supported by the federal government. “This is where Ottawa has got to come to the table. It cannot sit there and drag their feet and not make the change they’ve gotta make to let us be more competitive,” Murphy said. “Having us burdened with obligations that were formed 30 years while we’re leading a blazing trail with industry and Ottawa is not doing anything is unacceptable.” In briefing notes to investors, McReynolds and Canaccord Genuity’s Aravinda Galappatthige both said radio and TV advertising levels were lower than they expected, but McReynolds said greater than usual variance to estimates was expected due to COVID-19. --With reporting by Adam Langenberg at alangenberg@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Q3 ‘very tough’ for Corus as ad revenues plummet

Broadcast | June 26, 2020

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