Jun 26, 2020
Operator
Good morning. My name is Amy, and I will be your conference operator today.
At this time, I would like to welcome everyone to the Corus Entertainment Q3 2020 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.
Doug Murphy
Thank you, operator, and good morning, everyone. We hope that you and your families are staying healthy and safe during this time.
I want to welcome you to Corus Entertainment's fiscal 2020 third quarter earnings call. I'm Doug Murphy and joining me this morning is John Gossling, Executive Vice President and Chief Financial Officer.
Before I read the cautionary statement, I'd like to remind everyone that we have support slides for this call. You can find them 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. Today's 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 start on Slide 3.
When we last spoke early April, we talked about how quickly the world had changed and it continues to do so. Our responsibility as a national and local broadcaster is to provide the public, reliable timely news and entertainment programming.
That responsibility has never been greater than it is now. As you well know, significant and unprecedented challenges emerged for businesses in the weeks following the implementation of COVID related restrictions.
At Corus, this difference -- this experience was no different. Our immediate focus was on the health of our employees and ensuring they were safe and secure.
We then quickly acted to implement our business continuity measures. Once established, our next action internally was to confirm our steadfast commitment to purposefully advance our strategic priorities in the midst of this crisis.
I am pleased to report that we have done just that. These advances include working with the industry in Canada to embrace common audience segments to ensure better targeted advertising, reaching more Canadians on digital platforms such as STACKTV, deepening our strategic studio partnerships as we secure a strong schedule for the coming broadcast year, achieving meaningful share gains in TV and radio given the strength of our content, and finding new buyers for our owned and controlled TV series around the world.
To achieve these wins, while seamlessly providing the essential services Canadians need from us is a testament to the talent and resiliency of our team at Corus. That said, Q3 was a very tough quarter.
As witnessed by other broadcasters around the world, we experienced significant advertising revenue declines. TV advertising was down 31% and radio advertising was down 52%.
At the same time, we took immediate steps to review all of our costs and took a disciplined approach to reduce expenses. Fortunately, our resolute focus on deleveraging our balance sheet these last two years provided Corus with the financial flexibility to withstand the impact of the short-term challenges.
And we also prioritized spending and investments to ensure our momentum and advancing our strategic priorities was uninterrupted. Corus as an essential service is doing our job in keeping Canadians connected and informed.
Our team is working at peak capacity with more than 75% working from home to deliver news and entertainment. The Federal Government has been doing their job too by providing support to hundreds of thousands of Canadians and their employers through the Canada Employment Wage Subsidy and other programs.
We applaud the move by the Ministry of Canadian Heritage to introduce a $500 million emergency support fund for cultural, heritage and sports organizations. Our production and creative communities are facing tremendous hardships in our country as most, if not all, productions remain on hiatus.
These two measures will position our economy, both creative and otherwise, for a more rapid return to a new normal of economic activity once the public health agencies begin to further lift COVID related restrictions. For Corus, this has enabled us to fully focus on the uninterrupted delivery of news, information and entertainment services for all Canadians.
Over to Slide 4. We are learning a lot about the acceleration of existing trends, and we're seeing the emergence of some new ones during this pandemic.
Audiences are spending more time with video. We're seeing this as a rediscovered television, and we're seeing this across digital video platforms.
At Corus, we've made great strides in serving our existing video subscribers with an improved value proposition and we are reaching new audiences that don't subscribe to a video bundle through a traditional distributor. For example, one short year ago, we launched STACKTV.
It was a success right out of the gate, and grew markedly every month accelerating as more Canadians were required to self isolate. STACKTV has now become a meaningful part of our business portfolio with over 200,000 Canadian subscribers and growing, a milestone we’re excited to share.
We're also investing to improve the subscriber value proposition by providing enhanced flexibility to consume our Corus video content on the go, complementing the significant investments our distribution partners are making, and new platforms to improve the TV experience. Viewers have embraced our expanded Global TV app, which has seen an acceleration in downloads and time spent during the crisis.
With nearly 4 million downloads to-date and more than 6.9 million video starts in the first month alone, our viewers are taking advantage of new ways to access our content. Over to Slide 5.
Audiences are rediscovering television and they're rediscovering Corus. Since mid-March, Corus has seen a meaningful shift in audience share, given the strength of our content.
Survivor is a great example. In its 40th season, the season finale on Global had a strongest showing in 15 years with 2.4 million total viewers.
This demonstrates unequivocally that a hit on TV is still big, and we saw significant tune in for audiences in the younger 18 to 34 demo. The importance of having a trusted source of news has never been greater.
The growth of news on linear television and digital platforms such as globalnews.ca has been incredible. In fact, we are now the number one digital news brand in Canada.
We are bigger online than any other broadcaster, private or public, bigger online than any newspaper or digital-only competitor. This spring, our ongoing commitment to and investment in news was further realized when we launched Canada's first 24X7 streaming news channels, available completely free through the Global TV app and Amazon Prime Video, making news even more accessible and delivering stories that keep Canadians connected both at home and abroad.
To satisfy our audience's desire for more information about emerging world events, our team has created special news programming such as Coronavirus: Canada in Crisis, Coronavirus: The New Reality and Living in Color: Being Black in Canada. And in radio, some notable new trends have emerged which are encouraging.
It is no surprise that drive time tuning has declined, but what is of interest is a significant increase in streaming as listeners find new ways to access our Corus Radio stations digitally, through the Radioplayer app on mobile devices or voice activated devices at home or via Internet connected televisions. Listening to radio at home is on the rise during the crisis.
And lastly, and for you rock fans out there, rock music is back during this pandemic and this situation. In Vancouver, our two rock stations, CFOX and Rock 101 ranked one and two; and in Toronto, for the first time, the more than a decade, Q107 is a top three station.
