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4.0 Broadcasting

4.4 Broadcasting distribution

 

Overview

This section provides financial and statistical information relating to the distribution of programming service activities²⁰⁸ provided by BDUs. Financial and statistical information relating to non-programming activities, such as Internet and telephony, is discussed in sections 3.1 and 5.3 of this report.

Highlights

• Programming distribution revenues were $7.0 billion in 2008, an increase of 10.2% from 2007. There were 11.1 million subscribers to these services, a 2.8% increase from 2007.
• Revenues per subscriber per month²⁰⁹ were approximately $53.36 in 2008, a $3.57, or 7.2%, increase from 2007.
• Approximately 90% of households subscribed to BDUs for programming services in 2008.
• The cable BDU footprint encompasses over 12.6 million Canadian households.²¹⁰
• The industry EBITDA margin was 25.3% in 2008. Cable and IPTV²¹¹ BDUs had a combined 28.1% EBITDA margin in 2008 down from 35.9% in 2004; while DTH and MDS BDUs had a lower margin of 19.0%, a significant improvement from 2.5% in 2004.
• The top four cable BDUs and the two DTH providers captured 90% of all BDU subscribers in 2008.

The Industry

BDUs provide programming distribution services utilizing cable, satellite, wireless MDS, or IP.²¹² The industry consists of approximately 224 cable companies²¹³ that operate 1,952 cable BDUs,²¹⁴ 2 national DTH distributors, and 21 MDS operators.²¹⁵ The industry is dominated by 4 major cable operators with 65% of the BDU programming subscribers and two DTH operators with 25% of the subscribers. The remaining 10% are served by the smaller BDUs.

Sector analysis

BDU programming service revenues increased 10.2% in 2008 to $7.0 billion. Approximately 11.1 million Canadian households subscribed to video services from cable and IPTV BDUs, and from satellite (DTH) and MDS BDUs, a 2.8% increase over the previous year. Although revenues have been increasing over the 2004 to 2008 period at an annual rate of 8.4%, the increase in the number of subscribers was 2.6% over the same period. This has resulted in a 5.5% annual increase in the monthly revenues per subscriber, which has increased from $43.00 in 2004 to $53.36 in 2008. These increases can be attributed to increased subscription fees, greater consumption of pay and pay-per-view services and a movement by consumers to higher-priced digital or high definition (HD) services. DTH and MDS BDUs tended to have higher revenues per subscriber. In 2008, they were approximately 25% higher than those of the cable BDUs.

Cable and IPTV BDUs captured 71% of total revenues and 76% of total subscribers, relatively unchanged in 2008 over the previous year. IPTV BDUs reported significant revenue and subscriber increases but, due to their limited footprint, did not have a significant impact on overall national share. Within their footprint, IPTV providers generally reported progress in their deployment of IPTV. For example, MTS Allstream reported a 34% market share in its deployed areas, up from 32% in 2007.²¹⁶

Digital service penetration continued to increase as 62% of BDU subscribers received digital services, up from 58% in 2007. Approximately 47% of cable BDU subscribers received digital services compared to 100% for IPTV and DTH. Most MDS systems were digital except for a small number of systems operating in a number of small rural areas.

BDU EBITDA margins have ranged between 21.46% and 26.6% over the 2004 to 2008 period. In 2007, the margins declined to 21.4% from 24.5% in 2006, and increased to 25.3% in 2008.

In 2008, BDUs contributed $323.0 million to Canadian programming and local expression, an increase of 7.9% over the previous year. In 2008, 51.5% of these funds were directed to the Canadian Television Fund (CTF), 12.7% to other eligible independent programming funds and 35.8% to community channel programming. Approximately 139 Class 1 licensees²¹⁷ reported community channel expenses in 2008.

Total payments to program suppliers under the terms of Program Affiliation Agreements²¹⁸ were $2.3 billion in 2008, a 9% increase over the previous year. Of these payments, 88% were payments to Canadian affiliates.

In 2008, payments to program suppliers represented 33% of subscriber programming revenues.

