© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Corus Entertainment Q4 and Year-End 2020 Analyst and Investor Conference Call. [Operator Instructions] Thank you. As a reminder, this call is being recorded.I'll now turn the call over to Mr. Doug Murphy, President and CEO of Corus Entertainment. Please go ahead, sir.
Thank you, Julianne, and thank you, everyone. Good morning. Welcome to Corus Entertainment's Fiscal 2020 Fourth Quarter and Year-End 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 include 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 filings with the Canadian Securities Administrators on SEDAR.I will now start on Slide 3. I know it's a busy morning, and we appreciate your time and attention today. Fiscal 2020, our 20th year as a public company, was a year like no other. We were off to a promising start with a strong first half, then the pandemic arrived and turned the year on its head. I've described 2020 as the book of COVID.Most of you know the story so far, chapter 1, shock and awe, with widespread cancellations of advertising campaigns, indeed unprecedented. In chapter 2, stabilization. We saw those cancellations cease. Chapter 3, a modest recovery, when advertisers returned to the air with retooled campaign messages that were conscious of the COVID pandemic.We now find ourselves in the fourth chapter, which I initially referred to as sequential improvement, but later renamed up and to the right. Our new up and to the right chapter is not just about advertising recovery. It also reflects our overall outlook for consolidated revenue. No matter what the chapter is, our resilient team has been there to serve the needs of our audiences and help our advertising clients navigate the challenging environment.Importantly, we have not lost strategic focus. We made great strides in 2020 as we positioned Corus for future growth, further advancing our strategic priorities and achieving our financial objectives during this most unusual time. These steps diversify our revenue and deliver future financial flexibility. They include: transforming how we sell television. We have been successful in advancing our advertising technology road map, and as an industry, have come together to adopt common audience segments, a big step forward for Canada in the global advertising marketplace.Putting more content in more places as we pursue new and emerging digital platforms. STACKTV is a runaway hit, now with almost 300,000 subscribers in less than 18 months since launch.International content licensing with our ever-expanding slate of great content is fueling growth and revenue diversification.Maintaining financial strength with sufficient liquidity to navigate challenging times. We remain intensely focused on free cash flow, enabling us to pay down our bank debt to create financial flexibility, advance our strategic priorities and fund our dividend.So as we turn the corner on fiscal '20, we have once again delivered strong results with consolidated revenues of just over $1.5 billion, consolidated segment profit of $506 million, resilient free cash flow of $296 million and improved financial flexibility with bank repayments of $230 million this past year. It's a happy new fiscal year at Corus, despite the ongoing COVID-19 pandemic. Let me briefly update you on our fall schedule launch.Over to Slide 4. The launch of our fall schedule on Global has been very unique this year with premier dates renew and returning shows staggered throughout the fall, and in some cases, into the winter season. Our premier schedule looks fantastic with new series and returning hits like S.W.A.T. and the NCIS franchise starting next month.In the meantime, we have opportunistically acquired new shows at bargain prices to fill in the global prime time schedule where necessary. Recently acquired new hits such as I Can See Your Voice, which have been airing in September and October and other acquisitions like it are delivering strong audiences and a great return on our investment.Moving to Slide 5. The schedule on our specialty channels is loaded with content from our output deals and unaffected by the COVID crisis with the same volume of premiers as last fall. Our strong lineup is delivering 15 of the top 20 shows this fall, including the number one show, The Secret of Skinwalker Ranch, airing on History. This, once again, demonstrates the strength of the Corus portfolio of specialty channels replete with exclusive, highly differentiated content that is in the can and ready to air.I will now turn it over to John.
Great. Thanks, Doug. Good morning, everyone. I'll start on Slide 6. Our capital allocation policy has proven instrumental to maintaining a solid financial position in its current climate, while enabling us to make significant progress towards our deleveraging goals. Over the past 2 years, we have repaid $480 million of bank debt, including $230 million this past year, and that's highlighted by the $100 million in debt repayment that occurred in the fourth quarter.Our reported leverage decreased to 3.18x net debt to segment profit at the end of the fourth quarter, and that's an improvement from 3.22x at the end of Q3. A reminder that leverage in the current year reflects the impact of the adoption of IFRS 16 for leased accounting at the beginning of the fiscal year, which added approximately 21 basis points to the reported leverage at year-end.We exited the fourth quarter with a cash balance of $46 million and had available approximately $300 million under our committed revolving credit facility, which matures in 2023, and all of that could have been drawn at year-end. This provides us the sufficient liquidity to operate in these uncertain times.Our financial priorities remain unchanged. We are prudently conserving cash in this environment and increasing our financial flexibility over the longer term remains our focus.Eligibility requirements for the Canadian Emergency Wage Subsidy have, once again, been met in the fourth quarter. As a result, approximately $17.5 million of the estimated wage subsidy for the quarter has been recorded as a reduction of employee costs.With our improving results and the reduction of the wage subsidy rate in future periods, we anticipate a