Moving to Slide 6, some of you have heard me describe our pandemic experience using the metaphor of chapters being written in the book of COVID. Chapter One was titled Shock and Awe and is evident in our Q3 revenues.
We saw sudden significant advertising cancellations as clients reduced discretionary spending on marketing to protect their own businesses, given the shutdown induced reduction in their sales. Chapter Two: Stabilization, witnessed the advent of new advertising campaigns with newly approved and retooled messaging.
We're now in Chapter Three: The Modest Recovery, as part of the economy slowly reopen. As noted earlier, despite the impact of COVID, we remain focused on the long game.
And an important part of that is our investments in leading edge advertising solutions as we transform how television is sold. Last week, our industry organization Synch TV announced a critically important industry solution in Canada.
Corus, Bell Media, Rogers Sports and Media and later this year Quebecor Media will all adopt common audience segments. Advertisers will now be able to build a better, more targeted advertising campaign benefiting from a common shared grouping of 19 audience segments that will reach 90% of total linear TV audiences in Canada.
Our efforts to better target audiences through common segments is but one part of our strategy to transform how we sell television. Another is to improve the ease of transacting television through an automated platform, Cynch.
This self-service platform will increase the efficiency and effectiveness of buying television. Since its latest upgrade now delivers live inventory across 20 of our specialty channels for adults, with Global to be added later this year.
Over to Slide 7. As mentioned, we held our first virtual upfront this week, where we revealed our schedule for the upcoming broadcast year, both conventional and specialty television.
Let me offer a few quick highlights. You've heard us speak of our strategies to deepen our long-term relationships with world class content partners by securing premium content for distribution in new ways and places.
On Tuesday, we announced a new multiyear deal with NBCUniversal for originals from Peacock, exclusive to Corus in Canada. Shows like Brave New World, Girls5Eva, Saved By The Bell will not only air on our linear channels, but they will also be available for any of our on-demand platforms with full stacking rights.
Moving to Slide 8. Our Global fall schedule is packed full of premium dramas with successful returning series as viewers come back for every week.
Returning to our lineup, our fan favorites, New Amsterdam back for its third season and last year’s newest hits Evil and FBI Most Wanted both renewed for a second season. And on Sunday evening, we will have four full hours in simulcast to CBS, starting with the iconic 60 Minutes.
Then, The Equalizer, a new series starring Queen Latifah, and then NCIS LA and NCIS New Orleans from the popular NCIS franchise. And of course Survivor will be back yet again, appealing to that record fan base that watch this year’s season finale.
I'm now on Slide 9. As we announced on Tuesday, all of our specialty networks will feature a strong pipeline of shows for our U.S.
studio partners as well as hit Corus Original series. For new seasons of The Good Fight, Batwoman and Outlander, to the debut of Beyond Oak Island, we have an impressive fresh schedule to kick off in new broadcast year.
Moving to Slide 10. As part of our upgrades this week, we debuted our ever expanding slate of owned content.
Corus Studios announced a deep lineup of 20 new and returning series including new seasons of the hit series, Island of Bryan, and Rust Valley Restorers. More and more of our series produced by Corus Studios have multiple seasons which increases their appeal around the world.
And there are announcements of some new shows as well such as Cheese: A Love Story, and Family Home Overhaul. Our slate of own content from Nelvana is equally impressive.
Seven new and returning series have been announced, including the long anticipated live-action mystery drama reboot of The Hardy Boys, which will debut on YTV this fall and on Hulu in the U.S. later this year.
Nelvana series Ollie's Pack and The Dog & Pony show will debut on YTV and on Treehouse. New seasons of popular Nelvana produced series Esme & Roy, Miss Persona and Ranger Rob round up the schedule.
The worldwide production hiatus has definitely kick-started our content ownership sales and strategy and its merits as a source of revenue diversification. For example, HGTV and Food Network owned by Discovery US, Inc.
has acquired six Corus Studios. This represents 85 hours of content for their flagship networks in the U.S.
HDTV welcomes three series this summer, including Scott's Vacation House Rules, Making it Home with Kortney and Dave and the hit series Island of Bryan, which will be retitled Renovation Island in the U.S. market.
They've already had strong audiences in the first few weeks of viewing. Food Network acquired two series, including Fire Masters, and The Big Bake for their audiences later this year.
And as previously noted, in April, we announced the sale of a second season of the hit series Rust Valley Restorers to Netflix for international distribution outside of Canada. Many of these series will be in production once the restrictions are lifted, which bodes well for future international sales of subsequent seasons in the years ahead, as we build franchise IP.
With that, I'll hand it over to John to review the Q3 financial results, as well as our current financial position.
John Gossling
Thanks, Doug. Good morning, everyone.
I hope you're all well and keeping safe. I'll start on Slide 11.
Operational discipline is an integral part of how we operate at Corus. At the start of fiscal 2019, we began to accelerate the deleveraging of our balance sheet, increased our financial flexibility and putting us in a solid position to navigate through these unexpected times.
Over the past several quarters, we have repaid $381 million of bank debt, including $131 million for the year-to-date, which includes $80 million in optional debt repayments this year. With the decline in advertising revenue in the current climate, our reported leverage has increased to 3.22 times net debt to segment profit at the end of third quarter, reflecting lower segment profit and the impact of the adoption of our IFRS 16 at the beginning of the fiscal year.
We exited the third quarter with a cash balance of $80 million and had available $300 million under our committed revolving credit facility, which expires in 2023 and all of that could have been drawn. This cash position and our committed revolving credit facility provides us with sufficient liquidity to operate in these uncertain times.
