Our Environmentand Outlook 2011 Michel Tremblay - Johanne Charbonneau
May 26, 2008
Our Environmentand Outlook 2011 Michel Tremblay - Johanne Charbonneau
May 26, 2008
Challenge Us - May 2008 2
Overview
1. The World We Live In
2. Media Trends
3. Our Financial Picture
4. Outlook 2011
Challenge Us - May 2008 3
1. The World we live in
Surrounded by Mega Players
• A $12 billion industry with a handful of highly integrated players– $ 5 billion in transactions in 2007– 5 key players left in radio– Conventional television: 3 key players– Quebecor dominates all facets of the French market – Rogers, Shaw/Star Choice, Bell ExpressVu and
Videotron account for 75% of all subscribers
• We have few friends among these…but we have a very unique role
Challenge Us - May 2008 4
1. The World we live in
Culture not a Gov’t Priority …
• Nevertheless, our $60 million was renewed for 2 years…– Ends this year in 2008-2009
• Recent report of Heritage Committee on the mandate of CBC/Radio-Canada– Very supportive, largely unanimous, actionable, could
bring a new era…– Supports the concept of an MOU with Canadians– We have urged Government to act– Will depend on Governments’ response at the end of
June
Challenge Us - May 2008 5
1. The World we live in New Platforms Exploding
• New platforms are exploding and programming costs escalating
– We must meet the needs of Canadians
– Being there when they want, on the platforms they choose to use.
• …but there are significant resource implications…
Challenge Us - May 2008 6
1. The World we live in
A Flat Appropriation
• …which has declined by $428 million since 1990
• How will we sustain our activities and our growth?
$1,104$982
$1,532
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
CBC|Radio-Canada’s Parliamentary Appropriation: 1990-2007(Dollars in millions and in 2007 constant dollars)
Challenge Us - May 2008 7
1. The World we live in
…and Advertising Revenue is Weakening
• Advertising is vital to the operations of our television networks– It represents 50% of CBC Television’s budget and 40% of
Télévision de Radio-Canada’s
• And like other conventional broadcasters, CBC/Radio-Canada’s advertising revenue has weakened
$336
$457$452
$-
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
CBC|Radio-Canada’s Advertising Revenues: 1990-2007(Dollars in millions and in 2007 constant dollars)
Challenge Us - May 2008 8
1. The World we live in
CRTC: Making Important Decisions
• CRTC is dealing with issues that will have a lasting effect on us and the industry…
– Cable and Satellite Carriage Rules and Subscriber Fees• 90% of Canadians subscribe, carriage is key• Subscriber fee needed to deal with declining advertising dollars and
preserve our revenue base
– The Canadian Television Fund• Our guaranteed envelope of 37% is at risk• Worth $100 million to CBC/Radio-Canada• Government will decide
– Will oversee the transition to Digital TV by 2011– Will deal with our licence renewal in Fall 2009
Challenge Us - May 2008 9
1. The World we live in
In Effect, Most Canadians already pay to receive TV
Source: BBM/Neilsen Media Research
TV Subscribers
Off-air TV is in decline
Challenge Us - May 2008 10
1. The World we live in
Analog off-air TV viewers will be forced to choose a new TV platform in 2011
Consumer Intentions when Analog OTA TV Channels are Shut-Off
Analog OTA TV Households%
34% will subscribe to TV
30% don’t know what they’ll do
19% will buy a digital OTA TV
receiver
16% will go without TV
Challenge Us - May 2008 11
1. The World we live in
Subscription revenue is the Future
Distribution (%) of Revenue Sources
TV Subscription
Revenues49%
Government and
Corporate Grants
9%
Radio Advertising
13%
TV Advertising
29%
Subscription Subscription revenues are now, revenues are now, by far, the most by far, the most important source of important source of revenue in the revenue in the IndustryIndustry
Challenge Us - May 2008 12
2. Media Trends
Television Usage
• Usage of TV has remained strong, despite the growth of the Internet and other platforms
• …but content on demand is growing
20.9 21.2 21.5 21.4 20.921.9 22.0 22.0 22.6 22.0 22.3 22.0 22.6 22.6
23.725.4 25.4 24.4 25.0 24.5
0
5
10
15
20
25
1987-1988
1988-1989
1989-1990
1990-1991
1991-1992
1992-1993
1993-1994
1994-1995
1995-1996
1996-1997
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
Per
Cap
ita
Ho
urs
Weekly Per Capita Hours Of Viewing To TelevisionAll Persons 2+, 1987-1988 to 2006-2007
Challenge Us - May 2008 13
2. Media Trends
Consumers want content on-demand
Innovation Emerging Expanding DeclineMaturing
3% 15% 67% 100%
PVR (10%)
InternetTV (14%)
VOD (7%)
Several platforms are being adopted
to meet on-demand needs.