Statistical Information - Broadcast distribution undertakings

Table 4.4.1 Broadcast distribution - Basic and non-basic revenues, subscribers, monthly revenues per subscriber, and percent of households subscribing to BDUs (Part 1 of 2)

											CAGR
	2004		2005		2006		2007		2008		2004-2008
Revenues (millions)
Cable and IPTV	3,404.8		3,522.3		4,008.2		4,333.7	#	4,761.8
Percent of total	67.6%		66.3%		69.2%		68.7%	#	68.5%
Annual Growth			3.5%		-		8.1%	#	9.9%
DTH and MDS	1,329.1		1,437.9		1,641.1		1,834.1		2,036.2
Percent of total	26.4%		27.1%		28.3%		29.1%		29.3%
Annual Growth			8.2%		-		11.8%		11.0%
Reporting BDUs subtotal	4,733.9		4,960.2		5,649.3		6,167.7		6,797.9
Percent of total	93.9%		93.4%		97.5%		97.8%		97.8%
Annual Growth			4.8%		-		9.2%		10.2%
Non-reporting BDUs	305.5		349.7		142.0		141.5	#	155.5
Percent of total	6.1%		6.6%		2.5%		2.2%		2.2%
Annual Growth			14.5%		-		-0.3%	#	9.9%
Total revenues	5,039.4		5,309.9		5,791.3		6,309.3	#	6,953.5		8.4%
Annual Growth			5.4%		9.1%		8.9%	#	10.2%
Subscribers (thousands)
Cable and IPTV	6,856.1		6,862.6		7,484.4		7,691.3	#	7,916.6
Percent of total	68.7%		67.3%		71.1%		71.6%	#	71.6%
Annual Growth			0.1%		-		2.8%	#	2.9%
DTH and MDS	2,318.4		2,488.6		2,627.7		2,631.0		2,699.3
Percent of total	23.2%		24.4%		25.0%		24.5%		24.4%
Annual Growth			7.3%		-		0.1%		2.6%
Reporting BDUs subtotal	9,174.5		9,351.2		10,112.0		10,322.3		10,615.9
Percent of total	91.9%		91.7%		96.0%		96.0%		96.0%
Annual Growth			1.9%		-		2.1%		2.8%
Non-reporting BDUs and estimates	811.9	#	841.8	#	418.2	#	425.6	#	438.1
Percent of total	8.1%		8.3%	#	4.0%	#	4.0%	#	4.0%
Annual Growth			3.7%		-		1.8%	#	2.9%
Total subscribers	9,986.5	#	10,193.1	#	10,530.2	#	10,747.9	#	11,054.0		2.6%
Annual Growth			2.1%		3.3%		2.1%	#	2.8%

Table 4.4.1 Broadcast distribution - Basic and non-basic revenues, subscribers, monthly revenues per subscriber and percent of households subscribing to BDUs (Part 2 of 2)

Monthly Revenues/Subscriber	2004		2005		2006		2007		2008		2004-2008
Cable and IPTV	41.38		42.77		44.63		46.95		50.12		4.9%
Annual Growth			3.4%		4.3%		5.2%		6.8%
DTH and MDS	47.77		48.15		52.05		58.09		62.86		7.1%
Annual Growth			0.8%		8.1%		11.6%		8.2%
Reporting BDUs subtotal	43.00		44.20		46.56		49.79		53.36		5.5%
Annual Growth			2.8%		5.3%		7.0%		7.2%
Subscribing households	88.3%		88.0%		89.3%		88.7%	#	89.8%

Notes:

1. Based on the 12-month period ending 31 August
2. n/a: not available
3. n/m: not meaningful
4. Minor variances are due to rounding.
5. During the 2002 to 2005 period, pursuant to Broadcasting Decisions CRTC 2002-45, 2002-88 and 2004-382, the Commission exempted a large number of BDU licensees with fewer than 6,000 subscribers. These systems were no longer required to file annual financial returns with the CRTC.
6. In 2006, 2007, and 2008, licensees began reporting on all systems, including exempted system, held by the licensee. Total revenue and subscriber levels for 2006, 2007, and 2008 are therefore not comparable to the previous years.
7. Figures may have been restated for 2004-2007

Source:  CRTC data collection, Statistics Canada. Percent of households subscribing to BDUs: Statistics Canada, “Spending Patterns in Canada”, 62-202-X, 2008 for years 2004-2007, with CRTC projection for 2008

Table 4.4.2 Top Canadian distributors and number of subscribers (thousands)

