CANWEST’S INVESTORS’ DAY WAS supposed to be today, but the rumor is someone important recently had surgery and couldn’t make the Toronto meeting, which will now happen next week.
It’s too bad, because CanWest Global’s executives might want to get this bit of business over sooner rather than later. It will probably be an uncomfortable meeting.
It’s no secret that the Winnipeg-based media company launched by the late industry legend Israel Asper has fallen on difficult times of late. Its Australian radio and TV assets – after years of growth – are facing uncertain times with increased competition Down Under. Its New Zealand operations have cooled, too. Its Irish broadcast assets (45% of TV3), said to be worth about C$126 million, are on the block.
Its Canadian print publications appear to be doing okay – except for the National Post, which continues to lose money – but the whole company, to this outsider anyway, seems to have a bit of a scattershot feel to it.
While it’s getting out of Irish TV, the company is getting into Turkish and U.K. radio. It owns a radio station (Cool FM 99.1 Winnipeg) and a half (The Beat 91.5 Kitchener) in Canada. It has a free daily newspaper, Dose, which competes with a bunch of others already in the market. Some believe that one or both of those papers could be put to sleep this year.
“We firmly believe The National Post will never make money,” says a research comment published this month by BMO Nesbitt Burns analyst Tim Casey. “We would not be surprised to see the Post and Dose publications be closed down in the fiscal year. We ascribe no value to either asset in our valuation.”
Put together, all the assets I’ve mentioned so far don’t synergistically come together very easily. The newspaper group (except the Post) is an income trust now and it should work well as a group. But standalone radio assets spread from Winnipeg to Kitchener to Manchester to Istanbul to Auckland to Sydney?
That’s no cluster.
Despite all this, though, none of it will matter much if the company can turn its primary asset, Global Television, around. If Global TV can start churning out cash again, investments abroad and in free newspapers are far more easily swallowed by investors.
There are glimmers of hope, too. ET Canada is a slick piece of work, as far as celebrity shows go. The company has thrown substantial money behind teen show Falcon Beach (which Global desperately hopes will be a hit) and has other U.S. hits on its hands in 24, Prison Break, House, and Without a Trace. But, reliance on Fox for many of its American shows means Global couldn’t get out of the gate in the fall at the same rate of speed as other broadcasters because Fox’s Major League Baseball commitments mean many pre-emptions in October.
But even with the inroads Global is trying to make, CTV is still the dominant force in Canada, sometimes taking all 10 of the top 10 spots in weekly ratings. Plus, CTV has had the wherewithal to purchase good programs and park them. For example, CTV bought Commander In Chief (Geena Davis as president) and shelved it, waiting to see if it was a hit – thereby keeping it away from other broadcasters. The network is bringing it into its lineup this winter.
CanWest continues to battle, however. It’s about to launch a marketing and media blitz with its news anchor Kevin Newman, touting Global News’ switch to 5:30 p.m. in nearly all markets, not to mention a re-branding campaign with its new “greater-than/inverted check-mark” logo, as we showed here before Christmas. Global is spending millions ($25 to $30 million more than last year) on programming, marketing and promotion.
Unfortunately, it takes a long time for any positives to work their way through the system. Improved ratings now don’t count until the next round of upfront ad buying, which starts to happen in May, and won’t be seen on the revenue line until fiscal 2007.
CanWest is moving on another front, too, we hear. According to a source, it filed a lawsuit with the Ontario Court of Justice claiming the federal government’s limitations on prescription drug advertising violates the company’s freedom of expression rights under the Canadian Charter of Rights and Freedoms. We don’t have the full details on this one yet, but we’re working on it.
In Canada, federal laws limit how prescription drugs can be advertised here. No similar limits exist Stateside, which is why we see all sorts of ads on CNN or TBS or Spike, for example, with many, many disclaimers at the end. (“If you are pregnant or about to become pregnant or have liver disease or acne or have ever had the gout, or stubbed your toe, do not take XYZ Pills…”)
CanWest CEO Leonard Asper has gone on record before complaining about this, saying the prescription drug ads is a US$4 billion dollar market south of the border – and something Canadian broadcasters and publishers should be able to tap into here.
But none of that helps right now. “We understand the overall advertising market for conventional television remains weak, and as such, it seems highly doubtful that an EBITDA bottom has been reached at Global,” adds the BMO Nesbitt Burns research.
“(CanWest) Management expects the conventional television market to grow 3-4% during fiscal 2006, with specialty television up 8-9%,” it continues. “That said, given its dominant schedule, CTV is clearly capturing all of the revenue gains in conventional.”
Ouch.
“We have assumed some recovery in 2007,” says the report, “but visibility is very low.”
