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Broadcasting Sector Overview

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Total broadcasting revenues declined by 1.2% between 2017 and 2018. The biggest drop in revenue was from television distribution services (or BDUs), as they collectively reported a decrease of $168 million (or 2.0%).

Although radio stations continue to report declining revenues, the rate at which the revenues are shrinking is slowing down. This year, commercial stations reported a -0.5% growth rate, which is lower than the 5-year average rate of -1.6%.

• Over 700 commercial radio stations reported revenues of $1,514 million in 2018, compared to $1,521 million in 2017. English-language radio stations outperformed all other stations with a reported -0.1% growth rate, followed by French-language stations (-1.7%) and ethnic stations (-3.5%).
• The most pronounced decline was reported by Ethnic AM stations, while the FM English-language and Ethnic stations reported slight increases.
• The shift from local advertising to national advertising continues to occur. Local advertising revenues dropped 0.9% over the last year, while national advertising revenues continued to rise modestly at a rate of 0.7%.

• The profitability margin for commercial radio has remained stable with a PBIT margin of 18.3%. Radio stations in the Atlantic region experienced the sharpest decline in 2018. On the flip side, Ontario and BC and Territories were the only regions reporting positive growth rates in 2018.

• Non-designated markets, which are typically smaller markets with fewer than 3 ownership groups, reported a slight increase of 0.02% from 2017 to 2018. Five new stations were reported in this segment of the industry in 2018.
• The non-designated markets of Newfoundland and Labrador, Nova Scotia and Prince Edward Island posted a combined -6.4% decline in revenue in 2018. Halifax and St. John’s also posted negative growth rates of -3.9% and -7.7%, respectively.
• Some of the best performing radio markets this year were located in Southern and Central Ontario. Kitchener-Waterloo was the best performing radio market in all of Canada with a 4.3% growth rate, while Peterborough, Toronto, St. Catharines-Niagara and Hamilton posted growth rates of 4.1%, 2.3%, 1.9% and 1.9%, respectively.

Commercial stations

Conventional stations generated less revenue in 2018 than in 2017 as they continue to feel the effects of weakening advertising sales. This trend is consistent with the overall negative growth of the past 7 years.

• Conventional stations reported revenues of $1,541 million in 2018, compared to $1,608 million in 2017. The year-over-year decline of -4.2% exceeds the 5-year average of -3.9%.

• BC and Territories and Quebec regions posted the greatest revenue declines (-6.8% and -5.8%, respectively).
• The Prairies were the only region to post a positive revenue growth this year. Albeit negligible, the 27 stations located within Manitoba, Saskatchewan and Alberta posted a collective 0.4% year-over-year growth rate.
• Independently-owned stations received nearly $22 million in revenue from the Independent Local News Fund (ILNF). This year is the first year of the new fund which was created to support non-vertically-integrated conventional stations which provide local news.
• For the first time this year, television service providers (or BDUs) were afforded the flexibility to redistribute all or part of their local expression contribution (community channel expenditures) to fund local news programming on their local conventional stations^{Footnote 1}. The aggregated transfer amount reported by conventional stations for 2018 totalled approximately $48 million. While the region of Quebec accounts for approximately 1/5 of total conventional TV revenues, the funds transferred within that region accounted for only 5% of the total national transfer amount.
• Increases in programming and production expenses resulted in overall expenses exceeding total revenues for the fourth consecutive year. Conventional stations posted a profit before interest and taxes (PBIT) of -$135 million in 2018, compared to -$101 million in 2017.
• Canadian programming expenditures (CPE) increased by 6.1% in 2018. Conventional television stations reported $656 million in CPE in 2018, compared to $618 million in 2017. The bulk (58%) of the surge in CPE came from the News and Drama program categories, as both categories increased by approximately $11 million in 2018.

CBC Conventional Television

• The public broadcaster is reporting an increase of 12.6% in total revenues for its conventional television this year, going from $944 million in 2017 to $1,063 million in 2018.
• Commensurately, CPE expenditures also increased to $580 million this year, compared to $509 million in 2017.
• These increases are mainly attributable to increases in national advertising revenues and programming expenses due to the broadcast of the 2018 PyeongChang Winter Olympics.

