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Good morning. My name is Jodi, and I will be your conference operator today. At this time, I would like to welcome everyone to the Corus Entertainment Third Quarter 2021 Analyst and Investor Conference Call. [Operator Instructions] And 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. Sir, please go ahead.
Thank you, operator, and good morning, everyone. Welcome to Corus Entertainment's Fiscal 2021 Third Quarter Earnings Call. I'm Doug Murphy, and joining me this morning is John Gossling, Executive Vice President and Chief Financial Officer. Before I read the cautionary statement, I'd like to remind everyone that we have slides to accompany today's call. You can find them 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 start on Slide 3. We promised eye-popping revenue performance this quarter, and we delivered it. Despite an unexpected third wave lockdown, our results were strong, with impressive revenue gains across our entire portfolio, led by consolidated advertising revenue growth of 23%. As I mentioned on our last call, we have entered the Spring Forward chapter of Corus' book of COVID. The economy is reopening, vaccine uptake is increasing, and Corus is ready as Canada gets back to business safely. These Q3 results clearly demonstrate strong operational momentum on all fronts. TV and radio advertising revenue grew double-digit, realizing the ongoing benefits of our go-to-market revenue strategy. Another notable highlight of the quarter is our streaming business which is on fire. Not to be outdone, the content business delivered double-digit growth for the fourth consecutive quarter. Our focus on free cash flow remains unwavering. Corus is steadfast in our determination to achieve the revised leverage goal announced last quarter of below 2.5 net debt to segment profit. We are well on our way. Key financial highlights for the quarter include: Consolidated revenues of $403 million, consolidated segment profit of $131 million, solid free cash flow of 70 -- $55 million and improving financial flexibility with reduced leverage to 2.82x net debt to segment profit. In addition to these outstanding financial results, I'm delighted to reveal these key milestones. There are now in excess of 600,000 paying subscribers to our streaming services, more than doubling over the past year. Second, our team successfully completed an important refinancing in the quarter, issuing $500 million of new 7-year notes at 5%, with net proceeds used to pay down bank debt. And we extended our existing bank credit facilities to a 4-year term. John will provide more details later in the call. Finally, we have secured a market-leading supply of premium video content to deploy across all of our platforms this coming year which was unveiled at our upfront just a few weeks ago. Over to Slide 4 and a look at our prime time fall schedule on Global. Quite simply, it's one of the best schedules we've had in many years. This fall, Global will feature 18 hours of simulcast premium network television content every week, with an amazing lineup of new series and proven returning franchise hits. We are very excited about the long-awaited return of Survivor from Fiji. Now in its 41st season, this epic competition series has consistently delivered huge audiences, especially in the younger 18 to 34 demo. Gil Grissom and the original cast of characters of CSI: Crime Scene Investigation return in the most talked-about show of the season, CSI Vegas. Returning hits, 911, NCIS and FBI flank new franchise expansions NCIS Hawaii and FBI: International. And The Equalizer, with Queen Latifah, the #1 new drama on television this year, returns in the fall. These are just a few examples of our winning schedule. Over to Slide 5 and our Specialty lineup. This is our second year as exclusive partner for Peacock content in Canada available on all Corus platforms. Bel-Air, the timely, provocative and big-budget reimagining of the 90s Sitcom, The Fresh Prince of Bel-Air, is now a 1-hour drama from executive producer Will Smith. The Lost Symbol takes us from page to screen based on the best-selling third novel in Dan Brown's Da Vinci Code series. And the debut of high-octane action comedy, MacGruber, starting and executive produced by Will Forte. Over on W, we are ready to serve our passionate fan base the biggest lineup of Hallmark holiday movies ever this year with younger and more diverse stories and characters. Once again, we have Canada's favorite lifestyle shows, including the most watched show on HGTV in Canada over the last 10 years, Island of Bryan; and the #1 new Canadian hit show on HGTV Canada, Rock Solid Builds. Moving to Slide 6. Last month, our studio businesses unveiled exciting new production slates for the coming year. Let me provide a few highlights. First, Corus Studios announced 21 dynamic lifestyle and unscripted titles, furthering our ambition to become a much bigger content player globally. The slate consists of 13 returning shows, including HGTV Canada's blockbuster hit, Island of Bryan, which is back for a fourth season, and sees the Baeumler family build and run their resort in the Bahamas while adding on a whole new property in Florida. We can't wait to see their story continue. History's Rust Valley Restorers Season 4 and Big Timber Season 2 are also back, with prior seasons of