Broadcasting Financial Summaries 2016 Highlights
Overall Broadcasting Sector
- Total broadcasting revenues declined slightly, going from $18.0 billion in 2015 to $17.9 billion in 2016, a change of 0.5%. All commercial broadcasting sectors experienced slight declines, with the exception of discretionary & on-demand services which experienced a slight increase.
- Canadian television broadcasters spent over $3 billion on Canadian programming expenditures (CPE) in 2016, an increase of over $150 million from 2015. Some of this increase is due to additional CPE expenditures by the CBC.
- CBC’s annual parliamentary appropriation for its conventional television and radio networks increased by $54 M and $14 M, respectively. For all networks combined, the parliamentary appropriation reached almost $1.1 billion in 2016.
- Total subscribers to television service providers (BDUs) decreased by 1.1% in 2016, less than the decrease of 1.4% reported in 2015.
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Conventional television stations continue to feel the effects of weakening advertising sales. Stations are adjusting by reducing overall spending which is keeping operating margins around the 20% level.
- Total revenues declined by 4.5% during the last broadcast year, going from $1,757 million in 2015 to $1,678 million in 2016. This is the fifth consecutive year that conventional television services have reported revenue declines due to continued decreases in advertising dollars. This decline is consistent with the average annual growth rate of -4.8% from 2012 to 2016.
- Weakened economic conditions in the Prairies and Atlantic regions have contributed to a decrease in local advertising revenues in those regions.
- Conventional television stations in Quebec reported a decline of 2.6% in total revenues, faring better than the decline of 4.5% at the national level. Quebec was the only region to post a positive growth rate for local advertising revenues in 2016 (1.8%).
- The Small Market Local Programming Fund (SMLPF) added $8.6 million to total revenues, a decrease of 4.7%. The decline is commensurate with revenue trends observed in 2016.
- Canadian programming expenditures (CPE) declined for the first time since 2013, with a decrease of 3.4%. Conventional television stations reported $633 million in CPE this year, compared to $656 million last year. Over 60% of the expenditures are geared toward information-related programming (categories 1, 2a, 2b, 3-5).
- Non-Canadian programming expenses were reduced by almost 7%, going from $656 million in 2015 to $610 million in 2016.
- Despite efforts to reduce spending, overall expenses have exceeded total revenues for the third consecutive year. Conventional stations posted a PBIT of -$113 million in 2016, compared to -$141 million in 2015.
- Private conventional television stations employed over 5,300 individuals in 2016. The number of persons employed in the sector decreased by almost 500 individuals from 2015, and by over 1,000 individuals since 2012.
- CBC conventional stations reported an increase of over 7% in total revenues, going from $1,107 million in 2015 to $1,185 million in 2016. The public broadcaster saw an increase of over 30% in national advertising and a jump of over 8% in programming expenses, due primarily to the broadcast of the 2016 Rio Olympics.
- CBC also reported an increase of 7% in Parliamentary Appropriation revenues.
- CBC’s added investments in Canadian programming allowed it to surpass its private counterparts in total Canadian programming expenditures this year. CBC’s CPE increased by nearly $80 million (or 14%) to reach $635 million, compared to $557 million in 2015.
Discretionary and On-demand Services
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Discretionary and On-demand services reported slight increases in overall revenues. Ongoing growth and profitability for these services are due to their dual stream of advertising and subscription revenues.
- Three hundred and seven (307) discretionary and on-demand services generated $4.4 billion in revenues in 2016, slightly higher than the $4.3 billion reported in 2015. The increase is mainly due to revenue increases reported by sports and movie-oriented services.
- *NEW* The inclusion of exempt third-language category B services provides a more accurate picture of the discretionary and on-demand television sector as a whole.
- English-language stations represent more than half of the total number of services, but generate over 80% of total revenues.
- Subscriber revenues made up over two thirds (2/3) of total revenues in 2016. This proportion has remained consistent from previous years.
- National advertising revenues increased by over 9% in 2016, while subscriber revenues posted a modest increase of 0.5%.
- The top 10 highest grossing services accounted for 42% of total revenues. These services collectively spent over $1 billion in Canadian programming expenses. This amount represents a third (1/3) of total CPE.
- Sports-oriented services (TSN, Sportsnet, Sportsnet One, RDS, TVA Sports) remain among the biggest revenue generators and enjoy above-average profitability margins. Other genres among the top 10 highest grossing services consist of general interest (Discovery Channel, W Network and History Television), movie (The Movie Network) and news (CBC News Network).
- Total expenses increased by 3.7%, going from $3.3 billion in 2015 to $3.4 billion in 2016. This growth rate is more modest compared to the 4.3% posted in 2015 and 7.1% in 2014.