Educational stations

The Conventional television financial summary now includes separate information relating to educational stations. Together, 6 educational stations reported nearly $187 million in revenue and spent over $67 million in CPE in 2018.

For the second consecutive year, discretionary and on-demand services reported declining revenues and reduced spending. These services spent over $1.7 billion on Canadian programming expenditures this year.

• Revenue growth rates of the nearly 300 discretionary and on-demand services varied among languages. English/Bilingual services and French-language services reported negative revenue growth of -2.9% and -4.5%, respectively. However, Ethnic services experienced a significant double-digit year-over-year revenue growth rate of 23.3%.

• Discretionary services are reporting a negative year-over-year growth rate of -1.8% for 2018. However, this pales in comparison to the -14.5% negative growth rate reported by the On-demand services this year.
• The “Top 10” discretionary and on-demand services in terms of revenues reported over $1.9 billion in revenue in 2018, this represents a slight year-over-year decline of 1.0% compared to 2017. The over 280 services outside of the “Top 10” reported a steeper year-over-year revenue decline of -4.0%, totalling $2.3 billion in revenue.

• English/Bilingual services continue to be the most profitable services. This year, the English/Bilingual services reported a PBIT margin of 25.9%, while the French-language and Ethnic services came in at 10.0% and 11.5%, respectively.
• The profitability of discretionary services decreased from 24.8% in 2017 to 23.5% in 2018. Conversely, the profitability of on-demand services increased from 10.9% in 2017 to 13.4% in 2018, this increase was primarily caused by a decrease in expenses.
• Discretionary services reported nearly $1.7 billion in CPE in 2018. Over 50% of the CPE for discretionary services was spent on sports programming, followed by 14% on news programming.
  • Of the $370 million allocated to drama, music and entertainment programming, $69 million was spent on reality television.

Television service providers (BDUs) continue their downward trend, albeit at a slightly slower rate than the previous year. The continued uptake in IPTV services is helping offset drops reported by cable and satellite providers (Direct-to-Home).

• For the fourth consecutive year, television service providers have recorded a negative growth rate. However, the rate at which revenues are declining is showing signs of slowing down, going from -2.3% in 2017 to -2.0% in 2018. Overall revenues dropped by $168 million, from $8,581 million in 2017 to $8,414 million in 2018.
• Cable and satellite service providers continue to report revenue declines, dropping by 3.4% and 5.0% in the last year. Albeit negative, these rates fare better than the five-year average annual growth rate declines of -3.9% (cable) and -6.3% (satellite).
• For the first time since its introduction into the Canadian marketplace, IPTV revenues have surpassed the $2 billion mark. However, the pace at which IPTV is growing is slowing down. IPTV revenues grew by 4.5% in 2018, which is much lower than the five-year average annual growth rate of 12.7%.
• The sale and rental of set-top boxes generated $937 million dollars and accounted for over 11% of total revenues in 2018. Revenue from set-top box rentals increased 4% compared with 2017, despite subscribers falling by 0.9% over the same period. Set-top box rentals are the only segment of revenue growth for television service providers.

• The total number of subscribers decreased by 0.9% in 2018, this is an improvement compared to last year’s decrease of -1.7%. While cable and satellite providers continue to lose subscribers, IPTV added over 200,000 subscriptions to its subscriber base in 2018. Approximately 2.8 million Canadian households now subscribe to IPTV.
• Cable and IPTV aggregated subscribers increased in Ontario, Quebec and the Atlantic region in 2018, while the Prairies and BC and Territories reported losses. Quebec cable and IPTV providers were the only providers reporting increases in Canada in 2018.

• Cable, IPTV and satellite providers all reported weaker operating margins in 2018. This year marks the second year IPTV providers have posted a positive operating margin.

• In 2018, BDUs contributed $422 million to the creation and production of Canadian programming, compared to $417 million in 2017.