Apr 5, 2019
Operator
Good morning. My name is Michele and I will be your conference operator today.
At this time, I would like to welcome everyone to the Corus Entertainment Q2 2019 Analyst and Investor Conference Call. All lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions].
Thank you. As a reminder, this call is being recorded.
I will now turn the call over to Mr. Doug Murphy, President and CEO of Corus Entertainment.
Please go ahead.
Douglas Murphy
Thank you, operator, and good morning, everyone. Welcome to Corus Entertainment’s fiscal 2019 second quarter earnings call.
I'm Doug Murphy and joining me today is John Gossling, Executive Vice President and Chief Financial Officer. Before I read the cautionary statement, I'd like to remind everyone that there are a series of slides that accompany this morning's call that can find on our website at www.corusent.com under the Investor Relations section.
Now let's move to the standard cautionary statement found on Slide 2. 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 are contained in the company's filing with the Canadian securities administrators on SEDAR. I'll now turn to our second quarter results on Slide 3.
I'm pleased to share that we have delivered yet another strong quarter in Q2 with Television advertising revenue growth exceeding our expectations. After a positive start to the year in Q1, we experienced continued momentum in Q2.
This is due to the disciplined execution of our operating plan and continued progress advancing our strategic priorities. Let's first take a look at some key financial highlights before John provides more color on these items later in the call.
Consolidated revenues of $384 million were up 4% for the quarter. We delivered impressive growth of 11% in Television advertising revenue, which is the best result we have seen in many years.
While some of this increase is attributable to the impact of the Olympics in the prior year quarter, it is increasingly evident that we are benefiting from our unwavering strategic focus and operational discipline. Our revenue go-to-market strategy is beginning to deliver meaningful results, driven by new pricing flexibility in specialty, ongoing traction in ad tech and audience segmentation, impressive acceleration in digital advertising, a determined pursuit of new business, and the emergence of new direct-to-consumer advertisers coming to television.
Segment profit of $113 million was flat to the prior year quarter as strong growth in our TV segment profit was offset by a swing in stock-based compensation expense at corporate and soft radio results. Our improved overall financial results operating in concert with our capital allocation policy, which was purposefully revised to aggressively reduce our debt is doing just that and having a positive impact on our balance sheet.
In Q2, our robust free cash flow of $84 million enabled increased voluntary debt repayments that have accelerated the reduction in our leverage. I will now turn to our Q2 highlights and take a few minutes to discuss some notable developments in our business.
Moving to Slide 4. We want to take a moment to share a few highlights from our audience performance in television.
On Global, building on our strong fall schedule, New Amsterdam still reigns as a number one new drama and ranked as one of the eighth top programs in the top 20 for adults 25 to 54 in addition to Chicago Med, Survivor and Big Brother Canada. Turning to Slide 5 and taking a look at our specialty television portfolio, a number of our top specialty channels are delivering year-over-year audience growth.
HGTV, Food Network and W Network are strong performers with Hallmark Movies remaining a meaningful contributor to W Network's growth. Over to Slide 6, the big story in our specialty TV businesses this week was the launch of Adult Swim on April 1st.We have deepened our partnership with Warner Media enabling us to bring the first 24/7 Adult Swim channel to Canada.
This is a great example of portfolio optimization in action. We rebranded an existing network with broad distribution in order to deliver targeted highly valued content to a coveted audience demographic.
In fact, in the US, Adult Swim has been the number one channel for adults and men 18 to 34 for the past 14 years. We're extremely excited about this great addition to our portfolio with loads of never before seen content for Canadians, which will further strengthen Corus’ presence as a leader in specialty entertainment.
Moving on to Slide 7, we are advancing our own more content strategies to Nelvana and Corus Studios. Our owned-content investments drive audiences on our networks and diversify our revenues through international content sales.
We call this our Corus advantage. Looking first at Nelvana, we have 15 series that are currently greenlit or in production.
Building scale through partnerships is a key strategy in our content business. And I want to take a moment to highlight what's new with some of these great strategic partnerships.
In February, Nelvana and Discovery's joint venture, redknot, greenlit two new animated preschool series: The Dog & Pony Show and Agent Binky: Pets of the Universe. Both series will be slated to air on Discovery Kids Latin America, and Treehouse in Canada and will be available for sale globally.
Sumitomo and Nelvana recently announced development of their first series from that partnership, GEKI DRIVE, an action adventure cartoon based on the hyper-fast customizable cars produced by Japanese toy company BANDAI. This is another great example of why these new partnerships can deliver a truly unique and appealing intellectual property.
Further, we are scaling our production partnerships nicely with both Nickelodeon and Sesame Workshop, the second season of Corn & Peg and the Emmy nominated Esme & Roy moving into production. We are definitely priming the pump at Nelvana as we set the stage for growth later this fiscal and into fiscal '20.
