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Specialty channels launch pushes TVA Group into red

Pierre Dion, head of TVA Group Inc.


The launch of new specialty cable networks, including Sun News and a new French-language sports channel, has pushed TVA Group Inc. into the red.

The Montreal-based company is owned by Quebecor Media Inc. and operates the largest French-language TV network in Canada, as well as a collection of specialty stations and some magazines and newspaper. It reported a net loss of $2.86-million in the three months ended Sept. 30, compared with a profit of $5.33-million in the same period a year ago.

The losses were due to weakness in the television business as TVA launched three new specialty channels since the spring: Sun News, its 24-hour news network; French-language sports channel TVA Sport;, and a station aimed at women, Mlle.

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TVA executives had forecast that investments in multiple channel launches could weigh on the company's financial results.

"Short term, we're still very much in an investment period … there's no doubt," TVA Group chief executive officer Pierre Dion told analysts on a conference call to discuss the third-quarter results on Wednesday.

TVA is attempting to establish a presence in genres that have performed well for other specialty TV owners in Canada: women's channels, and sports. TVA Sports, in particular, is entering a highly competitive market as the broadcast rights to sports events rise and networks compete for an increasingly rare commodity: TV viewers who want to sit and watch those programs (and their commercials) live. The channel will compete against RDS, the French-language equivalent of TSN, owned by Bell Media – which last month launched a second sports channel, RDS2.

Sun News, which has been on the air for about six months, was also a drag on earnings. While specialty channels make money on a mix of advertising revenues and fees from cable and satellite subscribers, TVA chose to forego subscriber revenue for Sun News until now. The channel was placed on a free, over-the-air TV signal, replacing the money-losing Sun TV station in Toronto, Ottawa, Hamilton and London, Ont. The over-the-air station was also picked up free by some cable and satellite companies.

Sun News gave up its over-the-air licence at the end of October. It informed the Canadian Radio-television and Telecommunications Commission in July that it would do so, after the company received a letter from the CRTC that it would be expected to defend its practice of placing a specialty station on a regular TV signal.

The combined revenues of Sun TV and Sun News have dropped 86 per cent since the news channel launched in April. The channel is now negotiating deals with subscriber TV services to increase revenues.

Sun News has inked deals with Shaw Communications Inc. and the cable service Quebecor owns, Vidéotron Ltée., to carry the channel. It also recently announced deals with Cogeco Cable Inc., and Rogers Communications Inc. Mr. Dion said he expects to sign more deals in coming days.

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"In the past few months we've worked very hard on our distribution agreements … and these efforts have paid off," he said. The company expects to begin receiving subscription revenues from Sun News and its other new channels by the end of the year.

He predicted the specialty channels would reach profitability in three to five years.

Like other media companies, TVA Group struggled with a difficult advertising market in September. Its over-the-air TVA network, which depends entirely on ad revenues, saw its ad sales slip roughly 4 per cent in the quarter, and the publishing division had a nearly 16-per-cent drop in advertising. The specialty channels, including French-language children's station Yoopa and drama channel addikTV, as a whole performed better, with roughly 19 per cent higher advertising in the quarter and an 8-per-cent bump in subscription revenues.

TVA's revenues for the quarter totalled $89.2-million, down 5.4 per cent from $94.3-million a year earlier.

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