material reduction in the wage subsidy moving forward into Q1.Free cash flow of $87 million and $296 million for the 3 months and year ended August 31, 2020, respectively, was much stronger than anticipated.In the fourth quarter, free cash flow was negatively impacted by approximately $35 million from the repayment of HST/GST deferred from the third quarter, and that was partially offset by wage subsidy receipts of approximately $16 million. Both of these items are reflected in the net change in noncash working capital balances in the statement of cash flows.For the full year, free cash flow benefited from $16 million in wage subsidy funding and also from a $17 million deferral in corporate income tax installments from Q3 into Q1 of fiscal 2021.I'll now provide a brief update on our Q4 and year-end results, starting on Slide 7. As Doug mentioned, signs in advertising recovery began to emerge in our fourth quarter as reflected in the Q4 results. Encouragingly, August delivered meaningful sequential advertising improvement over June and July, both of which saw significantly better results than the third quarter.Corus' consolidated revenues were down 16% for the quarter and 10% for the year. At the same time, consolidated segment profit decreased 14% for the quarter and the year.We delivered a strong consolidated segment profit margin of 30% for the quarter and 33% for the year, and that's up from 29% in the prior year quarter and down slightly from 35% in the prior year.Net income attributable to shareholders for the quarter was $30 million or $0.15 per share basic compared to $23 million or $0.11 in the prior year quarter.Now let's turn to our TV results in the fourth quarter and full year, as detailed on Slide 8. Overall, TV segment revenues decreased 13% in Q4 and 9% for the year. TV advertising revenue declines improved sequentially as the summer progressed and was down 25% in the quarter and 15% for the year. Encouragingly, as I mentioned, August was the best month we've seen since the arrival of COVID, with continued progress into September.Contributing to this improvement were improved advertising demand; advanced advertising, which now represents 24% of total TV advertising revenue in the quarter, and strong double-digit year-over-year growth from new digital platforms as we make our premium content available in more places and that increases the inventory available for sale.In fiscal 2021, our goal is to increase revenue from advanced advertising as a percent of TV advertising revenue as well as advertising revenue from new platforms. We are currently in the process of finalizing our reporting framework for these goals, which will be unveiled next quarter.Subscriber revenues were down 1% in both the quarter and year, benefiting from growth, driven by increased STACKTV subscribers, offset by the impact of channel closures and retroactive adjustments related to distribution agreement renewals in the fourth quarter.Adjusting for the impact of the TLN disposal in March of the prior year, full-year subscriber revenues were up slightly on a pro forma basis.Merchandising, distribution and other revenue increased 15% in Q4 and for the year due to increased demand for our original content from foreign broadcasters and distributors. We are benefiting from this revenue diversification as we continue to build our content offering.Our preliminary outlook for the first quarter indicates that TV advertising revenue and total TV segment revenue are expected to continue to recover, particularly given our September results.With 6 weeks remaining in the quarter, we are very mindful of the fact that there can be variability in this estimate, both positive and negative. We will lap the COVID impact in the third quarter of the current year, which is when we anticipate to turn to year-over-year advertising growth.Total TV expenses in -- sorry, total expenses in TV were down 15% in the quarter and 7% for the year. Direct cost of sales in Q4 decreased 11%, and that was driven mainly by lower programming costs and a reduction in revenue-based costs.G&A expenses were down 20% in the quarter, benefiting from the elimination of discretionary spending, relief on Part 1 CRTC fees, the implementation of IFRS 16, lower revenue-based costs and the estimated wage subsidy of $14 million in TV.Looking forward, in Q1, we expect to benefit from lower programming costs, the continued elimination of discretionary spending and the reduced contribution from the wage subsidy.TV segment profit was down 9% in the fourth quarter and 11% for the year. TV segment profit margins were 33% and 36%, respectively, for the quarter and year, and that's compared to 32% and 37%, respectively, in the prior year.Now let's turn to our Radio results as outlined on Slide 9. Radio segment revenues decreased 43% in Q4 and 28% for the year. The fourth quarter result represented an improvement from the third quarter and that was driven mainly by the gradual reopening of local businesses across Canada.On the ratings front, we announced in September that Toronto's Q107 and Vancouver's Rock 101 were #1 in the rankings for adults, with the resurgence of the Rock format supporting these notable gains. We are particularly excited that Toronto's Q107 has received top billing for the first time in 15 years.Radio segment profit decreased $5.7 million in the quarter and $18.6 million for the year. Our Radio segment profit margin of 6% for the quarter and 16% for the year was a decline from 20% and 24%, respectively, in the prior year, and that's mainly attributable to the advertising revenue challenges in the local markets.I'll now wrap up with a few comments on our financial focus for the new fiscal year. Our plan provides a solid foundation for our goal to move up and to the right in all 3 of our revenue streams.In fiscal '20 to '21, we will continue to operate with financial discipline, pursuing operational efficiencies, tightly managing our costs, investing in growth initiatives and improving our balance sheet through an intense focus on cash, liquidity and paying down our debt. We remain fully committed to returning value to our shareholders as we position ourselves for the future.And with that, I'll turn it back to Doug.