Moving to Slide 8. Over at Corus Studios we currently have 14 series that are in production or have been greenlit.
This includes three new renovation real estate series, Vacation House Rules, Make Your Move, and Farmhouse Facelift, which were recently announced as new additions to our slate for 2020. And demand for our powerful slate of lifestyle and factual content is growing.
Just yesterday, we announced our expansion into four new markets and new sales for STITCHED, Backyard Builds, Masters of Flip, Save My Reno and Worst to First. On to Slide 9, we’re committed to following our viewers and listeners across new and growing platforms and making smart investments in growth opportunities.
For example, we’re experiencing significant growth from our expanding online presence of Global News on Globalnews.ca. In Q2, average monthly unique visitors grew 22% with over 28 million average monthly video views and increased about 191% over the prior year.
Turning to Slide10, this week, we also announced the acquisition of the Canadian operations of longtime partner KIN. The investment in this network of premium social media content creators further strengthens Corus’ leadership in the lifestyle space and complements our existing social digital agency so.da.
As advertisers seek out new ways to engage with audiences on social platforms, so.da continues to gain momentum, recently announcing the production of its second mid-form twitter series #DestinationDishes, offering an exciting opportunity for engaging social content partnership. And lastly a quick look at our podcasting business CuriousCast, a natural platform extension for our radio and news business.
We’re pleased to see this content resonate with audiences. Most recently new podcast Crime Beat debuted at number one on Apple podcast Canada in all categories.
CuriousCast has nearly tripled our average monthly downloads since launch with over 2.6 million downloads per month and interestingly 35% of our total downloads are US based. These are all good examples of smart investments in new and emerging market spaces as we explore emerging growth opportunities.
With that, I will now turn things over to John, who will walk us through our Q2 financial results.
John Gossling
Thanks, Doug, and good morning, everyone. I'll start on Slide 11.
As Doug mentioned earlier, we delivered Q2 results that exceeded our overall expectations particularly on the top-line. Consolidated revenue increased to $384 million for the quarter and that’s up 4% from last year largely driven by double-digit growth in Television advertising sales.
Consolidated segment profit of $113 million was consistent with the prior year quarter. Improvements in TV were offset primarily by $7 million swing in stock-based compensation expense within corporate as well as soft radio results.
Consolidated net income attributable to shareholders for the quarter was $6.3 million or $0.03 per share compared to $40 million or $0.19 per share in the prior year, that's primarily due to an accounting estimate change that started in Q1 related to the useful lives of our television brand intangible assets. For the second quarter, this resulted in additional $35 million in amortization expense and that reduced net income attributable to shareholders by $26 million or $0.12 per share basic.
Further details can be found in this quarter's MD&A. Free cash flow of $84 million increased from $82 million in the prior year quarter, this result was driven by cash provided by improved working capital partially offset by higher film investment spend and higher cash taxes.
Looking at Slide 12, our revised capital allocation policy has enabled us to make significant strides in our de-levering operate this year. Net debt-to-segment profit is now at 3.05 times as of the end of Q2 and that compares to 3.28 times at the end of our prior fiscal year.
We continue to accelerate our progress against our target of getting below 3 times, making debt repayments of $61 million in the quarter and $118 million year-to-date. As well, in March 2019 we disposed of our majority interest in Tel and TLN.
While this was non-material transaction, it fits with our strategy to focus on our core businesses and optimize our portfolio. We note that proceeds of $90 million will be used for debt repayment.
As well, these sales have an approximate impact of $10 million on consolidated revenue and over $4 million on consolidated segment profit for the back half of the year. Now, let’s turn to our TV results for the second quarter as detailed on Slide 13.
Overall, TV segment revenues were up 10%, and again largely attributable to the impressive TV advertising revenue growth of 11% this quarter. As Doug mentioned earlier, beyond the impact of Olympics last year, we’re benefiting from a number of factors including new pricing flexibility on some of our specialty services, traction in ad tech, growth from digital assets and revenue focused on new business including direct-to-consumer advertisers.
This is a testament to the disciplined execution of our operating priorities. While we do not expect the results to be as robust in Q3, our current bookings indicate that we’re on track to deliver mid-single-digit TV advertising revenue growth year-over-year for Q3.
That said, our long-term visibility beyond Q3 remains limited. Subscriber revenue met our expectations of down 1% versus the prior year quarter and that’s due primarily to the shutdown of the Sundance Channel last year.
$2.5 million decrease in merchandising, distribution and other revenues over the prior year reflects some timing variability on the delivery of new episodes, soft publishing revenues and lower owned-content back-end payments compared to the previous year. TV expenses in the second quarter increased 3% over prior year.