Our financial priorities remain unchanged. We're prudently conserving cash in this environment and increasing our financial flexibility over the longer term remains our focus.
Our Q3 results reflect that we have met the eligibility requirements for the Canada Emergency Waste Subsidy or CEWS with a consolidated revenue decline in excess of 30% during the April and May 2020 measurement period. Approximately $17 million of the estimated CEWS for the three months ended May 31, 2020 has been recorded as a reduction in employee costs in the interim financial statements.
This program is doing exactly what it is intended to do. Provide support to employers like Corus during the period of highest disruption as we continue to provide essential services for all Canadians.
We're extremely grateful to the government for quickly recognizing the need for emergency relief during this period of uncertainty and acting quickly to put this program in place. I'll now provide an update on our Q3 results starting on Slide 12 before handing the call back to Doug.
Our third quarter performance reflects the material business impacts from COVID as Doug mentioned, particularly on advertising revenues, as well as the tough comparable from last year's unusually strong TV advertising revenue growth of 10% in Q3. Consolidated revenues of $349 million declined 24% compared to the prior year quarter.
This result was mainly driven by the lower advertising revenues and a decrease in merchandising distribution of the revenues due to COVID related shutdowns. Impressively our subscriber revenues were resilient increasing slightly this quarter.
Consolidated segment profit was $111 million for the quarter as compared to $171 million in the prior year, reflecting a significant revenue challenges partially offset by very aggressive cost management. Expenses were meaningfully reduced by approximately $50 million for the quarter as production delays reduced costs of sales, discretionary costs were eliminated and eligibility for the wage subsidy was confirmed for the April and May period.
Consolidated segment profit margin was 32% for the quarter. The net loss attributable to shareholders for the quarter of $752 million or $3.61 per share was driven by TV and radio, goodwill impairment and radio broadcast licenses impairments, which aggregated approximately $787 million recorded in the third quarter.
The impairment charges are non-cash item and adjusted accounting book values at May 31, 2020 to estimated current market value. Free cash flow was $91 million as compared to $90 million in the prior year quarter, reflecting the positive impact of relief measures enacted by the government, which allowed payment deferrals on Canadian income tax settlements and HST GST as well as lower spend on program rights and that was offset of course by the lower segment profits.
Free cash flow for the year-to-date of fiscal 2020 is $209 million compared to $216 million last year. Current year results do include the impact of the adoption of new accounting standard IFRS 16 leases this year, which increased free cash flow by $4 million per quarter and $12 million for the year-to-date.
Now let's turn to our TV results for the third quarter as detailed on Slide 13. Overall TV segment revenues for the quarter were down 21%, TV advertising revenue declined 31% driven by the impact of COVID on demand.
And as we mentioned earlier, we were unable to translate increased audiences into revenue. We were also comparing to unusually strong TV advertising revenue growth in the prior year.
TV subscriber revenue is up slightly from the prior year reflecting strong uptake of STACKTV, which more than offset channel portfolio changes made in the last year and the disposal of TLN in March of 2019. Merchandising, distribution and other revenues were down $2.6 million in Q3, and this reflects the lower number of deliveries on current productions as compared to the prior year and decreased merchandising revenues given the shutdown of retail businesses, which impacted the backing on sales.
TV expenses in the third quarter were down 15% over the prior year. Direct cost of sales decreased 8% and that was driven mainly by lower amortization on Canadian programming and a reduction in revenue based costs.
General and administrative expenses were down 26% benefiting from the elimination of all discretionary spending relief on part one CRTC fees, implementation of IFRS 16, lower revenue based costs and estimated CEWS funding of $13.5 million in TV. Overall TV segment profit of $116 million decreased 30% in the third quarter, TV segment profit margins were 35% and that compares to 40% in the prior year.
Now let's turn to radio on Slide 14. Radio segment revenues were $18 million and that was a decrease of $19 million or 52% for the quarter impacted by the shutdown of businesses across Canada.
Radio expenses in the third quarter decreased a significant 29% principally from lower employee costs tied to CEWS funding of $2.7 million, relief on part one CRTC fees, lower cost rate costs that are correlated to revenues and a halt in discretionary spending. Despite all -- cutting all variable costs possible in the radio segment, the significant decline in revenues in the quarter meant that the radio segment’s loss was $1.8 million.
Across the company, we are deeply committed to reducing costs, diligently managing our capital and readying ourselves to exit this period of uncertainty in a position of strength. With that, I will turn it back over to Doug.
Doug Murphy
Thank you, John. Moving to Slide 15.
It's a surprise to no one that Q3 was a very tough quarter. I am very proud of our team at Corus and what we have accomplished as an essential service for Canadians providing news, information and entertainment.
We have a very important role in helping all Canadians during this protracted period of self isolation. I am especially pleased that we're making such meaningful progress in advancing our priorities, so that we exit this pandemic in an improved strategic position.
As the future chapters of the book of COVID I revealed Corus has many reasons to be optimistic for the coming broadcast year and beyond. We have a strong lineup for our fall schedule as debuted during our virtual upfront this week.
We have seen a profound share shift in our favor on both television and radio. Advertisers will return as the economy reopens, there is no doubt and we're ready to support them.
Our advanced advertising and data offerings are transforming how TV is sold now with the industry in Canada adopting common audience segments and since beginning to scale. Our content is reaching new audiences on platforms such as STACKTV providing more avenues for advertising and subscriber growth.
Our owned and controlled content is appealing to new buyers around the world. And most importantly, our financial discipline to maximize our free cash flow, prudently manage our costs to delever the balance sheet and invest for the future remains resolute.