DVD Recorder
(18%)
Adoption and Use of Video Technologies,Canadians 18+
Challenge Us - May 2008 14
2. Media Trends
Canadians are adopting PVRs …
PVR Penetration Households
%
4
2
6
4
10
6
Anglophones Francophones
2005 2006 2007
Challenge Us - May 2008 15
2. Media Trends
Francophones are using VOD more than Anglophones
Watched VOD in the Past Month
Households*%
• Many prime time programs from TVA are available for free and on-demand to Vidéotron cable customers
67
11
7
Anglophones Francophones
2006 2007
* Only digital cable and telco TV subscribers have access to VOD.
Challenge Us - May 2008 16
2. Media Trends
The amount of time spent watching TV from the Internet is minimal
Weekly Per Capita Hours of TV Viewing on TV and on the Internet,All Persons 18+, 1998 - 2007
-
5.0
10.0
15.0
20.0
25.0
30.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: BBM Neilsen Media Research (TV), MTM (Internet)
TV
Viewing of TV on the Internet represents less than 1/100th of total
TV viewing time(Less than 15 minutes a week)
Challenge Us - May 2008 17
11.6
2.6
10.2
No Internet TV Internet TV Viewers
TV from theInternet
TV on a TVset
2. Media Trends
But young Canadians are starting to watch some TV from the Internet…
* On a TV set or TV obtained from the Internet. Generally, survey estimates of TV usage are based on self-reporting which tends to underestimate use.
Anglophones Francophones
12.812.8
Average Weekly Per Capita Hours of Television Viewing by Generation YAdults 18-27 years
(hours)
11.611.6
11.7
1.2
10.5
No Internet TV Internet TV Viewers
11.711.711.711.7
Challenge Us - May 2008 18
2. Media Trends
Very few Canadians watched video on cell phones
• 65% of Canadians own a cell phone, but:
– Only 2% of Canadians watched video on their phones*
– Very few cell phone users (less than 1%) watched television shows specifically*
* In the past month
Challenge Us - May 2008 19
2. Media Trends
Video MP3 Players are also being adopted, but not used frequently
• 9% of Anglophones and 6% of Francophones have a Video MP3 Player
• Video MP3 Players have the largest hard drives, so they are not necessarily being adopted to watch video (e.g. for more music storage capacity)
Penetration of MP3 PlayersAdults 18+
%
23 25
69
2006 2007
Video+Audio
Audio Only
2934
16 18
36
2006 2007
19
24
Anglophones Francophones
Challenge Us - May 2008 20
2. Media Trends
HDTV sets are in high demand…
15
27
33
913
21
27
21
2005 2006 2007 2008E
Anglophones Francophones
HDTV Set Household Penetration%
• This high level of growth reflects increased consumer demand for larger screen sizes, the aesthetics of new TVs (e.g. thinner) and the decline in HDTV prices
Challenge Us - May 2008 21
2. Media Trends
…but only half of HDTV set owners have an HDTV receiver
• DVD Players and subscription to a TV service are the most popular sources of digital content for HDTV set owners.
