Canadian pay and specialty channel revenues are up significantly this year over last, but with 16 new services launched in ’98 the overall profitability of the sector has dropped according to financial information filed to the crtc.

While revenues for Canadian pay and specialty channels in 1998 increased by 17.5% to $842 million from $717 million in ’97, overall pre-tax profit dropped 2.1% to $60 million for ’98 from $61 million in `97.

Operating profit percentage dropped 11% overall to 16.93% last year from 19.01% in ’97.

As the importance of branding in an ever-fragmenting market increases, the amount spent on sales and promotion by pay and specialties increased a whopping 38.1%, jumping to $103 million in ’98 from $75 million in ’97.

A troubling stat for the production sector finds that the amount of Canadian programming running on pay and specialties as a percentage of revenue dropped slightly to 36.13% in ’98 from 36.63% in ’97 – a decrease of 1.4%.

Also disquieting news for producers is the fact that investment in Canadian programming by pay and specialty broadcasters dropped 32.7% to $3 million in ’98 from $5 million in ’97.

On the other hand, the amount spent in total on Canadian programming increased 15.8% to $304 million in ’98, up from $263 million in ’97.

Pay and specialty national advertising revenue jumped 31.4% to $231 million in ’98 from $176 million in ’97, while local ad revenues increased by 20.6% to $9.1 million in ’98, up from $7.5 million the year before.

Cable companies paid pay and specialty channels $567 million in subscriber fees, up 11% from $511 million the year before.

As satellite distribution became entrenched in the market, subscriber fees from dth providers increased a gigantic 8783.3% to $11.6 million in ’98, up from a mere $30,000 in ’97.

TSN most profitable specialty in ’98

Acquired by ctv earlier this month as part of the blockbuster ESPN/Netstar deal, The Sports Network was the most profitable English-language specialty channel in 1998.

Last year, tsn took in $99.6 million in subscriber revenue, $54.2 million in national advertising revenue and reported an operating income of $49.9 million. With total expenses of $105 million, tsn had an operating profit percentage of 32.2%.

However, the news is not all rosy at tsn as its pre-tax profit dropped 52.1% to $5.2 million in ’98 from $10.9 million the year before. Operating profit percentage also dropped 11% from 36.2% in ’97.

Behind tsn in terms of operating profit percentage was Alliance Broadcasting’s History Television, which showed an operating profit of 31.5% on total revenue of $4.6 million and an operating income of $1.5 million.

Chum Television’s MuchMusic was next with an operating profit percentage of 31%. The music channel took in $32.5 million in total subscriber and ad revenues with an operating income of $10 million. Shaw Communications’ ytv reported an operating income of $14.7 million (the second highest) and a 23.6% operating profit percentage. ytv’s pre-tax profit fell to $4.6 million in ’98, down 58.9% from $11.1 million in ’97.

Specialties showing negative operating income for 1998 were startups including Global’s Prime tv with a -$5.7 million operating income deficit, Atlantis Broadcasting’s hgtv with a -$5.3 million deficit and CTV N1 with a -$2.1 million negative operating income.

All numbers include amortization.