TSN’s, Sportsnet’s expenses surge, profits tumble: CRTC data

Canada's most popular sports specialty channels reported millions of dollars in additional expenses as profits dropped during the 2012 broadcast year, according to new specialty channel data released by the CRTC. The regulator released data for the broadcasting year ended Aug. 31, 2012, showing that BCE Inc.'s TSN sports channel and Rogers Communications Inc.'s Sportsnet reported a tumble in profits and surge in expenses, particularly in programming and production costs. “We should expect that rights fees are going to continue to climb over time,” broadcast analyst Gordon Hendren, president of Charlton Strategic Research Inc., said in a phone interview. “Sports programming is the one piece of content that's preferred live. It will be in demand.” TSN's programming and production expenses rose from $167 million in 2011 to $272 million in 2012, or by 63 per cent. That contributed to a $21-million fall in pre-tax profits, to $36.99 million in 2012 from $58.34 million in 2011, according to the CRTC data. Despite lower profits, TSN's revenues rose 30 per cent, from $289.4 million in 2011 to $374.83 million in 2012. TSN's subscribers also rose by 2 per cent from 9,003,852 in 2011 to 9,190,812 in 2012. "The increasing costs of sports contents rights continues to be a concern, especially when revenue growth does not keep pace," Scott Henderson, a spokesman for BCE's Bell Media division, said in an emailed statement, without being more specific about the expenses. Sportsnet's total expenses rose 13 per cent from 2011, reaching $201.3 million in 2012, mostly due to rising programming and production costs, which rose 17.4 per cent year-over-year, from $150.6 million to $176.8 million, the CRTC said. The channel, owned by Rogers, reported a $10-million decline in pre-tax profits from $31.3 million in 2011 to $21.6 million in 2012, during which time subscribers also fell from 8,957,170 to 8,784,719. Rogers sports specialty channel The Score, which the company last year acquired for $167 million from Score Media Inc., reported profits of $5.2 million in 2012, down from $7.5 million in 2011. The Score's expenses rose 7.6 per cent from 2011, reaching $35.1 million in 2012, again mostly on higher program and production costs, the CRTC said. Subscribers fell 1.4 per cent to 6,731,693 as of Aug. 31, 2012. Hendren said rising sports rights fees are a short term issue as broadcasters figure out more appropriate pricing for sports channels and sports TV packages, as well as for the rights to distribute sports programming on mobile and online platforms. He said single sports channels should not be valued in isolation because the companies that own them have stables of channels, and sports programming can generate loyalty for the company brand and the other channels under it. “Sports channels are not going away. They're going to be more important in the future,” Hendren said. BMO telecom and media analyst Tim Casey said in a research note in March that the wholesale carriage rates for TSN and Sportsnet will rise over the next few years following the CRTC's deregulation of the sports and news specialty channel genres in 2011. Casey forecasted the wholesale carriage rates for those channels to rise from their former rates of about $1.50 per subscriber per month towards a range of $3 as broadcast distribution agreements are renewed. Quebecor Media Inc.'s French-language specialty channel TVA Sports, which launched in the fall of 2011 and reported annual data to the CRTC for the first time, had 1,639,336 subscribers as of Aug. 31, 2012, and an annual loss of $20.7 million, according to the data. Quebecor announced this month that it had reached an agreement with CBC/Radio-Canada for TVA Sports to air French-language coverage of the 2014 FIFA World Cup Brazil. The company's Sun News specialty channel, which at a CRTC public hearing this month will argue for mandatory carriage on basic with a wholesale carriage fee of 18 cents per subscriber per month, reported a 2012 loss of $18.5 million, up from a loss of $13.4 million in 2011 due to higher expenses. Sun News, which launched in April 2011, had 4,856,022 subscribers as of Aug. 31, 2012, the CRTC said. Astral Media Inc.'s The Move Network (TMN), which offers HBO content and which BCE plans to purchase of as part of a $3.38 billion deal for Astral, reported a small decline in profits and subscribers from 2011 to 2012. TMN's profits fell from $26.9 million to $26.5 million and its subscribers by more than three per cent, from 1,226,465 to 1,187,520, the CRTC said. Astral's Movie Network Encore specialty channel also declined in profits in 2012, from $13.9 million to $11.4 million. Subscribers fell 6.5 per cent year-over-year, from 1,583,223 to 1,480,266. The CRTC said in a release Thursday that the industry's total pay, video-on-demand and specialty channel revenues were $3.97 billion in 2012, with $1.9 billion from cable TV subscribers, $733.7 million from satellite, $1.2 billion from national advertising, and $31 million from local advertising. The TV industry segment created 226 new jobs, employed 6,176 people and paid $487 million in salaries during the year, the CRTC said. The television services spent $1.39 billion on Canadian programming in 2012, a 9.6 per cent rise from a year earlier, the commission said. They generated a total of $3.97 billion in revenues in 2012, rising 5.9 per cent from 2011, and national advertising revenues rose for a third consecutive year to $1.23 billion, the CRTC said. The data reported Thursday represented 229 pay, pay-per-view, or video-on-demand and specialty TV services, the CRTC said. Twenty-two new services started up during the broadcast year and three ceased operations. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and copy editing by Danika Grenier at dgrenier@thewirereport.ca

TSN’s, Sportsnet’s expenses surge, profits tumble: CRTC data

Broadcast | April 11, 2013

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