Thank you, John. I'm now on Slide 10. I'd like to take a moment and look beyond fiscal '20 and fiscal '21. Corus has a rigorous strategic planning discipline in calendar, the highlight of which occurs every winter with our Board, where we map out a 3-year strategic plan grounded in a robust financial model.We maintained this discipline in 2020 despite the year's challenges, not losing a step in terms of our long range planning. We are confident that this plan will deliver consolidated revenue growth year-over-year. Our plan consists of 5 strategic priorities, and I'd like to take a moment to bring these to life for you.Create a great place to work. We acquired Shaw Media in 2016 and launched our revised Corus Values 1 year later to support the creation of a high-performance culture. People and culture bring ideas to life and will drive our long-term success. This is our foundation, and it's integrated into our strategic thinking. We aspire to build an even stronger and more inclusive culture that attracts and retains talented people, supports local communities and creates opportunities for innovation and growth.Build a content powerhouse. Great content is truly at the heart of our success. We aspire to acquire and create more of it. This means deepening strategic studio partnerships as we work to create 2-way content relationships, both inbound and outbound. We will continue to secure long-term access to multi-platform rights, such as the acquisition of exclusive rights to NBCU's Peacock Original.As a content creator, through Nelvana and Corus Studios, we are already benefiting from the insatiable global demand for premium video content. By creating content that delights our audiences on our networks in Canada, we set ourselves up for success with international licensing sales where countless opportunities abound.Connect with audiences. Our audiences are in control of when, where and how they want to consume content, and we need to be where they are. We have seen impressive subscriber gains since launching STACKTV just over 1 year ago and are successfully reaching new audiences outside of the traditional cable bundle.This business has become incredibly valuable, almost overnight it seems. And we are intensely focused on accelerating its already impressive growth trajectory. In support of our authenticated subscribers, we continue to improve our value proposition by adding more value for subscribers with our Global TV app. Its recent launch on Apple TV adds to the current roster of iOS, Android, Chromecast, Amazon Fire TV and Roku streaming devices as we work to make it even more accessible to those inside the bundle. Our focus on these and other ad-supported digital initiatives and platforms will serve the changing needs of audiences and accelerate our revenue growth in the years to come.Help brands' growth. Advertising will always play a critical role in media. Audiences willingly watch commercials to subsidize the cost of premium video content. It's a time-honored virtuous cycle. At Corus, we are transforming how television is sold. Our portfolio of innovative client-centric solutions is continually adapting to meet the needs of our advertisers.Importantly, Canada's largest broadcasters this year announced the adoption of common audience segments, breaking new ground globally in the TV advertising industry. We believe that this common audience segment standard will catalyze the reallocation of ad dollars from digital back to television. Something, I'll remind you, we experienced in the pre-pandemic era with TV advertising growth of 7% in 2019. This year's big news is the long-awaited scaling of Cynch, allowing our advertisers to buy these same audience segments through an automated self-service platform. We are confident that these solutions will transform how TV is sold and increase its value through better targeting and ease of use, challenging what is offered by our digital competitors.Operate with discipline. Every single day, we bring rigor and financial discipline to our decision-making as we allocate capital within the business. Investments in technology, for example, are foundational to spur revenue growth and improved productivity. You've heard me describe how we have changed the menu at Corus, now offering audience segment selling as opposed to the traditional adult 25 to 54 demo. The next stage of this technological transformation and staying with my restaurant metaphor is "rebuilding the kitchen." This remodel will establish a significant competitive advantage for Corus in the years to come.Lastly, we have a demonstrable track record of expense-controlled discipline. An emerging learnings from this pandemic will benefit our cost structure as the quarters unfold in the years ahead.Over to Slide 11. This 3-year plan will return us to consolidated revenue growth year over year over year. We will deliver advertising revenue growth by further expanding audience segment selling, scaling Cynch, our automated buying platform, rolling out additional advanced advertising solutions and expanding our presence across digital platforms. We will achieve growth in subscriber revenue as we more than offset gradual declines in the legacy channel bundle business with accelerating growth in new platforms such as STACKTV, once again, now in almost 300,000 paying homes in just over a year.We will deliver double-digit growth in our content business. Our ambition is to create and accelerate sales from our slate of owned content at Nelvana and Corus Studios. For example, we announced yesterday plans to partner with Duncan Studio, an award-winning independent animation studio in Los Angeles, to develop animated feature films for the global content marketplace. We will remain intensely focused and disciplined as to how we manage and deliver strong cash flow to reduce bank debt, fund dividends and provide the necessary financial flexibility to pursue these strategic priorities.Moving to Slide 12. Our team is doing good work, positioning our company to be a stronger, purpose-led organization, which is epitomized by our commitment to shared value creation for all of our stakeholders. We recognize the importance of enhancing our performance as a responsible corporate citizen and as an essential service in Canada.Our intense focus on minimizing our impact on the environment, giving back to our communities, delivering strong governance and embracing diversity and inclusion is central to the philosophy at Corus. Creating a great place to work for our team is part of our future, and it is how we will further build our competitive advantage in the years to come.I've never been as excited and confident in our plan as I am now. Our team is aligned. The disruptions in our industry present some challenges, but also many more opportunities. We have momentum. Some of it has been accelerated during the COVID crisis, some of it preexisted this most unusual pandemic. We have a great plan, fully embraced by our leaders, and we are confident that we will return to consolidated revenue growth year over year over year.I want to close by thanking our dedicated and talented team, many of them who are on the call today, for all their effort, commitment and creative excellence as well as all of our stakeholders and partners and you on the call for your collaborative support.Back to you, operator.
[Operator Instructions] Your first question comes from Adam Shine with National Bank Financial.
Maybe one for you, Doug, and then one for you, John. So maybe just talking about the fall lineup, which you have previously expressed is really quite strong. You're very enthusiastic about it. We also, obviously, as you alluded to, have a bit of a staggered start to the new season because of the COVID impact on production activity, particularly, state side.So can you maybe elaborate a little bit more in regards to how the early trend in Q1 has evolved? You didn't touch at all on the fact that sports arrived back on the scene towards the end of your Q4, but it didn't seem like your August was necessarily too significantly impacted. But nevertheless, sports did get a significant amount of uptick in advertising post, let's call it, July. So maybe just a little bit more color on the early pacing in Q1.And then one for you, John, just in terms of some of the retro charges, I think one was a negative versus a positive. What were the magnitudes of each of those?And maybe, sorry, just going back to you, Doug, not just on the revenue front but also speaking to how margins might be able to play out just given the fact that you might not necessarily be expensing such expensive programming out of the gates in the Q1.
Great, Adam. In the first quarter, we chose my chapter 4 up and to the right, purposefully. We are seeing sequential improvement month-to-month now and the recovery of advertising when compared to prior year's quarter and prior year's months. There is a strong demand in the advertising marketplace. And we're continuing to see -- and we've discussed this before, media mix models evolving and money is coming to television. So there is the need for the wide reach and frequency of television for advertisers to reach audiences. And as we know, audiences are at home more often they've been in the past. So the demand is there.In terms of audience delivery from programming, as noted, where we did have some holes in our schedule because of production shutdowns or delays in the U.S., which does bring with it a commensurate programming cost savings, we've been very sharp in terms of acquiring at bargain prices. Other simulcast shows that were heretofore unsold, and they're delivering great audiences at a much lower cost. So the net benefit is an improved ROI on the schedule, thus far in the fall. So it's kind of a win-win in that regard.I'll pass it to John to take the second question.