Before I close the call, I want to address the [senseless] killing of George Floyd and the ensuing wave of condemnation and protests here in Canada and around the world. This has opened up a new level of transparent conversation about racial injustice.
In particular, anti-black racism. Of course, we acknowledge that systemic racism exists within our society and workplaces.
Our company values are built on a foundation of learning and challenging assumptions to create a new, better future. We are deeply committed to redoubling our focus on building an inclusive sustainable culture here at Corus.
And which equity, diversity and inclusion are central to what we do within our company and in our communities. Together, we all need to do better, and to do more.
Thank you. And back to you, operator.
Operator
Thank you. At this time, we will be conducting a question-and-answer session.
[Operator Instructions]. Your first question comes from the line of Adam Shine with National Bank Financial.
Adam Shine
Maybe can you talk a little bit about some of the trends you're seeing going into the season in light Q4 as look ahead ultimately into the fall? And then just in the context of the release schedule that you put out the other day.
Can you give us a sense of to sort of how much of that production is sort of already in the can or is there any risk to the new fall season as to productions restarting to get some of that output available for the fall?
Doug Murphy
I'm going to start with the second question Adam and hope you're well. Nice to hear from you.
The good news about our model as you know is that, we have a lot of our audiences are delivered by our specialty channels, and specialty channels are a function of our exclusive arrangements with the big U.S. brands and much of the content is already in the cans, whether or not it’s HGTV or Food or HISTORY, et cetera, et cetera, Disney, Nick, Cartoon, et cetera.
We've got a deep, deep library of new shows and catalogue shows. So we're feeling very confident that we can maintain audiences even if there's protracted delays in returning to normal where we will get over that.
On the Global we announced this week, the shows that we are going to start airing in September, October, some of it shifted to mid-season like Prodigal Son, FBI, they have moved over, New Amsterdam. So those are still evolving to be honest with you.
We are in constant contact with our U.S. studio partners.
Everybody is anxious to get back to production. Some shows are already in post, so they're just being finished up now.
Anything that was in principal photography is still kind of on hold. But to the best of our knowledge we've got a pretty good lineup secured for the fall.
Trends, one trends for sure is going to be a great hot Canada Day week next week and Canadians are going to be outside and on the lakes and I'm not going to watch a lot of television and that's pretty normal for this time of year especially because we had such a cold late spring. Other than that, in my remarks I mentioned a number of the trends, I mean we are not seeing core shaving and core cutting, we are seeing stability in our core traditional subscriber business and we are seeing very incredible growth in STACKTV, which rounds up to growth and subscriber line.
And that's going to continue. We're seeing people listen to radio on digital platforms in the home, which is a definite trend change.
And we're seeing a lot of interest in our own content business with the following and quite regularly with people looking from our content that can be sold to international market. So, lots of interesting things that we're learning and a lot of it in our favor.
Adam Shine
One follow-up. Just in the context of the 19 sort of core segments, how should we think about potentially driving incremental revenue during the course of the year particularly as some of these partners obviously come on board during the course of fiscal 2021?
Doug Murphy
The insight behind the audience segments is to as you've heard me say before, move away from selling the demo, adult 25 to 54 to selling targeted audience segments. That enables us to provide our advertiser better targeting, better value and enable us to better segment, the 70 billion impressions that we sell over the year.
So we can get better yield on those segments. We can help our advertisers feel like they're getting much better targeting outcomes.
And we talked about the specific categories. I think that was part of your question about trending as well.
As the economy reopens we're seeing, different product categories having different kind of profiles. I mean, you've all heard that U, the V, the L, we're seeing that in categories.
So for example, certain categories travel, airlines, cruise, they're not spending any money. Other categories, home improvement, telecom, groceries, online shopping, direct-to-consumer, entertainment and home, gaming, they're spending money.
And so the targeted segments enable us to more effectively hit the grocery stores for example, who want to target large families. So it will enable us I believe to come back stronger than we went into the global crisis by having a common platform in Canada.
Operator
Your next question comes from the line of Drew McReynolds with RBC. Drew, your line is open.
Drew McReynolds
Adam ticked off a couple my questions, but a couple more here. First, to you Doug, just on a regulatory update.
You are seeing some obvious delays in the processes of filings with the CRTC, et cetera. And obviously, government has delayed in a few things.
But maybe provide an update if you can on where things are with the broadcast app review and updated expectations on the radio review? And John for you on the government subsidy side for Q4, your fiscal Q4, just kind of remind us if that continues through the quarter?
And lastly, I guess for you, John, on the bad debt side, it doesn't look as if it's a major issue, I think provisions a little bit this quarter, but if you can quantify a little bit of that, that'd be helpful? Thank you.
Doug Murphy
I'll kick it off Drew. And thank you for your kind acknowledgement.
We -- [indiscernible] was speaking at the Virtual BANFF Media World Festival last week I think it was. And, we're very encouraged to hear that originally the government said they're going to table the legislation in June.
Obviously the COVID virus has sidelined that, but the minister was unequivocal in saying that it's going to be brought to the house in the fall. And there will be thereafter some more firm direction to the regulatory body to make more immediate change.
Our view is that we'll include both the leveling of the playing field, which will mean more people contributing to the system, principally the foreign owned Internet media broadcasters, as I've often described them, Netflix, Apple, Amazon, et cetera, and a commensurate of understanding that the existing burdens on traditional broadcasters are unsustainable. So we still believe that that will be the outcome and obviously it can't happen soon enough.
John over to you.
John Gossling
Sure. Hi Drew.
On the wage subsidy for Q4 I guess the first thing to say, there’s a little stub piece that comes from the way the periods are defined, that we know that we are eligible for, it's the first week of June. Beyond that it's very unclear, how the extension is going to work.
