Corus partially blames advertising recession, CRTC required programming expenditures, for fourth-quarter losses

Corus Entertainment Inc. revealed a $367.1 million loss this quarter blaming goodwill impairment charges, an advertising recession, and the CRTC’s Canadian programming expenditure requirements for the fall. Friday the company released its fourth quarter results for the three months ending Aug. 31. This represents a large drop from the same quarter last year, in which the company reported $19.9 million in profit. The fourth-quarter loss also means that Corus did not turn a profit for its 2022 fiscal year: in the same results, it revealed a $245.1 million loss for the year. On Friday’s morning call with analysts, Corus president and CEO Doug Murphy blamed part of the losses on a CRTC decision to deny a request to waive conditions of licence and regulations relating to broadcasters’ expenditures for the 2020 broadcast year. In August, the commission denied the request made by the Canadian Association of Broadcasters (CAB) and instead opted for an extended payment approach to benefit the entirety of the broadcasting industry. The CRTC ruled that, in regard to the required CPE, it will allow licensees of the large ownership groups in the television sector to pay incurred shortfalls as of Aug. 31, 2020, by no later than Aug. 31, 2023. Licensees of independent services have one extra year to pay their shortfalls. Corus is required to make up $50 million in CPEs, a requirement that Murphy firmly criticized on Friday’s earnings call. “These result from the dated, regressive spending obligations that bind Corus while our trillion-dollar market capitalized foreign-owned internet media broadcasters and competitors enjoy unfettered and unregulated access to our market,” he said, noting that the CPE requirements would continue to impact Corus’ bottom line in 2023 and 2024. The CPEs were estimated at $8 million for the fourth quarter, and $19 million for Corus’ 2022 financial year. When discussing Corus’ success stories in its TV lineups, Murphy made no mention of the company’s Canadian productions and took another jab at the commission’s CanCon requirements. Murphy announced that Corus had secured a deal with Disney to carry a suite of its channels on Corus’ Stack TV streaming service. “It opens up the opportunity to leg up on our Stack TV growth because Disney has such a strong brand awareness and our subscribers will benefit from that.” Murphy called its programming deals with its U.S. partners “smart investments” and said that investments in regulatory programming cost obligations were not strategic. In a news release, the company said part of the loss was also due to goodwill impairment charges, which totalled $350 million in the last fiscal year. The company’s fourth quarter revenue was $263.5 million, a six per cent decline in comparison to the same period in 2021. Its total revenue was up four per cent in 2022, totalling about $1.59 billion, compared with $1.54 billion in 2021. The downward trend was particularly pronounced in Corus’ radio segment, where profits dropped 60 per cent this quarter, compared to the same time last year, from $4.3 million to $1.7 million. Its television arm also saw substantially reduced profits, which dropped by 46 per cent in the same period, from $110 million to $59 million. The total revenues for TV and radio were steadier: TV revenues only dropped 6 per cent from $335.8 million to $314.1 million, and radio stayed the same, at $25.4 million for Q4 in both 2021 and 2022. Advertising revenue from TV had a sharper drop of 14 per cent, from $176.9 million in 2021 to $151.9 million in 2022. These trends all reflect a reversal to the upward trajectory that Corus’ last quarterly report displayed when it was released in June 2022. CFO and executive vice president John Gossling noted on the earnings call that some of the reduced income could be explained by a seasonal summertime reduction in TV advertising. Speaking on a Friday morning earnings call, Murphy said that the losses could partly be attributed to an industry-wide slowdown in earnings from advertising across all mediums. “We are in an advertising recession. All advertising across North America is being impacted, not just here at Corus. The standard media index, a measurement the industry uses, reported a 12 per cent decline in the entire ad economy in the U.S. in July; and seven per cent for July and August combined when compared to the same months a year earlier.” “This decrease in advertising demand is a logical result of companies trying to manage their profitability given inflation induced cost increases and the revenue impact of supply disruptions on their business,” Murphy said, also suggesting that this advertising slowdown is a possible indicator of an impending recession. Corus’ losses weren’t completely unexpected: in a written statement, Canaccord Genuity analyst Aravinda Galappatthige noted that Corus’ management had already flagged the downswing in September, and that the year-over-year advertising decline was roughly in line with Canaccord’s estimates. However, rapidly increasing operational expenses for Corus’ TV segment — which increased 13 per cent in the last year — were “not fully anticipated”. – Reporting by Tim Forster, and editing by Jenna Cocullo at jcocullo@thewirereport.ca.

Corus partially blames advertising recession, CRTC required programming expenditures, for fourth-quarter losses

Broadcast | October 21, 2022

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Corus partially blames advertising recession, CRTC required programming expenditures, for fourth-quarter losses

Broadcast | October 21, 2022

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