Cost-cutting hits CTV, Globe and Mail by Grant Surridge
Source : Vancouver Sun
November 22, 2008
TORONTO -- When CTVglobemedia Inc. ponied up as much as $3 million for rights to the "Hockey Night in Canada" theme music, previously at home on the nation's public broadcaster, it caused an outcry of excess across the country.
While the nation's hockey fans have moved on with their lives and now enjoy the music before The Sports Network's hockey telecasts, the move is just one example of what observers call a philosophy of big spending to remain on top of the Canadian media pile. It's a strategy that is now facing grave uncertainty.
Last year, CTVgm opened up its wallet in Los Angeles to retain the rights to top-rated American TV shows such as Lost and Grey's Anatomy, all premised on bringing in enough ad dollars to more than offset the upfront cost. Some of the shows are broadcast on the main network, some on its lesser networks such as A-channel, while others are bought simply to keep them out of the hands of the competition and never see the light of a television screen.
"[Chief executive] Ivan Fecan is not scared to spend money to make money," said a former executive of one of the company's television properties, who did not want his name used.
CTVgm this week joined Canadian and media counterparts around the world in announcing layoffs and spending cuts in advance of a possible recession and reduced advertising spending next year.
The company is something of a "black box" when it comes to painting a picture of its operating results. It is a private company with a handful of major shareholders and, unlike its publicly listed competitors, is not obligated to reveal financial information.
Fecan addressed employees across the country from Toronto on Wednesday, warning of impending layoffs and a freeze on travel and entertainment spending at CTV Inc., the country's largest private broadcaster.
Layoffs related to the business climate were not an uncommon occurrence at CTV when, as a smaller, less-successful network, it was housed in a publicly traded company. But they have been rare in recent years.
At another CTVgm property, the Globe and Mail, publisher Phillip Crawley sent a memo to staff this week detailing the cost-savings measures the paper will be forced to take to brace for a tougher economy, including urging staff to take vacations during the holiday season as "an easy way to help our bottom-line performance."
"As we near the end of the first quarter of our new fiscal year, it is very evident that expectations for newspaper advertising targets will not be met," read the memo obtained by the National Post.
"The Globe and Mail is not immune to the adverse trends referred to in Ivan's message," said Crawley.
As an example of that pullback, neither CTV nor the Globe sent a reporter on tour with the prime minister this week at the Asia-Pacific Economic Cooperation summit in Peru.
"By next week, each department head will have revised spending targets designed to offset the drop in revenue," reads the memo from Crawley. "The impact of reduced limits on operating and capital expenditures will be felt throughout the company."
According to informed sources, CTV peeled back its advertising targets by up to 20 per cent about a month ago after realizing it would be difficult to meet them in the current economic climate.
However, chief CTVgm spokeswoman Bonnie Brownlee said Friday afternoon that CTV has no plans to reduce its advertising sales targets.
Doug Checkeris, chief executive of the North American operations of Mediacom, a global media buying agency, said it is not unusual for broadcasters and publishers to rein in targets and expenses in a downturn.
"You kind of want to prepare for the worst and you rebalance your expenses before the bad revenue news gets to you," he said. "Nobody wants to chase down the revenue curve. That's not fun."
Canwest Global Communications Inc., which also owns the The Vancouver Sun and National Post, relies on advertising money for between 80 to 85 per cent of its revenue at its network Global TV. That figure is believed to be lower for CTV, but still a significant portion of total revenue. Much of the remaining revenue comes from syndicating its own programming to other broadcasters outside the country.
CTVgm chief executive Fecan refused to comment for this article.
According to information available through Torstar's regulatory filings, CTVgm reported net income of $17-million on revenues of $1.57-billion for the nine months ending Aug. 31, 2008.
That compares with net income of $565,000 on revenues of $1.3-billion in the corresponding period a year earlier. Comparison of the two net incomes is complicated by CTVgm's purchase of CHUM Ltd. in 2007.
The belt-tightening at CTV is part of a larger trend affecting all media companies.
Last week, Canwest, the country's largest media company, said it would lay off 560 employees, or five per cent of its workforce. Corus Entertainment Inc. told employees it would be watching discretionary spending ahead of tough economic times. Even CBC sent a note to staff this week asking employees to pull back on expenditures.
In his memo to staff at CTV this week, Fecan addressed the crisis facing some of the company's largest advertisers, including embattled automaker General Motors Inc.
"Having worked on GM, I can tell you that in this kind of a climate the first thing they do is ask, 'What are we allowed to cancel from our TV commitments?' That's literally the first question," said Jeff Will, from media buying agency Wills & Co.
CTVgm is owned by four major shareholders: Woodbridge Co., the investment vehicle for the Thomson family, which owns 40 per cent; Torstar Corp., which publishes the Toronto Star, owns 20 per cent; the Ontario Teachers Pension Plan has 25 per cent; and BCE Inc. has 15 per cent.
