Corus Entertainment Inc. (CJREF) CEO Doug Murphy on Q2 2021 Results - Earnings Call Transcript
Corus Entertainment Inc. (OTCPK:CJREF) Q2 2021 Earnings Conference Call April 9, 2021 8:00 AM ET
Company Participants
Doug Murphy - President & Chief Executive Officer
John Gossling - Executive Vice President & Chief Financial Officer
Conference Call Participants
Adam Shine - National Bank Financial
Vince Valentini - TD Securities
Drew McReynolds - RBC Capital Markets
David McFadgen - Cormark
Jeff Fan - Scotiabank
Operator
Good morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Corus Entertainment Q2 2021 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, Michelle, and good morning, everybody. Welcome to Corus Entertainment's fiscal 2021 second 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 slides to accompany today's 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 facts 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. I'll start on Slide 3. This was another strong quarter for Corus. Our team is making meaningful progress as we execute our strategic plan with discipline to deliver consolidated revenue growth year over year over year, as we prepare to put the COVID-19 pandemic behind us. Throughout the pandemic, you've heard me discuss our experience at Corus using a metaphor, the book of COVID.
Starting with the first chapter, shock and awe, followed by chapter two, stabilization, then chapter three, modest recovery, our most recent chapter coined up into the right, not only characterizes these sequential improvements we have been experiencing in advertising revenue, but also describes our confident long-term outlook for consolidated revenue growth at Corus. Today, I'm excited to reveal the next chapter in the book of COVID at Corus, is titled spring forward, as expect to post consistent advertising revenue growth.
Our Q2 results have hit the mark on all fronts. We are demonstrating strong operational momentum highlighted by sequential television advertising revenue recovery, accelerating paid streaming subscriber gains, double-digit growth in our content licensing business, and once again, another quarter of impressive free cash flow generation. Key financial highlights for the quarter include: consolidated revenues of CAD359 million; consolidated segment profit of CAD113 million; impressive free cash flow of CAD90 million; and improving financial flexibility with bank debt repayments of a further CAD61 million in the quarter, which contributed to a further reduction in leverage to 3.02 times net debt to segment profit. I'm also delighted to reveal two other key milestones on today's call. First off, we now have more than 500,000 paid subscribers on our streaming platforms. Second, our strong free cash flow and the significant progress we have made in reducing our bank debt has resulted in today's official announcement that Corus is now setting a new leverage target of below 2.5 times net debt to segment profit.
Over to Slide 4 and a look at our primetime schedule performance on Global. Last time we spoke, we noted the uniqueness of this year's programing schedule with delays and timing shifts of content deliveries owing to the COVID-19 pandemic. That said, and as expected, our spring programing lineup has performed well, with exciting new series and returning hits. This robust schedule has delivered nicely from an audience perspective, positioning us to benefit from the inevitable economic recovery. Global has 11 shows in the Top 20 this season, with new dramas, The Equalizer and Clarice debuting strongly out of the gate, along with returning franchise fan favorites 9-1-1, FBI, Big Brother Canada and New Amsterdam. Now, I know all of you on the call today tuned into Oprah's much anticipated interview with Meghan and Harry. What a blockbuster, propelling Global's overall primetime audience for the week to its highest level of the year. In fact Oprah with Meghan and Harry, a CBS Primetime Special, delivered an impressive 3.2 million total viewers, becoming the number one non-sports broadcast in Canada this season that almost taking over and over time, the World Junior Ice Hockey gold medal game.
I would also add that this massive audience drove massive free trials to our STACKTV product, further accelerating its growth.
Moving to Slide 5. Our studio business continues to grow with strong double-digit results once again this quarter. Let me provide a few highlights. Nelvana, now with a total of 20 series in production, continue to pursue more and more exciting new projects. After a successful launch of The Hardy Boys over the past few months, we were pleased to share that we have greenlit a second season of this popular series. This recent foray into live-action is a truly notable one, as we expand the genres in which we produce content to meet the demands of the global marketplace. Other recent notable greenlights include two new series now in production as part of our Nickelodeon co-production framework and announced at the Nick upfronts last month, ZJ Sparkleton and The Hamster Show. These series will premiere on Nickelodeon and Treehouse in 2022. We have announced a third series as part of our redknot co-production partnership between Nelvana and Discovery Kids, titled Super Wish, this in addition to the second season of Agent Binky: Pets of the Universe and The Dog & Pony Show.
