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Good morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Corus Entertainment Q2 2019 Analyst and Investor Conference Call. [Operator Instructions] Thank you. As a reminder, this call is being recorded. I will now turn the call over to Mr. Doug Murphy, President and CEO of Corus Entertainment. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to Corus Entertainment's Fiscal 2019 Second Quarter Earnings Call. I'm Doug Murphy, and joining me today is John Gossling, Executive Vice President and Chief Financial Officer. Before I read the cautionary statement, I'd like to remind everyone that there are a series of slides that accompany this morning's call that can be found on our website at www.corusent.com under the Investor Relations section. Now let's move to the standard cautionary statement found on Slide 2. Today's discussion contains forward-looking statements that may involve risks and uncertainties. Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements are contained in the company's filing with the Canadian Securities Administrators on SEDAR. I'll now turn to our second quarter results on Slide 3. I am pleased to share that we have delivered yet another strong quarter in Q2, with Television advertising revenue growth exceeding our expectations. After a positive start to the year in Q1, we experienced continued momentum in Q2. This is due to the disciplined execution of our operating plan and continued progress advancing our strategic priorities. Let's first take a look at some key financial highlights before John provides more color on these items later in the call.Consolidated revenues of $384 million were up 4% for the quarter. We delivered impressive growth of 11% in Television advertising revenue, which is the best result we have seen in many years. While some of this increase is attributable to the impact of the Olympics in the prior year quarter, it is increasingly evident that we are benefiting from our unwavering strategic focus and operational discipline. Our revenue go-to-market strategy is beginning to deliver meaningful results, driven by new pricing flexibility in specialty, ongoing traction in ad tech and audience segmentation, impressive acceleration in digital advertising, a determined pursuit of new business and the emergence of new direct-to-consumer advertisers coming to Television. Segment profit of $113 million was flat to the prior year quarter, as strong growth in our TV segment profit was offset by a swing in stock-based compensation expense at Corporate and soft Radio results. Our improved overall financial results, operating in concert with our Capital Allocation Policy, which was purposefully revised to aggressively reduce our debt, is doing just that and having a positive impact on our balance sheet. In Q2, our robust free cash flow of $84 million enabled increased voluntary debt repayments that have accelerated the reduction in our leverage. I will now turn to our Q2 highlights and take a few minutes to discuss some notable developments in our business. Moving to Slide 4. I want to take a moment to share a few highlights from our audience performance in Television. On Global, building on a strong fall schedule, New Amsterdam still reigns as the #1 new drama and ranked as one of the 8 top programs in the top 20 for adults 25 to 54, in addition to Chicago Med, Survivor and Big Brother Canada. Turning to Slide 5, and taking a look at our specialty Television portfolio, a number of our top specialty channels are delivering year-over-year audience growth. HGTV, Food Network and W Network are strong performers, with Hallmark movies remaining a meaningful contributor to W Network's growth.Over to Slide 6. The big story in our specialty TV business this week was the launch of Adult Swim on April 1. We have deepened our partnership with WarnerMedia, enabling us to bring the first 24/7 Adult Swim channel to Canada. This is a great example of portfolio optimization in action. We rebranded an existing network with broad distribution in order to deliver targeted, highly valued content to a coveted audience demographic. In fact, in the U.S., Adult Swim has been the #1 channel for adults and men 18 to 34 for the past 14 years. We are extremely excited about this great addition to our portfolio, with loads of never-before-seen content for Canadians, which will further strengthen Corus' presence as a leader in specialty entertainment. Moving on to Slide 7. We are advancing our Own More Content strategy through Nelvana and Corus Studios. Our owned content investments drive audiences on our networks and diversify our revenues through international content sales. We call this our Corus Advantage. Looking first at Nelvana, we have 15 series that are currently greenlit or in production. Building scale through partnerships is a key strategy in our content business and I want to take a moment to highlight what's new with some of these great strategic partnerships.In February, Nelvana and Discovery's joint venture, redknot, greenlit 2 new animated preschool series, The Dog & Pony Show and Agent Binky: Pets of the Universe. Both series will be slated to air on Discovery Kids Latin America and Treehouse in Canada and will be available for sale globally. Sumitomo and Nelvana recently announced development of their first series from that partnership, Geki Drive, an action-adventure cartoon based on the hyper-fast customizable cars produced by Japanese toy company Bandai. This is another great example of why these new partnerships can deliver a truly unique and appealing intellectual property. Further, we are scaling our production partnerships nicely with both Nickelodeon and Sesame Workshop, with second seasons of Corn & Peg and the Emmy-nominated Esme & Roy moving into production. We are definitely priming the pump at Nelvana