these popular shows licensed to Netflix for the international market. And lastly, we have hit our stride with third seasons of Food Network's popular competition shows, Great Chocolate Showdown and Wall of Chefs, as they find new audiences both inside and outside of Canada. Our 8 exciting new series include, among others, Styled, Wall of Bakers and Scott's Own Vacation House Rules starring Scott McGillivray. And we have just announced 2 additional greenlights, expanding our Corus Studios slate for the upcoming year to 23 titles. Excitement is building around the announcement of a new original series starring the one and only Pamela Anderson as she returns to her roots on the Coast of Vancouver Island to rebuild her family home with her new husband and local carpenter, Dan Hayhurst. Tentatively titled Pamela Anderson's Home Reno Project, this show is certain to be hotly contested in the international marketplace. Corus Studios are creating value for our shareholders and our buyers alike as we purposely build multiple seasons of our most popular shows to create franchise IP. This quarter, we secured yet another sale to Discovery for the latest seasons of Island of Bryan, retitled Renovation Island on HGTV in the U.S.; as well as Scott's Vacation House Rules and the Big Bake. Over to Slide 7. We currently have over 30 series in production or development at Nelvana. And this quarter, we have greenlit 5 new shows, including Best & Bester, Super Wish and a second season of Agent Binky: Pets of the Universe. Two of our Nelvana shows were nominated for Emmys just yesterday, underscoring our investment in the creative development pipeline. One was our preschool hit show, Esme & Roy; and the second was the live action series, The Hardy Boys, which was picked up by Hulu in the U.S. and will soon air on YTV in Canada in 2022. Our merchandise licensing business is poised to benefit from the reopening of retail stores around the world. Spin Master recently confirmed on their earnings call that Bakugan is back in the game now that pandemic-related restrictions are starting to lift. We are thrilled to see this great brand once again engage children with collectibility and group play. Our content production and merchandising strategies not only drive audiences on our Corus networks, but they accelerate our international revenue growth, as once again evidenced in this quarter. Moving to Slide 8. Corus Television reaches 29 million Canadians every month, however and whenever they choose. Our strategy to build a diverse portfolio of digital streaming products remains a priority, generating new audiences and thus more advertising inventory and sales growth. When we look at STACKTV audiences, they're streaming the equivalent of 10 million episodes per month. Notably, almost half of the total STACKTV audience enjoys the experience of live television, which increases overall audience delivery and enhances our advertising revenues. At our upfront recently, we announced that dynamic advertising insertion for our video-on-demand viewers on STACKTV will arrive before the end of this calendar year. Once again, we are creating more digital advertising inventory and in turn more revenue. The new Global TV app, launched only 16 months ago, not only improves the value proposition for the subscribers to our channels business, it also offers us an opportunity to feature our premium video content online. There is an insatiable demand for premium digital video content from viewers and advertisers alike, and Corus is there to meet it. Let me double-click on the connected TV marketplace, which is a real opportunity for us. In addition to our existing connected TV platforms: Chromecast, Roku, Fire TV and Apple TV, we are thrilled to announce the Global TV app will also be available on Samsung later this year. Yet another example, of course, putting more content in more places. Usage of the Global TV app continues to grow, with just over 1.5 million unique video devices accessing content, up 17% over the prior year. In addition to a growing user base, total time spent has more than doubled, up 115% over the prior year, with almost 12 million hours viewed in Q3 alone. In large part, this growth in viewership is driven by more content, both free and front of the wall available to all and behind the wall, creating more value for the subscribers to our channels business and premium digital video impressions for our advertisers. Whether it's STACKTV or the Global TV app or the next new digital product in our pipeline, Corus is all over growth opportunities in the digital video marketplace. Moving to Slide 9. Corus has invested more than $50 million in transforming how we sell television since we acquired Shaw Media. Two of our strategic priorities, connect with audiences and help brands grow, are emblematic of our ambition to be a leader in the very important field of data-driven advanced advertising. Recently at our upfront, and in partnership with ThinkTV, we announced the addition of 7 new profiles to our industry-wide common audience segments. We now have 26 common audience segments in addition to our ability to build virtually any custom segment as desired by our advertisers. Corus is at the forefront of changing how TV is sold, improving its targeting and driving results. With that, I'll now turn it over to John to discuss our Q3 results. John?
