Apr 6, 2017
Executives
Doug Murphy - President and Chief Executive Officer John Gossling - Executive Vice President and Chief Financial Officer
Analysts
Phillip Huang - Barclays Adam Shine - National Bank Financial Jeff Fan - Scotiabank Vince Valentini - TD Securities Aravinda Galappatthige - Canaccord Genuity David McFadgen - Cormark Securities Tim Casey - BMO
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the Corus Entertainment Q2 2017 Analyst and Investor Call.
During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session.
[Operator Instructions] As a reminder, today’s call is being recorded Thursday, April 6, 2017. No, I would like to turn the conference over to Doug Murphy, President and CEO of Corus Entertainment.
Please go ahead, sir.
Doug Murphy
Thank you, operator. Good morning everyone.
I’m Doug Murphy, and welcome to Corus Entertainment’s fiscal 2017 second quarter analyst call. Joining me on the call today is John Gossling, our Executive Vice President and Chief Financial Officer.
Before we read the cautionary statement, we would like to inform everyone that there are a series of PowerPoint slides that accompany this call. The slides can be found on our website in the Investor Relations section.
We will now run through the standard cautionary statement. This discussion contains forward-looking statements that may involve risks and uncertainties.
Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements is contained in the company’s filings with the Canadian Security Administrators on SEDAR. Turning to Slide 3 of the presentation, this week we celebrated the one-year anniversary of the new Corus and what an incredible journey it has been.
We are right on target with where we are expected to be at this stage of the integration, with momentum building across many areas of our business. Our ratings have been bolstered by the power of our strong brand and content.
The successful cross-promotional heft cross our portfolio, and an unwavering commitment to creating a great experience for our audiences wherever they are. As we strive to own more content, we continue to invest in growing our slate, both for use on our domestic networks and for sale in the international marketplace.
Last week, Corus Studios announced further sales of Masters of Flip, now in a 147 territories and buying the view now in 55 territories, as well as the introduction of a number of new unscripted lifestyle series for sale, ahead of MIPTV in Canada this week, including Save my Rental, Backyard Builds, the Baker Sisters, Home to Win Season 2, and Worst to First as we continue to expand our lifestyle content footprint worldwide. Further, Nelvana will ramp up its slate as the year progresses, delivering episodes of the new franchise properties such as Hotel Transylvania licensed by Disney, and Mysticons licensed by Nick, as well as episodes of The Zhu Zhu, which continues to perform well on the Disney Channel.
Our success in placing this content with strong, global broadcasters, positions Nelvana and Corus Studios for growth in line with our priority to own more content both in the back half of fiscal 2017 and into fiscal 2018 and beyond. Television advertising revenue is trending as expected with sequential improvements materializing as the impact of our calendar agency deals come to bear and as we reap the benefits of the strong performance of our schedules to date.
And lastly, as I said of the top, we are one, and I mean this both literally and figuratively. We have adeptly managed the integrations of our structure, our systems, and processes right on schedule.
This coupled with strong expense controls and integration cost synergies have translated into solid margins this quarter. Now let’s turn to Slide 4, and a discussion of our results.
Our consolidated segment profit for the quarter was $103 million, up from $80 million last year. Consolidated revenue was $368 million, up from $198 million last year.
On a pro forma basis, including Shaw Media and excluding Pay TV in the prior year, consolidated segment profit increased 6% in the quarter reflecting the continued realization of cost synergies, which resulted in strong expense savings of 9% for Q2. Our improved cost structure translated into impressive consolidated margins of 28% in the quarter, up 3% compared to 25% in the year prior.
As anticipated, Q2 was challenging from a top line perspective with the timing of calendar year agency contract renewals and tough comparables in the prior year, which included significant multi-year SVOD deals. As a result, our consolidated revenues were down 5% in the quarter compared to the prior year.
With that, I will now turn the call over to John, who will provide further detail by segments.
John Gossling
Thanks very much Doug. Turning to Slide 5, on a pro forma basis, including Shaw Media and excluding Pay TV in the prior year, segment profit for television increased 3% in the quarter.