Direct cost of sales were up 3%, which includes programming amortization expense at plus 1% and G&A expenses up 3% driven by the strong advertising revenue growth and our investments in advanced advertising and data initiatives. TV segment profit increase 10% in our second quarter, reflecting a strong top-line growth.
TV segment profit margins were 32% and that's improved from 31% in the prior year. Now, if you can turn to our radio results on slide 14.
From a market sector perspective, the automotive category was the largest contributor to the decline. And from a regional perspective, Alberta is showing ongoing economic market pressure and Toronto is still work in progress from a ratings perspective.
We continue, however, to see the benefits of our revenue diversification strategy in markets where we have both radio and television, as we focus on those clients using both local TV and radio advertising solutions. Radio segment profit decreased $1.9 million in the quarter, given these challenging revenue results.
Segment profit margin of 16% was down from 21% in the prior year. Before I turn things back over to Doug, I would like to highlight that today we declared a quarterly dividend of $0.06 per Class B share, payable in June as detailed in the separate press release this morning.
To conclude on Slide 15, given the positive momentum in the Television segment, our continued commitment to driving strong free cash flow, we expect to meet our target of getting to below 3 times net debt-to-segment profit in the back half of this fiscal year. We're very pleased with the positive results our team is delivering while we continue to make prudent investments for future growth.
With that, back to you Doug.
Douglas Murphy
Thanks, John. I’m now on Slide 16, we are seeing resilience in our TV business this year.
And while we cannot look around the corner, there are increasingly more reasons for optimism. First, I want to share my excitement about the findings of new research recently released by Accenture.
This first of its kind Canadian media attribution study and industry review investigates the relationship between TV, digital and other forms of ad spending to better assess how to optimize the returns on marketing campaign investments. They analyzed $3 billion of ad spending by 105 brands advertising in Canada in four industries over the last 4.5 years.
The study concluded that typical -- that the typical advertising media mix models are definitely over rotated into digital and that a heavier weight of TV advertising and the media mix will improve campaign ROIs. As well, advertising on television combined with digital improves the effectiveness of multi-platform advertising campaigns.
Interestingly, this may explain the growth we are seeing in TV advertising by direct-to-consumer companies, such as Expedia and trivago, they are seeing this attribution in their own results, and consequently, are heaving up on television. Another key finding of this study was that advertisers in Canada would be more successful in growing their top-line if they rebalance the mix of media elements and marketing campaigns and reallocated dollars to television advertising by shifting some of their spending from digital.
These conclusions from this study were remarkably consistent with other US and UK based research. We've always opined that the market has shifted too far into digital.
It’s extremely validating to have an independent research study prove that TV is unrivaled in terms of both long-term brand building and short-term sales impact. Over to Slide 17.
Another reason for optimism is the progress we're making in audience-based buying. We've spoken many times in the past about the fact that we are investing to enhance our suite of advanced advertising solutions and data analytics capabilities as the cornerstone of our strategy to transform how television is sold.
And we are taking a leadership position in our industry to identify and advocate for opportunities to accelerate the growth of audience-based buying, such as aligning on a shared approach industry-wide for defining common audience segments. An industry solution would create a more robust and effective ecosystem for agencies and advertisers to target audiences for maximum campaign impact.
Finally, turning to Slide 18. We're very pleased with the results this quarter, and they further validate that our strategic priorities are working as we compete in this dynamic and fast changing media marketplace.
As we look ahead, we have a lot to be excited about. We will have TV ad growth in Q3.
Our slate of owned-content is growing and sets the table for increases in international revenue from broadcasters and streaming platforms that rolled over. We're making steady progress on our advanced advertising and data initiatives and advocating for an industry solution for common audience segments.
We continue to explore growth opportunities through smart investments in digital content. And finally, our focus on driving free cash flow and decreasing our leverage will enable us to build future financial flexibility as we continue to evolve our business.
In closing, we'd like to thank all of you for your support of Corus and the hard working Corus team around the country. John and I will now be happy to take any questions that you may have.
Over to you, operator.
Operator
Thank you. [Operator Instructions] Your first question comes from Vince Valentini from TD Securities.
Your line is open.
Vince Valentini
A couple things here, maybe just to key on what you just said there recently, Doug. We will have positive TV ad revenue growth in Q3.
That's pretty confident statement, given the lack of visibility you've had in the past couple of years. Does that signal that even to this point in the quarter you're trending almost to this double-digit base?
So even if the last month in a bit fell off, you'd still be positive or can you give us a little more color on that confidence?
Douglas Murphy
No, well what I say is that we have growth on the books already, Vince. I wouldn't have for moment say double-digit, but we're very confident there will be growth like once again in Q3.