Thanks, Doug, and good morning, everyone. I'll start on Slide 10. This past April, we saw a compelling opportunity to access the credit markets and made the prudent decision to refinance a portion of our debt. We are extremely pleased with the depth and breadth of the response to our senior unsecured notes offering with $500 million of notes issued at 5% for a 7-year term. Subsequent to this, we used the net proceeds of our notes offering to pay down a portion of our bank debt and successfully amended and restated our bank credit facility. Our term loan tranches were combined into a single facility of just over $900 million. And along with our $300 million undrawn revolving facility, the maturity dates were extended to May 31, 2025. This longer-term mix of funding sources provides diversity to our balance sheet and represents a return to our discipline of having fixed rate, long-term bonds as part of a purposefully laddered debt structure. We could not be more satisfied with the outcome, and we'd like to extend an official welcome to our new fixed income investors who are with us on today's call. This refinancing is a demonstrable step towards our long-term goal of increasing value for shareholders. And it reflects our firm commitment to operate with discipline, which is one of our key strategic priorities. In the third quarter, we made further progress on our new goal to get leverage below 2.5x net debt to segment profit. We delivered $65 million of free cash flow in the quarter and have repaid $602 million in bank loans for the year to date, which includes the net proceeds of the $500 million notes issue. And that lets us achieve improvement in net segment -- sorry, net debt to segment profit to 2.82x. This is down significantly from 3.18x at the end of fiscal 2020 and 3.02x at the end of Q2. I'd also like to quickly highlight. This morning, we declared a dividend of $0.06 per share for Class B shareholders, payable in September 2021. Now over to Slide 11 and a review of our third quarter consolidated results. As Doug mentioned earlier, Corus' consolidated revenue was $403 million for the quarter, and that's up a whopping 15% over the prior year. This is what we meant by Spring Forward into Growth. Consolidated segment profit of $131 million for the quarter benefited from the top line growth and was up a significant 17% versus the prior year. The current year quarter benefited from estimated government wage subsidy and regulatory relief of approximately $5 million, and that's compared to approximately $17 million a year ago. This was offset by the $6 million impact of a stronger share price on share-based compensation expense. Moving forward, we do not anticipate receiving further meaningful wage subsidy benefits. We delivered consolidated segment profit margin of 32% for the quarter, and that was consistent with last year. Net income attributable to shareholders for the quarter was $41 million or $0.20 per share basic. Our free cash flow of $65 million was down from $91 million in the prior year quarter. And as a reminder, the prior year quarter benefited from government relief measures, including the cash income tax installment holiday, which had a $22 million impact year-over-year, as well as lower programming rights payments and higher working capital contributions. Now let's turn to our TV results for the third quarter, and that's detailed on Slide 12. Overall, TV segment revenues were up 15% from the prior year, and that was driven by a 22% increase in TV advertising revenue. That's an excellent result, reflecting impressive advertising revenue recovery during the third wave lockdown. Our networks and sales teams were once again able to successfully balance ratings supply with advertising demand to maximize the value of our inventory. With our successful upfront revealed, our teams are fully focused on monetizing our strong summer and fall schedules with a head start compared to last year's pandemic delays. The runaway growth on STACKTV and Nick Plus really shines through in our third quarter, driving a notable 2% increase in subscriber revenues. We're making significant strides in growing this important recurring revenue as awareness of and interest in our streaming platforms build. For the fourth consecutive quarter, we've delivered strong double-digit gains in merchandising, distribution and other revenues, up 21% this quarter. This was driven by a rebound in Nelvana merchandise licensing, including Bakugan and Kids Can Press book publishing sales as well as strong animation software sales at Toon Boom. As a reminder, the prior year's third and fourth quarters included a large sale of Corus Studios content to Discovery's flagship networks in the U.S., HGTV and Food Network. TV expenses in the third quarter increased by 11% over the prior year as program deliveries normalized compared to delayed deliveries in the prior year with the widespread pandemic-related production hiatus. Direct cost of sales increased 8% from the prior year, and that reflects higher program rights amortization and other cost of sales, partially offset by decreased film investment amortization. Our increased G&A expenses primarily reflect reduced wage subsidy benefits of almost $4 million compared to $14 million in the prior year quarter as well as increased variable compensation costs commensurate with the revenue improvement. This quarter marks the beginning of a necessary path to return course to a more normalized cost structure. We continue to tightly manage discretionary spending as a partial offset to these returning costs. Overall TV segment profit increased 21% in the third quarter as increased revenues outpaced the expense normalization. TV segment profit margins were 37%, and that's up from 35% in the prior year. Our new platform revenue and optimized advertising revenue performance metrics once again highlight the benefits of our revenue diversification strategy, as you can see on Slide 13. Our team remains highly focused on the pursuit of attractive growth opportunities in streaming, digital and video advertising, and the automation of advanced advertising initiatives, we are gaining meaningful