- Programming and production expenses increased by 6% in 2016, while administrative and general expenses decreased by more than 5% over the same period.
- CPE increased by 5.9% from 2015 to 2016, going from $1,636 million to $1,732 million. Over half of all CPE by specialty services went toward sports-related programming.
- PBIT levels vary among different services and service types. In general, specialty services are more profitable than pay and on-demand services.
Television Service Providers (Broadcasting Distribution Undertakings)
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Television service providers (BDUs) continue their downward trend with drops in revenues and subscribers. IPTV (Internet Protocol Television) gains across the country are helping offset losses reported by cable and DTH (Direct-to-Home).
- For the second consecutive year, television service providers have reported a negative growth rate. Overall, providers reported a drop of 2.1% in revenues for 2016, compared to a drop of 0.1% in 2015. Total revenues have fallen by nearly $185 million, going from $8.9 billion in 2015 to $8.7 billion in 2016.
- DTH and cable service providers continue their downward trend by posting decreases in both revenues and subscribers. Five years ago, DTH service providers held nearly 30% of the BDU revenue market share. Today, their market share has been reduced to under 25%.
- IPTV revenues grew by nearly 15% in 2016 to reach $1.8 billion. IPTV has grown annually, on average, by 32% since 2012.
- *NEW* The sale and rental of set-top boxes generated $830 million dollars and accounted for nearly 10% of total revenues in 2016. This is the first time set-top box sale and rental revenues are reported separately within general revenue.
- The total number of subscribers decreased by 1.1% in 2016, less than the decrease of 1.4% reported in 2015.
- IPTV added an additional 300,000 subscriptions to its subscriber base in 2016 as approximately 2.5 million Canadian households now subscribe to IPTV.
- Despite IPTV’s continued double-digit subscriber growth, the rate at which Canadian households are subscribing to IPTV is showing signs of slowing down. IPTV service providers reported subscriber growth at 13.8% in 2016, down from 21.3% in 2015.
- In 2016, BDUs contributed over $428 million to the creation and production of Canadian programming. This amount is slightly lower than last year’s figure of $437 million.
- Cable and DTH service providers continue to report operating margins in the twenty to thirty percent range, while IPTV providers have yet to yield profits given deployment costs and initial discounted offerings to attract customers.
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Commercial radio stations have posted negative growth for the third consecutive year. This trend is more pronounced for local advertising sales. Some regions have cited economic slowdowns as a contributor to lower advertising revenues. English-language stations reported revenue losses while French-language stations reported a moderate increase in revenues.
- Commercial radio revenues fell below the $1.6 billion mark and reverted to 2010 levels. Over 700 commercial radio stations reported revenues of $1,551 million, compared to $1,602 million in 2015. This represents a drop of 3.2%.
- Local advertising dropped 5.4% over the last year, while national advertising continue to rise but at a more modest rate of 1.2%.
- English-language stations reported a drop of over $53 million in revenues (-4.2%) in 2016 along with lower profitability margins. French-language stations reported a moderate increase of $3 million for a growth rate of 1.1%. A reduction in overall expenses helped French-language stations increase their profitability margin to 20.4%, compared to 16.7% in 2015.
- Ethnic stations have remained stable, collectively reporting over $46 million in total revenues in 2016. Local advertising revenues represent over 88% of total revenues, highlighting ethnic broadcasters’ ability to deliver content to targeted local audiences.
- Many western markets (particularly in Alberta) reported decreases in advertising revenues due to concerns regarding the instability of the oil industry as well as financial impacts stemming from the Fort McMurray and the Wood Buffalo Region wildfire. For example, the Edmonton radio market posted a negative revenue growth rate of 14.5% driven by a decrease of 19.1% in local advertising sales.
- Conversely, some Central and Eastern markets fared better than their Western counterparts. Saint John, New Brunswick recorded double digit growth of 10.7% in 2016. Windsor-Chatham, Ontario was just behind with a growth rate of 9.4% over the same period. This is particularly notable given that the national average experienced a 3.2% decline in total revenues.
- Both AM and FM bands were negatively affected by faltering advertising revenues in 2016, however, AM stations fared better than FM stations in terms of growth. AM stations reported revenues of $284 million and a negative growth rate of 0.6%. FM stations reported revenues of $1,267 million and a negative growth rate of 3.8%.
- Commercial radio’s PBIT margin remained stable at 19%. This margin is within the 18-20% range of the past 5 years.
- Total radio revenues for CBC increased by over $14 million (or 5.1%) between 2015 and 2016. The increase is almost entirely attributable to a change in the Parliamentary Appropriation.
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