So that'll be the third quarter of consecutive growth in TV ad spending, advertising.
Vince Valentini
And then to go back to Q2 and dissect it a bit, obviously you have a bit of a different year-end and quarter end period than your major broadcast competitor. Would you characterize that December was disproportionately strong out of the three months in Q2, or was this 11% ad revenue growth reasonably evenly spread across December, January and February?
Douglas Murphy
I think it was pretty evenly spread Vince, it was -- the pacing was kind of consistent throughout the year, and the money just kept coming in with good demand.
John Gossling
Yes. The one thing I would say, if you're looking for year-over-year seasonality, it was last February, we did have the Olympics.
So you had a comp there that was much favorable.
Vince Valentini
I was just going to ask that. I mean, some people I think are saying this is just easy comp versus the Olympics.
Do you have any way of going back now and say, hey if the Olympics hadn't existed, you may not have been down 3% in Q2 last year, you may have only been down 2%. But this year, you would be only be up 9% or do you have any way of quantifying it?
Douglas Murphy
Yes, we know in our models what they are, I think you summarized it fairly well.
Vince Valentini
Okay, last but not least. Just the content merchandising space a bit weak this quarter, but there's always lumpiness in timing.
You guys have way better visibility than us. Can you give us any better clarity as, do you get more deliveries and revenue flowing through in Q3 or is that more Q4 or next year?
John Gossling
So it's interesting Vince, that's a relatively small delta, but obviously a large percent and we do focus a lot on a given that that's where we expect a lot of the growth comes from. So, I was looking at it even just before the call, that particular revenue category has 14 different items in it.
I'd say the things that are related to Nelvana actually, in total, we had growth in the quarter small, but it was still growth. The thing that they're also in there are things like we get some system signal payments through -- from distributors.
And you would ask this in the past that there's a change coming in some of those payments that the distributors have to make, we don't know what that's going to translate to for us yet. And there's always a timing issue with those payments, so we effectively treat them on a cash basis.
So that was a big driver actually of the downside this quarter over $1 million. Kids publishing was a bit softer this quarter compared to last, they had a fairly big distribution deal a year ago.
And then yes, some of the Corus Studio stuff, the back end is a little bit harder to predict. So I'd say there's a mix of a tougher comp on that when last year was a big quarter.
And as well, we do have some things that are pushing into the last part of the year. Now remember, in Q4, last year, we had a big SVOD sale of $4.5 million.
So that's going to be a tough comp for us as we get into Q4, but we're certainly pushing hard on all these revenue categories.
Douglas Murphy
And I’d just add that at a high level -- and we're -- our strategic objective of owning more content is very much in play here. Nelvana has got significant growth in episodic delivery, in the quarter, it’s just not showing up on the revenue line yet and increasingly also on Corus Studios, we're really building that catalog and going into second, third, fourth seasons of our hit shows that are selling internationally, that volume helps to grow.
Some of it just doesn't quite hit the top-line based on how you how you recognize revenues and the timing of deliveries, we need to get the complete seasons built before we can take them into revenue. So I mentioned in my remarks purposely that we're priming the pump.
You'll start to see I think some more significant growth next fiscal and beyond.
Operator
Your next question Next question will come from Adam Shine from National Bank Financial. Your line is open.
Adam Shine
Maybe starting with you Doug, in terms of some of the advertising growth, you highlighted a couple of players like an Expedia or trivago, within the context of the Accenture discussion. But anything else in terms of specific categories that might be driving some of these gains in terms of specific categories coming back into the TV space as well?
And then one for John after.
Douglas Murphy
Okay, so the -- thanks for that question because this is something really I'm sure everybody on the call kind of lands -- land on this point. There's -- traditionally TV had 200 big advertisers and those are advertisers we work very closely with, and we're trying to change how we sell television to them, and we're selling audience segments, and we're working with data, and we're doing integrations on Tempo and we are doing great digital campaigns and so.da and all that stuff is working great.
There's an emerging 50 advertisers I would characterize them [indiscernible] that all started in digital. And now they're coming into television, and they're diversifying their media mix elements in their media campaigns.
And that's something to take a -- pay careful attention to, because what it means is, these folks can look at their own attribution. I mean that guy on trivago, the reason why you see him all the time is because television advertising works.
And they can see it in their results. And you're seeing that across all the other platforms, whether it’s Amazon or Google or Expedia.
There's a plethora of these digital advertisers now on television. And to me that it anecdotally substantiating the empirical research that Accenture, as has released in the last couple of months.
So that's the note that I wanted to make sure that all of us on the call pay careful attention to.
Adam Shine
And just turning over to, John. I mean, on the TV side, obviously, we had a very strong top-line, and you could absorb some growth in cost.
