By Ahmad Hathout
Rogers is not done buying premium programming after its blockbuster purchase of the rights to content from Warner Bros. Discovery and NBCUniversal, the company’s chief financial officer said Wednesday, with a strategy of cutting out the middleman and going direct-to-studio seizing a chunk of its programming costs for quarters to come.
“We are looking to source leading programming that the customers watch, making that available and making that available at lower margins by cutting out the middleman company and going direct,” Rogers’s Glenn Brandt said during the company’s second-quarter earnings conference call.
“We will continue efforts and opportunities in that vein,” he added. “This is going to take multiple quarters to fully fill in, but we’re at a good start.”
The multi-year deal announced in June deal reverberated through the industry, in part because it meant Rogers was scooping up key home and culinary content that have been the cornerstone of Corus’s portfolio of programming. (The deal is being challenged in an Ontario court by Bell, which had some of those programming rights.)
Executives at Corus, whose rights to the trademarks of Discovery content will expire by year-end, have over the years lauded that type of programming, claiming that advertisers were getting a better bang for their buck because ad spots on live sports, content dominated by Rogers and Bell, are more expensive than lifestyle programming.
Corus has been allaying fears by telling shareholders that it is confident in its ability to rebrand and acquire new content that will make it the leading destination for that programming.
For Rogers, this is a play to find lower-cost ways to source content that its subscribers actually want to watch, according to Brandt.
“That is a balance between finding lower-cost ways of sourcing the content, as well as gearing the content delivery to customers with what they actually watch, rather than, ‘here’s a full slate of channels,’ many of which never get tuned in,” he said. “So we still have several initiatives that we will fill in, not just over the next few quarters, but over the next few years.
“Still lots and lots of opportunities,” he concluded.
The company’s acquisition of more content to round out its slate of diversified programming appears to have an analogous parallel in other aspects of its business, including connectivity.
The company’s purchase of independent internet service provider Comwave in the fourth quarter gives it the ability to utilize the wholesale internet access regime to bundle internet with television, which it is now doing in Quebec.
This move, company head Tony Staffieri said Wednesday, means another opportunity to grow in the province.
Rogers also sells a fixed wireless product where it doesn’t have cable networks, including in Quebec and parts of southwestern Ontario.
Company executives said the product has, so far, seen success.
“Consumers and businesses find it very simple to buy and get up and running literally within seconds, and so the product is doing well, not only in those markets but nationally as well,” Staffieri said.
“We’re finding in certain segments — including students entering Canada and new-to-Canada that are still finding themselves somewhat mobile in terms of where they’re going to be living — have an affinity to the product because it’s convenient and it is mobile for them.”
Having both fixed wireless and home internet through the access regime, Staffieri conveyed, gives consumers the ability to decide what is the best use case for them — capturing an audience where it otherwise wouldn’t be because of network limitations.
But while fixed wireless – with its use of wireless signals that don’t have the capacity of hard wires – is generally less preferred to cable internet, Staffieri said innovation in network slicing, which segments traffic to avoid bottlenecks, could foster in more potential for its use.
In the last quarter, Rogers, Bell and Telus all saw higher customer turnover in the postpaid mobile wireless business. Staffieri said in that quarter that the company expects to see elevated churn throughout the year due to heightened competition and how easy it is to switch, now with eSIM allowing customers to ditch physical cards.
On Wednesday, Staffieri allowed himself an opportunity to clarify some of the finer points of that comment.
First, for context, Rogers has seen an increase this quarter in prepaid subscribers. The company added 50,000 net new prepaid customers in the quarter, up by 55,000 compared to the same period last year. Churn in that segment was down by nearly half over the same period, at 3.2 per cent.
The company has been using prepaid as a funnel to get customers onto the premium Rogers brand, the only one with a 5G option.
Staffieri said the pre- to post-migration has been “extremely successful,” with anecdotal evidence (Rogers doesn’t breakdown migration numbers) showing that, “surprisingly, many will go right from the Chatr prepaid brand right to the Rogers brand.”
Now, for the additional clarity: “When you look at the overall combined churn, most of that is happening in the flanker category, quite frankly,” he said. “What we are seeing is customers moving around in that space as they are more price conscious, and we also see customers going from postpaid to prepaid, giving the similarity of the product and some of the advantages that prepaid has for them.”
“As we look to medium term, we said we would expect churn levels to continue to be elevated for those reasons,” he continued. “Long-term, as we look out beyond the next three to four quarters, our expectation is that we will see churn levels likely decline, but we think it will be sometime before we enter that space.
“Notwithstanding that, the churn is happening against a backdrop of continuing growing market, and so while churn is up for the industry overall, gross adds are up significantly and our market share and gross adds continues to be strong and continues to improve, and so on a net add basis, we see the market continuing to grow,” he said.
That growth, we’ve heard from the industry, comes, in part, from a higher number of average newcomers to Canada and people simply switching providers.
The company added 112,000 net new postpaid subscribers in the quarter that ended on June 30, down from the 170,000 it added in the same period last year.
Postpaid churn was up to 1.07 per cent from 0.87 per cent in the same period last year — still a slight improvement to the 1.1 per cent it saw in the first quarter.
The total postpaid subscriber base was to 10.6 million, up by 491,000. Meanwhile, the prepaid base shaved 174,000 subscribers over the year for a total base of roughly 1.07 million.
Average revenue per user was up by 45 cents to $57.24.
The company added 26,000 net new internet subscribers, up by 1,000 over the year. The total base sat slower than last year, at 4.22 million.
The company lost 33,000 video customers, compared to the 12,000 it gained in the equivalent period in 2023. The total base was also down in the quarter to 2.7 million.
Home phone net losses were up to 31,000 this quarter, higher than the 29,000 it lost last year, for a total base that was down by quarter-end to 1.56 million.
Smart home monitoring net additions were 13,000, up from the 4,000 it lost last year. The total base by this quarter’s end was 101,000.
Total revenue for the quarter was $5.1 billion, up from the $5.05 billion it brought in in the same period last year. Net income was also up to $394 million from the $109 million it made in the equivalent period.
Breaking that down further, wireless revenue was up two per cent over the year to $2.5 billion; cable revenue was down two per cent to $1.97 billion; while media was up seven per cent to $736 million, due to high sports-related revenue, primary driven by the Toronto Blue Jays baseball team.
Rogers executives also said they expect the media segment to return to profitability in the second half of the year.
