Corus suspends dividend amid macroeconomic uncertainty, ad weakness

By Ahmad Hathout, Editor, CARTT.ca

Corus Entertainment CEO Doug Murphy said Friday that the CRTC’s preliminary view that the media company should see relief from its regulatory obligations, at least temporarily, is a significant move because it understands the financial environment it is going through.

Last week, the CRTC said it is of the view that Corus should have its spending on programs of national interest reduced to five per cent, instead of the regular 8.5 per cent, and to extend the deadline to pay back what it already owes the regulator from the pandemic relief period. Comments on the proposal are due Nov. 3.

“The regulator’s statement last week was the most substantive move toward regulatory change that our company has seen in years, and we are encouraged by it,” Murphy said on the company’s third-quarter financial earnings call, adding he won’t specify about costs related to the decision until it is finalized.

However, the statement, Murphy added, “acknowledges the challenges and opportunities of the moment: it would provide the much-needed flexibility in our content planning and spending for the coming years by letting us focus more on producing the best content that drives our linear and digital businesses.”

He also noted that the Online Streaming Act, which will force foreign platforms to contribute to Canadian content, “gets the big things right” to level the playing field and provide relief to those regulated. But he also said more “comprehensive reforms” are urgently needed.

“Additional contributions from foreign-owned streaming platforms must result in permanent reductions in Canadian broadcasters’ overall Canadian programming expenditure requirements,” he added.

The CRTC reasoned in its preliminary view that Corus’s financials are dire. In the media company’s application for relief earlier this month, it said high inflation, its sub-$1 share price, and its debt-to-liquid cash ratio reaching “unacceptable levels” after the content company saw a 61 per cent free cash decline over the previous year have put it in a precarious position with rapidly declining profitability.

Over the “challenging year,” the company has seen what Murphy described Friday as a “double whammy”: a decline in advertising dollars that has affected the industry and an increase in required spending on programming.

Murphy said there has been a “distortion” in the market since the pandemic: the supply chain and labour shortage issues are still here, especially with the writers strike, and wage inflation has challenged business models. He added the company’s clients have been squeezed as a result and they have had to make adjustments.

As such, the company has had to make changes to programming, including canceling Entertainment Tonight after 18 seasons.

Despite the difficulties, the company said its STACKTV and Global News products have been especially resilient during this turbulent period. The company’s Nelvana studio also announced this month that it has negotiated a distribution deal for Millie Magnificent.

In the meantime, Murphy said the company is now committed to “prudent actions.”

Corus announced earlier this month the elimination of the position of executive vice president of content and strategy and the expanded role of Troy Reeb as Executive Vice President of Networks and Content.

For the three months that ended Aug. 31, total television advertising revenues were down to $137.4 million, from $151.9 million last year. Subscriber revenues were also down to $126.5 million compared to the $127.7 million it saw last year. Distribution, production and other revenues were up to $50.4 million compared to $34.6 last year.

Together, the television segment saw revenues that were flat at $314.2 million compared to last year.

“For the year, almost all advertising categories exhibited declines as advertisers continued to hold, reduce or cut spending compared to the prior year with the exception of the iGaming and travel categories,” the company said in its financial filing. “Subscriber revenue declined from the prior year as a result of declines in the traditional linear business that exceeded growth from streaming services.

“The increase in distribution, production and other revenue was primarily driven by higher production deliveries by Nelvana and Aircraft Pictures, higher Corus Studios content distribution revenue, as well as higher Toon Boom Animation software licensing, partially offset by a decline in merchandising and book publishing sales,” it added.

For radio in the quarter, the company saw a slight dip to $24.6 million from $25.4 million last year.

Total revenues for television and radio were down slightly to $338.8 million, from $339.5 million in the same quarter last year.

Television profit was down this quarter to $49.7 million from $59 million last year, attributable to advertising and subscriber revenue losses. Radio profit, however, was up to nearly $3 million from $1.7 million last year.

For its outlook, it appears it will be a rocking immediate future before things get better. Corus said it expects its television advertising revenue in the first quarter of fiscal 2024 to decline in the range of 15-20 per cent compared to the prior year.

This story was first published by our sister publication, CARTT.ca and is reprinted with permission.