Yes. Adam, on the retro item, there's -- in the current Q4, it's under $1 million, but it was negative, which is a bit unusual. Usually, it goes the other way. And in the prior year, it was just under $3 million. So year-over-year, the change is $3 million, but the impact just alone in Q4 was relatively small.
Your next question comes from Vince Valentini from TD Securities.
I want to make sure I'm hearing you correct, Doug. TV advertising revenue is up on a year-over-year basis in the month of September? Or it's just -- this is August?
No, no. The sequential improvement month to month to month is improving when compared to last year. We're still down. We're going to be down in the first half of the year, as we said. We'll recover in the second half of the year, but each month is getting better relative to the prior year. So the declines are less.
Okay. That's what I thought. But I thought I misheard you in the last answer. The -- can you put any more numbers around that? If you're down 25% for all of Q4, does that mean August was down less than 20% and September is down 15% or less? Or can you give us any...
That's sort of in the zone. I mean you could draw a line right to April 1, where you're flat year-over-year, and it's relatively straight-line recovery in that regard. That's what we're kind of seeing. Interestingly, the revenue team -- shout out to my revenue team, they had -- their revenue models, 4 months ago predicted this in terms of our Crackerjack audience delivery estimates and stuff. So it's been basically hitting the mark every month. So -- yes, so that's a fair characterization, Vince.
Okay. And with all these moving pieces, probably more for John, on the free cash flow. In the last few months with the wage subsidies and tax deferrals and maybe not spending as much on programming as you would normally have, especially on the Canadian side, are you able to think through full-year 2021 at this point?I assume you had to tell something to your Board in terms of a budget. Is it remotely possible that you can keep free cash flow close to where it was in 2020? Or is it just a bunch of timing issues and you could see a significant snap down in 2021?
No, it's a good point, Vince. So let me just walk you through what impacted 2020, first, because I think that informs the 2021 conversation. So yes, there was the benefit of the wage subsidy in the full year of 2020. That was $16 million. There was the benefit of the tax installment deferral -- corporate tax installment deferral, that was $17 million. So the impact of that one is basically double in 2021 as it reverses because we paid that amount in September. And then we assume a full installment base for all of 2021. So think of that as flipping around $35 million on us in 2021.And I think it's fair to say, given how significant the beat was in Q4, we've pulled forward some cash flow from 2021. Just our collections were strong, and we just had a very, very good end of Q4. So I think that's going away a little bit on 2021. But the main items are really, in terms of the swings, will be those 2 items. And then as Doug just mentioned, as the business recovered in the back half, that's going to create a little bit of working capital investment.So if we get to significant year-over-year TV advertising revenue growth, that's going to put up some more receivables as we get to the end of the year. So those are kind of the 3 big pieces that we look at. Is it possible to get back to where we've been? I think that's unlikely in 2021. But I think beyond that, yes, it's possible.Certainly, given the step-down we saw in the back half and what that did to our segment profit, that's going to be the driver ultimately of the free cash flow. So we're going to take a little bit of a pause probably in 2021. But there's -- as you said, there's so many timing issues that it could definitely go in our favor as well. And we don't know what more is to come. I mean there's obviously a lot of questions, as we said at the beginning of our fiscal. So that's our plan. We're going to -- I guess, the main message is we're going to manage it very, very carefully and watch how the cash is flowing with -- like a hawk like we have been.
And all that packaged together, is there any commentary on the dividend? It seems very small as a percentage of the free cash flow you did in 2020. But as you say, there's moving pieces, I assume that dividend increases is not in the near-term cards, but keeping it at $0.24. Can you give us any comfort there?
Yes. I mean, certainly, we've changed the cycle of how the dividends get declared just given that we were so far ahead between declaration and payments. So I think we'll continue with that for the next little while, at least until we can see ourselves coming out of the impact of COVID. But you're right, the payout ratio is quite low as a percentage of free cash flow and the dividend yield is quite strong. So we're not looking at any increases at this point.
And last one, I'll throw at Doug. The regulatory file zip, you just kind of gave a little bit of commentary in the throne speech. But certainly, my expectation, and I think, others is that the Heritage Minister had promised something a little more concrete in the fall in terms of recommendations to the CRTC or even some new legislation being drafted for a modernized broadcasting act.Have you heard any updates on that? Is the second wave of the pandemic and potential other fires politically going on, maybe another election at some point. Does that all mean that the stuff is on the back burner for another several months? Or do you and your team hope that we will see something concrete before year-end?
