Canadian Cable Giants Slip on Soft Ad Market
It's tough sledding for cablecasters cutting back on mass-market promotions to sustain subscriber bases in the face of competition from phone giants.
TORONTO – A soft Canadian advertising market is denting the bottom line at cable giant Shaw Communications, which runs the Global Television conventional network.
The Shaw Media TV division saw second quarter revenue fall marginally to $242 million, against $244 million in 2011, as lower ad sales were recorded for a primetime lineup that includes House, Glee, Hawaii Five-O and Fox’s Sunday night animated lineup.
At the same time, the Shaw Media division, which includes cable channels like HGTV Canada and Food Network Canada, saw operating income rise 7.7 percent on lower programming costs and marketing expenses.
Shaw Media also traditionally secures higher ad revenues in the first quarter, driven by fall launch premieres of rookie and returning U.S. network series.
Overall, second quarter earnings at Shaw Communications for the three months to Feb. 29 were up 3 percent to $178 million, compared to a year-earlier $172 million, as overall revenue rose 2.9 percent to $1.23 billion.
At the same time, the media giant did flag weakness on the cable side, where Shaw Communications faces stiff competition in western Canada from phone giant Telus Corp’s rival Optik TV service.
Shaw Communications lost 9,946 cable TV customers during the latest quarter as its operating margin fell 2.2 percent, compared to last year.
That has the cabler and broadcaster cutting its 2012 cash flow outlook to $450 million, compared to earlier guidance of $550 million.
The loss of basic subscribers to Telus was eased by mass market promotions and added customer service costs, which are being sustained industry-wide.
That could change as Shaw throttles back on expensive promotions and raises subscriber rates to maintain growth.
Rival cable operator Cogeco, releasing its own second quarter results, said it will crack down on "promotion hoppers" – subscribers who jump to another service in search of discounts.
"So the decision was made to tighten our credit conditions. So of course, when you introduce that measure, you do take a hit," Cogeco CEO Louis Audet told financial analysts after revealing he lost around 9,100 basic cable subscribers during the latest quarter.
Montreal-based Cogeco posted earnings for the three months to Feb. 29 at $83 million, compared to a profit of $32 million in 2011, but only because of a one-time gain from accounting provisions related to its discontinued Portuguese cable operations, Cabovisao.
Cogeco bought the Portuguese operations in 2006 for $465 million, and recently sold Cabovisao at a knock-down price of $59 million.
Stripping out the one-time accounting provision, Q2 earnings from continuing operations at Cogeco dropped 25 percent to $31 million, on total revenue rising 8.3 percent to $317.7 million.