Oct 19, 2018
Executives
Doug Murphy - President and CEO John Gossling - EVP and CFO
Analysts
Adam Shine - National Bank Financial Aravinda Galappatthige - Canaccord Genuity Vince Valentini - TD Securities Maher Yaghi - Desjardins Jeff Fan - Scotiabank Drew McReynolds - RBC David McFadgen - Cormark Securities
Operator
Good morning. My name is Chris and I will be your conference operator today.
At this time, I would like to welcome everyone to the Corus Entertainment Q4 and Year End 2018 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, sir.
Doug Murphy
Thank you, operator, and good morning everyone. I’m Doug Murphy, and welcome to Corus Entertainment fiscal 2018 fourth quarter and year-end analyst call.
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.
You can find them on our website at www.corusent.com under the Investor Relations section. Now, the standard cautionary statement 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 filings with the Canadian Securities Administrators on SEDAR.
With that, I’ll now turn to our results and offer some perspective on fiscal 2018. Let’s start with the key financial highlights on slide number three, which John will expand upon shortly.
First Corus delivered record free cash flow of $349 million up from $293 million in the prior year. To put this in context, our free cash flow yield is impressive at over 35% as of yesterday.
Our ability to consistently deliver strong free cash flow is something we’re very proud of and a clear demonstration of the resiliency of our business in the underlying value of our company. Second, despite lower television advertising revenues in fiscal 2018 which incidentally met our expectations in Q4 of modest single-digit declines Corus delivered effectively flat consolidated revenue and an improved consolidated segment profit margin of 35% for the year.
I'll add that our ability to maintain healthy segment profit margins as a result of our continued strong operating discipline and prudent cost control. In fiscal 2018 we were able to reduce overall expenses and rationalize our operating model while investing in initiatives that will shape our future, such as advanced advertising and owning more content more on those investments and others shortly.
Finally, throughout the year, Corus continued to make steady progress on de-levering as we continue working towards our stated leverage target of below three times net debt to segment profit. I’ll now highlight just a few of our May operational achievements for fiscal 2018 in Slide 4.
First, we’ve taken important steps to broaden our audience reach across platforms evolving our business to follow our viewers and listeners, while many of these initiatives will take time to scale. They underpin our plans for the long-term growth of our brands and the monetization of our own original content across new and growing platforms.
This past year, we obtained additional video-on-demand or VOD rights as part of our programming deals with our content partners enabling the launch of our premium VOD offering. As illustrated the example of the growth potential on this platform, total views on our premium VOD services through Rogers have nearly doubled since launch, fueled by these expanded rights across eight of our largest biggest channel brands.
In the past year, we've focused on expanding ad-supported premium video onto new platforms, such as of the launch of our most widely distributed app, Global Go, available on Google Comcast -- Chrome Cast, excuse me, and Apple TV. Global News also has a powerful online presence with Globalnews.ca, which continues to see significant growth.
In fiscal '18, average monthly unique visitors grew 54% and average video monthly views grew by 356% compared to the prior year with revenue increasing by 47%. The success of Globalnews.ca is a clear demonstration that audience growth in turn results in revenue growth on many new platforms, a trend that we expect will continue in 2019.
We were excited to expand into two new adjacent markets in Q '14, with the announcement of targeted and strategic investments in social media and podcasting. First, we launched so.da, our new social digital visual advertising agency at our June upfront.
To date, we've been successful in winning new business and initial feedback from our client is overwhelmingly positive. As we scale so.da, we expect to grow our nonlinear audiences and create new incremental revenue streams.
This summer, we also launched our new podcast network, CuriousCast, which already has had more than 1 million downloads per month of its 35 plus shows and is home to Apple Canada's number one music podcast the ongoing History of New Music, and the top two prime podcast, Nighttime. Second, as detailed on Slide 5, we continued to make strategic investments to enhance our suite, advanced advertising solutions and data analytics capabilities.
We have proven, through our in market experience at Rogers, that there is significant advertiser demand for dynamic ad insertion within video on demand content, which has great potential as an emerging revenue stream as these audiences grow. As the TV industry increases its investment in on demand content and grows these audiences, it makes strategic and financial sense to ensure that new advertising capabilities are developed and deployed in tandem with the rollout of new video platforms for subscribers, such as X1 and MediaFirst.
In fiscal '19 we'll continue our work to align the industry around a shared technology roadmap that will enable us to scale up and further deploy these types of advanced advertising innovations. Our success to-date with audience based buying has proven to be a clear differentiator for us in the marketplace.
Another expanded beta test for CYNCH, our automated audience-based buying platform, is currently underway as we work toward a full launch next year. We anticipate that this platform will simplify and introduce a new way to buy television advertising, and in so doing, accelerates the industry shift to audience-based buying.
Altogether, advertising revenues from video on demand, DAI and audience-based buying, including the contributions from the initial beta test of CYNCH has nearly doubled in fiscal '18 with more than 200 participating advertisers and the pacing for the coming year remains very strong. As you'll see on Slide 6.
Over the course of fiscal '18, we continue to make investments in our Own More Content revenue diversification strategy, significantly growing our Nelvana and Corus Studios content slates. Nelvana currently have 14 series in production or that are recently completed.
A few weeks ago Corus announced that Nelvana has greenlit three new preschool shows including digital first live-action series, Miss Persona and two new animated series, P.U.R.S.T Agent Kitty and the remarkable Mr. King based off of the popular Corus-owned Kids Can Press titles.
All of which were introduced to the international market at MIPCOM this past week. In the coming year, we look forward to announcing new series that will be produced as a result of our existing coproduction partnerships with global children's content companies.