But one thing that stood out for me was G&A in TV increased for the first time obviously in probably four quarters or so suggesting a lapping of some prior savings initiatives. Do we embark perhaps in the back half of the year and prepping for F2020 on further cost saving efforts such that we will see some of the cost increases in check?
John Gossling
I mean, certainly, it remains a very important focus for us. But you're right, Adam, there's pressure as we see that kind of top-line activity.
There are some variable costs, there's some compensation costs that will be driven by revenue. And frankly, you start programming, move up a little bit in Q2.
I think we've done a really good job, really in the last three years since we brought Shaw Media of pushing that down. We've got some investments we're making in Canadian that will help to drive Corus Studios that we've talked about.
Foreign is always difficult to predict because of timing and you could argue that in Q2 last year, because of the Olympics, we were under delivered on foreign -- there we took -- probably took a little bit more. So I think, the trend is -- what we see is, yes, pressure for G&A and programming to start moving up.
So that will -- obviously focuses on what other efforts need to make to try to counter that. But given the kind of top-line we're driving, it's okay in terms of things that are variable with the revenue line.
Operator
Next question comes from Aravinda Galappatthige from Canaccord Genuity. Your line is open.
Aravinda Galappatthige
Congrats on the quarter again. I just wanted start with a question on the audience based buying.
I know that in Q1 Doug you mentioned -- you kind of gave a percentage of 15% and the growth rate. Is there kind of an H1 number you can give us that’ll kind of help us size that up?
Douglas Murphy
Yes, it is actually, the growth has increased in Q2 relative to Q1 on a percentage basis over the prior year. So we continue to make great progress on that and I think we're 17% now television advertising is audience based buying that’s up a 0.5% I think from the first quarter.
And then the year-over-year nominal growth is almost a 50% over the prior year. So we got the pedal down on this one.
That metric will swing around from quarter-to-quarter, but the trend is definitely going up because it's working.
Aravinda Galappatthige
And just moving on to dynamic ad insertion side of things, any kind of updates there that sort of maybe help us to think proper path to that side of ad tech kind of coming into play as well. I know that there is a sort of measurement study that’s happening and you’re working with both Rogers and kind of trying to Shaw up and running as well.
Anything on the path to sort of those revenues kind of are starting to trickle in as well?
Douglas Murphy
So a couple of things there. Yes, we’re working on measurement study with Numeris, the total video audience measurement task which will include all video viewing in the fall and capture on demand viewing, so that will be added to the currency.
We’re currently in sort of active deployment of sort of dynamic ad insertion on VOD with Rogers, but Rogers only, we’re not up yet with Shaw, so it’s relatively nascent at this moment Aravinda. But we expect as the new platforms roll out X1 and MediaFirst to have more likely next year we will see some meaningful growth albeit at a small base this year in the dynamic ad insertion on VOD.
So it’s an area where everybody recognizes that there is audiences there and with those audiences there is advertising opportunities and the two new platforms X1 and MediaFirst will be much more facile in terms of how we can execute the DAI opportunity.
Aravinda Galappatthige
And then just lastly on -- actually I have more on radio but on Adult Swim, I know it’s early days but any comment Doug or John you can provide on sort of materiality or the tailwind to ad growth there given sort of the impact that it had, given significance of the channel in the US?
Douglas Murphy
Well it’s a monster in the US Aravinda and it’s by the way it’s super funny. I would encourage everybody on the call to check it out my favorite Rick and Morty is terrible show but I can tell you that anecdotally in the first few days we’ve more than doubled the audience, we are delivering on action.
And that’s we’re in free preview right now, so before discovering it, we got a pretty robust advertising campaign on multiple media across the country. So we’re optimistic but we’re still measured, that’s our tone.
Even with this big quarter we had, we’re maintaining kind of measure in our approach to everything. So there was a nice upgrade from the existing service, it’s a big brand, that hadn’t been in Canada before, another example of our stable execution of our priorities around here and we’ll report back more in the next quarter as to what we’re seeing from Adult Swim.
Aravinda Galappatthige
And lastly on radio. I know that four, five years ago sort of you had been in period of raising softness in the Toronto stations as well.
And that’s persisted for a while, maybe a while longer than you would have hoped for. Is there any sort of comparison to what you’re facing right now, I know it’s not just Toronto but it’s Alberta as well but any comment there that will give us some visibility as to how radio would perform?
Douglas Murphy
Yes, a couple of comments, I mean as an industry it’s a little soft but it’s just not Corus, it’s the TRAM, between the which is reported by all radio broadcasters is down this year, I think that’s largely driven by the macroeconomic softness in certain parts of the country and certainly Alberta as you know that we noted. For Corus in particular, we have some Corus-specific issues in Edmonton and Toronto, we have moved very quickly to address both of those.