traction. New platform revenues were approximately 8% of TV advertising and subscriber revenues in the quarter, and that was a material increase from 5% in the prior year quarter. This incredible growth of 82% over last year highlights our continued progress in driving new sources of revenue as we further build our connections with audiences wherever they are. Optimized advertising revenues, which reflect our progress in transforming how we sell television advertising, represented approximately 38% of total TV advertising revenue in the third quarter, and that was a huge increase from 28% last year and 22% -- sorry, 28% last quarter and 22% in the prior year. To put this in perspective, the result reflects 111% growth year-over-year. Next, let's turn to our Radio results, as outlined on Slide 14. It was great to see growth in the Radio segment revenues this quarter as we delivered a 31% increase. The broad improvement across key advertising categories is encouraging and demonstrates the resilience of our team. Radio continues to be disproportionately impacted by the pandemic-related restrictions on local businesses, but we are significantly outperforming the market. We have used this time to strengthen our rank position in several key markets and are well positioned for recovery as businesses reopen. In addition, we are seeing ongoing growth in hours streamed across our music and news stations. Radio segment profit increased to $1.3 million in the quarter, and that was driven by the revenue improvements as we continue to navigate the challenging market conditions. Segment profit margin of 6% was up from negative 10% in the prior year as we continue to diligently manage costs during the recovery. Q3 represents an important milestone on our road to a new normal. The growth across all of our revenue streams this quarter provides an excellent start to our Spring Forward chapter. We are excited for the future and committed to advancing our plan to deliver consolidated revenue growth year over year over year. And with that, I'll turn it back to Doug.
Thank you, John. Finally, over to Slide 15. As I reflect on this past year, I could not be more proud of or more impressed by our team. We have not only adeptly navigated the business through this most challenging environment, we have also positioned the company to come out of the pandemic on a stronger strategic footing, as was our stated objective. We have confidence in our plan to deliver consolidated revenue growth year over year over year, and this quarter's results have hit the mark. Everything is working. We are especially excited about the year ahead. Global has the best fall schedule in many years, with 18 hours of simulcast premium network television content and a perfect balance of returning hit franchises and exciting new shows. Our sales team, benefiting from a head start when compared to the timing of our upfront last year, has been booking a ton of business these last week. Well done, team. And as of yesterday, 77% of Canadians over the age of 12 have received at least their first vaccine, with 32% now fully vaccinated. Restrictions are slowly lifting as Canada gets back to business. Canadians have over $100 billion of available savings to be put to work once governments provide the all clear. Corus will be there for our advertisers as they Spring Forward with us. Our streaming business is on fire and will start burning hotter still. A new season of Rick and Morty has just launched, driving new interest in STACKTV from that coveted younger demographic. We cannot help but marvel at how far we have come in only 2 years with our many digital video strategies at Corus. We are increasing the value of our content business for our shareholders through the creation of multiple seasons of hit shows to serve our networks in Canada, to benefit our international buyers and to create intellectual property franchises. June marks a major milestone for Nelvana as we celebrate its incredible 50 years as a globally recognized producer, developer and a licensor of award-winning children's animated and live-action content. From its humble beginnings in Canada in 1971, Nelvana has produced well over 4,800 episodes of programming, airing in over 180 countries around the world and earning over 70 major international awards, including multiple Emmys, with perhaps more to come given yesterday's nominations. Happy anniversary, Nelvana. At Corus, we are disciplined allocators of capital. And this is once again on full display this quarter as we successfully diversified our sources of financing, delivered solid free cash flow and increased our financial flexibility. Corus represents a compelling investment, with a multiple of under 6x, a free cash flow yield of almost 25% and an attractive dividend yield of 4%. Our shareholders will benefit both from the reopening of the economy, our disciplined capital allocation policy and our commitment to deliver consolidated revenue growth in the years ahead. Throughout the COVID pandemic, Corus has demonstrated a commitment to protect the health of our people and ensure the continuity of our business as we meet the needs of all our stakeholders and support our communities. Last year, we helped raise $21.6 million for over 500 charitable organizations across Canada. This year, in our third quarter, through the efforts of our Corus Cares initiatives, our teams helped raise $4.4 million for 344 community initiatives and provided 2,400 volunteer hours to local organizations across Canada. We are using the power of our portfolio for good and could not be more pleased with our team's dedication and passion for serving our local communities. In the coming months, as COVID restrictions ease, we are taking our learnings from the pandemic, along with extensive input from our people, to create an even better place to work for the future. As always, we will place the well-being and engagement of our people and the long-term sustainability of our business the top -- as our top priorities, building a strengthened, purpose-led organization, focused on delivering strong execution against our strategic and financial priorities. Over to you, operator.