Development investments in our feature film initiatives look promising with the announcement that Nelvana, Duncan Studio and Peter Dinklage's Estuary Films were joining forces to develop an animated feature based on the award-winning graphic novel by the author Ryan Andrews, This Was Our Pact. Expect more exciting new announcements from Nelvana in the quarters ahead.
Corus Studios slate features 18 series now on production this year across a wide variety of content genres, with new partners and exciting new and innovative business models. Today, we announced the largest output deal to-date for Corus Studios, as the business scales with the sale of over 200 episodes to Hulu. This breakthrough sale consisted of nine Corus Studio original series, such as Backyard Builds, Wall of Chefs, Home to Win, Big Bucket Food List, and more. In addition, we've secured new sales worldwide over the past few months, including Great Chocolate Showdown to The CW Network, Big Timber sold to the world's largest international streamer, and a multi-territory sale of Island of Bryan to Discovery International.
Our growing production investments at Nelvana and Corus Studios are taking flight. They provide our Corus networks with great content to drive audiences and leverage our Corus advantage to prime the pump for accelerating revenue growth.
Moving to Slide 6. We are following our audiences wherever they are with more content in more places to delight our viewers while also increasing our impressions and sellable ad inventory that drives revenues. The very strong growth we are seeing in our streaming business is truly remarkable, as most of you had noted, and it is accelerating. STACKTV and Nick+ are runaway success stories, now with more than 500,000 paying subscribers combined, that's up from just over 400,000 on our Q1 call. Our streaming and new platforms businesses now contribute over 8% of our combined television advertising and subscriber revenues, very, very close and in line with our U.S. media peers. One year ago, we launched a new Global TV app, providing authenticated subscribers access to up to eight of our premium specialty TV channels in addition to Global. The Global TV app also provides viewers with ad-supported content and 14 regional global news streams free in front of the paywall, creating additional impressions in advertising revenue opportunities while enabling sampling of our great content.
Let me provide you a few other quick stats to demonstrate the evident momentum in our streaming businesses. We've had more than 6 million downloads of the Global TV app this year, that's an increase of 35% over last year, and 1 million of those downloads are on connected TVs, such as Roku, growing extremely quickly. In terms of viewership, our video starts are up 23% over this time last year, and our Global News OTT live streams are driving important engagement with Canadians over 1 million hours of time spent per month, as we provide Canada with important timely, regional, local, accurate information, whatever and whenever they need it.
With that, I'll turn it over to John.
John Gossling
Thanks, Doug. Good morning, everyone.
I'll start on Slide 7. Our second quarter results reflect meaningful progress against our strategic priority to operate with discipline. With results trending up into the right and our track record of driving strong free cash flow, we are on the cusp of achieving our long-time leverage target. We delivered CAD90 million of free cash flow in the quarter and have repaid CAD95 million in bank loans for the year-to-date, achieving improvement in net debt to segment profit to 3.02 times, which is down significantly from 3.18 times at the end of the last fiscal. The hard work of our teams has helped us to achieve this goal ahead of our expectations. Given our confidence and this momentum today, we are excited to announce our new long-term leverage target of below 2.5 times net debt to segment profit. We've now paid down CAD575 million of bank debt with [indiscernible] our revised capital allocation policy just 2.5 years ago. This change in target reflects the confidence we have in our ability to spring forward and further increase our financial flexibility, supporting the advancement of our strategic plan and shareholder value creation in the years ahead.
Now over to Slide 8 and a review of our consolidated results. As Doug mentioned earlier, Corus' consolidated revenue was CAD359 million for the quarter. That's down 5% over the prior year, but reflects a third consecutive quarter of sequential improvement. Importantly, we have turned the corner as we spring forward into growth in the second half of the year. Consolidated segment profit was solid at CAD113 million for the quarter and that's down just 3% versus the prior year. The current year quarter did benefit from relief on CRTC Part I and Part II regulatory fees of CAD7.8 million and the estimated wage subsidy benefit of CAD4.4 million, and those were offset by the impact of a stronger share price on stock-based compensation expense. We delivered consolidated segment profit margins of 31% for the quarter, that's consistent with last year.