On to Slide 7, Corus studios have expanded from home innovation into new life style genres this year, such as travel and escape, food, fashion, automotive and science with 11 new or continuing series slated to go on the air in fiscal '19, a significant increase from the four series last year. In October, we announced that Corus studies has amplified its slate of original content for international sale by bringing three at MIPCOM, including the fiery cooking competition, Fire Masters; travelogue series, Big Food Bucket List; and demolition docu-series, Salvage Kings, which is currently a working title.
Throughout fiscal 2018, we have continued to broaden Corus studios global footprint with our original lifestyle series now sold in more than 150 territories. The Corus advantage remains at the center of our own more content strategies.
As a reminder, the Corus advantage is where we maximize our required Canadian program spending to create owned and controlled original content to drive audiences on our networks in Canada, but also deliver revenue growth and diversification to increase global content sales in the unregulated global marketplace. Next Slide 8, further bolstering our revenue diversification efforts Corus remain confident in the growth potential that exists in local communities across Canada for both Global TV and Corus radio has a strong presence.
As advertisers continue to fully leverage the power of local, we're building stronger partnerships with our local advertising clients. In fiscal 2018, total spending from accounts that are duplicated across both TV and radio increased 22% compared to the year, up nearly $9 million.
Lastly, as detailed in Slide 9, building a powerful season of summer program we are thrilled about our early momentum in the fall. As a confirmed just this week global celebrated yet another triumphant premier week, 11 of the top 20 series for total viewers and adults 25-54 global owns more series in the top 20 than any other network.
This includes a strong line up of returning titles such as Survivor and NCIS, as well as a very promising new series, New Amsterdam, which has become a number one series and all demos, and FBI which is the most watched new series for total viewers. Again while some of these initiatives are just launched, there an indication of our business model and underscore our commitment to putting Corus on a path towards revenue stability.
With that, I'll now turn things over to John who will walk us through our Q4 and yearend results for fiscal 2018.
John Gossling
Thanks, Doug good morning, everyone. I'm on Slide 10.
Overall, our Q4 results were slightly better than expectations. As Doug mentioned, Corus continues to drive very strong free cash flow, delivering $96 million of free cash flow for the quarter, and as mentioned $349 million for the year, which is a record and those were up from $80 million and $293 million, respectively last year.
As a reminder, contributing to fiscal 2018 free cash flow was a one-time item related to the termination our interest rate swaps as part of the amendment and extension of credit facilities, which resulted in net cash proceeds of approximately $25 million in the first quarter. That said, our healthy free cash flow has enabled us to make steady progress towards our leverage target of getting below 3 times net debt to segment profit.
We ended the year with net debt to segment profit of 3.28 times and that was down from 3.46 times a year ago. Our revised capital allocation policy as announced last quarter is expected to drive further progress in fiscal 2019, as we work diligently to reach our existing goals.
Corus’s consolidated revenues decreased just 1% for the quarter and 2% for the year; at the same time however consolidated segment profit increased 6% for the quarter and resulted flat for the full year. We delivered a strong consolidated segment profit margin of 30% for the quarter, 35% for the year and that’s up from 28% and 34%, respectively, in the prior year.
This is very clear demonstration of our unyielding commitment to remaining fiscally disciplined and managing cost carefully. The net income attributable to shareholders for the quarter was $34 million or $0.16 per share basic and that compares to $29 million or $0.14 per share basic last year.
Net loss attributable to shareholders for the full year was $785 million or a loss of $3.77 per share, which includes broadcast license and goodwill impairment charges taken in Q3 of the year. Adjusted basic earnings per share for the quarter were $0.19 per share and a $1.14 per share for the year and that compares to $0.22 per share and a $1.10 per share, respectively, in the prior year comparable period.
Let's turn to key results now for the fourth quarter and year, as detailed on Slide 11. Overall TV segment revenues were flat in Q4 and decreased 2% for the period as expected.
As Doug mentioned, lower TV advertising revenues from the challenging market led to a decrease of 4% for both Q4 and the full year. This was partially offset by subscriber revenue which grew 1% in Q4 and was flat for the year as well as strong growth from merchandising distribution and other revenue which grew an impressive 19% in Q4 and 6% for the full year.
This is a clear example of how we can benefit from our continued focus on revenue diversification and the merits of our own more content strategic priority. A particular note, the significant 19% increase in merchandising distribution and other revenues in Q4 was mainly the result of an increase in deliveries in episodes at Nelvana as well as a multiyear subscription of the on-demand licensing deal in the quarter of over $4 million.
As was the case with contents sales we expect to continue to see variability in this category from quarter-to-quarter as we do see with other large content companies around the world. Total expenses in TV increased 1% for both Q4 and the year.
This was due to modest increases in program expenses offset by lower film amortization expense Nelvana and lower G&A expenses. We continue to make incremental investments in advanced advertising initiatives and incurred higher costs for Global’s morning shows, which were previously covered by CRTC banner.
In the fourth quarter TV segment profit increased by 1% and declined 4% for the year. TV segment profit margins were 32% and 36%, respectively, for the quarter and year compared to 31% and 37%, respectively in the prior year comparable period.
Now let’s turn the radio on Slide 12, radio segment revenues declined 2% in Q4 and 1% for the full year and that was driven by radio advertising challenges that will continue to persist in certain markets in Western Canada, but we have seen some offsets from strong performances in many of the Ontario markets. Radio segment profit however increased 2% in both the quarter and year, we delivered a radio segment profit margin of 25% for the quarter, 27% for the year and those are improved from 24% and 26% in the prior year.