We're going on the assumption that the current rules that say, if you qualify in a month, that means you automatically qualify in the following month which tell us that we would qualify in June that we don't need to requalify. But we don't know that for certain.
And we also don't know what the qualification threshold is going forward on this renewal. So I think a lot of corporate candidates waiting to hear from Federal Government, how that’s going to work.
So we'll have to wait and see, just need to size it. It's about $10 million a month.
A little bit of that goes against Nelvana that ends up in the film assets. But, we don't have certainty right now for many reasons of what the Q4 benefit could be other than that first week of June.
So that's really all we know at this point. On the bad debt situation, we did have a little bit of a pickup in our provisions in Q3.
It was about $2 million for that period. Needless to say with keeping a very close eye on things, the local situation, particularly in radio would be of some concern, but it's a lot of smaller accounts as opposed to large agency accounts for the most part.
So, we're being very cautious, also because it's such a huge driver of free cash flow and the working capital impact of it. So, so far so good for the most part say on that.
We like the trend there, but we are on it on a daily basis.
Operator
Your next question comes from the line of Aravinda Galappatthige with Canaccord Genuity. Aravinda, your line is open,
Aravinda Galappatthige
I wanted to go back to the advertising trends. Doug, you talked about sort of the three phases of the three chapters.
I was hoping you can perhaps define sort of the modest recovery phase a little bit more, quantitatively what are we talking about? Are we talking to the flat or maybe modest declines, or even modest growth?
I know that you had a fairly strong May as kind of sort that came back, but I was wondering has that wave sort of ended. So I was looking for a little bit more color on that front.
And secondly for John, you guys provided some great color around cost reduction I know in the prior conference call and sort of the different buckets. I was wondering, if you can give us an update there.
I know that as more in Q4 and Q1 that's some of the programming cost containment opportunities open up. So I was looking for a little bit more insight in that area.
Thanks.
Doug Murphy
So with respect to the advertising, a modest recovery chapter. That refers really to May, and that refers to the comparative over last year, recall last year Q3 was a barn burner, right?
Plus 10% TV ad growth. So in May of last year, the third month of that quarter, we were largely sold out.
So, this year we had lots of inventory versus last year we had no inventory. So it would be logical that we saw a number of weeks where we had better sales this year May than we had last year May.
But that was a function of the quarter in particular. We're still pacing behind Q4 and I don't expect that to get to growth really last year, we were plus four Q4 last year.
So we still have some work to do on the pacing, but it's not going to be growth. It's modest recovery.
That's how I’d describe that.
John Gossling
Aravinda on the cost side, a lot of it depends on what Doug said in response to Adam's question around programming and timing, obviously for Q1. For Q4, I think we have a pretty good sense of that.
There should be some additional programming phase compared to Q3. Obviously we had programming that was ready to go that we aired in Q3 and with the shutdown, the hiatus, it will slow things down a little bit more in Q4.
On the SG&A and the salary costs, that obviously the big nut there is the wage subsidy, whether that applies in Q4 or not. Now even without that, we will see some pretty substantial savings is our current view for Q4, just with the momentum of what we’ve had in place starting with the lockdown.
So, it could probably be without the wage subsidy, strong double digit reductions again in operating costs and then programming always a bit of a wild card, but it could be high-single digit, low-single digit savings as well for the fourth quarter. And then, I think Q1 is still just a little bit too uncertain right now, given that potential movement on timing for programming.
And maybe I can follow-up on Q4 before you have any follow-up questions Aravinda. The other thing I would just note is remember now that the Olympics are gone, so advertisers earmarked significant amount of dollars for the Olympics.
Now they're trying to decide where to put those dollars. As well programmers that were not carrying the Olympics had programming strategies to stay away from the Olympics and not get run down by that audience machine.
So it's a once in a lifetime very bizarre quarter to try to get your head around inventory and impressions and programming strategies and demand from advertisers. And then you link that sort of to the return to the some degree of new normal and the slow ease back of economic activity and it’s anybody's guess.
What we know -- what we do know is that we've grown our share. We have made great strides on our advanced advertising and database initiatives.
And we're going to trade on that and get as much money as we can from our advertising partners.
Aravinda Galappatthige
A quick follow up and I will pass the line. On STACKTV, thanks for the additional color there.
The incremental growth that you've experienced gets you to sort of revisit the TAM there, any sort of data thoughts on what the market size -- ultimate market size would be for you guys given sort of the traction using right now? Thanks.
Doug Murphy
I think this actually the new product speaks to a number of things. First of all, we're reaching audiences that are not in the cable bundle, younger Canadians, new Canadians, et cetera.
We're reaching audiences that don't want to consume sports, so they can get a Corus bundle and they're enjoying that. As a reference, if you look at the U.S.
market, and this is just a reference and that suggestion, this is our forecast we don't know is the early answer, but in the U.S. vMVPDs are 6% to 7% of the marketplace.
There's 110 million homes there. We've got -- so that's 6 million to 7 million -- we have 14 million homes in Canada, so you can see our way to maybe a target market as 1 million homes.
So I think we got a good runway here for a while.
Operator
Your next question comes from the line of Vince Valentini with TD Securities. Vince, your line is open.
Vince Valentini
Let’s start with John, the 57 million in tax savings or deferrals. Would that have to be mostly paid in Q4 or do you think that gets deferred further into next fiscal year?
John Gossling
So the 37 million identified as being sales tax, that's the HST, GST portion, that gets paid at the end of June. So that's next week.
Corporate tax installments have been deferred now until September 1st, that takes us out of the fiscal. The 20 million, we were chatting with that before the call.
