The impact of CBC's decision to allow for-profit Rogers Communications to broadcast NHL games for free on the public network could hit CBC's bottom line hard over the next two and a half months thanks to the Stanley Cup playoffs.
During the 2014-15 regular season, the first since it lost the national NHL broadcast rights to Rogers, CBC aired the Rogers-produced games mainly on Saturday nights. But under the terms of its deal (among other things, it maintains a regular Hockey Night in Canada presence on Saturday nights), Rogers collects all of the advertising revenue from games shown on CBC.
So the public broadcaster is about to go for weeks without any significant prime-time ad revenue. There will be playoff games on CBC almost every night through the first three playoff rounds because Rogers is carrying every series.
In previous years, TSN aired at least two playoff series through the first three rounds, which limited the number of games telecast by CBC. But that changes with this year's playoffs. In the first round, for example, CBC will carry at least one game and often two every night from April 15 through the end of the month if all of the opening-round series go to their seven-game limits.
"For the next eight weeks, because of this deal with Rogers, it basically means [CBC] can't make any money," broadcast industry observer Barry Kiefl, president of Canadian Media Research Inc., said Monday. "It's a real set of handcuffs for the CBC. It's devastating in that respect."
Just how devastating was shown in CBC's third-quarter report on its 2014-15 fiscal year, which covered October, November and December of 2014 – the first three months of the current season when the loss of the NHL advertising revenue kicked in. Total advertising revenue for CBC in those three months fell by $45.2-million from the same period in 2013 – to $77.7-million from $122.9-million, a drop of 37 per cent.
That was the effect of losing an average of one night of prime-time advertising a week over three months. The advertising revenue declines will likely get worse through the playoffs because postseason games attract larger audiences. The total loss should easily match the $125-million to $150-million the network said it earned in hockey advertising for the 2013-14 season, the last year of its rights deal with the NHL.
However, CBC executives argue the decision to hand over their airwaves to Rogers is financially prudent because CBC does not have to pay the production costs of the hockey broadcasts or for new programming to replace the NHL games.
Moreover, the network is not having to pay a massive rights fee to keep that hockey-generated income rolling in. Under its previous deal for national rights, CBC paid the NHL an estimated $120-million a season; to win those rights away, Rogers is spending $433-million annually in a 12-year agreement.
"The CBC/Rogers deal benefits the CBC in several ways," Chuck Thompson, head of public affairs for CBC English Services wrote in an e-mail. "It includes significant in-game promotional value to market CBC content, is financially responsible as we don't take any financial risks and, with our national reach, makes the games [including the Stanley Cup Final] available to more Canadians."
But Kiefl argued there are relatively cheap programming options available, such as reruns or movies, during which at least some advertising could be sold. As for the value of CBC promoting its own shows during games, Kiefl said, "No one really knows what the promotional value is."
CBC acknowledged the financial impact in its own look at the future. In its corporate plan summary, a report projecting its performance through 2019, CBC expects its advertising revenue to fall from $491-million in the 2013-14 fiscal year to $341-million in 2014-15 and then to $290-million in 2015-16. It expects a recovery to $355-million in 2016-17.
There is also the question why a taxpayer-supported broadcaster such as CBC, which is governed by the 1991 Broadcasting Act, would hand over its airwaves to a for-profit company such as Rogers. Thompson said Rogers has a network licence that allows it to cover CBC's signal during hockey broadcasts.
However, the Canadian Radio-television and Telecommunications Commission is expected to issue a statement later this week about the relationship between CBC and Rogers.
TSN's parent company, BCE Inc., also owns 15 per cent of The Globe and Mail.