We’ve changed our mornings shows on Q and we’ve changed morning show on the Edge. Our music recipes are different now.
We are marketing more aggressively. We just rebranded Fresh to Energy 95.3, so we are now in the top 40 business here in Toronto.
We’re already seeing some progressive movement in the overnights in the Toronto cluster. So the nice thing with radio is you can move pretty quickly if you get it right.
So we’ve done the right things in Toronto and now we have to kind hold the Corus and look for the results to come.
Operator
Your next question comes from Jeff Fan from Scotiabank. Your line is now open
Jeff Fan
Doug, you touched on the over steering to digital from television and I want to just follow up on that. How long do you think it will take for us to get back to a level where you think in your opinion is the right mix on TV versus digital?
Because as you said in the last couple of years we have seen an over correction and over steering, now we’re kind of getting back to more of a level set, how long do you think that process is going to take for advertisers to get back to the right mix in their spend between digital and television?
Douglas Murphy
That's a great question, I’d invite anybody on the call if they haven't seen the presentation, we're happy to share it with you. I think one of the stats on the Accenture study said that the TV was -- the industry was under invested in television by 5 points.
In other words, in the media mix models, it should be 47, not 42. And so that's kind of directionally what we're seeing, I think they can correct pretty quickly.
And we're out on the street now pitching literally next week, we're going to go see roughly 400 advertisers, we’ve already talked to 300 advertisers in the last couple weeks here in Ontario, and Eastern Canada. Accenture is meeting with I think 50 CMOs across the country to also talk about this opportunity.
So, I like to think that, we could correct this in the next 12 to 18 months, but it's really kind of difficult to predict that. There are some advertisers that will continue to do what they're doing.
There are others, and many of them want to maximize their campaign ROI. And what's true also is, if you look at the level of TV investment in Canada compared to the US, it's relatively under invested.
And in other words, the US folks put more money in television in their mixes. Another thing that's evident in this study is incremental investment in television has the highest incremental return on new campaign.
So there's a lot of really good things in here that is empirically based, which we will be talking to the community about and I think we'll get some results from it.
John Gossling
And just some of that’s gone up, right, I mean Doug talked about the audience based buying as a solution for the industry. So the things that Corus needs to do in a way we operate, there's things that the industry needs to do in a way it operates.
And so that -- again, that will require some time, some investment, and frankly, some cooperation. So we're on all those things, we're trying to be as aggressive as we can.
And that's why we keep saying we're investing in ad tech and data, because we have a huge focus there. But, there's the systems working, that can sometimes take time and in getting all the players in the industry takes a lot of effort as well.
Jeff Fan
And maybe just a follow on. Regarding the 50 digital advertisers or digital players that are now advertising on TV, how far along are we in terms of getting them on board?
Douglas Murphy
Well I think -- I mean, I think kudos to our business development efforts with the sales team, they're increasing their spending. I mean they’re -- and I think as I say I think that's evidence of the effectiveness of television.
These companies started off in digital and then as they begin to get success and grow, they widened their funnel and started investing in brand building and bring TV into their campaign. So I don't think this is a one-time thing, Jeff, I think this is a trend.
Jeff Fan
That's great. And just a final question.
Disney is launching their streaming service. Doug, I'm wondering if you have any thoughts about what your role will be with respect to Disney going forward, particularly related to the channel business and any role that Corus could play on their streaming service?
Douglas Murphy
We have a very, very strong relationship with the Walt Disney Company. We've been speaking with them on a regular basis over the last weeks and months.
They're very much aware that we’re their partner in Canada and the success of Disney+ will very much be a function of us working together. And I think we're still putting those details together.
But I think that for us, Disney values our channel business here in Canada, it’s a significant part of their overall model, whether or not it’s marketing the theme parks or Disney Consumer Products or the feature film releases, we are piece of that ecosystem that's invaluable to them. And so I expect us to be working in concert as they bring Disney+.
I don't know exactly what that's going to look like, Jeff, but I think it's just a smart business for each of us to work together as opposed to not.
Operator
Your next question comes from Tim Casey from BMO. Your line is open.
Tim Casey
Yes, a couple from me. One, Doug or John, on the strong television ad number this quarter, order of magnitude wise, could you talk a little bit about how you'd break down the gain, I think you sort of mentioned that maybe a quarter of it is due to the weak comp but how much do you think is pricing, how much is ratings and how much is as I guess media mix?
What would you guess? And second question on the audience based buying you mentioned you've got to get the industry aligned.
Can you talk a little bit more about that? Doug, does that mean like your other television operators or does that mean the buying community or it’s the distribution community?
