TORONTO — Two new competitors in the Toronto TV market are inflating programming costs for Toronto-based Chum, according to company execs, who released its first-quarter fiscals Monday.
Chum prexy-CEO Jay Switzer predicted the recent launch of Omni.2 and Toronto One will cause Chum’s programming costs to climb by C$3 million ($2.3 million) per year. “The expansion of the market by two more players does that,” he told analysts Monday.
For the first quarter ended Nov. 30, the cost of TV programming at Chum jumped by $3.7 million from the first quarter a year ago. In addition to the increased competition, Chum said the cost hikes were due to efforts to “improve the quality and competitiveness of programming.”
Switzer said the increased competition is not affecting ratings or ad sales for Chum’s Citytv, though he added they’re seeing a “softness on revenues” of up to $761,000 on the New VR, a TV station north of Toronto.
Net earnings for the quarter were $10.3 million, level with last year, while revenue jumped 4% to $118.3 million. Healthy ad sales and subscription revenue increases in the TV division led the increase.
Television revenue jumped 5.7% to $91 million, radio held steady at $25.2 million and “other” (satellite services, part of which it divested during the quarter) dropped by about 8% to $2.1 million.
Interest expenses for the quarter more than halved to $1.3 million, after Chum applied to its debt $77 million in proceeds from a share offering in July. Chum’s long-term debt now stands at $103.7 million.
Switzer said specialty stations are performing well, and he expects three of the eight nascent digital nets to generate positive cash flow this year. “We’re clearly getting close to break-even this year,” he said. Last year the digital nets posted combined losses of $1.5 million.
Chum operates eight local TV stations, 18 specialty channels and 30 radio stations across Canada.
During the quarter, Chum restructured its two British Columbia TV stations, Citytv Vancouver and Victoria’s New VI, issuing 34 pinkslips and combining the master control for the two stations. The one-time costs for the cuts will be $760,000, with estimated annualized operating costs savings of about $1.5 million.