[Operator Instructions] Our first question comes from the line of Drew McReynolds from RBC.
Doug and John, I guess being first in the queue, I'll ask about TV pacing in Q4. But more broadly, as we look at post-lockdown dynamics, how do we kind of look at Q4 and Q1 in terms of ad categories that you expect to come back? Maybe some may wane. How do you see audiences kind of through the summer into the fall as people start traveling again? And then second question on TV margins when we look into fiscal 2022. I guess for you, John. I know a ton of puts and takes and moving parts. But is there anything you can kind of help us square off what that looks like, perhaps relative to fiscal '21 or perhaps even pre-COVID fiscal 2019?
Thank you, Drew. I'll take the first one, and John will hit the second. Listen, we're thrilled with the momentum in the advertising pacing at the moment, and we have no reason to believe it won't continue going forward. Q4 was a stronger quarter relative to Q3 last year, so it's a bit of a higher hurdle on a comp basis. But the reference I would draw you to is international markets, Drew. I mean this -- we're lagging behind in Canada, which in some ways, for your models, gives all of you a chance to look at U.K., look at U.S., look at Australia. In those markets, well, some of them had recent setbacks, but those markets have had pretty strong returns. I mean, let's take the entertainment category, one example. Fast and Furious 9 just did $70 million at the box office last weekend. That's the highest box office performance in the U.S. since the Star Wars release in December of '19. So that portends a return of theatrical marketing, right? At the end of the day, despite all the conversations about releasing movies on streaming platforms, all of the big-budget tent poles are with talent that is paid on gross points. So I mean, these studios will release aggressively theatrical movies and market them aggressively. In fact, in the fall, I know in Canada, as we get the all clear, there's a really strong schedule of big tent pole releases coming, and that will bring with it advertising investment. So I think in areas like travel, accommodation, direct-to-consumer travel, that's still -- like Expedia, Trivago, that's still sort of clearly dependent upon getting the airlines working again in Canada. We're not there yet. In the U.S., there's so much demand, they've got supply and capacity constrained. So I think we have every reason to expect tailwinds for the number of quarters ahead as not only do Canadians get back to some degree of the next normal, but also as companies invest to take advantage of both positioning their brands and their front of consumers once they're coming back to economic activity and to take advantage of all this dry powder that's sitting out there to be spent. So -- and then I guess the third thing I'd note, we're coming into this with a great position given our schedule. So we'll be able to serve our advertisers as Canadians watch our great shows. John?
Thanks, Doug. Drew, on the margins, I know it's a question you like to ask pretty consistently. So obviously, as Doug has just mentioned, there's some pretty good revenue tailwinds coming, and that's into Q4 and then into Q1. In terms of what might normalize on the expense line, a couple of things. One is, as I said, we're out of wage subsidy now for the most part. So that has been almost $13 million this year that we won't see next year. And the second one would be programming costs. We ran pretty light on programming in the first half of the year. We're catching up now in Q3. So we'll likely be looking pretty flat in '21 on that line compared to '20. And of course, both of those years were pandemic-impacted, so you can and should expect some increases in programming costs as we get into kind of a more normal year in '22, especially in Q1 as we've got the full slate that Doug just mentioned. So those are kind of the moving pieces. It's a little early to tell. The upfront was just a couple of weeks ago. But so far, so good. I think we're feeling pretty good. And -- but as I said, at this point, it's just a little bit early.
And Drew, I didn't address your ratings over the summer questions. I'll do that now. Let's put it this way. We know the Olympics are coming. We know that the Canadians are in the Stanley Cup finals. That's bringing people back to television from streaming. That's a good thing for people viewing television in aggregate. We feel really good about our summer schedule. But the big money is in Q1. So I would say it's hard really to predict kind of the audience delivery over the summer given this most unusual pandemic and such. But the return of sports in aggregate helps the overall television viewing universe, which is a positive sign. And our schedule has been designed to accommodate for the Olympics. And then lastly, and John mentioned this in his remarks, about matching demand with supply. One of the brilliant outcomes of our Peacock deal is that, that content can be deployed on whatever platform has the most demand, whether that's digital, which is going like crazy, or on traditional channels business if there's demand there. So we have a lot of flexibility to kind of position great shows and best impressions if there's demand and audience.
Our next question comes from the line of Adam Shine from National Bank Financial.
Doug, maybe you could start with just reflecting on some of the step-up function that you saw with optimized advertising revenue. It was certainly a big jump from the prior pacing.