											CAGR
Corporations	2005		2006		2007		2008		2009		2005-2009
Rogers Cable Communications Inc 1	2,249		2,260		2,278		2,295		2,312		0.7%
Growth	-0.8%		0.5%		0.8%		0.7%		0.7%
Shaw Communications Inc. 2	2,138		2,179		2,220		2,242		2,274		1.6%
Growth	3.1%		1.9%		1.9%		1.0%		1.4%
Videotron Ltd.1	1,455		1,520		1,583		1,652		1,729		4.4%
Growth	1.9%		4.5%		4.1%		4.4%		4.7%
Cogeco Cable Inc2	831		836		855		859		868		1.1%
Growth	0.2%		0.6%		2.2%		0.5%		1.0%
Subtotal - Cable	6,673		6,795		6,936		7,048		7,183		1.9%
Growth	1.2%		1.8%		2.1%		1.6%		1.9%
Star Choice Television Network Inc2,3	830		862		873		886		897		1.9%
Growth	2.0%		3.9%		1.3%		1.5%		1.2%
Bell Canada Enterprises.1,4	1,532		1,739		1,824		1,823		1,864		5.0%
Growth	9.2%		13.5%		4.9%		-0.1%		2.2%
Subtotal – DTH and IPTV	2,362		2,601		2,697		2,709		2,761		4.0%
Growth	6.5%		10.1%		3.7%		0.4%		1.9%
Total – Top Canadian distributors	9,035		9,396		9,633		9,757		9,944		2.4%
Growth	2.5%		4.0%		2.5%		1.3%		1.9%
% of All Subscribers	89.6%		90.7%		90.6%		89.5%		n/a

Notes:

1. As of 31 March each year
2. As of 28 February each year
3. Star Choice Television Network Inc. is controlled by Shaw Communications Inc.
4. Bell Canada Enterprises includes Bell ExpressVu LLP DTH and Bell Canada VDSL based IPTV.

Source: Corporate quarterly reports

Table 4.4.3 Number of subscribers receiving digital services (thousands)

		Cable		DSL		Subtotal		DTH		MDS		Subtotal		Total
		Number of Subscribers	Percent Growth	Number of Subscribers	Percent Growth	Number of Subscribers	Percent Growth	Number of Subscribers	Percent Growth	Number of Subscribers	Percent Growth	Number of Subscribers	Percent Growth	Number of Subscribers	Percent Growth
September 2008
	English	2,936.4		206.6		3,143.0				13.2
	French	996.2		4.9		1,001.1				5.0
	Total	3,932.6	17.5%	211.5	21.9%	4,144.3	17.7%	2,651.8	-1.8%	18.2	-21.8%	2,670.0	-2.0%	6,814.3	9.1%
	Share of:
	Digital subscribers	57.7%		3.1%		60.8%		38.9%		0.3%		39.2%		100.0%
	All subscribers	35.6%		1.9%		37.5%		24.0%		0.2%		24.2%		61.6%
September 2007
	English	2,523.0		171.8		2,694.8				17.1
	French	825.3		1.8		827.0				6.2
	Total	3,348.3	12.6%	173.5	34.8%	3,521.9	13.5%	2,700.5	1.6%	23.2	-21.7%	2,723.8	1.3%	6,245.7	7.9%
	Share of:
	Digital subscribers	53.6%		2.8%		56.4%		43.2%		0.4%		43.6%		100.0%
	All subscribers	31.2%		1.6%		32.8%		25.2%		0.2%		25.4%		58.2%
September 2006
	English	2,283.8		128.7		2,412.5				16.7
	French	689.2				689.2				13.0
	Total	2,973.0	13.0%	128.7	42.5%	3,101.8	14.0%	2,658.3	5.7%	29.7	-24.6%	2,688.1	5.2%	5,789.9	9.7%
	Share of:
	Digital subscribers	51.3%		2.2%		53.6%		45.9%		0.5%		46.4%		100.0%
	All subscribers	28.2%		1.2%		29.4%		25.2%		0.3%		25.5%		54.9%
September 2005
	English	2,116.8		90.3						26.4
	French	514.0								13.0
	Total	2,630.8	28.1%	90.3	87.3%	2,721.4	29.5%	2,514.9	9.3%	39.4	-16.2%	2,554.4	8.8%	5,275.8	18.5%
	Share of:
	Digital subscribers	49.9%		1.7%		51.6%		47.7%		0.7%		48.4%		100.0%
	All subscribers	25.8%		0.9%		26.7%		24.7%		0.4%		25.1%		51.8%
September 2004
	English	1,663.9		48.2		1,712.1				31.7
	French	390.1				390.1				15.3
	Total	2,054.0		48.2		2,102.2		2,301.4		47.0		2,348.4		4,450.6
	Share of:
	Digital subscribers	46.2%		1.1%		47.2%		51.7%		1.1%		52.8%		100.0%
	All subscribers	20.6%		0.5%		21.1%		23.1%		0.5%		23.5%		44.6%

Note: English- and French-language subscriber estimates for DTH were not provided from 2004 to 2008.
Source: Mediastats

Figure 4.4.1 EBITDA margins achieved from basic and non-basic programming services

Notes:

1. Based on the 12-month period ending 31 August
2. Figures may have been restated for 2004-2007 years.

Figure 4.4.2 Contributions to the CTF, other independent industry funds and expenditures on local expression (community channels) reported by broadcasting distribution undertakings ($ millions)

Notes:

1. Based on 31 August of each year.
2. Minor variances are due to rounding.
3. Broadcast distribution undertakings include contributions reported by class 1 cable, DTH, MDS, as well as satellite relay distribution undertakings (SRDU).

