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The statistics presented in this publication are for the fiscal year ending August 31 and cover the period from 2003 to 2007. The analysis below includes references to other periods when it is useful to put the industry’s recent performance in historical context.

Significant slowdown in the growth of revenues for television broadcasters

The operating revenues in the television broadcasting sector ¹  reached $6.2 billion in 2007, up 3.0% compared to 2006, the lowest year-over-year increase since 1997. This growth is also almost three times smaller than in 2006.

That said, the overall picture for the sector masks some substantial differences between the various industries.

Conventional television losing ground

Public and private conventional television broadcasters reported revenues just under $3.5 billion, a 1.3% decline from 2006. This was the first decrease in revenues for this industry in 10 years.

It was a particularly difficult year for public and non-commercial television. Sales of air time plummeted 8.2%, and grants fell 4.9%. This segment’s revenues were $1.3 billion in 2007, $70.8 million less than in 2006.

Private conventional television generated $2.2 billion in revenues in 2007, up 1.1% compared to the previous year. This represents a modest increase for this segment after a year of stagnation in 2006.

Historical data clearly show that the rather modest performance of conventional television in 2007 is part of a general trend. This segment earned 55.9% of the sector’s revenues in 2007, compared to 64.4% in 2002 and 79.4% in 1997. This constant and rapid erosion is mainly due to competition from specialty television and the resulting audience fragmentation.

Private conventional television faces a particularly tough challenge in this regard given that its business model is almost exclusively based on the sale of advertising. This represents approximately 94.0% of its annual revenues year after year. But the advertising market is both highly competitive and growing modestly.

This is the context in which the CRTC handed down its May 17, 2007 decision authorizing conventional television broadcasters to gradually increase the number of advertising minutes during prime time. This decision came into force on September 1, 2007, and therefore has not yet had an impact on the results presented here.

Market sluggishness for television advertising

Sales of air time for Canadian television broadcasters reached $3.3 billion in 2007, a 1.8% year-over-year increase. This was only the second time in the past ten years that the annual rate of growth of the television advertising market fell below 2.0%, both times having occurred in the past three years.

Conventional television broadcasters, were harder hit by the weak market. Sales of air time by all conventional television broadcasters slightly decreased (-0.3%), from $2.38 billion in 2006 to $2.37 billion in 2007. Those of public and non-commercial television broadcasters reached $322.3 million in 2007, down 8.2% year over year.

Specialty television obtained much better results. Its advertising sales rose 7.5% to $948.3 million, in part thanks to an increase of its audience share from 25.4% in 2006 to 28.0% in 2007. ²  This is nevertheless the weakest year-over-year increase of this segment’s advertising revenues in 10 years.

The share of advertising revenue in the television broadcasting sector’s business model has shrunk over the years. In 2007, this source represented 53.7% of the sector’s total revenues, compared to 59.7% ten years earlier.

On the other hand, the relative importance of subscription revenues exclusive to pay and specialty television is rising.

Pay television and specialty television ³  kept its momentum  ⁴ 

While it was a tough year for conventional television, pay and specialty television revenues rose 9.1% in 2007, settling at $2.7 billion.

The pay television segment experienced the strongest growth in 2007. Its revenues rose 13.5% to $547.4 million, largely as a result of viewers’ growing appetite for pay-per-view television and video-on-demand. Revenues from these services rose 25.8% in 2007 to $197.8 million. This accounted for close to two-thirds of the growth in the pay television segment.

The specialty television segment also did quite well. Its revenues reached $2.2 billion, up 8.0% compared to the previous year.

The two main sources of revenue for specialty channels—subscription and advertising revenues—have increased, but less quickly than in 2006. Sales of air time rose by 7.5% to $948.4 million, and subscription revenues by 8.2% to $1.2 billion.

Specialty digital channels ⁵ —the oldest of which appeared on the television landscape in 2002—are gaining ground. They earned close to 11.0% of specialty television revenues in 2007, compared to 3.6% five years earlier. The 93 digital channels on the air in 2007 generated revenues of $233.2 million, 18.9% more than in 2006. This segment grew almost three times faster than the analog channels.

Specialty television continued to gain ground in the sector and is about to overtake private conventional television and move into first place in terms of revenues. Ten years ago, the size of the specialty television sector was barely one-third that of private conventional television.

Relatively stable profits

The weak growth in 2007 revenues did not harm the profitability of private television broadcasters too much. This group’s profit margin before interest and taxes rose from 14.2% in 2006 to 15.5% in 2007, and its operating profits increased from $663.8 million to $763.2 million. Pay and specialty channels accounted for close to 85.0% of private television profits in 2007.

The overall results mask substantial differences between the various segments. For example, the profit margin of specialty channels rose from 22.2% in 2006 to 24.4% in 2007, while that of the conventional channels rose from 4.2% to 5.3% over that same period.

Specialty channels generated margins of over 20% for the third consecutive year, whereas those of conventional channels were under 10% for the third time in the past ten years.

In 2007, pay channels lost their ranking as the most profitable in the sector—which they had held since 2001—to the specialty channels. This having been said, in 2007 pay channels generated over 21 cents in profits before interest and taxes on every dollar of revenue.

It should be noted that digital specialty channels earned profits before interest and taxes for the first time after five years of losses. However, their $2.1 million in profits were modest, amounting to less than one cent in profits per dollar of revenue.