Sun News outperformed projections, ramped up subscribers: Giganomics report

Sun News Network has performed better than forecasted, reaching 4.9 million subscribers in 2012 and almost matching the channel's subscriber revenue projections under a business model involving mandatory carriage, Giganomics Consulting said in an analysis prepared for Cogeco Cable Inc. Citing CRTC data, Giganomics said subscriber revenues for Quebecor Media Inc.'s Sun News Network indicate that, in 2012, the channel outperformed its 2010 forecast by more than 150 per cent when operating as a standard specialty channel. The channel's 4,856,022 subscribers and $4.19 million in subscriber revenue in 2012 reached 90 per cent of a forecast made in 2010 that was based on subscriber revenue under a mandatory distribution licence, Giganomics said. Sun News reported total revenue of $5.66 million in the 2012 broadcast year, which started in September 2011, and an overall loss of $18.5 million. "The comparison of total revenues, including revenues from advertising, indicates an even stronger performance. Sun News outperformed its 2010 forecast of total revenues as a Category 2 service by almost 170% and obtained 98% of the forecast of total revenues assuming the service had mandatory access," the Giganomics analysis said. Cogeco filed the Giganomics report with the CRTC this week as part of the regulator's consultation on a proposed regulation that national, all-news channels must be offered to subscribers and grouped together in “neighbourhoods” on the dial. The Giganomics report compared CRTC's most recent specialty channel financial data with Sun News forecasts filed with the commission in 2010. Cogeco, along with other distributors and broadcast companies Rogers Communications Inc., Shaw Communications Inc., MTS Inc., Telus Corp., and CBC/Radio-Canada, are against the CRTC proposal, saying it could lead to higher carriage fees for all-news channels and complicate dial positioning. "I think Cogeco is off topic. The CRTC consultation is not about Sun News, rather it is about BDUs living up to their obligations under the Broadcasting Act to distribute Canadian news programming," Kory Teneycke, vice-president of Sun News, told The Wire Report in an emailed statement Wednesday. CRTC Chairman Jean-Pierre Blais raised the idea of a news neighbourhood regulation during a CRTC hearing this year on new applications for mandatory carriage on basic TV service. At the hearing, Sun News sought a mandatory carriage licence, arguing that it needs a leg up as a “new entrant” in Canada’s broadcasting market to help it deal with competing broadcast distributors that place the channel in the dial’s “stratosphere.” The CRTC denied Sun News’ request, and the same day issued its proposal for "must offer" licences for all-news channels, and a requirement that they be grouped in "neighbourhoods" on the dial. All existing and new Category C all-news channels would fall under the regulatory protections. In the U.S., the Federal Communications Commission imposed “news neighbourhoods” as a condition in its 2011 approval of Comcast Corp.’s acquisition of NBCUniversal in 2011, requiring news or business news channels to be carried in nearby channel positions. Cogeco, which declined to comment for this story, said in its filing with the CRTC that Sun News has fared well as a standard, unregulated specialty channel. The channel "is already reaching after only two years of operations more than half the subscribers in English-language markets," Cogeco said. Pam Dinsmore, vice-president of regulatory at Rogers, said in a phone interview that the company's concern is not the "neighbourhooding" of channels, it is the CRTC's "interventionist" proposal to regulate the news channel genre. "We don't really understand what the real problem is outside the fact that a couple of distributors aren't carrying Sun News, and we think the commission could surgically fix that if they wished to, without proposing this framework," Dinsmore said. "It raises the spectre of having to remove CBC News Network and CTV News Channel off the basic service," Dinsmore said. She referred to a public opinion survey, conducted by the Strategic Counsel and filed with the CRTC by Rogers and other distributors, that said most TV subcribers don't want all-news channels moved off basic cable. Five existing Category C all-news channels would be affected by the proposed changes, including CBC/Radio-Canada’s CBC News Network and its French-language station Réseau de l'information (RDI), BCE Inc.’s CTV News Channel, as well as Quebecor’s Sun News Network and La Canal Nouvelles. Giganomics said Sun News' actual 2012 financial results reflected the channel's "ramping up period" after it launched on some, though not all, distributors’ services at the start of the 2012 broadcast year. For the CRTC's hearing on mandatory carriage, also known as 9(1)(h), Sun News applied for mandatory distribution on basic service with a wholesale fee of 18 cents per month per subscriber in English markets, arguing that the regulatory protection is necessary for an all-news channel that has run into carriage issues with distributors MTS and Telus. Both MTS and Telus said this week in comments to the CRTC that they oppose the proposed regulations. "Sun News’ most unusual licensing history and its regulatory bet on a mandatory basic carriage order may account for some of the carriage issues it has experienced but TELUS would like to resume negotiations in order to offer the Sun News service on a discretionary basis to its subscribers," Telus said in its comments to the CRTC. "TELUS is motivated to offer the broadest range of programming services to its subscribers." MTS said in its comments that it is willing to distribute Sun News though "it believes that it should be able to do so in a package that reflects MTS’ customers’ probable demand for the service." MTS said the company's news theme package is the appropriate place for Sun News, adding that it "has received very few enquiries asking for the service. This despite promotions of the service in Sun-owned newspapers in Winnipeg, encouraging readers to lobby their BDU to carry SNN ." Teneycke said during the CRTC's mandatory distribution hearing that the carriage offers that Sun News received from MTS and Telus were inadequate, and that the channel’s average wholesale carriage fee of 9.7 cents is a “death sentence” by competing broadcast distributors. “All we’re saying is that make sure that people see our product, make sure they see it for five years at a reasonable and fair price, which is way below what the average is for the other all-news channels in Canada. Let’s do that for five years, and if in five years it hasn’t worked, we’re dead,” Teneycke said at the time. Telus said in its comments to the CRTC that it does not oppose the neighbourhood aspect of the regulator's proposal, and that its TV service has begun changing its channel lineups to create “neighbourhoods” of genres, including news. "When TELUS launches Sun News, it will include it within news neighbourhood" within the 800s, which will include CBC NN, CTV News Channel, CNN, MSNBC, Fox News, BNN, Bloomberg, BBC World News, Al Jazeera, CPAC, and others, Telus said. According to CRTC data, CBC News Network had total revenue of $86.16 million in 2012, with 11,362,597 subscribers and a pre-tax profit $15 million. CTV News Channel had total revenue of $25.86 million in 2012 with 8,694,480 subscribers and a pre-tax profit of $5.9 million. Quebecor's French-language news channel Le Canal Nouvelles had total revenues of $30.38 million in 2012, with 2,432,684 subscribers and a pre-tax profit of $8.8 million. CBC's French-language channel RDI reported total 2012 revenues of $57 million with 11,679,275 subcribers and a pre-tax profit of $11.6 million. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Sun News outperformed projections, ramped up subscribers: Giganomics report

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