Table 4.4.4 Number of cable undertakings contributing to community channels

This table outlines the number of Class 1 licensees that have reported community channel expenses between 2004 and 2008. The figures do not necessarily represent the actual number of community channels in operation, as some channels are funded by more than one undertaking.

	2004	2005	2006	2007	2008
Class 1	137	134	134	131	139

Note: Based on 31 August of each year
Source: CRTC data collection

Table 4.4.5 Affiliation payments made to pay, PPV, VOD, and specialty services (Part 1 of 2)

The following table sets out affiliation payments to Canadian and non-Canadian pay and specialty services reported by BDUs.

($ millions)	2004	% of total	2005	% of total	2006	% of total	2007	% of total	2008	% of total	% annual incr. / decr.
											05	06	07	08
Payments to Canadian affiliates
Cable
Pay	169	87%	202	90%	261	91%	317	92%	342	92%	20%	29%	22%	8%
Specialty	694	88%	693	86%	830	87%	864	84%	963	84%	0%	20%	4%	11%
Total	863	88%	895	87%	1,091	88%	1,182	86%	1,304	86%	4%	22%	8%	10%
DTH and MDS
Pay	165	99%	138	100%	154	100%	190	100%	200	98%	-17%	12%	24%	5%
Specialty	312	88%	372	91%	415	89%	449	89%	478	89%	19%	11%	8%	6%
Total	477	91%	510	93%	568	92%	639	92%	678	92%	7%	11%	12%	6%
Combined: Cable, DTH, and MDS
Pay	334	93%	340	94%	415	94%	507	95%	541	94%	2%	22%	22%	7%
Specialty	1,007	88%	1,066	88%	1,245	87%	1,314	85%	1,441	85%	6%	17%	6%	10%
Total	1,341	89%	1,405	89%	1,659	89%	1,821	88%	1,982	88%	5%	18%	10%	9%
Payments to Non-Canadian affiliates
Cable
Pay	24	13%	21	10%	24	9%	28	8%	29	8%	-13%	15%	14%	5%
Specialty	97	12%	109	14%	127	13%	168	16%	189	16%	12%	17%	32%	13%
Total	122	12%	130	13%	152	12%	196	14%	219	14%	7%	17%	29%	12%
DTH, and MDS
Pay	2	1%	0.1	0%	0.2	0%	0.1	0%	3.1	2%	-93%	61%	-64%	3722%
Specialty	44	12%	37	9%	52	11%	57	11%	60	11%	-15%	38%	11%	4%
Total	46	9%	37	7%	52	8%	57	8%	63	8%	-18%	38%	11%	9%
Combined: Cable, DTH and MDS
Pay	26	7%	21	6%	25	6%	28	5%	32	6%	-19%	15%	13%	16%
Specialty	141	12%	146	12%	179	13%	225	15%	249	15%	4%	22%	26%	11%
Total	167	11%	168	11%	204	11%	253	12%	281	12%	1%	21%	24%	11%

Table 4.4.5 Affiliation payments made to pay, PPV, VOD, and specialty services (Part 2 of 2)

($ millions)	2004	% of total	2005	% of total	2006	% of total	2007	% of total	2008	% of total	% annual incr. / decr.
											05	06	07	08
Total affiliate payments
Cable
Pay	193	54%	223	62%	286	65%	345	64%	371	65%	16%	28%	21%	7%
Specialty	792	69%	802	66%	957	67%	1,032	67%	1,152	68%	1%	19%	8%	12%
Total	985	65%	1,026	65%	1,243	67%	1,378	66%	1,523	67%	4%	21%	11%	11%
DTH and MDS
Pay	167	46%	138	38%	154	35%	190	36%	203	35%	-17%	12%	23%	7%
Specialty	356	31%	410	34%	466	33%	507	33%	538	32%	15%	14%	9%	6%
Total	523	35%	547	35%	620	33%	697	34%	741	33%	5%	13%	12%	6%
Combined: Cable, DTH, and MDS
Pay	360	24%	361	23%	439	24%	535	26%	574	25%	0%	22%	22%	7%
Specialty	1,148	76%	1,212	77%	1,424	76%	1,539	74%	1,690	75%	6%	17%	8%	10%
Total	1,508	100%	1,573	100%	1,863	100%	2,074	100%	2,264	100%	4%	18%	11%	9%

Note: Based on 31 August of each year.
Source: CRTC data collection