BCE, parent company of Bell Media, is the latest company to release its quarterly financials, giving some insight into the initial financial effects of COVID-19. Although the quarter, which ended March 31, only encompassed a little more than two weeks of the official pandemic period, the impact was already felt by companies, from legacy media to big digital players. BCE was no exception.
Media operating revenue for BCE is up 0.9% to $725 million, which was driven by higher subscription revenue from Crave, as well as contract renewals with TV distributors. Advertising revenue, however, was down 2.5% year-over-year, due mainly to softness in the overall ad market as the result of COVID-19.
“Advertising is frequently one of the first discretionary expenses that companies cut back on,” CFO Glen LeBlanc reported on the company’s conference call on Thursday morning. And, he says, although the current pullback is relatively small, he cautions that it will likely be bigger in Q2, with the specifics depending on the length of the current shutdown and the resulting economic impact.
Although viewership on Bell Media’s TV properties is up 25% year-over-year, that has not translated to big returns from the advertising business, nor will it for some time.
“Although media consumption and TV viewership is up, ad spending won’t necessarily follow,” said LeBlanc. Additionally, he says, because advertising “has a very high revenue flow-through,” Bell Media’s EBITDA did decrease by 6.1%, bringing in a total of $155 million. Besides lower ad rev, this was the result of higher operating costs, driven mainly by ongoing Crave content expansion as well as the cost of broadcasting rights for the Super Bowl.
On the plus side for media, TSN and RDS customer deactivation was minimal – although BCE did not disclose specific figures – which the company remarked is a strong point considering the lack of live sports.
Bell did not make any announcements regarding the status of its Upfronts or its fall television schedule. The subject of TV programming did come up following its presentation through an analyst question. While BCE CEO Mirko Bibic did not offer any specifics on its fall programming, he said that although Q2 will be tough in terms of advertising, the strength of Bell Media’s subscription revenues is helping to keep the segment strong.
Bibic added, “Customers and viewers are rediscovering the value and attractiveness of linear TV and you can see it in the ratings. You can also see it in terms of the engagement with Crave… more customers are discovering it.” Crave has engaged in several promotions such as a free month for subscribers and a partnership with TIFF to offer movie nights and live Q&As with filmmakers.
Additionally, said Bibic, there has been “some stabilization in the cancellation of ad buys,” with pickup in advertising across categories such as financial services, technology and CPG. While there’s still no confirmation – although plenty of speculation – on timelines for the return of the NBA and NHL seasons, he said there is some hope in an eventual return from sports organizations such as UFC, NASCAR and the PGA Tour.
Bibic added that “we’re going to be managing our cost structure very carefully in media,” while LeBlanc once again cautioned that “Q2 is going to be a difficult quarter.”
Additionally, BCE as a whole has not issued financial guidance for the remainder of the year. Across the greater company, operating revenue was $5.7 billion, down 0.9% year-over-year. The slight reduction was due to an overall softened economy, affecting all operating segments. Service revenue was up 0.3% year-over-year to $5.1 billion, while product revenue decreased 9.7% to $622 million.
