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Corus CEO says regulators may need to rethink stance on consolidation

Corus Entertainment's headquarters photographed in Toronto on Wednesday, Jan. 13, 2016.

Cole Buston/THE CANADIAN PRESS

With streaming players introducing more foreign competition into Canada's media market, industry regulators may need to change their view on consolidation, Corus Entertainment Inc. president and CEO Doug Murphy says.

On Tuesday, Corus announced that it will sell two French-language specialty channels, Historia and Séries+, for $200-million. That deal comes just four years after Bell Media sold its 50 per cent stake in those channels to Corus, as part of its $3.38-billion acquisition of Astral Media Inc. in 2013. Corus's purchase of specialty channels from Bell – which also included Teletoon – was a condition of the federal Competition Bureau's approval of the Bell-Astral deal. Bell Media already has a portfolio of 10 French-language specialty channels, including VRAK, Investigation, Canal D, Canal Vie, Super Écran and sports channels under the RDS brand. The deal is subject to review by the Competition Bureau and the Canadian Radio-television and Telecommunications Commission (CRTC). The companies expect it will close in mid-2018.

On a conference call to discuss the company's fourth-quarter earnings on Wednesday, Mr. Murphy was asked whether the sale signals expectations that regulators in Ottawa are changing their views on consolidation, considering the challenges that media companies now face.

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"As you know, our business is changing dynamically," Mr. Murphy said. "We've got over-the-top players coming in – Netflix, Apple, Amazon, others. That's clearly a new development that is going to be taken into consideration as we look at consolidation."

He referred to Canadian Heritage Minister Mélanie Joly's insistence that "everything is on the table" in her review of Canadian cultural policy.

"The tone needs to be reflective of the fact that Canadian-domiciled media businesses need to be vibrant," he said. "… Asset moves like this clearly are beneficial to the system. In that regard, we're of the view that they'll be favourably reviewed in Ottawa."

"The last time around, the Competition Bureau expressed their concerns about concentration – not necessarily of our viewing share, but of subscriber revenue. The industry landscape has changed immensely in the last four years," said Gerry Frappier, Bell Media's president of French-language TV and RDS.

For example, he pointed to the fact that the CRTC lifted "genre protections" in 2015, which means that specialty channels are no longer protected from competition from other channels within their programming genre. (Such protections were already lifted for news and sports, but were further opened up as a result of the CRTC's "Let's Talk TV" hearings.) That may affect concerns over how many specialty channels a broadcaster can own together. Mr. Frappier also referred to the competition from streaming video providers.

"There are a lot of headwinds in this industry," he said. "Anything a player can do it increase its scale is good for business, and good for the creation of content. … If you don't allow the important media players to stay on a healthy foothold, the whole system suffers."

Toronto-based Corus on Wednesday posted lower-than-expected quarterly revenue, led by a 5 per cent fall in the media company's radio business.

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Corus said its radio segment, which has been struggling for a while, saw revenue come in at $35.2-million, while its television business revenue dipped slightly to $346-million.

Total revenue fell nearly 1 per cent to $381.2-million, missing the average analyst estimate of $389.7-million, according to Thomson Reuters I/B/E/S.

The revenue miss was mostly on account of lower merchandising, distribution and other ancillary segments, RBC Dominion Securities analyst Drew McReynolds said in a client note.

Net income attributable to shareholders rose 15.7 per cent to $28.9-million in the quarter as the company also benefited from a one-time gain of $16.5-million.

Excluding items, Corus earned 22 cents per share, 6 cents above analysts' expectations.

The Toronto-based company also said it would likely hit its debt-reduction target by the end of the third quarter of fiscal 2018, one quarter ahead of schedule.

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With files from Reuters

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Media and Marketing Reporter

Susan covers marketing and media for Report on Business. Before joining The Globe and Mail in 2009, Susan worked as a freelance reporter contributing to the Ottawa Citizen, the Montreal Gazette and other publications, as well as CBC Radio's Dispatches and Search Engine. She has a Masters degree in journalism from Carleton University. More

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