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‘The financial model of conventional television with advertising is challenged,’ said Bell Media president Kevin Crull. (JENNIFER ROBERTS For The Globe and Mail)
‘The financial model of conventional television with advertising is challenged,’ said Bell Media president Kevin Crull. (JENNIFER ROBERTS For The Globe and Mail)

Broadcasting

Traditional TV profits fall as viewers, advertisers look elsewhere Add to ...

Canada’s conventional television industry saw profits drop 85 per cent last year, as advertisers found other ways to spend their money and programming costs increased sharply amid competition with online services for rights to popular programming.

The conventional broadcasters, which own over-the-air networks accessible to most Canadians, have been under pressure for several years as viewers abandon mainstream programming in favour of edgier offerings available on specialty channels.

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Conventional networks such as CTV and Global rely on advertising revenue and do not receive subscriber fees to fund their operations, as do channels such as HBO Canada or TSN.

“I would certainly concur the financial model of conventional television with advertising is challenged,” Bell Media president Kevin Crull said in April as he defended his company’s $3-billion purchase of specialty channel owner Astral Media Inc. “But I don’t think it’s going away any time soon.”

The Canadian Radio-television and Telecommunications Commission said the industry posted a $22.9-million pretax profit in 2012, down from $151.6-million in 2011. Earlier this year, it reported the specialty and pay industry posted a $934-million profit, roughly in line with a year earlier.

Plummeting profit is particularly disheartening for the broadcasters because, having just returned to profitability after the sharp losses incurred through the recession, they were unable to hang on to the gains as national advertisers reduced their spending.

The CRTC said Bell Media’s CTV network posted a $15-million pretax loss, Rogers-owned City and OMNI lost $40-million and Shaw Media’s Global earned $23-million. Those numbers could be worse next year, as a temporary fund set up to help conventional networks recover from the recession – funded by consumers on cable and satellite bills – is phased out and takes tens of millions of dollars out of the pockets of the networks.

The slow decline in traditional television has been at the heart of several recent shifts in the broadcasting industry, particularly BCE Inc.’s Astral Media deal, which comes only three years after the telecommunications company bought CTV. (BCE also owns a 15-per-cent stake in The Globe and Mail.)

Earlier this month, Rogers Communications Inc. reacted to the weak advertising market by shuttering its fledgling CityNews channel and laying off employees at Omni, a conventional network with stations across the country that specializes in non-English programming. The moves cut 2.5 per cent of the company’s broadcast work force, or about 60 full-time jobs.

Omni is particularly challenging for Rogers, because the viewers who once relied on the channel for news in their own languages can now find that information elsewhere.

“A special thing about OMNI is providing Canadians with Canadian news in their own language,” said president of broadcasting Scott Moore. “But not enough people are watching it.”

The CRTC said local advertising held firm across the conventional broadcasting industry in 2012 at $355-million, but national advertising fell 13 per cent to $1.3-billion from $1.5-billion in 2011. Programming costs skyrocketed by close to 17 per cent, however, to $1.3-billion ($563-million on Canadian programming and $729-million on foreign).

“Private conventional stations invested 17.6-per-cent more on Canadian programming, while spending slightly less on foreign programming,” the CRTC stated. “This activity resulted in new television programs for Canadians, including programming related to the 2012 Summer Olympic Games, and thousands of jobs in the Canadian production sector. In 2012, these stations employed 6,343 people and paid $537.2-million in salaries.”

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