What -- could you just flush out a little bit more what you mean by aligning the industry? Thanks.
Douglas Murphy
Thanks, Tim, and Nice to have you join us. We've been talking to all the agency groups and there’s five big agency groups and they've been very consistent saying we love what you're doing with audiences, Corus, can you please work with your broadcaster peers to help us all buy the same audience so that your definition of a fledgling family or a fashionista or a crucible aficionado or a foodie, et cetera, et cetera, is the same as the other broadcasters’ definition to facilitate a more wholesale embrace of audience segments buying across the Canadian media industry.
So that's that note. On the growth vis-à-vis last year, I've put it into -- a third of the growth is probably the Olympics comp, a third of it is price, a third of it is market share shift back to TV.
Operator
Your next question comes from David McFadgen from Cormark Securities. Your line is now open.
David McFadgen
So just a couple of questions. So when you look at the TV ad revenue growth of 11% and that’s obviously a pretty strong number.
How much of that do you think is derived from the digital solutions that you guys have put into place, because obviously once the shift normalizes back to, I guess, more a appropriate mix, then we could fall back on just the data solutions to drive out revenue growth. So I was just wondering how much of that is factored-in in the quarter here?
Douglas Murphy
Well, I mean I just mentioned on the prior call that you had to look at the incremental growth on TV ad, I would attribute -- I referred to, a third of the comp to the Olympics, a third to market share shifting and that's probably the digital piece, and a third to price. So every quarter, we are moving away from selling the broad demo, adult 25-54 to selling more targeted audience segments.
And that trend is irreversible, and we will continue to push that. As you do know, David, we're still in beta on our [Sense] platform.
And we hope to get that to scale for next fiscal, which will enable us to have automated -- an automated transactions on audience based buying, which will be a big leap forward again. So the share of the data based buying in our total mix will continue to grow.
And that will be I think, very positive for the overall TV business.
David McFadgen
Okay. That helps.
Douglas Murphy
And if I can just say one more thing. The more audience based buying we enable, the more yield we can get.
So there's a pricing element that comes with that mix too. So it’s a bit of a double dip.
David McFadgen
Okay. So I think in the Q1 call you gave a metric, you threw out a metric, how much revenue from audience based buying in digital solutions grew year-over-year, and it was quite a big number.
Can you give us that number for Q2?
Douglas Murphy
Yes, it's -- we've moved up to 17% of the total TV ad. So it's, I don't have exact number on my fingertips.
But John can get that to you on a follow-up, but it's definitely growing. If we set it up 42% over Q1 I think it’s closer to a growth of 50% in Q2, I did some rough math earlier this morning.
So it's continuing to grow.
David McFadgen
And then just one last question. Just on the whole merchandising distribution and other, you talked about Nelvana growing, but there could be some tough comps with some large SVODs fees in fiscal 2018.
Just on an overall basis, you’d expect the merchandising distribution revenue to be up in fiscal 2019?
Douglas Murphy
Overall, I don't know, maybe I'll let John look at that. But for fiscal '20, I have high expectations from our Nelvana and Corus Studios businesses in fiscal '20.
As I say, we prime the pump on the episodic output. We've also got Bakugan coming back in.
So the team is fully aware of my expectations, put it that way.
John Gossling
I mean, David on '19, as you know, it’s consistent with what we said in October on the Q4 '18 call. I think we would expect that other line to grow, but taking into account that as Doug said the SVOD sale in Q4 last year.
So we're going to live that out and we would expect to see pretty decent growth on that line for the year.
David McFadgen
So, okay. And then what was the delta that we're looking at, where we would ex out to get the 4 million in sale in Q4.
John Gossling
It was about 4.5 million in Q4 last year.
David McFadgen
Okay, so ex that out you should see I don’t know, mid to high single-digit growth.
John Gossling
That's what we said in October. I think we're still good with that.
Operator
[Operator Instructions]. Your next question comes from Drew McReynolds from RBC Capital Markets.
Your line is open.
Drew McReynolds
Three from me. Just a clarification, Doug, on the pricing flexibility in the release.
Is that kind of what you've addressed in terms of some of these new initiatives that you're just being able to monetize in different ways or is there something else that's happening to the traditional way you have priced kind of specialty?
Douglas Murphy
There's a bunch of answers into that question, Drew. So let me see if I can hit them.
Number one is when we sell audience is based buying. It's very -- when we pull the numbers and look at -- as an example when an advertiser comes they said, here's our first party data, we merge it with our set by set top box data, we push it out to the third party that further adds data to it, we get really good definition as to what shows their customers are watching -- or targeted customers are watching.
Interestingly, it's almost never the shows you think they were. So we find an interesting assortment of shows in our numbers that we then put together as a campaign.
