Sports channels drive specialty-channel revenue boost: CRTC

In recent years, it has almost become conventional wisdom in the industry that sports content is a good way for broadcasters to buffer themselves from trends toward cord-cutting and online video, and CRTC numbers released Thursday seemed to back that up. The regulator said in a press release that sports specialty channels, including BCE Inc.’s TSN and RDS and Rogers Communications Inc.’s Sportsnet, increased their revenues to $124.2 million in the 12-month period ending Aug. 31, up 13.6 per cent from a year earlier. That increase was a “major driving force for growth in specialty service revenues,” which increased 4.1 per cent to $3.43 billion, CRTC said. “As we know, sports is that one piece of programming that’s preferred live, so it’s highly relevant,” Gord Hendren, president of Charlton Strategic Research Inc., said in a phone interview. “Sports is the one thing that’s growing at a double-digit growth rate, which kind of fits … the hypothesis that it is must-see content. It’s must-see live. It has value from an advertising point of view and from a retention point of view.” He added, “that’s where investments are being made.” In 2013, when Rogers spent $5.2 billion on rights to NHL hockey over 12 years, The Wire Report reported that competition over sports content rights had increased, due to broadcasters gambling that live sports content can continue to appeal to consumers, despite the growth of online alternatives for accessing TV content. That deal didn’t take effect until the 2014-15 hockey season and was not reflected in the numbers released by the CRTC Thursday. Still, the CRTC data showed that the main Sportsnet network increased its revenue 23 per cent to $311.9 million. Sportsnet One revenues were up more than three per cent to $78.9 million, though revenues for Sportsnet 360 were down almost 30 per cent to $29.3 million, and Sportsnet World was down nearly four per cent to $11.5 million. Bell’s TSN saw an almost 13 per cent increase to $452.2 million, while its French-language RDS saw a nearly six per cent boost to $177.6 million. On Wednesday, Sportsnet president Scott Moore noted in an interview with The Wire Report that Sportsnet had seen “gigantic” growth in viewership over the past several years to bring the channel neck-and-neck with TSN. Hendren predicted sports will continue to be strong in the future, but said there could be “upward pressure on the cost side, à la the big deal with the NHL. Properties that have power and have value are going to command a premium,” noting that’s a trend that’s been visible in the U.S. “I see continued upward growth in terms of revenue, but I also see the margins are going to be under pressure, because I think the costs are increasing at the same time.” The CRTC numbers released Thursday showed expenses at the flagship Sportsnet network rose 35 per cent to $263 million, and increased 7.7 per cent to $44.7 million at Sportsnet One. Sportsnet 360’s expenses dropped 27 per cent to $33 million, and expenses at Sportsnet World declined by around four per cent to $8.4 million. At TSN, expenses rose 17.5 per cent to $319.2 million, and at RDS increased by 11.6 per cent to $130.7 million. The CRTC said Thursday that revenues for pay-per-view services were up 1.7 per cent to $101.3 million, while expenses were up more than four per cent to $91.9 million, for profits of $8.4 million. That was an improvement from last year, when analysts said a nearly 14 per cent decline was potentially a sign of traditional PPV winding down. Pay-per-view received a boost recently from the boxing match between Floyd Mayweather and Manny Pacquiao in early May, though that revenue would not have been reflected in the CRTC’s 2014 data. Video-on-demand revenue was down 1.3 per cent to $251.3 million. VOD expenses rose at a higher rate, more than six per cent, making for overall losses of $31.6 million, following a similar decline last year, which occurred despite companies investing in increasing the availability of content. David Purdy, Rogers’ senior vice-president of content, told The Wire Report last year that he expected the launch of Rogers’ and Shaw Communications Inc.’s streaming service Shomi, which launched in November, to eat into movie rentals on VOD. In December, Bell launched its own streaming service, CraveTV. Both CraveTV and Shomi are accessible online and through set-top boxes as VOD services. The companies have stated that means the services operate under the CRTC's digital media exemption when accessed online, though they are subject to CRTC’s VOD rules when accessible through the set-top box. The CRTC has also proposed a new hybrid category for streaming services. The data the CRTC released Thursday predates the launch of both Shomi and CraveTV. When asked whether the regulator would count their revenues in this report next year, CRTC spokeswoman Patricia Valladao said in an email “how they will be reported is still being discussed.” Hendren said that if Shomi and Crave are counted as VOD services, he expects the revenues reported under that category to show an increase. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Sports channels drive specialty-channel revenue boost: CRTC

Broadcast | June 4, 2015

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