as we set the stage for growth later this fiscal and into fiscal '20. Moving to Slide 8. Over at Corus Studios, we currently have 14 series that are in production or have been greenlit. This includes 3 new renovation real estate series, Vacation House Rules, Make Your Move and Farmhouse Facelift, which were recently announced as new additions to our slate for 2020. And demand for our powerful slate of lifestyle and fashionable content is growing. Just yesterday, we announced our expansion into 4 new markets and new sales for STITCHED, Backyard Builds, Masters of Flip, Save My Reno and Worst to First. On to Slide 9. We are committed to following our viewers and listeners across new and growing platforms and making smart investments in growth opportunities. For example, we are experiencing significant growth from our expanding online presence of Global News on Globalnews.ca. In Q2, average monthly unique visitors grew 22%, with over 28 million average monthly video views, an increase of 191% over the prior year. Turning to Slide 10. This week, we also announced the acquisition of the Canadian operations of longtime partner Kin. The investment in this network of premium social media content creators further strengthens Corus' leadership in the lifestyle space and complements our existing social digital agency, so.da. As advertisers seek out new ways to engage with audiences on social platforms, so.da continues to gain momentum, recently announcing the production of its second mid-form Twitter series, #DestinationDishes, offering an exciting opportunity for engaging social content partnerships.And lastly, a quick look at our podcasting business, CuriousCast, a natural platform extension for our Radio and news business. We are pleased to see this content resonate with audiences. Most recently, new podcast Crime Beat debuted at #1 on Apple Podcasts Canada in all categories. CuriousCast has nearly tripled our average monthly downloads since launch, with over 2.6 million downloads per month. And interestingly, 35% of our total downloads are U.S.-based. These are all good examples of smart investments in new and emerging market spaces as we explore emerging growth opportunities. With that, I'll now turn things over to John who will walk us through our Q2 financial results.
Thanks, Doug, and good morning, everyone. I'll start on Slide 11. As Doug mentioned earlier, we delivered Q2 results that exceeded overall expectations, particularly on the top line. Consolidated revenue increased to $384 million for the quarter and that's up 4% from last year, largely driven by double-digit growth in Television advertising sales. Consolidated segment profit of $113 million was consistent with the prior year quarter. Improvements in TV were offset primarily by a $7 million swing in stock-based compensation expense within Corporate as well as soft Radio results. Consolidated net income attributable to shareholders for the quarter was $6.3 million or $0.03 per share, compared to $40 million or $0.19 per share in the prior year. That's primarily due to an accounting estimate change that started in Q1 related to the useful lives of our Television brand and tangible assets. For the second quarter, this resulted in an additional $35 million in amortization expense and that reduced net income attributable to shareholders by $26 million or $0.12 per share basic. Further details can be found in this quarter's MD&A. Free cash flow of $84 million increased from $82 million in the prior year quarter. This result was driven by cash provided by improved working capital, partially offset by higher film investment spend and higher cash taxes. Looking at Slide 12. Our revised Capital Allocation Policy has enabled us to make significant strides in our delevering efforts this year. Net debt to segment profit is now 3.05x as of the end of Q2 and that compares to 3.28x at the end of our prior fiscal year. We continue to accelerate our progress against our target of getting below 3x, making debt repayments of $61 million in the quarter and $118 million year-to-date. As well, in March 2019, we disposed of our majority interest in Telelatino. While this was not a material transaction, it fits with our strategy to focus on our core businesses and optimize our portfolio. We note the proceeds of $19 million will be used for debt repayment. As well, this sale will have an approximate impact of $10 million on consolidated revenue and over $4 million on consolidated segment profit for the back half of the year. Now let's turn to our TV results for the second quarter as detailed on Slide 13. Overall, TV segment revenues were up 10% and again, largely attributable to our impressive TV advertising revenue growth of 11% this quarter. As Doug mentioned earlier, beyond the impact of the Olympics last year, we are benefiting from a number of factors including new pricing flexibility on some of our specialty services, traction in ad tech, growth from digital assets and a revenue focus on new business, including direct-to-consumer advertisers. This is a testament to the disciplined execution of our operating priorities. While we do not expect the results to be as robust in Q3, our current bookings indicate that we are on track to deliver mid-single-digit TV advertising revenue growth year-over-year for Q3. That said, our long-term visibility beyond Q3 remains limited. Subscriber revenue met our expectations of down 1% versus the prior year quarter, and that's due primarily to the shutdown of the Sundance Channel last year. $2.5 million decrease in merchandising, distribution and other revenues over the prior year reflect some timing variability on the delivery of new episodes, soft publishing revenues and lower owned content back-end payments compared to the previous year. TV expenses in the second quarter increased 3% over prior year. Direct cost of sales