Corus’ turnaround partly propelled by ads returning to linear

Corus Entertainment Inc. said it will see TV ad growth in the third quarter thanks in part to a cohort of 50 traditionally digital advertisers adding linear TV to their investments. The broadcaster’s CEO Doug Murphy said on a second quarter conference call on Friday that these developments provide “more reasons for optimism.” He noted a recent Accenture study on advertising in Canada that found the agencies overspent on digital, and that a “heavier weight of TV advertising in the media mix will improve” campaign investment returns. “There’s an emerging 50 advertisers...that all started in digital and now they’re coming into television and they’re diversifying their media mix and their media campaigns,” he said, not specifying which advertisers these are. “I don’t think this is a one-time thing; I think this is a trend.” This isn’t the first time Murphy has noted a movement away from digital and toward linear television. The company said as much when advertisers fled digital to the more “trusted” linear television after concerns about their advertisements being placed next to bad content on the internet. The comments come in what is shaping up to be a turnaround year for Corus, which previously said it would see ad revenues stabilize in a “handful of years” after consistent losses last year. At the end of the quarter on Feb. 28, the company saw an 11 per cent improvement to $211.3 million in advertising revenues thanks in part to better traction in ad tech, growth in digital advertising, and new revenues from direct to consumer businesses. However, the company saw a 13 per cent decrease in merchandising, distribution and other revenues and a one per cent fall in subscriber revenues. Total revenues increased four per cent to $384.6 million and profits in the segments -- television and radio -- were up slightly to $113.1 million from $112.8 million. The numbers beat analysts’ expectations, especially considering the “difficult operating environment” as Barclays’ Phillip Huang put it in a Friday note. He said major Canadian brands have “underinvested in TV, which could be poised to change.” But some analysts took a different tack on the certainty of the longevity of this success. Despite Corus’ optimistic outlook, Huang said “our conviction on the sustainability of the current trend remains quite low,” especially beyond the third quarter and compared to the “mainly stable” subscription-based businesses. Meanwhile, Canaccord Genuity analyst Aravinda Galappatthige said there are factors that can “support the thesis that TV ads can remain stable” after this year, including improvements in ad tech and the rollout of its ad buy system Cynch, the revision in the mix of ads on TV and digital, and the acquisition of Adult Swim, which he said “has massive audiences” in the United States, will help round the argument out. Corus’s slate of content is based on the lifestyle, family and children genres. It traditionally sees weaker quarters when big sporting events, such as the Olympics, are on display because it draws advertisers away from its content. Part of what drove its second quarter results is comparatively no Olympics: the equivalent quarter last year held the Winter Games in Pyeongchang, South Korea. Murphy said the growth so far and expected later this year is attributable to: one-third Olympics comparison, one-third pricing, and one-third a shift in advertising toward linear. Murphy noted that the company has already factored growth into the next quarter on its books. Earlier this week, the company acquired the Canadian operations of lifestyle entertainment company, Kin Canada, which it has worked with over the past few years. The company’s focus is on home, style, food, beauty, fashion and family, according to a press release. Murphy said in the release that the investmentment “demonstrates our targeted, strategic approach in an area of business that continues to grow and gain audiences.” Corus has been focused on growing its “audience-based buying” initiative, in which it is selling specific advertising to niche audiences, such as foodies and fashionistas, to maximize their relevance to the viewer. These technologies, including better data use and dynamic ad insertions in on-demand content, are all part of the broadcaster’s strategic roadmap that has put its executives in good spirits going forward. On the call, Murphy also revealed that Corus is taking a “leadership position” in the industry to “identify and advocate for opportunities to accelerate the growth of audience-based buying such as aligning on a shared approach industry-wide for defining common audience segments.” He said there are five big agency groups who’ve asked Corus to work with other broadcasters to “help us all buy the same audience” by coming up with the same audience categories to “facilitate a more wholesale embrace of audience segments buying across the Canadian media industry.” However, Huang noted that for it “to become successful with data-based ads longer term, Corus needs to evolve from a traditional linear TV company to perhaps a hybrid digital company by integrating and leveraging data from as many screens as possible.” That may require it to buy other entities, he added. Broken down, compared on a year-over-year basis, television revenues were up five per cent to $353.5 million while the segment’s profits were up to $113.7 million compared to $103.6 million last year. Meanwhile, the company saw radio revenues dip to $30.6 million from $33.2 million and profits drop to roughly $5 million compared to the $6.9 it gained last year -- a 28 per cent or $1.9 million dip year-over-year. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Corus’ turnaround partly propelled by ads returning to linear

News | April 5, 2019

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Corus’ turnaround partly propelled by ads returning to linear

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