Net income attributable to shareholders for the quarter was CAD35 million or CAD0.17 per share, and that's up meaningfully from CAD19 million or CAD0.09 per share in the prior year. Our free cash flow of CAD90 million was ahead of the CAD65 million in the prior year quarter. This current year quarter did benefit from wage subsidy receipts of CAD4.4 million, reduced interest payments on bank debt and lower programming rights payments and film investments, now that's offset partially by lower working capital contributions. I'd also like to quickly highlight, this morning we declared a dividend of CAD0.06 per share for Class B shareholders, and that's payable at the end of June 2021.
Now, turning to our TV results for the second quarter as detailed on Slide 9. Overall TV segment revenues were down 3% over the prior year, reflecting a third consecutive quarter of sequential improvement in TV advertising revenues. Our networks and sales teams were once again able to successfully balance rating supply with advertising demand to maximize the value of our inventory. We're now starting to comp against last year's shock and awe chapter. And as mentioned, we expect to see advertising growth in the back half of the year as vaccination programs accelerate and lockdowns subside. Despite the declines in legacy linear TV subscriptions and the impact of shutting down some of our less popular channels for the past year and a half, the impressive growth of STACKTV and Nick+ has driven an increase in subscriber revenue this quarter. We delivered strong double-digit gains in our content business from international Nelvana and Corus Studios content, as well as animation software sales of Toon Boom. This led to impressive growth of 14% in our merchandising distribution and other revenues in the quarter.
TV expenses in the second quarter decreased by 6% over the prior year. Direct cost of sales were down 1% and that reflects lower film amortization and other cost of sales that partially offset by higher programming costs as the timing of deliveries, particularly on Global continuous to shift. Our G&A expenses reflect continued disciplined expense control, which resulted in a reduction of 13% from the prior year, including the benefit from the wage regulatory fee and the wage subsidy. As we lapped the noteworthy impact of reduced programming cost brought on by the initial programming hiatus in the third quarter of last year, we embark on the necessary path to return Corus to a more normalized run rate for programming. This will continue to be one of the key variables impacting cost in the future quarters. As a partial offset to anticipate increases in programming costs, we will continue to tightly manage discretionary spending. This year, as we move through the recovery phase, our wage subsidy benefit has been reduced compared to the start of the pandemic a year ago, and that will also have a notable impact on our expense profile moving forward.
So overall, TV segment profit increased 4% in the second quarter, margins were 35% and that's up from 33% in the prior year. The benefits of our revenue diversification strategy are highlighted by the growth in our two new revenue performance metrics, new platform revenues and optimized advertising revenues, both introduced last quarter and highlighted on Slide 10. These metrics underpinned some of our most prominent growth opportunities in streaming, digital video advertising and the automation of advanced advertising initiatives, where we are making great progress.
New platform revenues of CAD24 million were approximately 8% of TV advertising and subscriber revenues in the quarter, and that's up from 7% last quarter and increasing materially from 5% in the prior-year quarter. This reflects revenue growth of 62% over last year and demonstrates our continued progress in driving new sources of revenue and further doubling our connections with audiences wherever they are. Optimized advertising revenues, which reflect our progress in transforming how we sell, publish and advertising, represented approximately 28% of total TV advertising revenue in the second quarter, and that's up nicely from 26% last quarter and 22% in the prior-year quarter. We're very encouraged to see the benefits of all the work that we have undertaken to advance our strategic priority throughout the pandemic. As we gain traction from the initiatives highlighted in these metrics and meet the insatiable demand for content in international marketplace through Nelvana and Corus Studios, our confidence and our plan to deliver consolidated revenue growth year over year over year continues to build.
Now, just briefly to turn to our Radio results which is outlined on Slide 11. Radio segment revenues decreased CAD7.8 million as Radio continues to be impacted by pandemic-related restrictions on businesses, especially in local markets. Radio segment profit decreased CAD3.2 million in the quarter, given the challenging market conditions. Segment profit margin of 7% was down from 16% in the prior year, as we continued to diligently manage costs to offset the revenue decline. So overall, this is a traditionally light quarter and we are very pleased with how our team continues to definitely [ph] navigate through the pandemic. Our strong consolidated Q2 results and the progress we've made in advancing our strategic priority have positioned us very well to spring forward with consolidated growth year over year over year. We are excited about our plan to deliver growth in the second half of the year and in the years ahead.
And with that, I'll turn it back to Doug.
Doug Murphy
Thank you, John. Finally, over to Slide 12. This year has been quite the adventure. Early on, we made a commitment to you that Corus would emerge stronger from this crisis. Our commitment is once again evident in this quarter's results as we safely execute our strategic plan. Metaphorically, we have used the Book of COVID to tell our story, and today I was excited to reveal as its author, a new chapter, Spring Forward.