Yes. We are relatively confident that we'll see something before the end of this calendar year. I've been in conversations with Heritage as recently as 2 days ago on this file. There is a drafted legislation now that is complete. I think the government is just trying to figure out when to bring it to the floor. You've heard the minister signal a relatively broad mechanism to have the web giants, as they call it, as you know, I call it, foreign-owned internet media broadcasters, to contribute both to the tax regime, but also to the Canadian programming expenditure regime. That is not something that anybody believe will be contested by the minority opposition parties. In fact, under the stumps speeches in the election a year ago, they were all in support of that.I think we have -- well, I understand that there's obviously a lot of stakeholders domestically in Canada that would like to see nothing changed. But the Heritage Ministry realizes that the traditional broadcasters must be provided with more flexibility and more incentives. So I think we got to read through what comes to the floor. There will be further direction from Heritage Ministry to the CRTC down the road, which will be more specific.So I think that's just a note I would caution all of us to. This is a process, but it's completely clear to me from discussions with both Heritage and industry that there is alignment around change in the conversation and allowing domestic broadcasters to be more market-driven and to aspire to own more content and to have more flexibility and how we deploy capital. So I'm still cautiously optimistic, Vince, that it's going to break in our favor, and we'll have to see.I just realized, Adam, on your call, I did not address the sports issue. So let me do that. I wasn't meaning to duck it, I just forgot it. The reality of it is that we continue to have seen a meaningful gain in share relative to our competitor broadcasters. That is, the casual sports viewer has come to Corus networks and stayed. I mentioned in my prepared remarks that our portfolio strategically differs materially from the other broadcasters in Canada and that we have very strong, highly differentiated, powerful brands that have specialty networks, Food, HG, History, that have deep content supplies of new content, shot and in the can pre-COVID.And so we have the ability to deliver audiences to match demand on our specialties. And so what's happened during the hiatus of sports was that we've -- a lot of those casual viewers, and they're defined as viewers that watch sports about 20% of the time, have come over to us. Now they all went back to NHL during the playoffs, and sadly, for all of us, Canadian teams once again did not go deep. And I always have sort of a challenged sporting fan relationship with our business here. Those folks have come back to our network.So the World Series is coming up. There'll be a bit of -- all the hardcore fans are back on that. But on balance, I would say 2 things: firstly, we have experience to share gain, and I expect that to stay; and secondly, I still remain of the view that sports will be challenged during the COVID pandemic in general. And I think that a lot of the volume of content, if you would, that would be on the air as a competitive viewing sort of opportunity for others will not occur because of obvious health reasons. You've seen it in NFL already. So I think I still like our shape relative to the sports broadcasters. And as you know, I've said many times, our sports are women and family, and we bring those indoors.
Your next question comes from Aravinda Galappatthige from Canaccord Genuity.
A couple from me. One, John, maybe I could just sort of get you to drill down a little bit more on the programming cost side of things. Programming amort, I think, according to the MD&A was down 10% in Q4. When you think of some of the dynamics that you've discussed in the past, U.S. and Canada and how that plays out in reaction to the current pandemic, should we expect that decline rate to maybe accelerate a little bit in Q1 or Q2 before normalizing? Or maybe I was wondering if you can kind of build on some of those specific dynamics a little bit?And secondly, a big picture question for Doug. I know that there is -- particularly during this -- the current period, there's been a lot of focus on connected TV and sort of the uplift in audiences there and advertisers starting to sort of respond to that, particularly with more and more of the premium content shifting to AVOD. I was wondering how you're seeing sort of the advertiser reaction there? Are you concerned that you're going to start to see a little bit more movement from linear there instead of take a second hit from digital? Wanted to get your thoughts on that.
Aravinda, okay, I'll answer the programming question. So for sure, Q4 was unusual. I'd say that the savings year-over-year were primarily on the Canadian side, just given the production shutdown, not so much on the foreign side. I think that there will be some in Q1, just given it's a much bigger quarter for global prime times.So what we're seeing now is, yes, there will be some reductions in Q1. Do they accelerate? Hard to say at this point, but certainly, we feel like it will look like Q4 in terms of the kind of reductions that we expect. Now that -- we're not sure how that plays out for the full year. So that's kind of the big unknown right now is how does that either get caught up or pushed into a future year.So right now, we think, yes, the early part of '21 programming cost will be down. But the Canadian is particularly challenged just because of the delay that happened, and it's hard to get that back up and running and on the year. And of course, we can time that a little bit more than what the U.S. deliveries look like on Global, just so that we hit the right time in terms of when we need the audiences and when we can monetize them.
Okay, Aravinda, just -- I think, I'm just going to replay your question to make sure I heard it right, your question was about the kind of consumption shifting from linear to digital and what we're doing to pursue those audiences. So if I heard that right, and correct me if I didn't. Yes, we're -- that's -- sorry, go ahead.
It was more specifically, Doug, on the connected TV front. I know that, that's sort of emerging as an element of digital and that's sort of gaining a lot of traction. And I was just wondering how you're feeling that more directly on the linear side?
It's all part of our desire to put more content in more places, Aravinda. That's why I mentioned the Global TV app, which is creating a lot more value for our subscribers and connected TVs as part of that road map in addition to Android, Chromecast, Amazon Fire, Roku, all of whom are on connected TV. So we're there. And that creates more inventory for us. So that's the key thing, I think, to note here. I think everybody understands on the call, we've talked about it a lot over the years is that our ambition is to change -- or how you sell television from the demo, the 70 billion impressions a year, to audience segments, both common and custom, gives us better targeting to advertisers and more yield and whatever you believe, and we model in this rigorous model I referred to in my remarks, we model audience declines over the plan period, but we also model yield improvements and a larger mix to total linear's advertising of advanced advertising, that's the offset. Then you add new platforms like STACKTV, which we'll be turning on dynamic ad insertion in the fiscal '21 and other connected devices with AVOD.And we think there's a huge lane in the AVOD space in Canada for us to basically take in the years ahead. There's strong demand from the agency groups to put more premium video content online. I'll remind the group over the call that Peacock that we acquired is available to go on AVOD. We can put those shows wherever we want, wherever the demand is and wherever the audiences are. So that -- all of that in some gets us to advertising growth. And that's part of the message we're communicating today.
Your next question comes from Jeff Fan from Scotiabank.
Just to follow on that, Doug, your last comment about AVOD opportunity. Which platform -- like where is the monetization platform for that for you? Is it the Global app? Is it potentially how STACK maybe even to monetize AVOD through the shows through STACK? What platform do you see that as the way to monetize that?And then the other question is also for you, Doug. It's regarding your content sales. So that certainly was the surprise in the quarter. Wondering if you can talk a little bit about the visibility in the pipelines for more deals as you look ahead.And then maybe a bigger picture on content is, certainly, things like you're pushing for more production to own more of the IP going forward in part of your strategic plan. I'm wondering, if Canada, given there'll be some success with the [ Amazon ], I'm not sure if this is happening, but want to get your thoughts on whether you're seeing international interest pickup on Canadian content? And wondering that, if that could become a much bigger opportunity over the next few years?