were up 3%, which includes programming amortization expense at plus 1 and G&A expenses up 3%, driven by the strong advertising revenue growth and our investment in advanced advertising and data initiatives. TV segment profit increased 10% in our second quarter, reflecting the strong top line growth. TV segment profit margins were 32% and that's improved from 31% in the prior year. Now we can turn to our Radio results on Slide 14. From a market sector perspective, the automotive category was the largest contributor to the decline and from a regional perspective, Alberta is showing ongoing economic market pressure and Toronto is still a work in progress from a ratings perspective. We continue, however, to see the benefits of our revenue diversification strategy in markets where we have both Radio and Television as we focus on those clients using both local TV and Radio advertising solutions. Radio segment profit decreased $1.9 million in the quarter, given these challenging revenue results. Segment profit margin of 16% was down from 21% in the prior year. Before I turn things back over to Doug, I would like to highlight that today, we declared a quarterly dividend of $0.06 per Class B share payable in June, as detailed in the separate press release this morning. To conclude on Slide 15. Given the positive momentum in the Television segment and our continued commitment to driving strong free cash flow, we expect to meet our target of getting to below 3x net debt to segment profit in the back half of this fiscal year. We are very pleased with the positive results our team is delivering while we continue to make prudent investments for future growth. With that, back to you, Doug.
Thanks, John. I'm now on Slide 16. We are seeing resilience in our TV business this year and while we cannot look around the corner, there are increasingly more reasons for optimism. First, I want to share my excitement about the findings of new research recently released by Accenture. This first of its kind Canadian media attribution study and industry review investigates the relationship between TV, digital and other forms of ad spending to better assess how to optimize the returns on marketing campaign investments. They analyzed $3 billion of ad spending by 105 brands advertising in Canada in 4 industries over the last 4.5 years. The study concluded that typical -- that the typical advertising media mix models are definitely over-rotated into digital and that a heavier weight of TV advertising in the media mix will improve campaign ROIs. As well, advertising on television combined with digital improves the effectiveness of multiplatform advertising campaigns. Interestingly, this may explain the growth we are seeing in TV advertising by direct-to-consumer companies such as Expedia and trivago. They are seeing this attribution in their own results and consequently, are heavying up on television. Another key finding of this study was that advertisers in Canada would be more successful in growing their top line if they rebalance the mix of media elements in marketing campaigns and reallocated dollars to television advertising by shifting some of their spending from digital. These conclusions from this study were remarkably consistent with other U.S. and U.K.-based research. We've always opined that the market has shifted too far into digital. It is extremely validating to have an independent research study prove that TV is unrivaled in terms of both long-term brand building and short-term sales impact.Over to Slide 17. Another reason for optimism is the progress we are making in audience-based buying. We've spoken many times in the past, but the fact that we are investing to enhance our suite of advanced advertising solutions and data analytics capabilities as the cornerstone of our strategy to transform how television is sold. And we are taking a leadership position in our industry to identify and advocate for opportunities to accelerate the growth of audience-based buying, such as aligning on a shared approach industry-wide for defining common audience segments. An industry solution would create a more robust and effective ecosystem for agencies and advertisers to target audiences for maximum campaign impact.Finally, turning to Slide 18. We are very pleased with the results this quarter and they further validate that our strategic priorities are working as we compete in this dynamic and fast-changing media marketplace. As we look ahead, we have a lot to be excited about. We will have TV ad growth in Q3. Our slate of owned content is growing and sets the table for increases in international revenue from broadcasters and streaming platforms the world over. We're making steady progress on our advanced advertising and data initiatives and advocating for an industry solution for common audience segments. We continue to explore growth opportunities through smart investments in digital content. And finally, our focus on driving free cash flow and decreasing our leverage will enable us to build future financial flexibility as we continue to evolve our business.In closing, we'd like to thank all of you for your support of Corus and the hard-working Corus team around the country. John and I will now be happy to take any questions that you may have. Over to you, operator.
[Operator Instructions] Your first question comes from Vince Valentini from TD Securities.
A couple of things here. Maybe just to key on what you just said there recently, Doug. We will have positive TV ad revenue growth in Q3. That's a pretty confident statement given the lack of visibility you've had in the past couple of years. Does that signal that even to this point in the quarter, you're trending almost to this double-digit base, so even if the last month and a bit fell off, you'd still be positive? Or can you give us a little more color on that confidence?