Television segment profit margin for Q2 was 30% and that compares to 28% in the prior year, again on a pro forma basis reflecting the benefits of our improved cost structure that Doug mentioned. Segment revenues for television decreased 5% with total television advertising revenues declining 4% in the quarter compared to the prior year, again on a pro forma basis.
The advertising revenue decline is principally a result of the timing of the agency contract renewals, which as we mentioned on our last call was expected to negatively impact the first part of the second quarter. This was partially offset by year-over-year growth from sales of advertiser brand integrations within our original shows.
While visibility remains limited, we are encouraged by the sequential advertising revenue improvements that we have seen to date. On a pro forma basis, total subscriber revenues increased 1% in the quarter with the full suite of Disney channels now reflected in the prior year quarter, our Q2 results demonstrate the continued positive impact of our powerful brands reflected in annual wholesale fee increases in certain carriage agreements.
On a pro forma basis, merchandising, distribution, and other revenues decreased 44% for the second quarter. The prior year did include higher service work in Nelvana studios as well as several large multiyear SVOD demand content deals, which amounted to approximately $8 million in the comparable quarter.
Additionally deliveries of new properties at Nelvana were lower in the quarter as some shows shifted from Q2 into Q3 and Q4 of this year. As Doug mentioned earlier, we expect to see a return to growth at Nelvana in the back half of the year and into fiscal 2018 as our exciting slate ramps up with the increased deliveries to our broadcast partners.
Moving on to the radio segment, revenues decreased 6% in Q2. The Ontario markets remain stable driven by strong growth in Ottawa and Kitchener, while Toronto held steady to last year.
However, this was offset by continuing declines in the West as a result of ongoing softness in Vancouver and Alberta, primarily in local sales as well as ratings challenges in Winnipeg. We have taken steps to reverse the ratings trend in this market with the recent re-launch of our two FM stations, POWER 97 and [email protected].
Radio delivered impressive segment profit of $6 million, which is up 22% compared to last year despite this revenue softness, which was attributable to our restructuring the division’s strong ongoing cost controls and the benefits we are realizing from the integration of global news with radio. We continue to remain intensely focused on our financial priorities for fiscal 2017, which are; one, ensuring we are identifying and capture all revenue and cost synergies.
As we mentioned last quarter, we are progressing very well against our stated targets and we are now at the mid-range of our $40 million to $50 million in annualized cost savings. We expect our revenue synergies to impact the back half of fiscal 2017 and then continue into fiscal 2018.
Two, delivering solid free cash flow to reduce leverage to below 3.5 times by the end of fiscal 2017 and below three times by the end of fiscal 2018, while simultaneously advancing our strategic priorities. And three, maintaining our dividend of $1.14 of Class B share.
We continued to track well against each of these priorities as we move into the second half of fiscal 2017. I’ll now turn the call back to Doug.
Doug Murphy
Thank you, John. We have now begun our second year as a combined company.
I’d like to take this moment to thank each and every member of the Corus team for his and here significant contributions to our company. It has been hard work indeed, but everything is coming together.
Our integration is almost done, our cost structure is vastly improved, our competitive performance is notable, and we continue to invest in our strategic priorities to; one, own and control more content; two, engage our audiences; and three, expand into new and adjacent markets. Allow me to elaborate.
On the ratings front, Global continues to perform strongly with many of our mid-season premieres returning higher than the fall of 2016 average. Global has nine shows in the top 20 ranking for adults 25-54; that’s up from 5 of the top 20 a year ago.
On the specialty front, turning to Slide 8, Corus continues to maintain these largest cumulative specialty television audience in Canada, excluding sports with four of the top five networks amongst adults 25-54, all of the top 5 networks for women 25-54, as well as all of the five networks for kids. Slide 9, in radio, our share of tune-in grew in the majority of our markets.
The winter PPM audience ratings were released subsequent to the quarter and highlights in the adult’s 25-54 demographic segment are as follows. In Vancouver, Corus radio had a remarkably strong performance where our overall share of the commercial radio markets key adult 25-54 demo was up to 28.1% from 23% a year prior.
Corus now has a number one, number two, and the number four ranked morning shows in the market, the CKNW, CFOX and Rock 101, respectively. After a very strong fall, Toronto's Q1 ‘07 saw a ratings decline in the winter book, partially due to the seasonal Christmas competition from other formats.