That would have been our normal installment run rate for Q3. But given the reduction in profitability the actual -- and because we paid in so much for the first half of the year, the actual installment for Q3 would have been closer to 5.
So really, the benefit -- depending on how you're looking at it, the benefit of a tax was 5, not 20. But yes, year-over-year, there's an impact there.
But in terms of, where we're at right now, given what you saw in Q3, it's a smaller impact. But that has to get picked up the first day of the next fiscal.
Vince Valentini
You talked about production costs being up 15% until there's a vaccine and given, I guess, distancing and PPE requirements on stage sets and so forth. Can you just clarify is that just for your Canadian spending?
Or do you think your U.S. sourced content will be up 15% as well?
Doug Murphy
That's a rough. You're referring to what we talked about during your fireside, Vince?
Vince Valentini
This is in your MD&A, Doug.
Doug Murphy
So basically, the rough estimate from the producers is 5% to 15% is the potential increase in production costs. That's a function of providing the necessary social distancing.
All the PPE that may be required when they're on set, et cetera, et cetera. I think it's really too early to say I wouldn't start modeling that necessarily.
We're still learning what to do. There's a number of issues that are challenging production, returning, not the least of which is the health issue, but there's also issues around insurance.
The issues around this cost piece and there’s issues around trying to get people to come back to work, right, because they serve. So at this stage, it's way too soon for us to give you any guidance on that, it’s an approximation at this time.
John Gossling
Remember that -- the way that the Canadian program expenditure requirement works is, we basically solve for the 30%. So, that extra 15 is that ultimately the right number, would be contained within our regulatory obligation.
We wouldn't be suggesting we're going to spend above that.
Vince Valentini
Exactly John, that's why I asked the question, because if it's just Canadian, then you just -- you'd spend the same amount but you get slightly fewer hours of content and you'd meet your government obligation, but if it was the U.S. content that was up 15% as well, that's a bit of a different story.
So -- but actually good enough answer for now.
Doug Murphy
Just jumping on that, let me just -- I want to make a note that that's why our Peacock deal is such an impressive outcome, because that content was done in the can, it is top-top stuff and it gives us, not to mention, are we going deeper with a great partner with NBCU, a longstanding partner with Corus Entertainment. But it also gives us a whole bunch of hit dramas that, that are available for use.
Vince Valentini
I'm glad you brought that up, because I that’s segue to what I want to ask you about that Doug. Is there any way you can characterize the cost in negotiations for that deal?
Is this something where you had to really twist NBCU’s arm to get them to sell the content in Canada rather than going with a direct-to-consumer model? And/or was there any sort of big bidding war between Global and -- between Corus and Bell to get it?
Or was this more normal course and reasonable cost in order to achieve that exclusive deal?
Doug Murphy
I would say that, premium content comes at a premium price, but it was within our budget for foreign acquisition. So was their arm twisting?
I can tell you right now that our friends at NBC, another side of the table are very smart negotiators. But we have a great smart team.
And I think there's a very strong mutual regard and a sense of collaboration. And our programming leadership has a real strong insight as to what we could do with the content and our NBCU partners saw that marriage in so doing, and so I think it was a win-win for both sides.
Vince Valentini
Okay, and last, I'm going to try the trends one more time to slightly different spin-on it. Because we have had more granular information from a lot of U.S.
media companies, along the lines of March and April sort of down 50%, but then May is more down 20% to 30%, and then even -- maybe even a little less erosion than that heading into June and July. Just for the three months during your fiscal Q3, is there any way you can quantify a little bit more granularity for us?
How much worse May -- margin in April were versus May?
John Gossling
If you read into my comment about the wage subsidy that we were down 30% in April and May, I think May was actually a tiny bit worse than April, not materially so. But the fact that we were -- if you can back still when we see the full quarter numbers essentially, that it wasn't minus 30.
So March wasn't that bad, but given the lockdown started halfway through it, I guess that would make a lot of sense. So going forward, one of the things I guess I didn't say about the qualification level for the extended wage subsidy is, if the qualification level stays at 30, then I don't think we're going to qualify.
So that I can tell you something about what we're seeing going forward on consolidated revenue.
Operator
Your next question comes from line of Jeff Fan with Scotiabank. Jeff, your line is open.
Jeff Fan
Most of my questions have been asked, but I do want to press on the topic of the return of traditional sports. Doug you mentioned no Olympics and that's fair.
But I guess with the sports leagues looking to restart, if they restart, a couple of them have dates. How do you think that's going to swing viewership and ad budgets as you kind of go through the restart period of July, August and into early fall, when you typically have new shows hitting the market in the fall season?
Doug Murphy
That's a great question. By the way, I enjoy watching the Belmont Stakes on the weekend with nobody in the stands and I -- the Europe Red did very well to the loss.
But nevertheless I digressed. I think it's really hard to figure out how the sports are going to come back.
I mean, you know, you read in the articles too, right, everybody's getting into the COVID and the athletes are concerned. So, you know, I guess I will answer your question maybe with a different answer.
What we're seeing in our research, and we've done six waves of research now, titled Canadians in Isolation. And what's one of the things, again, that I think distinguishes our company is the amount of our research and insights team as part of our revenue operation.
And, those waves of insights are teaching us or telling us that we're benefiting from the casual sports viewer who has rediscovered the Corus television offering. And we think we're going to sustain, certainly a meaningful amount of that share shift is going to stay with us because typically the casual sports viewer only views sports roughly, you know, 15 to 20% of the time, and a hardcore sports viewer is a different cat altogether.
So, our opportunity really is to retain the casual sports viewer, at least some share of that consumption will stay with Corus. And then when the sports do come back and I really hope they do come back, I mean, it's a significant issue for those broadcasters who have made big wagers in sports.