Sure. I mean, thrilled with the growth of the business, 38% of total. Now that's up 82% over the same quarter last year. Every agency and most advertisers of ours are participating in the targeting and in the automation. And what we're seeing is that the more that they participate in the optimized advertising experience, the more investment they further follow up with. So there definitely is -- we're moving past trial now into adoption. And we continue to make investments, Adam, in this very important part of our business strategy, which is to improve targeting, improve automation and continue to be data-driven in terms of how we serve the demands of our advertisers. So I'm thrilled with the 38% metric this quarter, and we're going to continue to keep the pedal down.
Just in regards to pacing, I mean you guys, I think, did a pretty good job tamping down some of the year-over-year expectations going into Q3. Obviously, you got your growth, but it wasn't quite as good as it could have been given the context of evolving government restrictions. When we think about the move into the second half to the year, particularly into that seasonally important sort of September into November time frame, do we start thinking about sort of unused marketing dollars from H1 manifesting themselves a lot more significantly in the back half of the year? Or do we need to temper our expectations a little bit just in regards to how marketing budgets may evolve through the course of this year?
Yes. That's a great question. From the conversations that we've been having with CMOs and agencies, I would say there's a general -- there's a strong sense of, I would say, confidence and positiveness about the fall season, the spending, the consumer return season. I think the other thing I would offer is that there's a lot of brands that want to get back in front of consumers that -- whether they're retail dining, multiunit dining operations, I mentioned theatrical earlier, travel and accommodations, hotel. All of those segments have dollars that, as you rightly know, have been kind of held off from investing because they couldn't go to work. But now they will be able to, as the government gives us permission, open up and return. So those dollars will flow back. Will we get back what we missed in the pandemic? I mean, it's the old economic haircut theory, right? If you don't get a haircut for 6 months, you're going to get 6 haircuts each week going forward? Probably not. But I do believe that there is a lot of demand out there. And again, you're seeing it in the other markets. So whether or not it's the H1 shifting into H2 or not, I would say that there's every signal out there that investment is coming.
And just quickly on -- sorry. Go ahead, Doug.
Just as an example of that kind of phenomenon, we did see that in December last year. So in Q2 for us, December was a big growth month as I think really what you were describing did happen, and it wasn't just on sports because we certainly got a big piece of it as well. And it happened across the industry. So I think there's an ability for that to happen. It's just hard to know how much people are holding back right now.
And Adam, to give you some more color. We have almost 400 advertisers on the audience segment selling now. And all of them -- and about half that much using the automated platforms. And so -- and that's up significantly. And so there's real momentum building in the uptake of our targeting and automation product.
Yes. I think that's very evident in this particular quarter. Just lastly, quickly on STACKTV and Nick. Obviously, we're seeing some real evolving traction. Is it still sort of an 80-20 split in regards to the 2 streamers?
Yes, that's about right.
Our next question comes from the line of Aravinda Galappatthige from Canaccord.
I'll start with 2 headline questions. First of all, John, on the programming cost. I was wondering if you can give me -- give us a little bit more color on how you see that shaping up. Obviously, Q3 was up year-over-year but not dramatically so. Maybe just any kind of assistance you can give us in terms of how that will kind of shape up into Q4 and early '22.And then on the Nelvana and Corus Studios, the other revenue component, we're seeing some pretty good consistency now in terms of top line growth. Is there any -- first of all, can you kind of give us a sense of the outlook going forward? And secondly, would you -- are you at a stage where you're considering breaking that out to perhaps sort of to make the value a little bit more evident there?
I'll let John take the first one and I'll take the second one. John?
Okay. So Aravinda, on programming, this has been a bit of a moving target all years, as you can imagine and especially with the way the first half turned out. You're right, we're up a little bit in Q3. I think we'll be up a little bit again in Q4. And I'd say right now, a good kind of assumption on programming for the full year of '21 is it will be down slightly over '20. And then going forward, as I mentioned, Q1 is going to have the full global schedule at normal kind of timing. So expect Q1 to have a pretty significant increase in programming just given that's at the pay-per-play model. So as we get those deliveries, we will be picking those up and expensing them right away. So that's really the view on programming at this point. I think we've been a little surprised that it's continued to run at the lower levels right now, but that is going to pick up.