And we're able to charge a higher yield because there's a much more targeted hit, sometimes 2 to 3 times more focused on targeted than they would have bought if they’d bought the top 20 shows. And that allows us to do two things: One is to blend up our overall pricing on average.
And also to keep liberated other inventory that might be more valuable to late breaking money, like theatrical releases or other kind of campaigns, elections and et cetera. So there's a mix and a price piece in that.
Secondly, from a trading perspective, this year, on our top specialties, we've moved to floating rate cards. So we always have been had dynamic pricing on conventional television.
And we've certainly taken a lot of price in the last year, as the industry has in Canada, North America and around the world. But now we have a new trading practice wherein we can float rate cards on our big specialty channels and our big specially channels are growing their audiences.
And as a result, we're having benefit of both more inventory and more price.
Drew McReynolds
Okay, that's, that's very clear. Two others from me.
First, maybe provide an update on expectations for television subscriber revenue growth and the two renewals this year? And lastly, on the TV visibility comment that John alluded to, I mean, certainly everything that you talk about seems quite positive.
I am just wondering, what's the hesitation -- even though bookings come in last minute, what's the hesitation just to express that caution kind of over the medium term on TV visibility?
John Gossling
Drew I tried to get this on the last call, but I'll try again. So as Doug said, in response to the first question, we can say, Q3 is looking like growth, because we know based on orders on the books today that, that we're there.
So this isn't a pacing concept. This is like what's actually on the book.
So we’ll look forward into Q4. Now we know what's on the books for Q4.
But it sure isn't anywhere near a place where we can say there absolutely will be growth, it’s pacing well, but I think roll the clock back to 2018 and the first quarter mix that we had that led to a whole bunch of things in '18 for us, I think that's where the hesitance is. We've seen the shape of the pacing curve change and it's very hard to predict.
It seems to behaving consistently now in a different way than what it was a year and a half ago but you don't know that that won't change again. So we had the -- orders are coming in sooner, the pacing is very strong as we go into the quarter.
And in the last two quarters now we've been able to say that we've actually got orders on the books that will get us to a growth place, if we stopped today and assume nobody cancelled, then we would be able to book more growth when we are on the next call in June. But for Q4, we can't say that yet because it's just too early in the whole cycle of selling.
So that hesitation, we just -- we went through that last year and we’re just cautious to go back there when it’s still hard to predict.
Drew McReynolds
But conceivably John and certainly understand that quarterly cadence that you’ve been very clear on with what’s going on and everything we’ve discussed here with respect to the TV ad market, I guess really the question is, is that quarterly cadence changing? I think kind of addressed that, presumably changing to incrementally better visibility but you’re clearly not calling in into -- to that dynamic overall.
Is that a fair assessment?
Douglas Murphy
Yes I mean I think there are some positive forces; there’s progress on audience based buying. By the way just on the last call heard from Mr.
McFadgen we did grow 50% year-over-year on our audience based buying in Q2. So I just did the math specifically on that for David’s benefit.
So we got I would say buying growth. We will accelerate that when we get since launch for the next fiscal.
We’ve got this market share in equilibrium from these highlighted by Accenture, we’ve got the emerging Nifty 50 if you would, new advertisers coming to television, the trivago guy and we’ve got floating rate cards on specialty, we’ve got still audience level are stable for everybody in the system in Canada. So I’m sure our friends on Queen Street are going to have a good quarter as well.
So all of this is I think positive. After last year we are reluctant to get too puffy on this stuff, we just wanted to be measured and execute faithfully to our plan and we will take it quarter-to-quarter but we’re also -- you didn’t ask this question but I’m just going to say it because we’re also extremely pleased with our deleveraging profile.
I mean that’s a great outcome for us and it was part of our decision to revise our Capital Allocation Policy and that would give us more wherewithal to make these important investments as we work to transform the business.
John Gossling
And Drew just -- so we didn’t miss your first -- well I guess that was your third question, on TV stuff, I would say more of the same. I mean we were down a little bit this quarter, but that was mostly Sundance disappearance.
You mentioned we do have two big renewals coming, do they both get done this fiscal, hard to predict, we would like to think they do but it’s never completely up to us. So if I was betting, I would say one or two for sure, so that could provide a little bit of benefit in Q4 to say but hard to know.
But yes, we’re looking at sort of plus or minus 1% or 2% is where we think that’s going to be.
Operator
I have no further questions in queue. I’d like turn the call back over to the presenters for closing remarks.
Douglas Murphy
Thanks, operator, and thank you, everybody on the call. As ever, we are available for your follow up questions if you have any.
And in the meantime have a great weekend and thanks very much. Bye, bye.
Operator
Thank you, everyone. This will conclude today's conference call.
You may now disconnect.