Television broadcasting

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Data presented in this publication are for the fiscal year ending August 31, and cover the period from 2005 to 2009. The analysis below includes references to earlier periods when it is useful to put the industry’s recent performance in a historical context.

Television broadcasters’ revenue growth essentially flat

In 2009, the television broadcasting sector’s ¹  operating revenues totalled $6.5 billion, up slightly (0.6%) from 2008. This is the lowest year-over-year increase since 1997, when a decrease in revenues had been reported. The growth of operating revenues since 2000 has averaged 5.1%. However, the overall picture for the television broadcasting sector does not describe some substantial differences between the various industries.

Private conventional television continues to decline

Revenues for public and private conventional television fell 3.9% in 2009 to $3.4 billion. This was the steepest decline in ten years. Although public and non-commercial television and private conventional television posted revenue declines in 2009, the situation was especially difficult for private conventional television. The operating revenues of this segment fell 7.7%. This was the largest annual decline in revenues for this sector in more than 30 years. The second steepest decline in the past 30 years was recorded the previous year, with a decrease of 1.9%. For the first time since 2002, the operating revenues of this segment fell below the $2.0 billion level.

Continued growth for pay ²  and specialty ³  television

Pay and specialty television continued to grow in 2009, with revenues increasing 6.0% year over year to $3.1 billion. However, the revenue growth of these segments combined has been diminishing from one year to the next for the past few years, in both absolute and percentage terms. For example, in 2007, the annual increase in the revenues of these sectors was $230 million; in 2008, $200 million; and in 2009, $175 million.

Pay television was the segment that posted the strongest growth in 2009. Its revenues rose 16.6% to $695.6 million. In turn, the revenues of the specialty television segment totalled $2.4 billion in 2009, up 3.3% from the previous year. However, this year-over-year increase was the smallest in 15 years for this sector. Digital specialty channels were instrumental in maintaining the revenue growth of specialty television. In 2009, digital channels experienced revenue gains of 13.0%, while the revenues of analog stations grew 1.9% compared to 2008.

Pay and speciality television continued to grow in importance and is on the verge of capturing half of the revenues of the television industry as a whole, as opposed to public and private conventional television. Scarcely more than five years ago, pay and specialty television captured only slightly more than one-third of the television industry total revenues.

Operating revenues stagnate due to the drop in advertising revenues

Canadian television broadcasters’ advertising revenues fell 8.4% to $3.1 billion in 2009, down from $3.4 billion in 2008. This was the first drop in 15 years. It explains in large part the weak growth of operating revenues in 2009, since other revenue sources showed growth.

All types of television broadcasters that obtain advertising revenues experienced a drop in their sales of air time. The advertising revenues of public and non-commercial television broadcasters totalled $311.3 million in 2009, down 18.0% from the previous year. Private conventional television broadcasters saw their advertising revenues fall in 2009 to $1.8 billion, which was their lowest level since 2003 and 9.5% lower than in 2008. This decrease was the largest in the past 15 years.

Speciality television also had a difficult year with respect to advertising revenues, but to a lesser extent. Its advertising sales declined 2.6% to $1.0 billion. This was the first time in 15 years that this segment has seen a decrease. However, specialty television continued to increase its share of the television advertising market. Its market share was 32.0% in 2009, compared to 30.1% one year earlier.

Advertising revenues have long been the largest source of income for the television sector, accounting for more than half of its revenues. However, for the first time in a number of years, advertising revenues represented less than half (47.8%) of the sector’s total revenues. Ten years ago, these revenues accounted for nearly 60% of the sector’s total revenues.

Loss of profits for private conventional television

Private conventional television faced a myriad of financial challenges for the past several years, especially with respect to profits. Although the profit margin before interest and taxes of this sector was 11.2% in 2005, it obtained a negative result (-5.7%) in 2009. The profits before interest and taxes reached $4.8 million in 2008, the losses amounted to $113.4 million in 2009. This was the first time in 30 years that profits have been negative. More than half of private conventional stations incurred losses before interest and taxes in 2009.

Only in Quebec did private conventional television register profits before interest and taxes in 2009, totalling $23.4 million. For the second consecutive year, private conventional stations in Ontario recorded losses, totalling $87.3 million. In Western Canada, for the first time in 15 years, private conventional stations incurred losses before interest and taxes, amounting to $33.7 million. In the Atlantic Provinces, the situation did not improve, since with losses of $15.7 million, the stations in this segment recorded their largest losses since 1999; 1998 was the last year in which those stations registered profits before interest and taxes.

The difficult situation of private traditional television contrasts with the situation of pay and speciality television. Pay and specialty channels generated a profit margin in excess of 20% for the fifth consecutive year. Their profit margin went from 22.1% in 2008 to 23.5% in 2009, and their operating profits went from $648.2 million to $728.7 million.

Specialty television has continued to be the most profitable sector of the television industry for the past three years. In 2009, it generated a profit margin before interest and taxes of 26.7%. By comparison, the pay television segment recorded a margin of 12.3% in 2009; that margin has been declining since 2005 (26.4%).