Corus has retooled the Q1 ‘07 morning show however with Jennifer Valentyne joining Derringer in the Morning, and we're already seeing positive trending in the spring. Our new morning show at AM640 combined with the addition of content from global news has led to a 20% increase compared to last winter.
And in Calgary, the company continues to hold the number one station across all demos with country 105. This past quarter, in support of our strategic priority to engage our audience across platforms, we launched Radioplayer in partnership with a number of other Canadian broadcasters.
This new streaming app is an industry initiative that follows our audience bringing almost 500 radio stations across the country to listeners on this premium platform with more than a hundred thousand downloads already it’s the most successful launch ever for the Radioplayer app worldwide. Slide 10.
As our industry continues to involve and AdTech remains a promising area of investment at Corus as we benefit from the changing media and technology landscape. We continue to roll out new initiatives and enhancements, which further enable our advertisers to reach Corus' premium audiences and then integrated, customized, and automated way.
Slide 7, we also continue to invest in our own content both through Nelvana and Corus Studios. We remain on track to more than double the episodes we have available for sale for both slates versus prior-year deliveries by the end of this fiscal.
As we look to 2017 and the second half of fiscal year, factors such as our expanding content pipeline, our competitive audience share improvements, the successful renewal of our calendar year agency deals and lapping some tough comps for last year all point Corus towards revenue growth as we enter the higher demand seasons of calendar 2017. As every month passes, we get better.
We learn more about our capabilities of the company, but equally important, our capabilities as a team. I acknowledge the outstanding work of the Corus team earlier and it is fitting to conclude with a comment about our people.
As much as we’ve been focused externally, we’ve been equally focused on building our culture and establishing a shared vision and value that will further unify our people, create a competitive advantage, and set a strong foundation to drive our business forward. As you can see it has been an eventful quarter and an exciting first year.
It’s amazing to see how much we have accomplished as a new Corus and we are excited by the potential that is in front of us. With that, we will take any questions you may have.
Thank you, operator.
Operator
Thank you very much. [Operator Instructions] And you will get a first question on line from Phillip Huang from Barclays.
Go ahead.
Phillip Huang
Yes, thanks good morning. Wanted to talk to you guys a bit about cord cutting and cord shaving, from speaking with the Telcos and the cable, certainly seems like cord cutting has relatively muted impact so far, I know it’s still early days given the old pick and pay has been implemented only a little bit more than three months, but what are you seeing on your end, do you see any signs of cord cutting or shaving acceleration on that front?
Doug Murphy
Phillip thanks for the question, it’s Doug speaking. No, we have seen no change in the trend.
We're still seeing 1% to 2% cutting, which has been what we have seen for the last number of years. I will just remind everyone that our rate cards are penetration based with certain pricing protections should we break certain tiers.
So, to this point in time, it has been a relatively de minimis impact on our business.
Phillip Huang
That's very helpful. And then maybe a quick question on the owned content front, obviously it is an area of focus for you guys with core studios in Nelvana, how much do you expect the mix of your own content revenues to be in the longer term, is there live even a broad target in your mind, Doug as you look to the potential in this segment?
Doug Murphy
We, in the past, we have cited 20% of total revenue in five years as a broad target. We are now in the throes of thinking about the future state of Corus and obviously our acceleration is to become an integrated media and content company and that means winning as a media business in Canada, generating healthier cash flows to de-lever, maintain our dividend, and fund our strategic priorities, you know the first of which is to own more content.
We are looking at, frankly speaking at the moment, more of an organic strategy investing in our sales via the Nelvana Studios and on Corus Studios to get to growth. To get to a large goal such as I just mentioned, but probably require some more active M&A work, and at this juncture, it is not in the horizon because of our focus to de-lever by the end of fiscal 2018.
So I would say, as the year rolls of, we can give you more specifics about longer term targets, but if you needed to put something on paper, I’d use that as a guide.
Phillip Huang
That's very helpful. Thanks very much.
Doug Murphy
You're welcome.
Operator
Thank you. We will get to our next question on the line from Adam Shine with National Bank Financial.
Go ahead.
