Private over-the-air broadcasters struggle to regain lost advertising revenues

Five years after the 2008 global financial crisis caused a 10 per cent decline in Canada's TV advertising revenues, private conventional broadcasters are still feeling the pain. “If you look at the conventional numbers, the recovery isn't there,” Theresa Truetler, president and CEO of the Television Bureau of Canada (TVB), said in an interview last week. “It's not a simple answer. There's a whole bunch of factors at play here.” According to CRTC data, privately owned over-the-air broadcasters' collective ad revenues fell 13 per cent from $2.04 billion in the 2007 broadcast year to $1.81 billion two years later, and have never fully recovered. Those broadcasters—including major networks CTV, Global, Citytv, APTN and TVA as well as other over-the-air stations—had $1.94 billion in ad revenues in 2010 and $1.95 billion in 2011 before their ad revenues fell back down to $1.83 billion in 2012, the most recent year for which data is available. Over the same period, public broadcaster CBC/Radio-Canada's ad revenues fell 19 per cent from $366 million in 2008 to $297 million in 2009 before growing again over the last three years and reaching a new high of $373 million in 2012. Specialty and pay channel ad revenues have also rebounded since falling two per cent from $1.03 billion in 2008 to $1 billion in 2009 and reached a new high of $1.26 billion in 2012. Treutler said one factor that has impacted conventional TV's ad revenue growth is the ever-expanding list of specialty channels, which have steadily claimed a larger share of the industry's ad revenues since 2007, while charging half as much for ads, on average, than private conventional broadcasters. “In principle, ad dollars follow consumer behaviour and consumer media usage,” Treutler said. “So as the number of specialty networks increases, there's more and more viewing going to specialty, and you can see that borne out in the steady increase in specialty revenue dollars.” In 2007, Canada's private-sector conventional broadcasters held a 32 per cent “viewing share” of the national television market and a 62 per cent share of the TV industry's ad revenues, meaning those over-the-air broadcasters accounted for nearly a third of Canadians' television viewing and nearly two-thirds of Canadian broadcasters' $3.3 billion in ad revenues. That same year, Canadian specialty channels accounted for 29 per cent of Canadians' TV viewing and 29 per cent of the industry's ad revenues. By 2012, the private over-the-air broadcasters' national viewing share had fallen to 26 per cent, while their share of television ad revenues fell to 53 per cent of the industry's $3.47 billion total. Specialty and pay channels' viewing share that year was 36 per cent of the Canadian total, as was their collective share of the national ad revenues. Independent broadcast consultant Kelly Lynn Ashton said many specialty channels compete over the same potential advertisers as the national over-the-air networks, though others compete over different advertising pools aimed at specific segments of the TV-watching population. “In the children's market, yes, they have a separate pool, but in other cases, some of them are doing really well and they probably are competing,” she said. “The niche audience is, in some cases, a distinct audience from the mass market, but not always.” Gord Hendren, president of Charlton Strategic Research, said many mass advertisers are attracted to high-demand sports programming like NHL hockey, which is more typically found on sports-themed specialty channels and the CBC than on the private conventional broadcasters. TSN, the country's most popular sports channel, is owned by BCE Inc., which also has the CTV over-the-air network. Sportsnet, the second-most popular sports channel, is the property of Rogers Communications Inc., owner of the Citytv network. “Sports is the one piece of content that's preferred live. ... Advertisers will pay for a live audience,” Hendren said. “They have a stronger following, a more loyal following. And therefore they are able to attract advertisers more easily.” Michel Arpin, former CRTC vice-chair of broadcasting, said there is “no doubt” the specialty channels' increased viewing share has factored into the conventional stations' inability to regain the ad dollars they lost following the global economic crisis. Arpin noted that Canadians are also spending more of their entertainment time watching over-the-top video services such as Netflix Inc. The CRTC said in October that 33 per cent of Canadians watched TV programming online in 2012, typically for three hours a week. Seventeen per cent subscribed to Netflix, the commission said. Treutler noted that Canada's conventional broadcasters also make much of their programming content available online, though have no way to demonstrate the value of advertising on their websites. “The problem that the industry faces right now is that measurement is not keeping up with how consumers' viewing habits are changing,” she said, noting that television viewing measurement company BBM Canada does not currently track broadcasters’ website traffic. “They're getting something for it. They're clearly selling it ... but are they being adequately compensated for the eyeballs? Probably not because the currency isn't there; the measurement isn't there.” Ashton said most companies that buy ad time on the conventional broadcasters' websites reach multi-platform deals that include TV ad time as well. She said broadcasters that categorize those packaged deals as online revenue instead of their TV revenue can also impact the television industry's reported financial figures. “They can allocate that one buy however they want,” she said. “We have to take them on their word.” Treutler added that because advertising decisions are increasingly centralized in places outside the country, a national campaign for Canada’s over-the-air broadcasters often falls off their radar screens as advertising teams struggle with tighter budgets and mandates for more focused advertising. “We've definitely heard those kinds of comments from marketers that, as the world becomes smaller ... Canada is, from a global perspective, not that big of a market,” she said. “So it's easy to cut back here to fund something else.” The good news for private conventional broadcasters, Ashton said, is that many larger companies are still willing to spend the money to reach the type of mass audience that's usually only available on a national network. “Tim Hortons is still advertising nationally. TD Bank is still advertising nationally. The national brands are still there and you can see those ads on conventional,” Ashton said. “The North American brands, you can see them on CTV and Global. They're there.” —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca.

Private over-the-air broadcasters struggle to regain lost advertising revenues

Broadcast | November 11, 2013

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