Our Environment and Outlook 2011 M ichel Tremblay - Johanne Charbonneau May 26, 2008.

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


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



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


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…



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)



…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)



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



In Effect, Most Canadians already pay to receive TV

Source: BBM/Neilsen Media Research

TV Subscribers

Off-air TV is in decline



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



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


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


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+


2. Media Trends

Canadians are adopting PVRs …

PVR Penetration Households

%

4

2

6

4

10

6

Anglophones Francophones

2005 2006 2007


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


2006 2007

* Only digital cable and telco TV subscribers have access to VOD.


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)


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.


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


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


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



2. Media Trends

HDTV sets are in high demand…

15

27

33

913

21

27

21

2005 2006 2007 2008E


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


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


Content Sources Among HDTV Set OwnersHDTV Set Owners

%


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


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+


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


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+

%


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+%


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

http://images.google.com/imgres?imgurl=http://i157.photobucket.com/albums/t77/yinkheay/FriendsterLogo.jpg&imgrefurl=http://www.makemoneyonline-x.com/2008/04/friendster-layouts-friendster.html&h=195&w=200&sz=11&hl=en&start=13&sig2=VncWHGHBrRTgjphn2asHYg&tbnid=YmyKl8dtvpuQDM:&tbnh=101&tbnw=104&ei=QTQPSNCXCafuigGFid29Cg&prev=/images%3Fq%3Dfriendster%2Blogo%26gbv%3D2%26hl%3Den

http://images.google.com/imgres?imgurl=http://futurelawyer.typepad.com/futurelawyer/images/linkedinlogo.png&imgrefurl=http://futurelawyer.typepad.com/futurelawyer/internet_tools/index.html&h=77&w=200&sz=13&hl=en&start=2&sig2=enDfbXrAZKkIp4jBZYMpkQ&tbnid=zc4-qcnqgWS66M:&tbnh=40&tbnw=104&ei=fjQPSN7fGpjgigG64aW2Cg&prev=/images%3Fq%3Dlinkedinlogo%26gbv%3D2%26hl%3Den


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


2006 2007

Visited a Social Networking Site* Past Month Internet Users 18+

%

* Past month use


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.


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.


Financial Situation at March 31, 2007



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%


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%


2008-09 Operating Budget Allocation

English Services

French Services


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 $)


Miscellaneous Revenues – 1999/2000to 2008/09 (excluding Newsworld and RDI)



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 *


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


Capital Investment Plan



Financial Risks

1. HDTV and Accelerated Coverage Program (ACP) Funding Pressures

2. Funding Concerns

3. Consolidation, fragmentation and emerging platforms

4. Canadian Television Fund


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


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


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


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


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


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


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?

Our Environment and Outlook 2011 M ichel Tremblay - Johanne Charbonneau May 26, 2008.

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Transcript of Our Environment and Outlook 2011 M ichel Tremblay - Johanne Charbonneau May 26, 2008.