All right. That's a multifaceted question, Jeff, but I'm going to take all of them. So let's talk about AVOD. The lanes in -- as I mentioned, the lanes are wide open for us in Canada because we have content with rights that are exploitable on AVOD, whereas some of our competitors, they don't have the entertainment content or they're wed to an SVOD strategy. So we're looking long and hard at how to take advantage of the very strong demand as from agency groups to find ways to advertise against premium video content. And AVOD really is very similar to conventional over-the-air network television, right?So -- and that's really the Peacock relationship and the strategy therein is let's test and learn in that regard. And that's what the Global TV app will do for us, right, in front of the wall. So that is going to be an area of focus. And we've got a working group right now that meets every single week on understanding where the opportunities are in that regard.STACK as it continues to just rip, we'll be turning on dynamic ad insertion this year. So that's going to help on the full in-season stacks that we have there, so -- on the on-demand piece of that value proposition. So that's incremental advertising. So again, opportunities are bound, and we're going to run them down.When we talk about the production content piece of the equation, it was a good quarter, Jeff. Thanks for calling that out. We are rebooting now, resetting the productions of Nelvana and Corus Studios. Nelvana has been producing quality animation for almost 50 years now. Our brand is extremely coveted internationally. And the breakout of this COVID experience, and again, that's one of the tailwinds resulting from COVID has been Corus Studios. And I think, I may have mentioned on the last call that we have been trying -- and this is a good example of what happens, and it's somewhat apropos to your comment about Schitt's Creek. We've been pitching our friends' Discovery, HGTV in the U.S. for some time on the Island of Bryan, which I'll remind the group was the #1 rated show on HGTV in 10 years.During COVID when their production shut down, they looked for content, we sold them Island of Bryan. They decided to rename it Renovation Island, and lo and behold, #1 show on HGTV in the U.S. That triggered a whole bunch of interest in Corus Studios. So we've got basically a bit of a bidding war on a whole bunch of our slate that's in the can ready to go. You see -- you'll see -- you saw some of that hit us in Q4. We'll sell some more of that in the fiscal '21 year. And so it just demonstrates the strength of the production team at Corus Studios.A couple of quick examples. We sold Fire Masters to Discovery. We sold Save My Reno and Big Rig Warriors to FYI in the U.S. Salvage Kings was sold to A&E internationally. I mentioned Island of Bryan. Scott's Vacation House Rules, The Big Bake, both on Discovery. And so we're on our way there with now 2 strong studios that are well-regarded globally, and that sets the stage for us to ramp up production in the years ahead and continue to work to secure. I mentioned this in my remarks, inbound and outbound relationships with our key content partners. And that's critical because Corus is becoming an indispensable partner for the big U.S. studio players, and that's part of our game plan in a 3-year model.
So just a quick follow-up...
Sorry, just a quick -- 2 other comments. I must congratulate Dan Levy and the team at Schitt's Creek. They did a great job. I'll give a shout out to the CBC in that regard, too. It's great to see well-deserved and earned creative recognition for Canadian content. That's the first time I think that we ever broke out of the country, and I do think it warrants reflection and accolades.I just want to note also for the group. Ken Duncan of Duncan Studios and his team in L.A., most of whom are Canadians, I'll have everybody know. Ken spent many, many years at Disney. In fact, he was there when I was there. He's a lead animator, he animated Belle for Beauty and the Beast, Jafar in Aladdin. He grew up in the Disney storytelling world, spent some time at DreamWorks, broke out on his own a while ago.We are really excited about a new kind of product line, if you would, a hot house development workshop to bring feature film IP ideas to life and broaden the ambition of our Nelvana Studio by working with such a talented group of players who are Canadians. So it's a real -- another nod to our ambition to grow our own content business.
Yes. Doug, just a quick follow-up. What percentage of your consolidated revenue or TV revenue, do you think -- or do you hope or expect content will represent in your multiyear outlook?
Well, let me answer the question this way. And as recent as this morning, I was -- probably it was described as irritating some of my senior leaders on this. It can't get big enough soon enough, okay? Fundamental to our model is to have diversity of revenue, and I need to give more revenue outside of Canada. And so we're pushing hard. I'm -- we have doubled the investment we're making in development both in Corus Studios and Nelvana that began about a year ago. We need to have a bigger funnel of IP projects. So I'll let John field the question of what percentage of the revenue it is. But I can -- my answer would be it's not big enough.
Yes, Jeff, we -- Doug has talked in the past about getting to 10% of our consolidated revenue on content. And yes, he's giving me a thumb up. So it's definitely a big part of the plan to continue to drive that.
Your next question comes from David McFadgen from Cormark Securities.
Okay. So I have 2 questions. I was just wondering if you could tell us the magnitude of the underspend on the Canadian programming expenditure, because I don't think you met the target that you're supposed to, according to the regulatory framework. And would that have positively impacted EBITDA and free cash flow?And then secondly, just on the subscriber revenue. In the fourth quarter, there was obviously a lot of put and takes here with that retroactive adjustment and some channels are shutdown, but then you have STACKTV coming in and contributing nicely. I was just wondering, if you exclude all those items, what was the underlying trend for subscriber revenue in the fourth quarter?
