Corus lost $2.3M in unspent CMF money from failed French channels deal

Corus Entertainment Inc. had $2.3 million in Canada Media Fund (CMF) money to spend on two French channels, but it suspended spending to focus on selling them in a deal with Bell that didn’t materialize. The money went back to the CMF’s reserve fund. The details of the money going unused are redacted from a CMF “unspent” fact sheet obtained via an access to information request. But Corus spokeswoman Dervla Kelly and CMF communications manager André Ferreira confirmed the missing money was related to a failed deal between Corus and BCE Inc. for two French channels, Historia and Séries+. That unspent money pushed the CMF to its lowest percentage of committed funds in five years, down to 98.8 per cent. It’s been trending downward over that period. It had a high of 99.9 per cent in 2013-14, but then slowly started to decline: 99.8 per cent in 2014-15, 99.7 per cent in 2015-16 and 99.1 per cent in 2016-17. Funds available have also been down the last two years, which have both seen leftover balances of more than $2 million. Ferreira said cord-cutting and cord-shaving have trimmed industry contributions to the fund over the years. The failed sale came during a hard year for Corus, which saw declines in television advertisements through 2018. It now holds onto two channels it wanted to sell, minus $2.3 million it could’ve used to develop them. Forecasting modest revenue growth for the company next quarter, National Bank analyst Adam Shine said in a note on Monday that "We wait to see if Séries+ and Historia get sold," leaving a question mark around Quebecor Inc. as a potential suitor. Late last year, the broadcaster announced that it came to an agreement to sell the channels to Bell at a value of $200 million. Corus noted that the channels weren’t core to its strategic priorities, and analysts viewed the deal favourably for Corus. Originally the channels were part of Bell Media’s portfolio before it was forced to divest them when it purchased Astral Media Inc. in 2013. The Competition Bureau earlier this year blocked the Corus-Bell deal because the conditions that forced Bell to sell the channels in the first place didn’t “materially change.” Bell argued that the advent of over-the-top (OTT) services changed the competitive landscape, which the Bureau denied. The block came before news reports that suggested Shaw Communications Inc. was looking to sell its stake in the broadcaster. Last month, the company asked the CRTC for permission to shut down 44 television rebroadcasting transmitter in small rural markets because they are too expensive to run, citing “challenges” to its conventional business. CMF funding comes in different “envelopes” to target specific categories of content that it hopes to bolster. The two Corus channels were under the French Performance Envelope with a pool of $4,929,618 for 2017-2018. Corus spent $2.6 million of that on Teletoon French, Kelly confirmed. The company has said that it is shifting its focus on new technologies to steer the ship, including an effort to bundle ad placements in specific viewer categories, like “foodies” -- another form of targeted advertising. It is part of a larger strategic plan that will take years to fully materialize, its CEO Doug Murphy said in one conference call. It has gone through a restructuring to drive that effort. Ferreira said in an email that Corus’ unspent funds do not factor into how the CMF calculates future allocations of funding, including for the company. Launched in 2010, the CMF supports the creation of Canadian content with roughly $134 million from the federal government and the rest coming from broadcaster’s annual TV subscription revenues, according to the fact sheet. The government last year pledged more money for the CMF over five years. The total CMF budget of the past year was about $350 million. Bell also had some leftover money for its French envelope. When asked to explain $211,000 in unspent CMF money for the year, Bell’s Marie-Eve Bergeron said in an email that the fifth season of “25 ans d’émotions” was not eligible for funding because the concept of the show changed between different seasons. The entire CMF budget for the performance envelope was about $251.8 million, with 99.1 per cent of it being spent, according to the sheet. The performance envelope “is consistently spent in almost all its entirety except for the last two fiscal years where the unspent amounts reached more than $2 million annually,” the sheet said. Corus took the fall for the majority of underutilized CMF money this past year. “With respect to other CMF funding programs, there is no specific trend to report,” the report said. “Unspent amounts are attributable to a series of distinct factors related to normal program management.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Corus lost $2.3M in unspent CMF money from failed French channels deal

News | December 10, 2018

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