This profit margin improvement illustrates the solid results we’ve been able to achieve to our focus of cost control and assessment. Before I turn things back over to Doug, let me briefly comment on our share price.
We do see a clear disconnect between our operating and financial performance and our share price. This is particularly like of our consistently strong free cash flow and our healthy profit margins that I just mentioned.
Corus experienced unprecedented levels of forced index selling following the introduction of the revised capital allocation policy that we strongly believe that we’ve introduced a prudent policy to underpin the long-term financial flexibility of our company. We have been successful and partially mitigating TV ad revenue softness through a number of cost revenue initiatives.
Thanks to our talented and resilient team. And finally, a quick reminder of the Corus' dividend schedule has now been switched for monthly quarterly as anticipated today's call, with a dividend of $0.06 per Class B share tabled in December as detailed in our press release this morning.
With that, I’ll hand things back over Doug.
Doug Murphy
Thanks, John. And before I conclude this morning’s prepared remarks, I want to follow-up on John’s comments about a share price.
I’m asked all the time. Hey, Doug, how’s business?
And my answer is always a lot better than our share prices indicate. Hopefully today’s results will begin to address that disconnect.
I’d like now to provide a few comments about the coming year. Let’s start on Slide 13.
The transformation of Corus began almost three years ago when we acquired Shaw Media. That gave us the horsepower and the scale needed to gain audience share, which we have done, as well as the scope to compete and win in Canada.
Since then we’ve continued to purposely execute against our three long-term strategic priorities with discipline and focus. As a reminder, these are the own and control more content to engage our audiences and to expand in new and adjacent markets.
As we continue to pursue these priorities, we will remain strategically disciplined, while continuously optimizing our core business and diversifying our revenue base. I touched on these initiatives in detail last quarter.
They include portfolio optimization following viewers on all platforms, leveraging the power of local, owning more content and integrating technology throughout our business. We’ll also keep our sights firmly set and where we are headed as an industry in Canada and as we adapt and evolve fully implementing our plan will take time.
However, we’re driving Corus along a road to long-term stability. Slide 14.
Well, John, rightly touched upon our financial discipline. We’re not solely cutting costs to manage our short-term profitability.
We’re also investing in our long-term future. These measured and strategic investments includes own more content, while we’re investing in Nelvana and Corus growing slate, Corus studio's growing slate of premium content.
Further, we are selectively investing in other growth areas for our business like so.da and CuriousCast. And we’re investing in Toon Boom, our award winning Montreal based animation software Company, which has promising international growth opportunities.
Lastly, as I outlined this morning, we’re continuing to invest in advanced advertising solutions and data analytics. As we make these investments Corus buyers to move seamlessly across platforms to accelerate the monetization of our audiences.
Think of this as an extension of the Corus advantage leveraging our great brands, content and talents onto the platform where more and more audiences are consuming and engaging with great content. And to that end, it’s also monitoring closely the growth trajectory of the virtual multi-channel video programming distributors or the VMVPDs in the U.S..
We believe it’s only a matter of time before these services start to enter the Canadian market. We see this is a potential source of new subscriber revenue and excellent opportunity to reach audience that prefer to stream their video content these are the core cutters, Corus savers, Corus average, not to mention additional advertising digital inventory.
Before we open up the call for your questions, let me conclude by saying that it’s going to challenging media marketplace we have demonstrated that we can deliver, we are executing strategies throughout our business that will ultimately mitigate our recent TV advertising challenges and we’re making investments in content and other growth areas that will diversify our revenues. As for the first quarter, there are early signs of improvement, we still expect variability from quarter-to-quarter but that said, in Q1 the market conditions appear to be firming, while we can’t see around the corner, we are noting improved demand in yields so far in the first quarter, it’s early days but we’re cautiously optimistic.
In short, our plan is working. We are consistently delivering strong free cash flow and enviable margins.
We are continuously rationalizing our operating model as we make steady progress towards our leverage target putting us on the road to achieving further financial flexibility. Our talented team is working hard to optimize our asset base, while we make strategic investments in our future to build long-term resilience and stability.
With that, John and I will be happy to take any questions you may have. Back to you, operator.
Operator
[Operator Instructions] Our first question comes from Adam Shine of National Bank Financial. Your line is open.
Adam Shine
Doug, just building on the last few statements, I mean, one thing you didn’t talk too much about heading into 2019 on the Nelvana side, Thomas the Tank Engine, merchandizing opportunity you picked up heading into the New Year. And then also we know that Bakugan gets the relaunch probably has some implications for you post the first half of F '19.
Can you speak to each of those opportunities? I don’t know what numbers you can put around them, but obviously you do have some context in regards to the first iteration of Bakugan whether or not the product repeats itself?
And then maybe just one for John quickly, corporate cost came in around $6.5 million for the year, F '18 obviously a lot of stock based comp reversal there. I’m not going to hold anyone to any guidance in this call, but certainly with respect to corporate cost.
Should we be thinking about a number around $17.5 million for F '19 maybe any commentary give or take on that would be appreciated?
Doug Murphy
Thank you, Adam. So, let me just knock off those questions.
First of all the Nelvana Enterprises team in Canada is building deliberately a merchandize agency business, and you know rightly the big get we’ve got with Thomas the Tank Engine, this is strategic in the sense and it fits right to our priority of expanded new and adjacent markets. We’ve got a really crackerjack licensing team here in Canada while we await the launch of our own brands.