97
78
5146
96
79
4741
DVDPlayer
Digital TV HDTVReceiver
GameConsole
Anglophones Francophones
Content Sources Among HDTV Set OwnersHDTV Set Owners
%
Challenge Us - May 2008 22
2. Media Trends
Usage of Radio
• …however, the usage of radio is on a downward trend
• But our radio services achieve record-levels in audience share
20.9 21.4 21.6 21.5 21.1 21.6 21.2 21.020.2 19.9 20.4 20.5 20.3 20.1 20.2
19.5 19.6 19.1 18.6 18.3
0
5
10
15
20
25
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Per
Cap
ita
Ho
urs
Weekly Per Capita Hours Of Listening To RadioAll Persons 12+, 1988 to 2007
Challenge Us - May 2008 23
2. Media TrendsA number audio choices have reached significant penetration thresholds …
Innovation Emerging Expanding DeclineMaturing
Conventionalradio use (91%)*
3% 15% 67% 100%
Satellite Radio* (7%)
Downloading Music* (17%)
Podcasting* (11%)
Streaming Radio* (16%)
MP3 Player (31%)
* Past month use
Adoption and Use of Audio Technologies,Canadians 18+
Challenge Us - May 2008 24
2. Media TrendsTime spent with satellite radio and MP3 Players are particularly high …
Satellite Radio• Satellite radio has in
excess of 1 million subscribers in Canada
• Satellite radio listeners spend 11 hours listening to the service in addition to their radio use
MP3 Players• Nearly one-third of
Canadian adults own an MP3 player
• MP3 player listeners spend over 6 hours listening to it in addition to their radio use
Challenge Us - May 2008 25
15
56
12
61
9
66
Dial-up
Broadband
2007
2006
2005
2. Media Trends
Broadband Internet has become commonplace at home
Type of Home Internet Connection* Canadians 18+
%
Challenge Us - May 2008 26
2. Media Trends
Most people use the Internet daily
71
56
8
13
2
2
Anglophones
Francophones
Past Day Past Week Past Month
71
81
Last Reported Usage of the Internet
Adults 18+%
Challenge Us - May 2008 27
2. Media Trends
Social Networking is Booming
• Social networking sites permit members to create on-line social networks
• They provide tools for social networks to communicate (e.g. e-mail, chat, voice) and share (e.g. photos, file sharing)
• Social networking sits are challenging web portals (e.g. Yahoo!) as the place for news, information and entertainment on-line
Challenge Us - May 2008 28
2. Media Trends
The Number of Social Networkers has Doubled in a Year
• The Internet has become an important social space where people can chat with friends, meet new people, and express themselves
18
42
20
12
Anglophones Francophones
2006 2007
Visited a Social Networking Site* Past Month Internet Users 18+
%
* Past month use
Challenge Us - May 2008 29
8 90
90
2
1 9
Anglophones
Francophones
2. Media Trends
Despite the hype, only a small amount of Internet time is spent accessing TV or radio
TV
Time Spent On-Line Internet Users 18+
%
RADIO* OTHER INTERNET ACTIVITIES
* AM/FM Radio streamed or podcasted
• The Internet is primarily used for The Internet is primarily used for communicating, socializing, reading, communicating, socializing, reading, shopping, researching, etc.shopping, researching, etc.
Challenge Us - May 2008 30
1. As at March 31, 2007, CBC/Radio-Canada’s assets totalled $1,592 M.– Short term: cash, investments, inventory, accounts receivable, etc.
– Long term: property, equipment, long-term investments, etc
2. For that same period, CBC/Radio-Canada’s liabilities amounted to $1,622 M.– Short term: accounts payable, employee related liabilities, etc.
– Long term: employee future benefits, bonds payable, etc.
3. Resulting in a negative equity of $30 M.
4. March 31, 2008 results are currently being audited and will be available this summer.
3. Our Financial Picture
Financial Situation at March 31, 2007
Challenge Us - May 2008 31
3. Our Financial Picture
Sources of Operating Revenue 2008/09
Total Revenues: $1,765 M
Commercial Revenues
24.8%
Other Revenues11.8%
$60M Additional
Government Funding3.4%
Parliamentary Appropriations
60.0%
Challenge Us - May 2008 32
Réseau de l'information
9.3%
French Radio18.8%
radio-canada.ca
1.8%
French Television
70.1%
English Television
70.8%
cbc.ca1.2%
Bold0.5%
English Radio18.4%
Newsworld9.1%
Support Components
19.6%
Media Related7.9%
English Services43.7%
French Services28.8%
3. Our Financial Picture
2008-09 Operating Budget Allocation
English Services
French Services
Challenge Us - May 2008 33
1999
/ 00
2000
/ 01
2001
/ 02
2002
/ 03
2003
/ 04
2004
/ 05
2005
/ 06
2006
/ 07
2007
/ 08
2008
/ 09
Nom
inal $
$60
$70
$80
$90
$100
$110
$120
$130
$140
$150
$160
(in millions of $)
3. Our Financial Picture
Miscellaneous Revenues – 1999/2000to 2008/09 (excluding Newsworld and RDI)
Challenge Us - May 2008 34
3. Our Financial Picture
Reinvestment of Self-generated Revenuesand other Efficiency Initiatives since 2000/01
86.0
39.1
182.0
76.9
0
50
100
150
200
250
300
Permanent budget allocations One-time budget allocations
• Excludes funding allocated on a pay -back basis.