No. What I will say is that we have growth on the books already, Vince. I wouldn't for a moment say double digit, but we're very confident that there will be growth, like, once again in Q3. So that will be the third quarter of consecutive growth in TV ad spending, advertising.
And then to go back to Q2 and dissect it a bit. Obviously, you have a bit of a different year-end and quarter-end period than your major broadcast competitor. Would you characterize that December was disproportionately strong out of the 3 months in Q2, or was this 11% ad revenue growth reasonably evenly spread across December, January and February?
I think it was pretty evenly spread, Vince. It was -- the pacing was kind of consistent throughout the year and the money just kept coming in, good demand. The one thing that I would say, if you're looking for year-over-year seasonality, was last February, we did have the Olympics. So you had a comp there that was much favorable.
I was just going to ask that. I mean some people I think are saying this is just easy comp versus the Olympics. Do you have any way of going back now and saying if the Olympics hadn't existed, you may not have been down 3% in Q2 last year, you may have only been down 2%, but this year, you would only be up 9% or do you have any way of quantifying it?
Yes, yes. We know in our model what they are. I think you summarized it fairly well.
Okay. And then last but not least, just the content and merchandising space seemed to be a bit weak this quarter, but there's always lumpiness in timing. You guys have way better visibility than us. Can you give us any better clarity? Is -- do you get more deliveries and revenue flowing through in Q3, or is that more Q4 or into next year?
So it's interesting, Vince. That's a relatively small delta but obviously a large percent, and we do focus a lot on it, given that's where we expect a lot of the growth to come from. So I was looking at it even just before the call. That particular revenue category has 14 different items in it. I'd say the things that are related to Nelvana, actually, in total, we had growth in the quarter. Small, but it was still growth. The things that are also in there are things like we get some distant signal payments from the distributors, and you had asked this in the past, that there was a change coming in some of those payments that the distributors have to make. We don't know what that's going to translate to for us yet. And there is always a timing issue with those payments. We effectively treat them on a cash basis. So that was a big driver actually of the downside this quarter, over $1 million. Kids publishing was a bit softer this quarter compared to last. They had a fairly big distribution deal a year ago and then yes, some of the Corus Studios stuff, the back end is a little bit harder to predict. So I'd say there is a mix of a tougher comp on that one. Last year was a big quarter and as well, we do have some things that are pushing into the last part of the year. Now remember in Q4 last year, we had a big SVOD sale of $4.5 million. So that's going to be a tough comp for us as we get into Q4, but we're certainly pushing hard on all these revenue categories.
And I'd just add that at a high level, and we're -- our strategic objective of owning more content is very much in play here. Nelvana has got significant growth in episodic delivery in the quarter. It's just not showing up on the revenue line yet. And increasingly also on Corus Studios, we're really building that catalog and going into second, third, fourth seasons of our hit shows that are selling internationally. That volume helps to grow. Some of it just doesn't quite hit the top line based on how you recognize revenues and the timing of deliveries. We need to get the complete seasons billed before we can take them into revenue. So I mentioned in my remarks, purposefully, that we're priming the pump. You'll start to see, I think, some more significant growth next fiscal and beyond.
Your next question will come from Adam Shine from National Bank Financial.
Maybe starting with you, Doug. In terms of some of the advertising growth, you highlighted a couple of players like an Expedia or trivago within the context of the Accenture discussion. But anything else in terms of specific categories that might be driving some of these gains in terms of specific categories coming back into the TV space as well? And then one for John after.
Okay. So the -- thanks for the question because this is something I really want to make sure everybody on the call, kind of lands -- I land this point. There is -- traditionally, TV's had 200 big advertisers, and those are advertisers we work very closely with. We're trying to change how we sell television to them, and we're selling audience segments, and we're working with data, and we're doing integrations on Tempo and we're doing great digital campaigns on so.da and all that stuff is working great. There is an emerging 50 advertisers, I would characterize the same, that all started in digital and now they're coming into television and they are diversifying their media mix elements in their media campaigns. And that's something to take a -- pay careful attention to because what it means is these folks can look at their own attribution. I mean that guy on trivago, the reason why you see him all the time is because television advertising works, and then you're going to see it in their results and you're seeing it across all the other platforms, whether it's Amazon or Google or Expedia. There is a plethora of these digital advertisers now on television. And to me, that is anecdotally substantiating the empirical research that Accenture has just released in the last couple of months. So that's the note that I wanted to make sure that all of us on the call paid careful attention to.