Well, I wouldn't exclude STACK, David, because I think that's kind of true run rate revenue. But yes, between those adjustments that Adam asked about and then the channel shutdowns, channel shutdowns are getting smaller as the year progresses. That was only about $1 million year-over-year in the quarter. So call it kind of between adjustments and channel shutdowns, that was a minus $4 million, year-over-year. So knowing that, that means that we were -- we'd be up from $1.19 million to $1.22 million if you want to look at it that way. So there's decent growth there. And STACK is driving all that, for sure, 100%.On the spending shortfall, it's a pretty significant number just given that everything is shut down for the back half of the year. We haven't completely quantified that yet. And of course, we're waiting for Ottawa to tell us how that's going to be dealt with going forward. So the CAB has asked for that to basically be -- that we're deemed compliant for 2020, which means that, that shortfall would effectively just be waved, and then we would go forward under the existing terms of our license.So I think a lot more to come on that. There's going to be a consultation process on it, and it's pretty hard to know where that turns out. Just in the middle of COVID, we did get a positive outcome on a request that we have made a year ago now to have our permitted underspend go to 10% from what's normally 5% in any given year.So that would certainly have helped in 2020. But yes, the shortfall is more than that. We were already planning for that before COVID hit. So as you can imagine that the shortfall is a fairly significant number that we have to figure out how we deal with going forward. And so that's all in the works right now.
I'd just add that in the decision on the 5% going to 10% flexibility that we got from the CRTC, there was a real tell in that decision. For they acknowledged that broadcasters have multiyear planning horizons and that it's wholly reasonable to be asking for flexibility and how that was deployed.In the most recent notes of consultation on September 19, I think it was -- there was another tell, and they were saying that it's -- the broadcasters, and the CAB did a great work here. Another example, by the way, of Canadian broadcasters working together to advance our collective interests, the notice of process basically said that it would make sense that the shortfall from COVID needs to be addressed over a protracted period of time, and "I think that's in the air, here."So that means the next license period. And so before long, we'll be -- our new license period begins in September of '22. And of course, that would be also the start of the modernized broadcast act, which would be, in our opinion, bringing with it flexibility and reduce obligations.So, yes, I think all of it's going to come out in the wash as these conversations and these legislation are revealed. But net-net obviously, we want to get back to normal in spending. No one wants to be in this COVID pandemic. It looks like we're going back into another wave. So we're just going to manage as adeptly as we always do, stay in close contact with the CRTC and Heritage and carry on.
Okay. And maybe I could just follow-up on the subscriber revenue. Previously, I used to think that you could hold the -- sort of the legacy subscriber revenue, say, from traditional televisions, fairly flat, and that STACKTV would be incremental. So the entire sub revenue would be growing. Is that a correct way to look at it? Or do you think...
100%. That's exactly right. That's the message we're trying to tell -- we're trying to send today everybody. Consolidated revenue growth year over year over year. So that means advertising, we talked about that. That means content licensing, talked about that, that means subscriber.So whether or not it's STACK or other vMVPDs or is our pursuit of AVOD on the Global TV app or dynamic ad insertion on STACK, that's advertising, sorry. But we are very confident and conviction -- with a great conviction that we can have overall subscriber revenue growth when you sum those together. So you think about modest growth in TV, and this is conservative, in my opinion, modest growth in TV, modest growth in subscriber, significant growth in content licensing, and that gets you to a very different consolidated top line picture over the next 3 years.
Your next question comes from Drew McReynolds from RBC.
Yes. I was like getting on, so my apologies if there's a duplication here, Doug and John. Just first on the Radio market, wondering if you can just provide an update on the dynamics there? And then just a couple of housekeeping items after that.
Great. I'm glad you asked, actually, that was the one question we weren't getting them. So -- and nice to talk to you again, Drew. The -- listen, Dan Kelly of the Canadian Federation of Independent Business was recently saying that 160,000 Canadian businesses have shut down. That's clearly not a good news for local advertising or local communities or local families for that matter. So we're seeing as is the whole Radio industry, we're just taking it in the chin right now. Our national business, actually, because Q107 is the #1 radio station in Toronto and Rock 101 is the #1 radio station in Vancouver, we are going to be able to avail ourselves with the national radio campaigns.And so that -- those national radio campaigns are part and parcel of campaigns that would include, as I mentioned in my earlier comments, in the media model mix, would include television. So when big advertisers are coming back with campaigns, they're going to buy Radio, and they're going to buy Radio based on the top rankers, and we're there.So my national business in Radio is looking very promising. But a lot of Radio is local. Example, Winnipeg, where 70% of the business is local. So I do think their growth is very much sort of anchored in the pandemic and the work that the federal government is doing to try to support small business is essential there. So we have -- we're going to just stay close to it, but I think you can expect Radio to be -- take longer to recover. TV is on their way back already, but Radio is a different story.
The other thing I'd say, Drew, is, there's often -- we hear other data points in the market about what's going on with Radio. And we get Radio industry revenue numbers every month. And certainly, compared to English Canada, we're pretty much bang on what the entire industry is doing. So I just want to put that out there because sometimes we get questions about, well, shouldn't you guys be doing better? But we're actually pretty much right there with the rest of the industry in terms of what's going on. And as Doug said, it's being driven by local.
Yes. Actually -- we're actually being, quite substantially, based on the September trends, looking at the numbers now, we're basically beating significantly against the market in terms of national. Local, we're kind of with the overall market.
Okay. Fantastic. On 2 housekeeping, one is, John, just comments on CapEx profile, fiscal '21, and just in general. And also on the government subsidies, did you -- could you quantify that into Q1? I assume it's less sequentially, but then does it kind of all dry up or subject to whatever the government does from here?