At Nelvana, we’re building a really decent business and I can’t give you a sizing, but it’s not insignificant managing other people brands and agents here in Canada. So, that gives us a lot of scale of retail as you might imagine and helps our brands and it helps our partners brands and of Corus when the largest kids broadcasters in the country you have significant opportunity to place product at retail.
So, that’s that business and kudos to the team for really embracing those opportunities. We’ve got a number of really exciting agency partnerships that we’ve announced and there is more to come.
As for Bakugan, we’re really thrilled to get the band back together with their friend the spin master. I have no doubt that’s it’s going to be another smashing success, but we don’t anticipate any meaningful economics in fiscal '19 and that primarily at fiscal '20.
So when you think we can model I would certainly consider finding that for 2021 but I wouldn’t encourage anything in this fiscal.
John Gossling
And Adam on corporate costs, yes, as you noted and I'm sure you don't have. It really jumped around this year with the stock based compensation line.
If you look back to fiscal '17 we were running about 26 million in total including stock based comp. That number of course it depends on what the stock price does and we have seen what happens as it moves quickly.
So, I would say very hard to predict given we don’t know where the stock is going to be, but somewhere in the 15 million to 20 million range is probably a good starting point and then we will go from there depending on that kind of variability we see on the stock based comp point.
Adam Shine
And maybe just one follow up for you John, obviously, you have highlighted despite the free cash flow you talked about onetime item related to the interest rate swap perhaps one other onetime item relates to lowering of the CRTC benefit payments. But one thing does also standout is the improvement on the working capital front, much lower usage this year versus last.
Can you speak to perhaps any other further improvements to go? Is this something where maybe in F '19 largely as '20 we get to more flattish working capital consideration?
Or is that pushing things?
Doug Murphy
No, I think it's fair. I think we would like to actually see working capital turn positive.
And some of that or big piece of that variability is in the collection side of things. As we have made some improvements this year, we would like to see more improvements there.
And part of it is just managing the flow between the programming dollars that are going out and I know those are in the separate line and the accounts payable. So we can manage those.
We do have some pretty aggressive targets to improve working capital and to turn that green this year. And as well at the same time, we think that towards the end, we will probably see a bit more programming money flow out as we start to ramp our Canadian slate for future years and some of that’s Nelvana, some of that’s just and the other specialty and global product that we are going to need to have.
So, there is going to be a lot of moving pieces, but we will try to manage them as tightly as we can. They largely offset and that’s the way that we try to land it, but any one piece can move around a little bit.
So, those are big parts of the equation for sure, but of course the starting point is going to be EBITDA.
Operator
Your next question comes from Aravinda Galappatthige of Canaccord Genuity. Your line is open.
Aravinda Galappatthige
So let's start with a question for you Doug on the ad tech front and when you think about all the initiatives, you're working on and hoping to initiate in the future. Maybe it's worthwhile to sort of touch on some milestones that you hope to shape by the end of next year.
I mean I know that on the measurement side obviously you can manage this ramping up and actually help. But what else do you want to see achieved or what sort of hurdles do you want to see crossed as we think about 12 months from now?
I'm specifically thinking about dynamic ad installation, I mean right now it's predominantly I think exclusively with Rogers. Do you see that expanded by the end of the year?
Doug Murphy
Thank you, Aravinda. So let me just maybe hit a couple of things on this one.
First of all, the premium VOD opportunity I think is still emerging. We have got a couple of other big distributors that we intend to place our product on.
as we trial the VOD, DAI with Rogers, we're in discussions with all the other BDUs, both on existing platforms, but principally on the new platforms as I referenced in my comments to ensure that the BDU roadmap optimizes for advertising technology. And fortunately because our other peers in the big media at Canada roughly speaking are Bell Media and Rogers there is a lot of economic self-interest in us working in concert to ensure, we have a finely tuned model as video platforms rollout.
So, I think about it and this is not going to happen overnight, but I think it’s pretty easy to get your head around the notion that we're going to put more audiences on demand. We're going to have better view or experience with new more slick platforms that will both sustain existing subscribers maybe even add some, but at least stabilize worst-case.
These new platforms will then be equipped with the ability to do dynamic ad insertion, which is critical. Then and they will measure all that.
So, we'll get an audience true up with those audiences that are currently and will be consuming on-demand, and this is the note that TV basically need to think of our product is both linear and on-demand. We’re not going to advocate beyond demand binge viewing space to the unregulated interlopers.
This is our opportunity to put our great content on that on demand platforms. There then the other end of that, so there is your audience piece right.
Then you got your advertiser piece and that really speaks to the transformation is happening in the world but also here in Canada to moving away from the old way of selling TV, which is the demo adult 25-54 into selling audience segments. And we're working now to create a unified approach to segmentation in Canada with our industry peers such that the agency groups and clients can buy the same definition of a segment from all three of us or four of us in the stands of players in the market beyond the big three, but we think is absolutely critical that we land on a standardized audience segment strategy and that’s the piece that we’re working on.
And addition to the BDU roadmap element lastly, the note and talk to how do you transact these audience segments and this is where sense comes in and we’re pioneering this platform there's a lot of interest in Canada in the platform. And so when you can then simply as an agency open our app and buy your impressions the same way you do with Facebook and Google on you know you can imagine how that starts to position television in very good stead with the agency groups and clients.
So, so there is more to go on but we’re only an hour here but the point I think really is. It is as pretty easy in my view at least to see your way through a point in time where the television advertising universe, is optimized and much more appealing to advertisers and then we'll be able to drop ads in DAI or linear using those segments and the video platforms and the CYNCH automated technology.