Great. And just turning over to John. I mean on the TV side, obviously, we had a very strong top line and you could absorb some growth in cost, but one thing that stood out for me was G&A in TV increased for the first time, obviously, in probably 4 quarters or so, suggesting a lapping of some prior savings initiatives. Do we embark, perhaps in the back half of the year and prepping for F 2020, on further cost-saving efforts such that we will see some of the cost increases in check?
I mean, certainly, it remains a very important focus for us. But you're right, Adam, there's pressure as we see that kind of top line activity. There are some variable costs. There are some compensation costs that will be driven by revenue. And frankly, you saw programming move up a little bit in Q2. I think we've done a really good job really in the last 3 years since we bought Shaw Media of pushing that down. We've got some investments we're making in Canadian that will help to drive Corus Studios that we've talked about. Foreign is always difficult to predict because of timing and you could argue that in Q2 last year because of Olympics, we were underdelivered on foreign. This year, we took -- probably took a little bit more. So I think the trend is -- what we see is, yes, pressure for G&A and programming to start moving up, so that will obviously focus us on what are the efforts we need to make to try to counter that. But given the kind of top line we're driving, it's okay in terms of things that are variable with the revenue line.
Your next question comes from Aravinda Galappatthige from Canaccord Genuity.
Congrats on the quarter, again. The -- I just want to start with the question on the audience-based buying. I know that in Q1, Doug, you mentioned, you kind of gave a percentage of 15% in the growth rate. Is there kind of an H1 number you can give us that will kind of help us size that up?
Yes, it's actually, the growth has increased in Q2 relative to Q1 on a percentage basis over the prior year. So we continue to make great progress on that. I think we're 17% now Television advertising is audience-based buying, that's up 1.5 points, I think, from the first quarter. And in the year, year-over-year nominal growth is almost -- is up almost 50% over the prior year. So we are -- we got the pedal down on this one. That metric will swing around from quarter-to-quarter, but the trend is definitely going up because it's working.
Okay, great. And just moving on to sort of the dynamic ad and solution side of things. Any kind of updates there that sort of maybe help us think of a path to that side of ad tech kind of coming into play as well? I know that there is a sort of a measurement study that's happening and you're working with both Rogers and I think you're trying to get Shaw up and running as well. Anything on the path to sort of those revenues kind of starting to trickle in as well?
So a couple of things there. Yes, we're working on a measurement study with Numeris, the total video audience measurement test, which will include all video viewing in the fall and capture on-demand viewing, so that will be added to the currency. We are currently in sort of active deployment of DA -- DO -- sorry, dynamic insertion on VOD with Rogers, but Rogers only. We're not up yet with Shaw. So it is relatively nascent at this moment, Aravinda, but we expect as the new platforms roll out, X1 and MediaFirst, to have more likely next year, we'll see some meaningful growth off albeit a small base this year in the dynamic ad insertion on VOD. So it's an area where everybody recognizes that there is audiences there and where there's audiences, there's advertising opportunities and the new -- the 2 new platforms, X1 and MediaFirst, will be much more facile in terms of how we can execute the DAI opportunity.
Okay. And then just lastly on -- actually, I have one more on Radio. But on Adult Swim, I know it's early days, but any comment, Doug or John, you can provide on sort of the materiality or the tailwind to ad growth there, given sort of the impact that it had -- given significance of the channel in the U.S?
Well, it's a monster in the U.S., Aravinda. And it's -- by the way, it's super funny. I would encourage everybody on the call to check it out. My favorite, Rick and Morty, is a hysterical show, but I can tell you that anecdotally, in the first few days, we've more than doubled the audience that we're delivering on ACTION. And that's -- and we're in free preview right now, so people are discovering it. We've got a pretty robust advertising campaign on multiple media across the country. So we're optimistic, but we're still measured. That's our tone. Even with this big quarter we just had, we're maintaining kind of measured in our approach to everything. So it was a nice upgrade from the existing service. It's a big brand that hasn't been in Canada before. It's another example of our faithful execution of our priorities around here. And we will report back more in the next quarter as to what we're seeing from Adult Swim.
Okay. And lastly on Radio. I know that, I think it was 4 or 5 years ago, sort of you had this period of rating softness in I think the Toronto stations as well and that persisted for a while, maybe a while longer than you had hoped for. Is there any sort of comparison to what you're facing right now? I know it's not just Toronto, but it's Alberta as well, but any comment there that will give us some visibility as to how Radio would perform?