But of course, it's going to be totally predicated upon the health of the athletes and the economics of the leagues. And that is you're seeing right now with baseball and others, it's not clear what the path forward is.
So all I can really talk about in terms of sports is what our plan is to try to retain that, that audience share shift so that when sports do come back, whenever they do come back, we'll be able to benefit from the trend that's happened in the ensuing timeframe.
Jeff Fan
Okay. I just want to follow up also on the, on the Peacock and congrats on getting that deal done.
With respect to monetization of that content, NBCU is obviously focused more on the advertising video on demand, the AVOD market. Your monetization sounds like it's going to be linear.
Do you have a platform that you think you help thrive the AVOD opportunity in Canada?
Doug Murphy
Well, I mean, increasingly I would -- I don't think the distinction in my head or our team doesn't between linear and nonlinear anymore. I mean, you know, look at what is STACK, is STACK linear or nonlinear.
Half of the viewing is the live feed, right? So, you know, that part -- I think what's important to note is yes, we were able to secure the rights exclusively, and yes, we were able to secure all the rights for every platform on demand, linear, whatever it looks like.
So we'll deploy that in the most optimal way for our audience, for our advertisers and to maximize our distribution revenue.
Jeff Fan
When does that delivery starts to come, will it be pretty much in line with the Peacock national launch in the U.S.?
Doug Murphy
I believe so. I mean, we don't need to be day-in day-out, obviously, because there's not a “broadcast”.
So, well that, that was my note earlier, is it, you know, to the extent to which there's production shutdowns in the U.S. we've got some flexibility.
There's some hit dramas to kind of layer in if we need to when there's demand. So I think the key note here, and this is also my comment earlier on these specialty channel of content, post supply and all the new shows we already have into can is, we're going to be very, very judicious in terms of how we debut new content.
It's got to be advertising demand there. And so the ability to be surgical in terms of driving supply, and then we can drive demand by being surgical with common segments.
I think we'll start to see the merits of both of that as the fall quarter kind of plays out. And I know you in particular have been interested in common segments.
So I don't want to lose that now, let me just make a couple comments. I can't underscore enough how groundbreaking this is in the world for Canada to adopt common segments.
There's no other country doing it, quite frankly. This should be on the cover of Ad Week because it will enable our industry to do all that we can do to maximize our economics, provide better service for our advertisers and continue to transform how we sell television.
And then that's fundamental. I don't know what that's worth in the long haul, but it is a great example of industry working in unison to do the best we can do for our industry.
This is where Ottawa got to come to the table. They cannot sit there and drag their feet and not make the chains they’ve got to make to let us be more competitive.
Having us burdened by the obligations that were formed 30 years ago, while we're leading blazing trails in this country with industry and Ottawa is not doing anything is unacceptable. And that's, I think, I want to just make that comment, sorry, the soapbox comment, the latter one.
But the former one I can tell you definitely is groundbreaking, it's history making and Canada, our relationship, we’re very proud for what we've accomplished.
Jeff Fan
And maybe just a quick follow up on the timing of the implementation of those segments. And when we start to see some of that benefit?
When do you think that will start to happen?
Doug Murphy
The teams are working right now on bringing it to life, I would suspect sort of in the next broadcast year, they'll start to come to life. I mean, we're doing it.
We're obviously doing it now at Corus. But Quebec Corus is going to come in a little bit later.
Rogers is working with us for a while now, Bell is excited to work with us and Rogers and [NFC Solution]. So -- but on specific timing, I'm not completely clear on.
Operator
Your next question comes from the line of Maher Yaghi with Desjardins. Maher your line is open.
Maher Yaghi
I wanted to just go back on U.S. extensions.
I understand periods for which ends in July, 4th of July, is the same, the criteria are the same. So you have not decided yet if you're eligible or not, as you mentioned, John, because you are close to that 30% threshold but let’s assume that you don’t -- and period 5 and 6 come in and those eligibilities don’t allow you to also access that extension.
So you’re looking at $30 million cost -- additional cost per quarter. How -- what are the options in front of you right now to offset those increased costs, if you can be eligible for a renewal of the CEWS?
John Gossling
So Maher on the eligibility question, it's quite technical. So yes, we have seen an announcement that the eligibility criteria for the June period 3, 4 is minus 30, but what we don't know with a 100% certainty because the legislation is no yet is whether the -- you qualify in May, means you automatically qualified in June, rule still applies.
That was certainly how the initial way of the subsidy works. So we're assuming that's the case.
We don't know that with 100% certainty. And then, of course, going forward, we don't know what the cutoff is going to be for that bright line, whether it's something different than minus 30.
We're hearing some signals that it is, potentially lower, but we don't know that for certain. And I guess you’d call it an increased cost because, we've reduced our costs from the benefit of that.
But at this point, we certainly like to know, because it's a very material item for the fourth quarter, but we just don't understand that. Now having said all that, we qualified at a consolidated level, which means everybody in the Group in Canada qualifies, all the employees.
There are still scenarios where parts of the business qualify, but not the entire business. And that's where it gets much, much more complicated technically.
And we get into some issues around what companies are employees are paid by what -- there's a massive spider web of legal entities and regulation and rules. And some of those we think are getting resolved.
And some of them again we don't know until we see the legislation. So there's still a possibility, even if we don't qualify for July and August, that we would see some form of a subsidy coming at us, because portions of the business i.e.
think radio could potentially continue to see pressure much more than whatever the threshold is.
Doug Murphy
I would just add the industry in Canada, I mean everybody is just sitting there waiting for the Federal Government and the Ministry of Finance to reveal more details on the next reference period. The government is concerned as to why more employers aren't taking advantage of the wage subsidy.