Aravinda Galappatthige
Thanks Doug and just a quick follow-up there, and the second question and will leave it there. So in terms of follow up when you think about those efforts, anything you need from the regulator that would sort of ease that parts for you, and secondly as maybe John can jump in on this with respect to subscriber revenues when you've done well to hold the line there, as you look at some of these BDU agreements that are being renewed.
Can you just talk to the prospects, the pricing growth that you can derive there to help maintain the sub-revenues as we look through the end of fiscal '19?
Doug Murphy
So, the regulatory file obviously is very important one this year for us. I guess a couple of comments, I mean there is a review of the broadcast act, which is kind of underway, and are -- we’ll be making our submission at end of November, as well others.
You know, the Finance Minister will be revealing this new competitiveness platform shortly. I am hoping for the sake of the budget that we consider taxing Netflix and others because certainly we can use the revenue as a nation, and that will help level the playing field here with the media companies.
And as for specifically the CRTC, again I would just echo my regard for the harnessing change report, which I think hits head on some of the many issues that need to be considered as part of this Telecom Act, the Broadcast Act, Corporate Act review, mainly that all participants in the communication services sectors should contribute to the Canadian programming obligations and in that regard we are avid supporters of producers both independent producers and our own production company. I'm proud of the work that we all do in Canada and that we export around the world, but there needs to be a lot less regulations and a lot more flexibility.
We need to make content that works on our networks and we can sell around the world. The Netflix and Amazon, Apple are being told to direct certain amount of their spending to -- draw, certain amount of their spending to documentary and so we really have to -- kind of have a vital content storytelling sector and in the cultural arts sector in Canada.
We need to let the storytelling really go where the demand is and so I think there's an ongoing discussion we will be having with all the various stakeholders both with the CRTC and Heritage and we’re looking forward to passionately participating in the coming review process.
John Gossling
And Aravinda, on your subscriber revenue question as you really know that that flat outcome for the year I think is quite impressive. Renewals are on a fairly constant cycle and just been through one very large distributor with I think a good outcome on the sides there.
And then we’ve two very large ones coming up as we get into fiscal 2019. So I mean I guess, there’s a couple of things we have talked about portfolio optimization.
We’ve talked about the bigger and better services and looking to in some ways rebalance rates there. I guess the other thing that sort of underpins at it, it’s kind of more for more strategy, so Doug talked about the premium VOD, and those are some of the things that are driving discussions as well as there’s a much better product on offer here that can drive much better engagement with the ultimate viewers that helps in that conversation.
So I think we’re feeling that the outcome has been good, the negotiations are always very challenging and we certainly take note of what’s happening to the video subscribers in the country and how we can help to make the product even that much better. So more to come on that, it's going to be busier on that front.
Doug Murphy
If I could just maybe add to that Aravinda, we’ve to remember that three quarters of Canadians still have their preferred way of consuming premium content, television subscription. So when we think about that significant population, what we try to do as a program supplier is to both optimize our traditional product line, but also innovate with new products like the premium VOD and others that are kind of in the development ladder over here at the moment.
For the 25% that are consuming content outside of that cable subscription, that's where I think we’d like some emerging opportunities with the VMVPDs. So we can see our way again to in aggregate having a very stable subscriber revenue line just because we’re going to reassert our product offering to the traditional BDUs, and we’re going to be participating when the time comes with the new entrants in the market place.
And by the way, the new platforms I referred to earlier are agnostic as to who will provide them the video, it’ll just provide a great experience to the viewers and that’s what the whole industry needs to do. So that would be just a general overarching comment I'd make on the subscriber marketplace.
Operator
Your next question comes from Vince Valentini of TD Securities. Your line is open.
Vince Valentini
Let me start, Doug, thanks for the comment on ad tech initiatives and the good ratings performance you’re having the fall, but I want to make sure we’re all on the same page, down 3% or 4% on TV ad revenues is kind of where you’ve been in the last few quarters, I don’t think you’re seeing anything here or saying there’s a near-term recovery from that, and some of these ad tech initiatives will take a little while, so in the first of second quarter, kind of in that same down 3% or 4% range reasonable?
Doug Murphy
What I would say to that is, the ad tech is going to take some time. I mean it’s moving along, we’re going as fast as we can on that one.
But it’s going to be still consistent evolution but it’s in motion. As a general matter what we’re thinking of until we get fully scaled on that, that we think we’re going to be in the low negative single-digits.
I would though note that we’re seeing a bit of a change in market conditions just in the first quarter. So I’m not going to, as I said, I can’t look around look around the corner.
But I think there’s going to be a little firming in demand and I know there’s going to be some firming in demand and also coincidentally we’re getting some yields pickups. Because the reality that's the factor is, there is still a lot of demand with television.
So the money is coming in, the pacing is way up from prior year. But the inventory is down because there’s some audience level declines over time.
And so we think, we are seeing by coming in earlier, because what is also true is there is a lot of concern now both digital, both environment and privacy. So those factors audience level is down, giving us more opportunity to place the campaigns earlier environmental privacy concerns are helping see a little bit more optimistic in Q1.
And in Q2, it was hard to say. Only we know definitively is there’s no Olympics this year, which is good for Canada and if you’re a broadcaster, not if you're a viewer, but I wouldn’t, I’d be hesitant to give you much more of an outlook than just that.
John Gossling
I think the reason we use the word cautiously as, we haven’t forgotten what happen in Q1 last year and at any point mid quarters pacing interesting. But as Doug just alluded to pacing, doesn’t necessarily follow the same path that it historically has.
So I think back two-years ago, at this point in that quarter pacing looked great and then it really slowed down and we have that surprise in Jan when we reported Q1. So that’s why we’re always a bit cautious, because we don’t have a great predictive ability anymore on how it’s going to pace.