Yes, a couple of comments. I mean as an industry, it's a little soft, but that's not just Corus, that's the TRAM, which is reported by all radio broadcasters, is down this year. I think that's largely driven by the macroeconomic softness in certain parts of the country and certainly Alberta as you noted and we noted. For Corus, in particular, we have some Corus-specific issues in Edmonton and Toronto. We've moved very quickly to address both of those. We've changed our morning shows on Q and we changed our morning show on the Edge. Our music recipes are different now. We're marketing more aggressively. We just rebranded Fresh to Energy 95.3, so we're now in the kind of top 40 business here in Toronto. And we're already seeing some progressive movement in the overnights in the Toronto cluster. So the nice thing about radio is you can move pretty quickly if you get it right. So we've done the right things in Toronto. Now we've got to kind of hold the course and look for the results to come.
Your next question comes from Jeff Fan from Scotiabank.
Congrats on the numbers. Doug, you touched on the oversteering to digital from television. And I want to just follow up on that. How long do you think it will take for us to get back to a level where you think in your opinion is the right mix on TV versus digital? Because as you said, in the last couple of years, we've seen an overcorrection and oversteering. Now we're kind of getting back to more of a level set. How long do you think that process is going to take for advertisers to get back to the right mix in their spend between digital and television?
Well, that's a great question. I'd invite anybody on the call, if they haven't seen the presentation, we're happy to share it with you. One of the stats on the Accenture study said that TV was-- that the industry was underinvested in television by 5 points. In other words, in the media mix models, it should be 47, not 42. And so that's kind of directionally what we're seeing. I think they can correct pretty quickly and we're out on the street now pitching. Literally next week, we're going to go see roughly 400 advertisers. We already talked to 300 advertisers in the last couple of weeks here in Ontario, in Eastern Canada. Accenture is meeting with, I think, 50 CMOs across the country to also talk about this opportunity. So I'd like to think that we could correct this in the next 12 to 18 months, but it's really kind of difficult to predict that. There are some advertisers that will continue to do what they're doing. There are others and many of them want to maximize their campaign ROI. And what's true also is if you look at the level of TV investment in Canada compared to the U.S., it's relatively underinvested. And in other words, the U.S. folks are putting more money in television in their mixes. And the other thing that's evident in the study is incremental investment in television has the highest incremental return on your campaign. So there's a lot of really good things in here that is empirically based, which we'll be talking to the community about, and I think we'll get some results from it.
And Jeff, some of this is on us, right? I mean Doug talked about the audience-based buying as a solution for the industry. So there is things that Corus needs to do in the way we operate. There's things that the industry needs to do in the way it operates and so that's -- again, that will require some time, some investment and frankly, some cooperation. So we're on all those things. We're trying to be as aggressive as we can. That's why we keep saying we're investing in ad tech and data because we have a huge focus there. But there's systems work and that can sometimes take time. And getting all the players in the industry takes a lot of effort as well.
And maybe just a follow-on. Regarding the 50 digital advertisers or digital players that are now advertising on TV, how far along are we in terms of getting them onboard?
Well, I think -- I mean I think kudos to our business development efforts with the sales team. They are increasing their spending. I mean they're -- and I think it's -- as I said, I think that's evidence of the effectiveness of television. These companies start off in digital and then as they begin to get success and grow, they widen their funnel and start investing in brand building and bring TV into their campaigns. So I don't think this is a onetime thing, Jeff. I think this is a trend.
That's great. And just a final question. Disney is launching their streaming service. Doug, I'm wondering if you have any thoughts about what your role will be with respect to Disney going forward, particularly related to the channel business and any role that Corus could play on their streaming service.
We have a very, very strong relationship with The Walt Disney Company. We've been speaking with them on a regular basis over the last weeks and months. They're very much aware that we're their partner in Canada, and the success of Disney+ will very much be a function of us working together. And I think we're still putting those details together, but I think that for us, Disney values our channel business here in Canada. It's a significant part of their overall model, whether or not it's marketing the theme parks or Disney consumer products or the feature film releases, we are a piece of that ecosystem that's invaluable to them, and so I expect us to be working in concert as they bring Disney+. I don't know exactly what that's going to look like, Jeff, but I think it's smart business for each of us to work together as opposed to not.
Your next question comes from Tim Casey from BMO.
Yes, a couple for me. One, Doug on -- or John, on the strong television ad number this quarter, order of magnitude-wise, could you talk a little bit about how you'd break down the gain? I think you sort of mentioned that maybe 1/4 of it is due to the weak comp, but how much do you think is price -- pricing, how much is ratings and how much is, I guess, media mix? What would you guess? And second question on the audience-based buying, you mentioned you've got to get the industry aligned. Can you talk a little bit more about that, Doug? Does that mean like your other television operators, or does that mean the buying community, or is it the distribution community? What -- could you just flesh out a little bit more, what do you mean by aligning the industry?