When BCE Inc. sold a major chunk of its share in the company to the other three investors in 2006, observers figured there would be an initial public offering within three to five years as a way for the investors to cash out.
That plan appears to have been put on hold in light of the capital markets.
© Vancouver Sun
While the nation's hockey fans have moved on with their lives and now enjoy the music before The Sports Network's hockey telecasts, the move is just one example of what observers call a philosophy of big spending to remain on top of the Canadian media pile. It's a strategy that is now facing grave uncertainty.
Last year, CTVgm opened up its wallet in Los Angeles to retain the rights to top-rated American TV shows such as Lost and Grey's Anatomy, all premised on bringing in enough ad dollars to more than offset the upfront cost. Some of the shows are broadcast on the main network, some on its lesser networks such as A-channel, while others are bought simply to keep them out of the hands of the competition and never see the light of a television screen.
"[Chief executive] Ivan Fecan is not scared to spend money to make money," said a former executive of one of the company's television properties, who did not want his name used.
CTVgm this week joined Canadian and media counterparts around the world in announcing layoffs and spending cuts in advance of a possible recession and reduced advertising spending next year.
The company is something of a "black box" when it comes to painting a picture of its operating results. It is a private company with a handful of major shareholders and, unlike its publicly listed competitors, is not obligated to reveal financial information.
Fecan addressed employees across the country from Toronto on Wednesday, warning of impending layoffs and a freeze on travel and entertainment spending at CTV Inc., the country's largest private broadcaster.
Layoffs related to the business climate were not an uncommon occurrence at CTV when, as a smaller, less-successful network, it was housed in a publicly traded company. But they have been rare in recent years.
At another CTVgm property, the Globe and Mail, publisher Phillip Crawley sent a memo to staff this week detailing the cost-savings measures the paper will be forced to take to brace for a tougher economy, including urging staff to take vacations during the holiday season as "an easy way to help our bottom-line performance."
"As we near the end of the first quarter of our new fiscal year, it is very evident that expectations for newspaper advertising targets will not be met," read the memo obtained by the National Post.
"The Globe and Mail is not immune to the adverse trends referred to in Ivan's message," said Crawley.
As an example of that pullback, neither CTV nor the Globe sent a reporter on tour with the prime minister this week at the Asia-Pacific Economic Cooperation summit in Peru.
"By next week, each department head will have revised spending targets designed to offset the drop in revenue," reads the memo from Crawley. "The impact of reduced limits on operating and capital expenditures will be felt throughout the company."
According to informed sources, CTV peeled back its advertising targets by up to 20 per cent about a month ago after realizing it would be difficult to meet them in the current economic climate.
However, chief CTVgm spokeswoman Bonnie Brownlee said Friday afternoon that CTV has no plans to reduce its advertising sales targets.
Doug Checkeris, chief executive of the North American operations of Mediacom, a global media buying agency, said it is not unusual for broadcasters and publishers to rein in targets and expenses in a downturn.
"You kind of want to prepare for the worst and you rebalance your expenses before the bad revenue news gets to you," he said. "Nobody wants to chase down the revenue curve. That's not fun."
Canwest Global Communications Inc., which also owns the The Vancouver Sun and National Post, relies on advertising money for between 80 to 85 per cent of its revenue at its network Global TV. That figure is believed to be lower for CTV, but still a significant portion of total revenue. Much of the remaining revenue comes from syndicating its own programming to other broadcasters outside the country.
CTVgm chief executive Fecan refused to comment for this article.
According to information available through Torstar's regulatory filings, CTVgm reported net income of $17-million on revenues of $1.57-billion for the nine months ending Aug. 31, 2008.
That compares with net income of $565,000 on revenues of $1.3-billion in the corresponding period a year earlier. Comparison of the two net incomes is complicated by CTVgm's purchase of CHUM Ltd. in 2007.
The belt-tightening at CTV is part of a larger trend affecting all media companies.
Last week, Canwest, the country's largest media company, said it would lay off 560 employees, or five per cent of its workforce. Corus Entertainment Inc. told employees it would be watching discretionary spending ahead of tough economic times. Even CBC sent a note to staff this week asking employees to pull back on expenditures.
In his memo to staff at CTV this week, Fecan addressed the crisis facing some of the company's largest advertisers, including embattled automaker General Motors Inc.
"Having worked on GM, I can tell you that in this kind of a climate the first thing they do is ask, 'What are we allowed to cancel from our TV commitments?' That's literally the first question," said Jeff Will, from media buying agency Wills & Co.
CTVgm is owned by four major shareholders: Woodbridge Co., the investment vehicle for the Thomson family, which owns 40 per cent; Torstar Corp., which publishes the Toronto Star, owns 20 per cent; the Ontario Teachers Pension Plan has 25 per cent; and BCE Inc. has 15 per cent.
When BCE Inc. sold a major chunk of its share in the company to the other three investors in 2006, observers figured there would be an initial public offering within three to five years as a way for the investors to cash out.
That plan appears to have been put on hold in light of the capital markets.
© Vancouver Sun