Adam Shine
Thanks a lot. Good morning.
Doug, maybe we can start with advertising, I know your folks on the business on an integrated basis, but any additional color that you can talk about both looking back into the Q2 and looking forward into early H2 trends regarding specialty versus conventional?
Doug Murphy
Sure Adam. We are actually very focused on revenue.
The integration work I think has been demonstrated by management is proceeding very well. So a lot of the energy of management now is on the revenue line.
Global having a stellar year, kudos to the team on their fantastic work in driving the competitive strength of that network, and as a result we're having opportunity to grow our revenues on global and expect continued growth as the year plays out. Specialty equally from the competitor ranking position is stronger than it has ever been, and we continue to feel very comfortable that with the agency deals now concluded and rolling into the higher demand parts of fiscal or of calendar 2017, excuse me, that we will start to see some meaningful revenue growth year-over-year in the rest of calendar 2017.
So, I would say the summary of my answer, I am happy to take a follow on question, if you have got one Adam is that, everything is playing out by and large as expected and we still remain optimistic and confident in fact that we're going to return to growth in the back half of fiscal 2017.
Adam Shine
I think it was John on the prior call that sort of isolated some of the effects in Q1, both related to federal election in the absence of that one agency business and it was like 20 million sort of split half, half, when we extrapolate that let's say into the Q2, you only would have been off by one month in the absence of that one contract, so maybe you can just, maybe John can touch on was that maybe a $2 million impact and then building on Doug's comments as we roll into Q3, Q4, the layering on of that additional agency business, one that wasn’t there last year adds maybe 10 million per quarter and sort of helps with some of that ad sales momentum?
John Gossling
Sure Adam it is John. I think your numbers are directionally correct, but I would say rather than just isolate that one particular factor, there is a lot of moving pieces when it comes to the agency business, and Q2 being a relatively low demand quarter, there are many ups and downs that happened across that entire portfolio, so, as Doug said, we are expecting sort of stronger consistent performance going forward.
I think that’s the key message here, I think that within Q2, yes, there is a little bit of noise just ups and downs of the various deals that we have, but that really is explained by how the quarter tends to play of just being in that low demand situation.
Doug Murphy
And maybe if I can just elaborate upon that, our business has got some tried-and-true seasonal characteristics, and there is two quarters of low demand and two quarters of high demand, so the calendar Q2 or Q3, calendar Q4 or Q1 are the high demand periods and as such January, February does not equal to over 12 in terms of any annual volume commitment. So, the nice thing about our competitive strength thus far this year is, when the demand comes in, we’ve got the audience that are most coveted on behalf of our agencies and our clients.
So, I think that’s a little bit of color for you Adam, and help I hope.
Adam Shine
That's great. And I will just throw in one last one.
You do mention it as an item in your MD&A and there is a lot of noise out there in the context to what’s going on in Hollywood with the writers negotiations with the producers. It’s very hypothetical, it might ultimately be resolved and hopefully it will be, any color in terms of, obviously you're taking a wait-and-see approach and hoping nothing happens, but at the same time anything regards to what moves you may or may not be making or need to make?
Doug Murphy
I would say, no one has got a crystal ball on these things, I’d say that, it’s really about money and obviously and from the networks perspective and our team was just down in Los Angeles last week for the LA prescreenings, the networks are all pretty confident that a reasonable economic act will prevail and will not have a strike that we had a number of years ago, certainly it is in the best interest of the television industry to proceed and not engage in the lockout in any manner. And so I think for us we're going to just basically stay close to our partners in the U.S.
and just observe and be ready for what we expect to be a satisfactory outcome, but as they say where there is no crystal ball, so you just got to have to be on the balls of our feet as we watch this evolve.
John Gossling
A couple of the other things on that just hopefully, makes you feel a little bit better, but in terms of what happened last time, which was in 2008 I think a lot of the teams here at the Global folks and other are quite aware of how that all played out and what has happened in terms of trying to mitigate that, so I think this isn't going to be something new for the bulk of our team. I guess every the other thing is, since that last strike, the cost model for how we acquire US prime-time programming has changed significantly.
So, to the extent that there is potentially audience and revenue impact the cost impact will also be different than it was last time.