And the good news about that is it's going to pick up to provide inventory and audiences when there's a ton of demand coming. So that's precisely when you want to have that investment in the books. On the content segment, yes, it's been fantastic. The teams have been putting some big numbers up the last 4 quarters. We expect that to continue. We have a tough comp in this fourth quarter which the team is working to address. But the comment I really wanted to make sure that people have heard was -- a couple of comments, actually. The first is multiple season creates -- multiple seasons of hit shows creates franchise IP. And it increases the value for our buyers. Whether or not they're streamers or broadcasters or both internationally, when -- this is where Corus has our Corus Advantage. And it's a distinction that very few other companies have, except for the big majors, and that is that we control the green light. So to the extent to which the shows are working on our networks, we can keep making them, and the more seasons we make, the more follow-on sales we get. Witness the Discovery U.S. HGTV second season sale of Island of Bryan, now entitled Renovation Island for them. So it really begins this flywheel of high-margin content. And so controlling the green light and making multiple seasons of hit shows is really a strong and lucrative strategy. And as for continued growth, I expect the same. There will be volatile quarters, Adam. As you know well, it just doesn't go up in a straight line in the content business despite the impressive results of the last 4 quarters. But the team is hitting on all marks, and much of what's happening here is the result of an increase in our development investment a couple of years ago strategically. We decided to put more dollars in the development funnel, so there were more projects at better states of development. So we could add new content. We're thrilled about this Pamela Anderson project. It's going to be a very, very exciting and hot show. And that just an example of making those creative development investments. So net-net, multiple seasons build franchise IP and margin, and then we're continuing to really invest in creative and development.
And I wanted to give you a chance to also comment on sort of the Discovery-Time Warner -- Warner Media transaction. Obviously, you have a fairly good relationship on the Discovery front. Does that sort of merger maybe create some worries for you down the road? Or you -- do you feel comfortable that the current programming arrangements would sort of hold given the equity position they have on some of the -- with respect to some of the channels as well?
Yes. No. I'm not worried about it. I think it's another example of the importance of consolidation in this space. We do have joint venture relationships with many of our partners in the U.S., including Discovery. And as I said many times before, Canada is a very lucrative licensing market. And these companies, they have to balance their ambitions to grow streaming with their desires to hit their quarterly results on both earnings and cash flow. And because of Canada's unique market structure, again, that we've discussed this before, Aravinda, where 73% of Canadians still enjoy the channels business, the penetration of the channels business is almost 100% in Canada should you desire to have a subscription to the channels business. And that's a very -- and it's a regulated market with simulcast. So the economics in this market really provide us a chance to work in concert with these big majors to ensure that we're able to access the content we need and pursue our strategies. And that we always have conversations depending on which way each partner is going. And no partner is the same, I will tell you, in terms of their ambitions for streaming. There's lots of different ways that we can work in concert or not with them depending on what they choose to do. So I would just say it's a lucrative licensing market which is valued by our international global partners. We have a resilient channels business in Canada. And Corus is acknowledged as being very innovative in our pursuit of digital video audiences. So in many cases, their reaching out to us to get our opinion on strategy. So I think it's kind of really business as usual. Even though there's lots of developments out there, we're not confused about the disruptive marketplace, but we're also confident in our position in it.
And our next question coming from the line of Jeff Fan of Scotiabank.
I just want to follow up on the comment made earlier about balancing the supply and demand for -- related to your ad inventory. What's your outlook for CPM? Could that be a pretty big driver, especially in the near term given where supply is and given some of the reopening, especially in the service sector? I just want to get your thoughts there. And then the other question is related to your new platform revenue mix. It's at 8% now, looks like it's stable from quarter-to-quarter. Wondering if you can talk a little bit about identifying the key initiatives, maybe the top few that's going to really drive that percentage up. And whether you have any kind of long-term milestones that you want to share with us with respect to where that percentage should be over multiple years.
Okay. Just on the new platform -- let me do the CPM one first, and John and I can do the new platform together. On the CPM, I mean, I'm sure you've been reading the trade for the U.S., Jeff, because I know you study that. Let's just say that everybody is holding out for the highest CPMs that we can get, to the extent to which CEOs of media companies have been getting phone calls from CEOs of consumer packaged good companies yelling at them. So I think it's important that the television recognizes its very important role in the media mix. And we stand our ground on price. So I'm not going to give you any specific CPM numbers, but I can reassure you that we share your -- the insight in your question is that, is there a chance to get pricing here? Absolutely. We're going to dig in. We know we've got some fantastic schedules in the fall, and it gives us, I think, a real opportunity. But it's always a bit of a balancing act, right? Because you got to manage sellout, you got to manage everything else along the way. So that's my first comment. New platform revenues, and I'll invite John to color in anything here that I may have missed. That is a top priority of us. And maybe, John, you can speak to the 8% sort of calculation in the quarter because that's a little bit dependent upon the ad recovery. But from a strategic perspective, we continue to invest a lot of time, energy and thinking into how big is big on STACKTV? How big is big on Global TV app? What other opportunities do we have to pursue other avenues? I've alluded to in my comments, the in front of the wall available to all opportunities, which we think is a real lane for us to consider pursuing. That 8%, we think, will be double-digits in the next print, in part because it's a smaller quarter and the mix of sub versus ad is different. But it doesn't mean I wasn't thrilled with the result in this quarter. I think it was up 112% year-over-year in the same quarter on that absolute dollars metric. So rest assured that it's a prime focus of ours. Look at the total subscriber number print this quarter. I mean, that's -- the slow decline we're seeing in the channels business is being offset and then some by the pursuit of these digital video subscribers. John, anything to add on that?