(in millions of $)
$268.0 MMedia
Components
$116.0 MSupport
Services *
Challenge Us - May 2008 35
Fleet and Minor Capital$9.1M
Corporate Contingency
$2.9M
Collection, Distribution and
Delivery$24.5M
Property Management
$63.7M
Enterprise Systems and Technology
Infrastructure$36.2M
Production Infrastructure
$188.0M
Three-Year Capital Plan: $324.4 M
3. Our Financial Picture
Capital Investment Plan
Challenge Us - May 2008 36
3. Our Financial Picture
Financial Risks
1. HDTV and Accelerated Coverage Program (ACP) Funding Pressures
2. Funding Concerns
3. Consolidation, fragmentation and emerging platforms
4. Canadian Television Fund
Challenge Us - May 2008 37
4. Outlook 2011
Traditional TV and radio platforms will still be the principal mediums for consumers
Weekly Per Capita Hours of Television Viewing and Radio Listening,All Persons 18+, 1998A - 2011F
24.325.7
26.7
21.4
17.919.4
-
5.0
10.0
15.0
20.0
25.0
30.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ho
urs
Actual Forecast
Source: CBC/Research and Strategic Analysis estimates based on BBM Neilsen Media Research (TV) and BBM Fall Surveys (Radio).
TV
Radio
Challenge Us - May 2008 38
4. Outlook 2011
Virtually all Canadians will subscribe to TV
37%26%
27% 41%
25% 28%
11% 1%4%
2007 2011Source: CBC/Radio-Canada estimates based on BBM/Neilsen Media Research and MTM
Share of TV Households by Technology Platform
• Two-thirds of analog OTA households will subscribe to TV by 2011
• OTA will shrink to 4% households
OTA TVTelco TV
Satellite
DigitalCable
AnalogCable
Challenge Us - May 2008 39
4. Outlook 2011
A third of TV household with have HDTV receivers
48%26%
39%
32%
13%
42%
2007 2011
Source: CBC/Radio-Canada estimates based on BBM/Neilsen Media Research and MTM
Share of TV Households by TV Reception Picture Format
• Two-fifths (42%) of TV households will have an HD receiver
• One-quarter (26%) of TV households will stay with analog cable
HD Digital
SD Digital
Analog
Challenge Us - May 2008 40
4. Outlook 2011
Even more consumers will be using personal audio platforms
Outlook 2011: Reach of Personal AudioAdults 18+
%
31
1611
7
43
1619 20
MP3 Players StreamingRadio
Podcasting SatelliteRadio
2007 2011 • Platforms that are mobile will continue to grow
• Streaming radio has already matured
Source: CBC/Radio-Canada estimates based on MTM
Challenge Us - May 2008 41
4. Outlook 2011
A sizeable portion of the TV audience will be using time-shifting technologies
Outlook 2011: Reach of Personal TVAdults 18+
%
107
14
27
14
20
PVR Cable VOD Internet TV
2007 2011 • PVRs will move into the mainstream
• Cable VOD will increase in popularity
• Younger Canadians will increasingly use the Internet to get some of their TV
Source: CBC/Radio-Canada estimates based on MTM
Challenge Us - May 2008 42
4. Outlook 2011
Internet use will continue to grow
Weekly Per Capita Hours of Television Viewing, Radio Listening and Internet Use, All Persons 18+, 1998A - 2011F
24.325.7
26.7
21.4
17.919.4
2.0
13.5
10.0
-
5.0
10.0
15.0
20.0
25.0
30.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ho
urs
Actual Forecast
Source: CBC/Research and Strategic Analysis estimates based on BBM Neilsen Media Research (TV), BBM Fall Surveys (Radio) and MTM (Internet)
TV
Radio
Internet
Challenge Us - May 2008 43
4. Outlook 2011
Outlook 2011: Challenges
• How do we sustain our core radio and TV services?
• How can we access new subscriber revenues?
• What is the best way to serve HDTV audiences?
• How do we adjust to platform fragmentation?
• What are the revenue opportunities from new platforms?
• How will we cope with a distribution duopoly?
• At what level should we interact with audiences?
• How can we increase our relevance to Canadians in a changing
media landscape?