Adam Shine
Great, thanks for that color.
Doug Murphy
Thanks Adam.
Operator
Thank you very much. We will get to our next question on the line from Jeff Fan with Scotiabank.
Go ahead.
Jeff Fan
Thank you. I've got a couple of questions.
Good morning. Doug, I want to just touch on your comment about returning back to growth and maybe dig a little bit further into the segments, specifically TV.
If we can just kind of look qualitatively and directionally on those main line items on advertising, subscriber and merchandising, can you just give us a little bit of flavor comparing maybe what you think second half may look like versus the first half? So the starting point would be advertising pro forma in the first half was down 6%; subscription revenue was positive, driven by Disney; and then the merchandise was down heavily.
So, if you can just kind of give us some color on each of those lines that would be really helpful.
Doug Murphy
Okay. I would say advertising growth back half low single digits, lower Q3, higher Q4 still low single digits, sub-growth low single digits and then I would at Nelvana that you are going to see a nice leg up in double-digits.
Jeff Fan
Okay. That's very helpful.
The second question is more broad - big picture. Our Heritage Minister is - looks like she's going to be releasing some findings from the big media studies that she's been embarking on for the last year or so.
It's probably going to happen it sounds like midyear, wondering if there are any thoughts on where there anything potentially meaningful could come under that that could affect the business, wondering if you can just give some insights on that.
Doug Murphy
We again, my crystal ball is not in front of me at the moment, but there is a lot of obviously, this week there has been a lot of conversation about putting everything on the table, broadcast act, telecom act, et cetera foreign ownership, so what we obviously always try to do is be available and stay close to all of the conversations on the hill, as to what specifically we can expect, the Minister has been extremely consistent with the view that she wants to help the Canadian content business grow from an export basis furthermore there has been a consistent support for the digital content aspect of the business, both of which we have completely support and concur with. So, in those two cases we think it is nothing, but beneficial for Corus.
And the budget we kind of hinted that something was coming, but was somewhat veiled in that regard. So again we try to say as close as possible to the goings-on and auto-on.
We expect the report to be generally positive, given what we've heard both from public and private from the Minister, but we will have to wait and see for the final decision.
Jeff Fan
Okay, alright thanks guys.
Doug Murphy
Thank you.
Operator
Thank you very much. And away for our next question on the line from Vince Valentini with TD Securities, go ahead.
Vince Valentini
Thanks very much. A couple of things, one, just maybe clarify the synergies.
So, I understand you're at the midpoint that would be $45 million annualized, so basically $11.3 million or so realized in the second quarter, is that fair?
John Gossling
Yes.
Vince Valentini
Perfect.
John Gossling
That’s great math. Exactly the right number.
Vince Valentini
Sorry, Jeff just asked this, but I want to make sure clarified it differently. You've got in the third quarter, the new agency deals are in place for a full 3 months.
Your ratings, as you pointed out, have been very strong across Global and Specialty. You also have the AdTech stuff that I may follow-up in a second.
Do you think you can take the minus 4% TV advertising revenue in Q2 and turn that into a flat or even positive number in Q3? Or is that too quick and optimistic?
Doug Murphy
No, no I think, we will be disappointed if we didn’t get to flat, that is clearly Global. We are hoping to get above flat.
That has been our kind of rally and cry in the seventh floor here now for quite some time, so and the team is intensely focused on that result Vince.
Vince Valentini
Excellent, but I just want to caution. John did use the words limited visibility in his opening comments.
Do you actually have bookings in place that would give you a pretty high degree of confidence in achieving that goal? Or is it still pretty much week to week?
Doug Murphy
It has been limited, but I will tell you in March the pacing has been obviously remarkably improved. So, when you look at March this fiscal versus March of last year on a pro forma basis, we have been extremely encouraged.
It looks like the weight of the volume deals are starting to come in and that would be again very consistent with our comments around the high demand Corus fiscal Q3 quarter, would you like to add anything to that John?
John Gossling
No, I agree with that.
Vince Valentini
That’s fantastic color. Maybe just lastly to follow up again on the AdTech, not needing you to go through a whole dissertation of all the things you're - the great things you're doing, but can you just give us an update on how the advertisers are reacting to these new solutions you're providing?