No. I think you've covered that well. It's really about the high demand Q3 on advertising. I sort of -- I wrote down stable, Jeff, when you said that because we're up 82% year-over-year. I'll get you a sequential increase number as well from Q2 because it is growing quite rapidly. So that 8% sort of masks the growth just because of the way it's calculated on a much bigger denominator in Q3 and then in Q1 as well will be the same.
Jeff, another way to think about it, it will step up in low-demand quarters, it will hold in the high-demand quarters, is probably how you could think about modeling it.
Yes. That makes sense. And maybe just a follow-on strategic question. Your balance sheet is in pretty good shape. You got the debt deal done. Is there anything strategic that you think would be a good use of excess cash to maybe accelerate some of these very important areas? Want to just get your thoughts there.
Yes. Well, first of all, we're just delighted with the refinancing in the quarter. That was -- that's a seminal moment for the company in terms of having the right laddered debt structure versus just a big term facility. Although we're very -- we love our bank friends, of course, but it's nice to kind of diversify our debt balance sheet structure. We're going to continue to invest organically. That's one of the things in the capital allocation conversation that we've been really focused on, is encouraging and challenging our team to come back with ideas for growth. An example that we're thrilled with, although we haven't talked on this call about as it's still sort of germinating, is our development investment with Duncan Studios in Los Angeles. We have a couple of feature film projects there that are coming along really quickly. And so that sets up an opportunity, we think, for sort of a new line of business on the content side of the equation. Embedded in your question, I think you're probably thinking about M&A. I would say that selective small, tuck-in strategic M&A is a consideration. Nothing big. We don't have any interest at all in a big swing. We believe that we can execute organically without having to take any more risk. We still believe that there is a lot of great ideas that our team is bringing us that we can invest in. So -- and as far as other financial opportunity, share buybacks, dividend hikes and deleveraging, our bias is going to remain to get towards that 2.5x net debt to segment profit. That's sort of the sweet spot, which should come relatively soon. And in the meantime, we'll continue to execute the strategy.
[Operator Instructions] Our next question comes from the line of David McFadgen from Cormark Securities.
Two questions. First of all, I was wondering if you could comment on your upfront market. When you read the trade press down in the U.S., they talked about actually CPM increases and amount of business being booked. And I was wondering if you can give us any color on that from your upfront. And then secondly, when we look at the optimized ad revenues, up to 38% in this quarter, I was wondering what's really driving that? Is that Cynch or is that ABB? Or what's the combination there that's really driving that number up?
David, I'll go back to front on that question. What's driving the 38% is significant increases in participation on behalf of advertisers and agencies in both the audience-based buying or linear optimization, that's one and the same definitionally. And in addition, a significant portion of those audience-based buyers are also using Cynch, the automated platform. So as I said earlier, we're moving beyond the trial phase into the wholesale adoption phase. And that is precisely where we want to be because we're getting people that are seeing the results of what we're able to provide from a targeting and automation perspective. On the CPM piece, all I can say without -- I'm not going to give you numbers or anything metric-wise. But it -- what you saw and heard of in the U.S. is basically what we're seeing and experiencing now here in Canada. All of the broadcasters in Canada, everybody is going after CPMs, getting price, holding their ground. There's a ton of demand for television. And we're super pleased with the momentum. I mean, it's been a very, very strong upfront for us this year.
And there are no further questions at this time. I would like to turn it back to Mr. Doug Murphy for the closing remarks.
Thank you, operator, and thank you, everyone, for joining us today on our Q3 results. Always great to hear from you and your questions. Please feel free to reach out to us and follow up with anything you may have. And in the meantime, have a happy Canada Day. Take care, everybody. Bye-bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.