So any sense of pacing is great now, it isn’t necessarily going to contain on the same track. But as I said we’re feeling a lot better.
Vince Valentini
That's very prudent, John. I’m assuming you go to the bank to repay debt, they won’t accept pacing as renumerations.
John Gossling
Yes, cash on the barrelhead. That’s all they take.
Vince Valentini
Can I ask another one, in terms of asset sales, is there anything at the margin that you can do there, I guess especially in the Quebec channels that you weren’t allowed to sell to Bell? Is there potential for another buyer there, or any other small non-core assets that you can perhaps help to accelerate your debt reduction?
Doug Murphy
I would just say at this point of time, our sort of theme for our fiscal '19 operating plan is optimized the core. So that means we’ve taken all the cash flow coming from all the assets and using it to deleverage the balance sheet.
If we get an inbound we’ll always have the conversation, but there is -- we’re not actively pursuing anything at this point in time.
Operator
Your next question comes from Maher Yaghi of Desjardins. Your line is open.
Maher Yaghi
So, I just wanted to, I know debt reduction is your number one priority and I think the market likes to hear that, but however as you mentioned you are producing quite a bit of free cash flow. And from the comments you’re mentioning today you still believe that that’s going to be the case in 2019.
Have you thought about deploying some of the capital in other uses that could be quite accretive to shareholders in terms of buying back your stock or buying a portion of what Shaw holds in your stock?
Doug Murphy
Maher, thank you for the question. The quick answer is no, our focus is on the investing for the future, stabilizing the revenue, paying down the bank debt and getting to a point of financial flexibility where we can make some more meaningful steps to get even greater gross.
So, at this point in time we’re setting the right balance of our offense and defense, the offense is principally targeted selective strategic investments throughout the Company in areas of growth or ad tack or content as we’ve discussed on the call. But share buybacks are not in the list of the options.
Maher Yaghi
Okay.
Doug Murphy
I guess one thing Maher we always say there is, we have turned off the treasury drift on the dividend. So, that in fact we’re not at least diluting any more, it’s not a buyback obviously.
But, we’re actually holding that the share base stable at this point.
Maher Yaghi
And just on the revenue line, we have nice surprise there. I wanted to ask you in terms of some of the more volatile portion of that merchandizing licensing.
How do we look at those improvements in the quarter? How sustainable they are may be in first quarter, second quarter?
Doug Murphy
No, it’s a question we always get and frankly it’s one that we’re challenged with internally a little bit as well, just given it’s hard to predict delivery sometimes and you saw the benefit of it as you mentioned in Q4. As I look back to 2018, Q2 and Q4 were quite strong on that line and probably going forward it’s not any quite as well as how quarter-to-quarter.
I think we expect to grow a little bit more consistently through '19, but Q1 will be in a lower basis because we did have that big asset for sale in Q4. So, the growth in the Nelvana certainly helps and to the extent that those deliveries come at a good pace in '19 and we would expect to see a little bit more stability in that line, it shouldn’t jump around as much as it has this year.
John Gossling
But I would also add that this the merchandize agency business at Nelvana Enterprise is conducting will show up in that line as well. That’s more of a stable because these are partners at Cartoon Network or Peppa Pig or PJ Masks with E One.
These are real existing businesses that we are helping to move product at retail so that generates an agency fee on those wholesale revenues as we go into the retail marketplace. So, we do have more of a steady, so you think about the merchandizing business in two pieces one is a more stable and growing albeit relatively small agency business and then sort of in more volatile owned content merchandised licensing business.
Operator
Your next question comes from Jeff Fan of Scotiabank. Your line is open.
Jeff Fan
Doug and John, I just wanted to follow up on ad tech outlook for the next couple of years. Obviously, audience measurement is really the key I think foundation before you can implement some of the initiatives.
So on the audience measurement front, when do you think the industry can truly measure linear and nonlinear, across the entire country, not just some of the initiatives on Ontario Quebec, but for the entire country? And do you think that's important to have the entire country for the advertisers to before they start to deploy money into and start allocating some budget towards these initiatives?
And then finally, ad revenue was down 3% to 4% as noted earlier, with these ad techs do we get to flat or do you think the overall revenue pie for television can actually grow?
Doug Murphy
So measurement is critically important for our industry. Numeris is doing as you know, but I would tell you hanging around with the future TV conference recently Jeff.
And as you know Numeris is in their first test of their total video audience measurement test. We will get some early returns this spring but there is going to be another series of iterations on that.
I don't think we have anything significant until probably towards the end of our fiscal and through the summer. So I think it'll probably be relatively impactful in the first quarter of next year the coming fall premier season we will probably see some interesting measurement realities which is going to be I think a positive impact.
But that doesn’t preclude the interest of advertisers on ad tech. There is part of the whole puzzle I tried to paint earlier here is that the opportunity to participate in DAI for example is relatively attractive and appealing because the ad load is less so ad tech is left out with less clutter.
Secondly, the viewer engagement is higher because once you select a VOD content to view you made the decision to watch it so you sticky you watch the whole thing. You can't fast-forward through it.
So it's a relatively easy conversation to have for those advertisers that are currently doing dynamic ad insertion on VOD. They love it, it's very effective for them and they just want more.
So that’s why we are working do diligently with the other BDUs to turn on their capabilities and with the industry to be there. You had another question which I'm blanking on, was that a piece.
Jeff Fan
Just in terms of the total TV ad pie whether all the initiatives to take it back to positive or flat how do you see that?