No. Sure. It's a good point, and I'll just do that one first, Drew. So you saw that Q4 looked a lot like Q3. That was more coincidence than anything else. Going forward into Q1, between our revenue improvements and the program, the way it's been changed on kind of a sliding scale, and the factors are declining over time that drives the subsea calculation, I'd say you can think of Q1 as kind of mid-single-digit millions of dollars of subsidies, so quite a bit less than what we've had.And then beyond Q1, we know that the program has been extended, but we don't know anything about how it works. That hasn't come out yet. So we're kind of in this position back in the summer where we knew the program has extended until the end of December. But again, we didn't know how it was going to work. So we're not going to assume anything because the first revision to the program was quite material. So we'll just have to wait and see what that looks like beyond our Q1.In terms of the CapEx profile, for sure, I mean, you can see in the numbers, we slammed the CapEx down pretty hard. Part of that in 2020 and the back half was just our ability to do things, and part of it was just to conserve cash. So I don't know that 2021 gets back to a sort of normal level of, call it, $30 million to $35 million, but we do have some pretty significant programs that we need to get back on for 2021. So we'll manage that according to how the business is going, but it should be higher than it was this year, in 2020, for sure.
Okay. Okay. Super. And maybe a last one, either for you, Doug or John. On -- I think since the tailwind, certainly with conviction on the top line, when we look at kind of Corus on an EBITDA basis, I know you don't provide guidance. So obviously, a tricky thing to answer. But does the margin profile with how your revenue mix is changing with all the initiatives you're putting through, how does the margin profile generally evolve here? Is there anything you can say to that?
A couple of things. Let me say this. Our 3-year model has got not just revenue growing year over year over year, okay? We're in the business to grow EBITDA, and we're in the business to grow cash flow, and that's part of the plan. In specific, I can tell you, content licensing, the Corus Studios business is a very high-margin business. We kind of finance the majority of the content here at home, and it travels with a big fat margin attached to it. Nelvana, similarly, but not maybe as high margin but equal to the overall margin of the business.STACKTV, as I think you're aware, is very margin accretive. And we're doing a bunch of modeling right now to try to figure out how big it is. One thing I can tell you with some degree of certainty is, it's not cannibalizing the legacy channel bundle. We're finding younger audiences who are at home during the COVID crisis, and they're procuring their groceries and their goods on Prime, and we're getting them.And we're just gearing up for a real marketing investment push, which will coincide with Black Friday and Cyber Monday on Amazon to really put the pedal down. And we're going to see, in my opinion, a fairly meaningful leg up in terms of that growth trajectory, which already legged up once the pandemic hit. That is a much more improved margin on a whole than we would get from our legacy bundle.So you put that all together, and we're really trying to signal to all of you that the story is about growth here at Corus. We've got many of our leaders of the company on the call. We got the CEO form, that strategic priorities that I just took you through, those -- that team of talented people are taking that to their teams. Every single person in Corus knows how they can impact the plan and the future of our company, and this is a growth story.
[Operator Instructions] Our next question comes from Jerome Dubreuil from Desjardins.
Congratulations on the results. I was wondering with the strong audiences that you generated some of the shows you recently acquired at a low price, does that change your strategy with regard to programming? Or were the savings mostly due to the unique context that we're in? I know you talked about the early part of '21 having lower programming costs, but what about the longer term?
Yes. That's a good question, actually. No, I mean, the model typically is a fall scheduled launch, right? That's what the networks in the U.S. do. We have relationships with some of the big networks of provider content. And so that is -- God willing, we'll return to some degree of normalcy, the next normal, whatever we want to call it, hopefully, this time next year. So I suspect that there will be a return to that traditional approach, although the juries out is just exactly what that looks like. In this particular example, one of the things that we're very good at is that we never -- we always try to make sure that we maximize the number of hours we have in simulcast on Global and that we don't burn shows. So we don't buy -- have 2 shows that collide with each other on a simulcast schedule, it's just a waste of money. And so when certain shows were moved into mid-season, for example, on Global, it created a simulcast window that other shows in the U.S. that were available but not sold in Canada, we just picked them up real quick.And again, a shout out to the programming team that were on their ball to their feet to acquire those shows and the studios that sold them didn't expect to sell them at all. So we were able to pick them up for a reasonable value, and it did a good job supplementing the holes in our schedule, given the COVID crisis. I don't expect that to be the case next year. At least I'm hoping it's not the case because I want us all to get back to the post-COVID world. But to the extent to which programming is still delayed on our simulcast schedule in the quarters ahead, we'll continue to look for similar opportunities to acquire and infill those schedule holes.
Okay, great. That's good color. And maybe another question, maybe I'm a bit late to the party for this one. But at the beginning of the quarter, we're hearing a lot about advertisers moving away from social media platforms. Any discussions you've had maybe with agencies that would suggest there was a potential impact on your advertising revenue in the quarter and going forward?
That's a great question, too. The -- I may have to get to my soapbox here a little bit. But the -- what's happening in general, and this is what happened in fiscal '19, it got sidelined in fiscal '20 for us, and that was dollars are coming out of digital back on to television. And it's coming out of social, it's coming out of Google.Why? Well, number one, they're expensive on a CPM basis. Number two, they mark their own homework in terms of the audience delivery stats. There's no common currency like we have in traditional broadcast. Number three, agencies want to change the allocations. The agencies understand that the optimal media mix model requires more television. Number four, the content. Social media is an issue. As you know, in Quebec, there are social media out there that's telling people to go burn 5G towers because that's what spreads COVID. That is ludicrous.So advertisers don't want to be anywhere near these platforms where they can't control the safety of their brands. And so I think that's all gathering. It's a gathering storm, in my opinion. In terms of dollars, they want to find a safe place for their brands, and that's Corus.
And congratulations on the results, again.
Great. Thank you. And looking forward to seeing you probably by a Zoom call, or whatever the case, but thanks, Jerome.
We have no further questions. I'd like to turn the call back over to Doug Murphy for closing remarks.
Thank you, Julianne. Thank you, everybody, for your time on the call today. We were very purposeful in our remarks to narrate our growth story. I think we've hit the mark. I want to thank all of the Corus team on the call and across the company and across the country. I wish everybody safety in this crazy time. And as ever, we're available to talk whenever you'd like. Thank you very much. And bye-bye.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.