Are you starting to see some pretty good bookings and uptick?
Doug Murphy
I will wax on here a little bit because I think it is important for the call. We always say that as a pure play in media content company Corus has to do only two things well.
Number 1, grow our audiences, number two monetize our audiences. And the monetize our audience piece gets to, regardless of where the audiences go, we think we can segment inventory, we can price CPMs in a more surgical basis, we can improve our yield management and squeeze more value out of our existing and production base, so any growth is just incremental.
How do you do that? Well, data is at the root of everything, it is obviously an afterward strategy from many industry these days.
It is the same in ours and with both data we are able to secure from set-top box, however we have our own data from our audience intelligence platform from 1.5 million Corus loyalist who have opted into hear from us and to participate in our - in the work we are doing. We are now able to more specifically package audience segments against a certain consumer profile either using third-party data such as Environics or Sapient, or using first-party data from a client or advertiser and then help that client our advertiser reach an higher yield more ROI efficient basis, they are audiences.
They are delighted because they are marketing investment goes further, we are delighted because we save inventory to sell our higher CPM rates on latebreaking money, which is typically things like theatrical releases and movie studios and the such. So, it is a yield game and I would say the uptake has been extremely buoyant and for us, as we look into the future it clearly is an area for ongoing investment as we realize that monetizing our audiences are everybody is important as growing them.
Vince Valentini
Fantastic, thanks guys.
Doug Murphy
Thanks Vince.
Operator
Thank you very much. And we will get to next question on the line from Aravinda Galappatthige from Canaccord Genuity.
Go ahead.
Aravinda Galappatthige
Good morning, thanks for taking my question. Doug with respect to the subscriber revenues, I know you alluded to sort of low single digit growth in the back half, we’ve obviously seen that growth number slide from near double-digits to about 1%, not surprisingly given the dynamic of the Disney Channel, so I guess what you are calling for is for sort of the current levels to be held, are there any other sort of dynamics that you think would kind of help that, maintain the sub-revenues in sort of positive territory, considering that there are obviously underlying subscriber declines or is it just that there is more sort of upside from the newer channels that could offset that?
Doug Murphy
It is a combination of both the newer channels Disney in particular, clearly as a power house brand has done everything that we have said it would do and we announced the launch of the services two years ago for us, but the other thing I would just note is, we have got a whole bunch of our house brands and that’s the kind of, we are making about top five, top five, it’s a pretty remarkable performance, and so when we go to negotiate our current agreements with our BDU partners we are seeing increases in sub rates. So, we have moderate single-digit inflation on a sub rate basis, which will also help explain grow, now that we’ve lapped the launch of the Disney Channels.
Aravinda Galappatthige
Thanks for that Doug and just can you remind me where you stand on those agreements, is the majority for Corus legacy and Shaw Media now sort of renegotiated or as there are couple more to go?
Doug Murphy
I would say we are in a very good pace, we have got a couple outstanding negotiations that our smaller in nature, but we feel very confident that we have been successful and taking advantage of the new scale of course to work in partnership with the BDUs to advance their strategic interests and ours simultaneously.
Aravinda Galappatthige
Okay thanks. And then just quickly on Nelvana, I mean obviously you talked about sort of the potential upside on the production and distribution side, but on the merch front, on the merch side of things any sort of prospect you have tied those that you kind of looked to the next 12 call it to 18 months that are emerging that you see is potentially brands that can start to give you that kind of merch licensing revenues that will be meaningful down the road?
Doug Murphy
Yes, I am happy to comment on that. I am also thrilled with the work that our Nelvana team has done and in kind of reposition the studio we had to do a pretty thorough spring cleaning there about a year and a bit ago, but now the fruits of our labor are appearing, you know all three of the - what I have described as a franchise properties have some optionality on the merchandise of licensing front, all three of them have master toy partners in tow, which is your first step.
Some of the shift you saw in this quarter on merch was simply the timing change for example of Mysticons and partnership with the Nickelodeon, we decided to move the launch of that show to fall of calendar 2017 from spring and so that causes us to kind of move the timing of the advances on the master toy and other merchandising licenses. Zhu Zhu Pets has performed well on the Disney Channel.