Doug Murphy
So our tone John referenced our January call last year in Q1. Our tone has become a lot more measured since then.
So I'm generally very optimistic fellow. I can see our way to stabilize revenue in a handful of years once we get these various pieces put in place, measurement, new platforms, alignment on ad technology, alignment on BDU roadmap.
I think television is still a critically important part in media mix for advertisers. I think the content and TV is still extremely attractive to consumers and I think the business there is investment being made in the industry around the world that I think show promise in terms of stabilizing the revenue picture.
So I would not advocate going beyond stabilization yet because I want to stay within my measured box, but certainly our inclination over here as we look into the future, given what we know it is that there is a more positive outlook. I think many believe given the malaise over the media sector in general these days.
Jeff Fan
Can you just remind on the dynamic ad insertion which BDUs are working with today? And then what's the outlook for having others on board?
Doug Murphy
Currently, it's really solely Rogers. But we are in many levels of discussions with everybody else because it's obvious that television need to be thought as I said in my call as both linear and on-demand and that's sort of intuitive, right.
So, my expectation is that will soon have ubiquity around the approach across the country, but we’re there yet.
Operator
Your next question comes from Drew McReynolds of RBC. Your line is open.
Drew McReynolds
Thanks very much a couple of follow-ups on my end. First with respect to carriage deals maybe a question for you, John.
Obviously, the first around through the new framework you are successfully able to get penetration based rate cards. Is that something that will be standard this time around as well?
John Gossling
It should be, I mean that’s the plan, although we're open to other models as well in terms of maybe it's not just for network type of model. So I think there's lots of things on this table, I mean that I think has worked well, but you know there could be other a way of approaching as well.
Doug Murphy
I think there is more opportunity now given some of these recent changes to work with our distribution partners to basically strengthen and broaden distribution for the bigger channels and address where we have situations where those bigger services are potentially undervalued given the share of audience and share of revenue within the total industry and similarly appreciate the fact that there are smaller services that may be overvalued. And so, as a general thematic note more flexibility provided by regulatory bodies is the way we have to go.
And so I think that's general comment. But at the moment the rate cards are still part of the mix but again at the end of the day, it's all about having the best content and the best brands and the best guidance that that will help us to position our company.
Drew McReynolds
Got you, Doug, thank you. On I guess for you John, there was a retroactive payment.
I think in the quarter didn't seem to be overly big but can you kind of flag what it was?
John Gossling
Drew there was small UI sort of in million dollar range and we had a small one last year as well for the year-over-year impact.
Operator
Ladies and gentlemen, please hold from moment, till we reestablish connection [Audio Gap]. Ladies and gentlemen, the speakers have resumed.
Doug Murphy
Now back to our regular program and sorry we somehow just lost the signal there, so Drew I think you were in the middle of the follow-up.
John Gossling
Yes, I am not sure where we dropped. Drew, you were asking about subscriber revenue in Q4 and that benefit of the renewal.
Drew McReynolds
Yes, that’s right.
John Gossling
It was relatively small it was around $1 million bucks in the quarter, we did have a small one in the year ago Q4, so think of subscribers flat to slightly positive if you normalize for those pieces.
Drew McReynolds
But I think generally speaking, when we -- every time we kind of conclude a large carriage of inventory, there's usually some kind of a true up?
John Gossling
Typically, yes, we chose up that.
Doug Murphy
Yes, it's in a credit contract, we’ll continue to record it at the old deal until we can get things finalized. So, we had a typically some kind of retrofit.
Drew McReynolds
Also just another follow-up on the merchandizing and distribution piece, I fully understand that the lumpiness and the moving parts underneath. I think last quarter and last couple of quarters, Doug.
You alluded to more modest kind of growth year-over-year and then boom we get the 20%. Just not asking for specific quarterly guidance because I get the business changes just wondering overall is this whole piece picking up a little better than you would have expected over last couple of quarters or is it just purely timing versus kind of your previous quarterly comments?
Doug Murphy
So, I can give you a little more dimension on that. There was a Netflix S5 sale in Q4 which shows up in the P&D number which skewed at growth upwards.
I think John mentioned it around $4 million. As regards the growth in the Atlanta slate that is ramping as I said is ramping significantly year-over-year.
There’s a lag right, so those -- the team that’s in Mipcom as we speak, pitching our shows, and we know we’ve got some renewals on Hotel T which is great. Our Nickelodeon and Framework is now in full motion, as you know we’re working with Sesame Workshop and Esme & Roy that show looks very promising off to a great debut both in Canada and U.S.
and same goes for our Discovery Kid partnership in Nelvana. So, there’s a whole bunch of slate being built right now and it will start to show up, but we can’t record revenue until we’re able to deliver episodes.
And typically, you don’t deliver episodes until you got the first cycle made, right of 13, or 20 or 26 depending upon what nature of the programming is. So, we’re kind of building a pretty good base of content but it’s going to -- it’ll start to get rolling.
I think probably more towards the last half of this year and into the following year when you’ll start to see some more material growth.
John Gossling
Yes, I mean early-early view Drew on it is that the shape of that line looks a lot more steady, in the coming year. Obviously, we’re going to have a tough comp in Q4 next year as we're at this, because that’s a multiyear deal, it’s not just a one-year.
So it is hard to predict, but certainly all the planning we’ve done so far is that it’s going to be a little bit more stable.
Doug Murphy
The comment I'd also make this getting up now to the consulted revenue pieces. I think, it’s always clear, but the whole strategy here is, there is three distinct pieces of revenue you’ve got domestic, where you’ve got advertising and subscriber and we’re, I mean working to optimize that business, we talked at length about that.