Thanks, Tim, and nice to have you join us. We've been talking to all the agency groups and there's 5 big agency groups, and they've been very consistent in saying, "We love what you're doing with audience in Corus. Can you please work with your broadcaster peers to help us all buy the same audience, so that your definition of a fledgling family or fashionista or a cruise ship aficionado or a foodie, et cetera, et cetera, is the same as the other broadcasters' definition to facilitate a more wholesale embrace of audience segments buying across the Canadian media industry?" So that's that note. On the growth vis-Ã -vis last year, I'd put it into 1/3 of the growth is probably Olympics comp, 1/3 of it is price and 1/3 of it is market share shift back to TV.
Your next question comes from David McFadgen from Cormark Securities.
So just a couple of questions. So when you look at the TV ad revenue growth of 11%, it's obviously a pretty strong number. How much of that do you think is derived from the digital solutions that you guys have put in place? Because obviously, once the shift normalizes back to, I guess, a more appropriate mix, then we could fall back on just the data solutions to drive that revenue growth. So I was just wondering how much of that is factored in, in the quarter here?
Well, I mean I just mentioned on the prior call that if you had to look at the incremental growth on TV ad, I would attribute like a 1/3 of the comp on the Olympics, 1/3 to market share shifting and that's partly the digital piece and 1/3 to price. So every quarter, we are moving away from selling the broad demo, adults 25 to 54, to selling more targeted audience segments. And that trend is irreversible and we'll continue to push that. As you do know, David, we are still in beta on our CYNCH platform, and we hope to get that to scale for next fiscal, which will enable us to have automated -- and automated transactions on audience-based buying, which will be a big leap forward again. So the share of the data-based buying in our total mix will continue to grow. And that will be, I think, very positive for the overall TV business. And then also -- if I can just add one more thing. The more audience-based buying we enable, the more yield we can get. So there is a pricing element that comes with that mix, too. So it's a bit of a double dip.
Okay. So I think in the Q1 call, you gave a metric, you threw out a metric, how much revenue from audience-based buying in digital solutions grew year-over-year and it was quite a big number. Can you give us that number for Q2?
Yes, it's -- we've moved up to 17% of the total TV ad. So it's -- I don't have the exact number on my fingertips, but John can get that to you on a follow-up, but it's definitely growing. I think we said up 42% over in Q1. I think it's posted up growth of 50% in Q2. I did some rough math earlier this morning. So it's continuing to grow.
Okay. And then just my last question. Just on the whole merchandising, distribution, other, you talked about Nelvana growing, but there could be some tough comps with some large SVOD fees in fiscal 2018. Just on an overall basis, do you expect the merchandising distribution revenue to be up in fiscal 2019?
Overall, I don't know. I'm going to let John look at that. But for fiscal '20, I have a high expectations from our Nelvana and Corus Studios businesses in fiscal '20. As I said, we primed the pump on the episodic output. We've also got Bakugan coming back in, so the team is fully aware of my expectations, put it that way.
Yes, I mean David, on '19, and this is consistent with what we said in October on the Q4 '18 call. I think we would expect that other line to grow, but taking into account that there is that [ big SVOD sale ] on Q4 last year. So normalize that out and we would expect to see pretty decent growth on that line for the year.
So -- okay. And then what was the delta that we are looking at, where that we wouldn't ex out. Is it the $4 million of sale in Q4?
It was about $4.5 million in Q4 last year.
Okay. So ex that out, you should see, I don't know, mid- to high single-digit growth?
That's what we said in October and I think we're still good with that.
[Operator Instructions] Your next question comes from Drew McReynolds from RBC Capital Markets.
Three for me. Just a clarification, Doug, on the pricing flexibility in the release. Is that kind of what you've addressed in terms of some of these new initiatives that you're just being able to monetize in different ways, or is there something else that's happening to the traditional way you have had priced kind of specialty?