It'll be coming back again in the fall, there will be toys on shelf as well for that property and that’s encouraging. And Hotel T, which we are really excited about and wasn’t initially thought of as a larger merchandising opportunity started to pique the interest of a lot of the major category, so that is another opportunity we are going to have.
So, we have learned over the years to be cautiously optimistic, you know as you know Nelvana has demonstrated in the past the ability to launch billion dollar toy franchises. We know we have a number of opportunities here.
We're not going to decline them home runs at this point in time, but we will certainly get that and have the right - we have the right launch set out for all three of those. So we're going to continue to execute, while we are going to look at the next sort of slate or shows coming behind it, which include as you know, the Esme and Roy property, which is a preschool coproduction with sesame workshop and HBO.
That will be later, but that’s one and there is a couple more coming and we will be talking about in the future.
Aravinda Galappatthige
That’s great. Thank you.
Doug.
Doug Murphy
You're welcome.
Operator
Thank you very much. We will get to our next question on the line from David McFadgen from Cormark Securities.
Please go ahead.
David McFadgen
Great thank you. So a couple of questions, let me just first start off with the sub-revenue growth, was the 1%, is that reflecting anything abnormal in the quarter, I would assume it would have been more like 2% to 3%, what is the outlook going forward, is that one or is that more in the 2% to 3% range?
John Gossling
Dave it is John. There is nothing unusual in there, you know obviously we have left the big impact of the Disney Channel now in Q1, I think we were pretty clear about that on the Q1 call, going forward there will be a little bit of volatility in here just depending on the timing of some of the distribution deals and how they got renewed and what that does to any immediate revenue, but that will be relatively small, so I wouldn't tell you it’s just 1% necessarily, but it is going to be in a fairly small range as Doug said low single-digits could be as high as four or five, it could be zero or one, it just depends on if anything is going on, but there was nothing really unusual in Q2.
David McFadgen
Okay. So, I will just ask - further do you think that 2% to 3% range is reasonable or we should more think about one?
John Gossling
I think it feels pretty reasonable right now based on everything we know. I mean the negotiations are ongoing as Doug mentioned, they for as much as we renew certain of the agreements, other ones come up for expiring renegotiations, so each one is a different story and each distributor has different packaging and they are making different packaging changes all the time.
So that potentially has much of an impact of any cord cutting or shaving impact has, just the way that we get packaged and of course we work very hard with our distributors to make sure that we are in the right places where the audiences are. So, I think we’ve got up fairly and I think consistently we have had a fairly stable view on the subscriber revenue line.
David McFadgen
Okay, and then just on the advertising growth, so Doug you talked about the fact that you expect a growth in the back half and you indicated that you thought Q4 had growth better than Q3, I am just wondering why that would be the case, can provide any color there?
Doug Murphy
Just momentum. I think is really the one what I would say.
I mean - and it is a smaller quarter. So as the volume comes in and agencies work to make their ideals, we start to see it coming in.
John Gossling
The comps were different last year.
Doug Murphy
And yes tough comps in the last year Q4. That’s right too.
David McFadgen
Okay. And then lastly, just on the DRIP, can you provide us any update on Shaw Communications and intentions on the DRIP, is there any update there?
John Gossling
There isn’t. You know it is business as usual at this point.
I would say on the DRIP generally, and not specific to Shaw, our DRIP participation has moved up in the last couple of month. So from a cash perspective that is obviously positive, but call the non-Shaw DRIP participation is trending above 30% right now, so that’s something that’s pretty high water mark for us in terms of where that participation has been.
David McFadgen
And why do you think that’s the case?
John Gossling
Hard to know, I mean obviously there is changes in the shareholder base all time, there have been some large blocks that have traded in the last couple of quarters. How people decide to participate or not, we don’t have a lot of visibility on that.
David McFadgen
Okay. All right thanks.
Doug Murphy
Thanks David.
Operator
[Operator Instructions] And our next question on the line is from the line of Tim Casey from BMO. Go ahead.