And yet we're waiting for the details. There's a little bit of let’s get the show on the road kind of thing.
We're told that a problem is coming back on July 8th. So, Minister of Finance has said that, it will be coming imminently.
So, let's hope that we get more details in the second week of July.
Maher Yaghi
And is there a relationship between the timing of your stopping of the buyback. And then the beginning of the benefit that you're receiving from the CEWS i.e., not expecting to do any buyback, while you're getting that benefit?
Doug Murphy
No, there's no -- that is totally unrelated. And we have no interest at this time of doing any buybacks.
Where basically our priority is sort of continue to manage our cash in a very disciplined manner. To ensure we can continue to advance our priorities, as we noted on the call today.
But there's no linkage between the wage subsidy and the cessation of the NCIB.
Operator
[Operator Instructions]. Your next question comes from line of David McFadgen with Cormark Securities.
David, your line is open.
David McFadgen
Most of my questions were addressed. But you talk in the MD&A about stock offsetting the impact from TLN, the shutdown of Cosmo and IFC.
Can you tell us what the revenue impact was from TLN, Cosmo and IFC in the quarter?
John Gossling
Sure. Those were approximately -- well, you can tell they're approximately offset to the STACK.
So you're asking me what STACK revenues, but that's fine. So those channel shutdowns and TLN, those $5 million in the quarter.
David McFadgen
Okay.
John Gossling
I think the note that I want to make on this one is and this is something I hope everybody picked up, but I'll say it again for the sake of repetition. Subscriber revenue is a growth opportunity, both STACK and existing base.
When you sum them together and we're in a good spot, Canadians are not cutting their cable, they are not shaving them right now. They're enjoying watching television, it is a trend that has been I think notable.
So you'll see it in this line item in Q3. I think we'll see how the future Corus play out, but the bundle remains dominant and we are also pursuing those Canadians 30%-ish that don't have the bundle.
David McFadgen
Okay. Does Amazon share churn with you?
Just curious to know because I don’t think this would be a fairly high churn revenue line.
John Gossling
We get a lot of data and we see what our audiences are watching and in detail that we don't typically see sort of otherwise. But, in specifics what they provide, we don't want to get into that detail.
David McFadgen
And then just lastly, in the quarter, I think when you reported Q2 you talked about potential to save some revenue -- sorry, save some costs on the U.S. programming side.
Did you -- were you able to do that in the quarter at all?
John Gossling
It was quite small. And we knew most of the shows were already ready to go.
And there were a couple that were shortened the number of episodes, but for the most part we were pretty much on. The real benefit will be Q4.
You can see in the programming lineups in the summer now, both for us and for CTV, that there's a lot of reality, and probably stuff that was already made or maybe not made in North America. So that's why I think there could be some benefit.
Now, having said that, it was already going to be -- there is already going to be a lower quarter because of the Olympics as Doug mentioned. So, there's some examples like the daytime soaps in repeats and therefore we're going to save some money on that, but we're managing that very carefully obviously.
But the big header in that line is the Canadian just because of the shutdown, and we're just not getting the big shows.
Operator
Your last question comes from Vince Valentini with TD securities. Vince, your line is open.
Vince Valentini
Just to clarifying on your answer to Dave’s question there. Subscription revenue should be a growth driver.
I agree with that on a pro forma basis. But it seems like every year you find another one or two channels that are not part of your real core offering and you decide to shut them down and focus your energy on the sort of top 20.
Do you think that pruning has done so that we may actually see that subscription revenue start to show in net growth or is it always going to be growth excluding channel shutdowns for the next couple of years?
Doug Murphy
I'm glad you asked me to clarify that because I’d probably give you some more context to that. I think subscription, that's probably the more traditional definition, I think the distribution of our content and revenues we're going to get from it, whether that's in the traditional bundle, or on STACKTV on our Global TV app, or on other evolving digital platforms, given the fact that we're increasingly able to secure the rights we need to put the content where it's got to go to follow the audience and drive inventory, to me that gives me confidence that what you're beginning to see in terms of the distribution in widely defines is going to be a potential area for growth.
Does that make it more clear? And then in terms of culling the herd and shutting down smaller services and such, listen, Vince, we've been very focused on trying to have fewer bigger, better services and fewer bigger, better partners.
And that's been something that we've done now for five years since we've acquired Shaw Media. So I think there probably still be a couple of examples in the years ahead, we'll probably trim down a little bit more, but none of that's going to be sort of life threatening from a revenue perspective.
And as I say, I think there's lots of opportunities to pursue growing areas through the digital video platforms that will help us to kind of manage anything that we decide to voluntarily shut down.
John Gossling
I think I'd say, you know, on channel shutdowns or even rebrands we've probably been leading the industry and that maybe is -- it doesn't feel so good sometimes to be a leader in that respect, but I think it's the right thing to do for our distributors and also for the viewers. In terms of pro forma, we're not quite that sneakier or maybe clever, we've never defined pro forma as something to exclude channel shutdowns.
It's only ever been things that we've disposed of. So the TLN Group or Movie Central, but we don't try to pro forma that out.
That's our challenge to make up that loss revenue. And that's where we're very focused on how we do that.
Operator
This concludes our question and answer session. I will now turn the call back over to Doug Murphy for closing remarks.
Doug Murphy
Thank you operator and thank everybody for your questions. I hope you enjoy a fantastic Canada Week next week.
I know here in Ontario it is going to be spectacular weather. So enjoy, get outside and watch TV in the mornings, but get outside in the daytime and enjoy it.
And I want to thank all of our team at Corus across the country for all their fantastic work and commitment and have a great day, everybody. Bye, bye.
Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for participating.
You may now disconnect.