TV growth flat, conventional revenues down: StatsCan

For the first time ever, ad revenues represented less than half of the TV sector's total revenues, according to the annual Statistics Canada report on the television broadcasting industry. CBC's Al Dark and CTV's Rick Brace give a broadcaster's perspective.

In the ad sales department at CBC, the awful period known as 2009 seems long-forgotten. But a Statistics Canada report released this week is bringing back painful memories with some hard data on the television industry that shows the broadcasting sector’s operating revenues are the lowest year-over-year increase since 1997, totalling $6.5 billion, up just 0.6% from 2008.

‘The numbers are just coming out now but from our perspective, the sales guys who have kind of been living and breathing it over the last 16 to 18 months; I feel like we passed that six months ago,’ says Al Dark, executive director of sales for CBC English. Ad revenues for Canadian TV broadcasters fell 8.4% to $3.1 billion in 2009, the first drop in 15 years, representing less than half (47.8%) of the sector’s total revenues.

Sales of air time were down by 18% for public and non-commercial broadcasters, according to the report, while private conventional TV was down by 9.5%. But Dark says the outlook for 2010 is much brighter. Sales of airtime may have been low, but the operating revenues for public broadcasters were actually up by 1.9% in 2009, whereas private conventional television saw operating revenues fall by 7.7%, which is the largest annual drop in revenues for this segment in more than 30 years.

‘It was the worst I’ve ever seen in my career, but the bounce has been quite substantial and much quicker than we expected,’ Dark tells MiC. CBC is now focusing on revenue streams that can make up for the loss of airtime sales – for instance, sponsorship integration, which is based on CPMs plus premiums. The highest premium is charged for brands that are woven into the script, and there are four levels of premium pricing below that, he explains, charged because the brand is outside of commercial clutter.

The significance of integrations as a revenue stream should not be overstated, however, says Rick Brace, president, revenue, business planning and sports, CTV.

‘It’s certainly become something that’s important to us not just in specialty but also in conventional,’ Brace tells MiC. ‘We see continued interest in product integration and product placement. As an overall percentage of revenue, it’s relatively small but it’s certainly material.’

Specialty TV and pay television segments again experienced gains of 3.3% and 16.6% respectively between 2008 and 2009. The profit margin for these broadcasters was in excess of 20% for the fifth consecutive year, increasing from 22.1% in 2008 to 23.5% in 2009, while operating profits rose from $648.2 million to $728.7 million.

However, the segment’s growth seems to be levelling out as their combined year-over-year revenue increases have been declining for the past few years, in both absolute and percentage terms, according to the StatsCan report. But what is driving the growth of specialty in Canada? It’s not the ratings boost that conventional TV is seeing because of PPMs, says Dark.

‘We have personally not seen substantial audience growth on our specialty services, but we’ve seen increased demand. So because of that demand we’ve been able to increase our CPMs,’ says Dark. ‘Marketers’ budgets have not been increasing, they have to do more with less, so they’ve arbitrarily been shifting certain dollars away from conventional television and into specialty. And the specialty, because they have been bought out by conventional owners, are raising their rates.’

In a lot of cases – not including high-profile sporting events – the price of CPMs is at about 50% of conventional, says Brace. ‘It makes an attractive option for advertisers to go that route,’ says Brace. He adds that the price of CPMs will still, at the end of the day, depend on numbers. ‘Our strategy is to try to [add], particularly to our premium specialty services, the best possible programming,’ he says.

Private conventional television has faced a slew of financial challenges over the past five years. Whereas the profit margin before interest and taxes of this sector was 11.2% in 2005, last year it obtained a negative result (-5.7%). A good part of that was because of the recession, says Brace.

‘If you’re trying to be efficient and you’ve got reduced advertising to spend, you may opt for specialty. We are seeing that rebounding this year, which we’re grateful for, and we are able to look at the improved rates as time has gone on. We’re seeing advertisers aggressively coming back in a lot of cases.’