Tim Casey
Thanks, couple from me, Doug what are you seeing on the radio side, I mean the revenue number in the quarter, I mean, understanding that it is seasonally a week quarter, how confident are you can turn that around and there has been a lot of noise regarding the integrity of YouTube and some of the digital platforms with respect to ad placements and there are some concern that there may be short-term hit to those, have you seen any migration or agencies to talking about migrating any volume out of the digital platforms back to legacy platform platforms?
Doug Murphy
Thanks Tim. So just on the radio, it was a disappointing revenue quarter, and we are still containing with the recession in Alberta and the foreign buyer's tax in Vancouver, which puts quite a damper on real estate advertisements, as well as mortgage advertisements and all of the related supply chain in that regard.
So that is, and I think also we have done a pretty radical reinvention of our local selling teams in those five market groups markets where we have both global and radio. I think there has been some learning curve opportunities there, which we are beginning to see improvements for example.
We continue to grow at a high percentage rate the amount of duplicated accounts, now that we had, that we are moving from global to global and radio from radio to radio and global and they are experiencing some very good early success, so from a bottoms up perspective the merits of local bundling that we think we are validating and - but there’s clearly been a bunch of learning going on at local level, which is a Corus specific issue on top of the macro, but we expect and have plans in place to address that in the rest of this fiscal and rolling into 2018. So that’s I think well in hand, the other piece I would just remind everybody about is, we are by and large continuing our gradual yet upward sloping trajectory on our ratings improvement, it has been a multi-year project to reposition our networks, our stations in the major markets.
We are thrilled with the success we are having in Vancouver and in Edmonton, Calgary. As we mentioned, Toronto was a bit of a slip given the Christmas format, so they get played out during the seasonal time, but we are, we're focusing on getting those rankers back up.
So those are, I think bode well for radio, although it is sort of steady as she goes. The, I would have characterized the news about the environmental risk with digital as very consistent with what we have been saying for a number of quarters now.
That if you want a safe place for your brands that is tried-and-true with reach and frequency, you know television or radio or where you want to go, and television in the event of video imagery. And yes we are seeing some advertisers, basically pulling up their tent and just redirecting to some buys over to television.
I don't expect Google or Facebook to not have an answer to these issues. These are massive companies with big balance sheets and huge tech teams.
So, they are going to find ways to protect against that. I would imagine, so I don't know if it is a permanent shift or some of the ongoing swing back and forth, and what we are kind of seeing in the ad market really is, we have talked in the past about there was a perception a year and a half ago that was either or yet, you are either going to be in linear or you are going to be in digital, increasingly now it is a mix game Tim and so I think within the notion of a marketing mix, and traditional media versus digital, it swings around any point in time, from 65 traditional 35 digital to 10% either way of that, and that is a function of both the agency, the clients, the season, and the kind of platform opportunities that exist.
We are seeing, for example, remarkable growth, double-digit growth in our product integrations what we call our client marketing world where we can integrate products and services into the lifestyle shows that we make on HG and Food. And that is the real premium advertising location for any agency or client.
And that’s attracting some money that’s being moved out of digital, and we package that out with a brand sell with a three second spot, with some digital, with some radio, and so we try to offer a compelling substitute or compliment to digital as and when possible.
Tim Casey
Is product integrations though in relative terms, is that a meaningful piece of your revenue line, I always thought that was a relatively niche segment?
Doug Murphy
No, I would say it’s 5% of our advertising line and growing.
John Gossling
And growing at a very high rate.
Doug Murphy
And it is something that only really Corus can do well, setting aside sports integrations like the beer and pickup trucks. But when you look at stuff like Samsung and Town & Country minivans and mortgage service providers and all those things that fit so well for property shows or cooking shows, furniture, I mean we are the first protocol for that business, and we like our shape there.
Tim Casey
Interesting, thank you.
Doug Murphy
Thank you, Tim.
Operator
Mr. Murphy, we have no further questions on the line.
I’ll turn it back to you.
Doug Murphy
Thank you operator and thank you everybody on the line for your interest and your questions. We look forward to speaking with you in summertime.
And in the meantime, enjoy your day. Thank you.
Operator
Thank you very much. And ladies and gentlemen this concludes the conference call for today.
We thank you for your participation and ask that you disconnect your lines. Have a good day everyone.