Then there’s a global content business. And so to the extent to which you believe that we can get the stable advertising or stable subscriber revenue profiles, which we do over the next year or two.
The content business will provide the growth that will get consolidated revenue to modest growth. So that’s kind of that, as we kind of continue to work these assets and optimize the core business.
That’s where we aspire to go and I think you’re going to see continued growth in the content segment, because that’s strategic as we continue to work on the media part of the business.
Drew McReynolds
One last one for me, sorry, and I may have missed it on some of the commentary. When you look at audience ratings, and Jeff alluded to this before, and you’re adding up linear, you’re adding up video-on-demand, other places, where your content available, whether it’s online or apps.
Those audience ratings in acknowledging the quality program does evolve overtime. But from your perspective, if you were to put it all together, are you holding your own relative to other SVOD programming out there?
In other words, we know the pie is expanding, we know people are consuming content. We know a lot of it is not getting measured.
Just wondering, what your best guess apples-to-apples on the properties that you have, kind of what your overall audience consumption looks like?
Doug Murphy
That’s a great question. So I’ll give you a couple thoughts on that.
First off, relative to what is measured, I know that’s not the entirety of your question. But just for us as a starter relative what is measured by Numeris we’re definitely holding our own and we’re gaining share and Global’s got 11 shows in the top 20 especially rankers are strong in the fall.
So competitively within the broadcast industry in Canada we’re super happy with kind of where we are. When you step back and you look at overall viewing levels, because you will know the last year this time was a bit of a wake-up for the industry.
We’re actually quite pleased with the stability of audiences with large at the moment. And so we’re seeing basically have a pretty stable audience of viewer, this is total industry now in television and that’s a promising development.
Early days measurements can change, now it can change with Numeris, but I think that’s true. When you then expand the aperture even more look at your viewership on YouTube or on Netflix or on Amazon et cetera because they don’t have to report their ratings or their viewers, it's really difficult to ascertain just what -- how much content is being consumed.
We do think that overtime ideally the measurement system will begin to capture all this, and that’s partly what the Numeris piece is doing. So, I think we got a year so we get the first beat on what we see in terms of other viewing behavior in a measured manner.
But at this point in time, it is super hard to speculate.
Operator
[Operator Instructions] Your next question comes from David McFadgen of Cormark Securities. Your line is open.
Doug Murphy
Operator, I think David has gone.
Operator
One moment please. Mr.
McFadgen your line is open.
David McFadgen
Okay. Can you guys hear me now?
Doug Murphy
Yes. Hi, David.
How are you?
David McFadgen
Thanks. So just on the merchandizing side, it's a tough business to predict on a quarterly basis, but what’s the outlook for fiscal 2019 you think you can get double-digit revenue growth on that business?
Doug Murphy
In merchandize?
David McFadgen
Yes. Well, merchandizing and distribution and other just that whole?
Doug Murphy
The whole one, I would say, I readily more comfortable sort of high single-digit and going all the way to double-digit just to kind of couch that a little bit.
David McFadgen
Okay, right.
John Gossling
To my earlier point Dave, the big scale we had in Q4, you’d have to pull that out because that’s not going to recur in '19. So, on that base on an adjusted base Doug's comment is a point to that.
But there is no line of sight right now to a big SVOD sale in 2019 because of the term of the one we just did.
David McFadgen
Okay. So, just to clarify if we took the fiscal 2018 revenue from that line took out that $4 million SVOD in Q4, 2018 and then apply high single-digit growth rates in that fiscal 2019 that’s probably kind of where it's going to come out more or less?
John Gossling
Yes. That’s pretty good.
David McFadgen
That makes sense. Okay.
And then just on the cost, you talked about how the corporate cost lines were probably $15 million to $20 million in fiscal 2019. So, if you look at your cost structure outside of corporate.
Do you have an idea how much that could go down whether it'd be flat? Or could you get it down a couple of points year-over-year even with same higher amortization cost on than that?
John Gossling
What I will say is this. You've heard me before I say that.
When we first put the comment, we got, there is a pure play media and content come to that and we did the two well, right. Maximize our audiences, monetize our audiences, that’s the first principle.
We've kind of added the third first principle if you would and that's rationalize the operating model. So, we have every team in the Company has got a rationalization of strategy on what they’re doing, we’re looking to whether or not that sits into technology or process automation or AI or machine learning.
We’re got a lot of work that’s underway today to position ourselves for further reductions in cost and improvements and efficiencies. That said those activities in this fiscal need a little bit of investment as well.
And so, that balances off as we go through this fiscal year. My expectation is that you’ll see the rewards of these investments beginning in F '20 and we’ve talked about our aspirations to achieve step function improvements in cost structure each and every year.
And so, I think those start seeing some of that pay off in fiscal '20.
David McFadgen
So would a reasonable outlook then be sort of a flat cost structure outside of corporate expense in 2019 versus 2018 or what do you think it actually be up a little bit due to the investment?
John Gossling
No, no, no, costs are not going out. I mean programming swing around, as you know, but the rest of the system, especially the system, we're focused on, on reductions.
Operator
There are no further questions at this time. I will now return the call to Mr.
Doug Murphy.
End of Q&A
Doug Murphy
Great, thank you operator and thank you everybody for your questions. We are really happy with the quarter.
And we are really happy with the contributions of our Corus teammates around the country and the small mass matter we have internationally now. So, I just want to say thank you to the team and we look forward to speaking to our investors and analysis in the coming days and weeks.
And have a great weekend. Bye-bye.
Operator
This concludes today's conference call. You may now disconnect.