There's a bunch of answers into that question, Drew, so let me see if I can hit them. Number one is when we sell audience-based buying, it's very -- when we pull the numbers and look at -- okay, an example an advertiser comes, they say, "Here is their first-party data." We merge it with our set-top box data, we push it out to another third party that further adds data to it, we get really good definition as to what shows their customers are watching, interests or their targeted customers are watching. Interestingly, it's almost never the shows that you think they were. So we find an interesting assortment of shows in our numbers that we then put together as a campaign, and we're able to charge a higher yield because there's a much more targeted hit that -- sometimes, 2 to 3x more focused and targeted than they would've bought if they bought the top 20 shows. And that allows us to do 2 things. One is to blend up our overall pricing on average and also to keep liberated other inventory that might be more valuable to late-breaking money like theatrical releases or other kind of campaigns, elections, et cetera. So there is a mix and a price piece in that. Secondly, from a trading perspective, this year, on our top specialties, we've moved to floating rate cards. So we always have been -- had dynamic pricing on conventional television, and we've certainly taken a lot of price in the last year as the industry has in Canada, North America and around the world. But now we have a new trading practice wherein we can float rate cards on our big specialty channels and the big specialty channels are growing their audiences, and as a result, we're having the benefit of both more inventory and more price.
Okay, that's very clear. Two others for me. First, maybe provide an update on expectations for television subscriber revenue growth and the 2 renewals this year. And lastly, on the TV visibility comment that John alluded to. I mean certainly, everything that you talk about seems quite positive. I'm just wondering what's the hesitation, even though bookings come in last minute, what's the hesitation just to express that caution kind of over the medium term on TV visibility?
Drew, I tried to get at this on the last call, but I'll try again. So as Doug said in response to the first question, we can say Q3 is looking like growth because we know based on orders on the books today that we're there. So this isn't a pacing concept, this is like what's actually on the books. So roll it forward into Q4, yes, we know what's on the books for Q4, but it sure isn't anywhere near a place of where we can say there absolutely will be growth. It's pacing well. But I think roll the clock back to 2018 and the first quarter miss that we had that led to a whole bunch of things in '18 for us, and I think that's why we're just a bit hesitant is, we've seen the shape of the pacing curve change and it's very hard to predict. It seems to behaving consistently now in a different way than what it was, say, 1.5 years ago, but you don't know that, that won't change again. So yes, the orders are coming in sooner, the pacing is very strong as we go into a quarter. And in the last 2 quarters now, we've been able to say that we've actually got orders on the books that will get us to a growth place. If we stop today and assume nobody cancels, then we would be able to report growth when we're on the next call in June. But for Q4, we can't say that yet because it's just too early in the full cycle of selling. So that's the hesitation, is we just -- we went through that last year and we're just cautious to go back there when it's so hard to predict.
But conceivably, John, and I certainly understand that quarterly cadence that you've been very clear on, with what's going on and everything we've discussed here with respect to the TV ad market, I guess really the question is, is that quarterly cadence changing? And I think you kind of addressed that and presumably changing to incrementally better visibility, but you're clearly not calling an end to that dynamic overall. Is that a fair assessment?
I think so.
Yes, I mean I think there are some positive forces. There is progress on audience-based buying -- by the way, just on the last call for Mr. McFadgen, we did grow 50% year-over-year on our audience-based buying in Q2. So I just did the math specifically on that for David's benefit. So we've got audience-based buying growth. We'll accelerate that when we get CYNCH launched for next fiscal. We've got this market share in equilibrium from these, highlighted by Accenture. We've got the emerging nifty 50, if you would, new advertisers coming to television, the trivago guy. And we've got floating rate cards at specialty. We've got still -- audience levels are stable for everybody in the system in Canada, so I'm sure our friends on Queen Street are going to have a good quarter as well. So all of this is, I think, positive. After last year, we're reluctant to get too puffy on this stuff. We just want to be measured and execute faithfully to our plan and we'll take it quarter-to-quarter. But we're also -- and I'll -- you didn't ask this question, but I'm just going to say it, because we're also extremely pleased with our deleveraging profile. I mean that's a great outcome for us and it was part of our decision to revise our Capital Allocation Policy and that would give us more wherewithal to make these important investments as we work to transform the business.
And Drew, just -- so we didn't miss your first -- or I guess that was your third question. On TV sub, I'd say more of the same. I mean, we were down a little bit this quarter, but that was mostly Sundance disappearing. You mentioned we do have 2 big renewals coming. Do they both get done this fiscal? It's hard to predict. We'd like to think they do, but it's never completely up to us. So if I was betting, I'd say 1 out of 2 for sure. So that could provide a little bit of benefit in Q4, say, but hard to know. But yes, we're looking at sort of plus or minus 1% or 2% is where we think that's going to be.
I have no further questions in queue. I'll turn the call back over to presenters for closing remarks.
Thanks, operator. And thank you, everybody, on the call. As ever, we're available for your follow-up questions, if you have any. And in the meantime, have a great weekend and thanks very much. Bye-bye.
Thank you, everyone. This will conclude today's conference call. You may now disconnect.