Last year's pandemic-impacted advertising revenues are in the review mirror, and as we see more Canadians vaccinated, we will experience waves of advertisers investing on Corus networks. There will soon be an historic consumer-led economic recovery as more than CAD100 billion of savings once governments provide the all clear. As a consequence, Corus will post eye-popping revenue performance when compared to prior quarters last year, hence Spring Forward. In that regard, investors will aptly be able to describe Corus as a recovery play.
Let me step back for a moment with a couple of big picture comments. Big is still big in television, big is front and center when we reflect on the reach and frequency of television and clearly evident with the record-breaking viewership of the Meghan and Harry interview with Oprah. A few more important facts; according to the latest CTAM Canada research, 73% of Canadians subscribe to a channel bundle. At Corus, we are making investments in our Global TV app to further improve the value proposition for subscribers in the authenticated Pay-tv system. For those who don't subscribe to the channel bundle, we offer new ways to access our content on fast-growing streaming platforms, such as STACKTV and Nick+ now with more than 500,000 paid subscribers. Other new platforms are in our sights expect more announcements in the quarters ahead.
History was made a few weeks ago in regards to broadcast television. No, I'm not talking about Meghan and Harry this time, I'm talking about a commitment. The NFL struck a groundbreaking 10-year deal predominantly with traditional broadcasters in the U.S. This is important as to what some of the smartest programmers are thinking about the resiliency of the channels business. This deal effectively anchors the bundle and underscores the sustainability of the channels business in the decade ahead.
Corus has a strong and resilient core channels business. We demonstrate again and again that our very attractive economics generate significant free cash flow to pay down debt and invest in new opportunities to grow our Company. With a generous free cash flow yield, a low payout ratio and a dividend yield of 4.1%, we believe that Corus remains a standout investment thesis in Canada. Corus is positioned to benefit from the pending economic and advertising recovery. Our focus remains on the delivery of consolidated revenue growth year over year over year, driven by the ongoing advancement of our strategic plan and expansion of our financial flexibility commensurate with our reduction in our leverage target.
As we conclude our call today, we recognize the pandemic still threatens the health and safety of Canadians. We are on the right path to move past this pandemic, but emphasize the need to maintain vigilance on the protections in place to keep everyone healthy. I want to acknowledge and thank our talented and resilient team, who continue to serve the needs of our audiences, clients and partners, and importantly take care of each other.
Over to you, operator.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] The first question will come from Adam Shine from National Bank Financial. Your line is open.
Adam Shine
Good morning. Thank you. So, another good solid quarter. Obviously, it is still challenging backdrop. Doug, can you speak to maybe some of the cadence in regards to how the ad trend dynamic is evolving? I mean you acknowledged in the Q2 that much of the improvement came at the start of the period before the latest round of lockdowns and/or other government restrictions, so, obviously, a very easy comp in the Q3. But maybe just talk about how the quarter so far is evolving? And then, maybe one for John in regards to the pattern of programming spend. There is no doubt that you guys have been very clear about some of the delayed dynamic of this unique broadcast year. But maybe as we go half -- the halfway point of your fiscal, where your thoughts are in regards to the level of programming spend further bleed in terms of delays into the Q3 and/or frankly an outright reduction in anticipated spend versus prior expectations? Thanks.
Doug Murphy
Thanks, Adam. As regards sort of pacing and trending on advertising, our new chapter, Spring Forward, specifically addresses the fact that we are definitely into growth year-over-year now and quarter-to-quarter basis, obviously, the comps are going to be pretty easy. The dollars are out there. This most recent lockdown certainly has delayed some spending. Some categories that really want to get back to business have been affected. Those are the same ones that had been affected all throughout the pandemic, right, so airlines, travel, accommodations those are the things. But we know that the money is there, and I think they're basically just waiting for some positive news post this emergency lockdown which is happening across the country. So I guess my answer would be, it shouldn't surprise anybody that the most recent lockdown has affected some of the pacing, but it's [indiscernible] an if it's a win. And our schedule -- and I'll come back to this in the call until we'll get a question, our schedule has positioned us extremely well to benefit from the inevitable return of investments and marketing by CMOS to drive their revenues because of our audience delivery and interestingly, the way the deliveries of our content has played out this quarter. John, so do you take the programming cost?
Adam Shine
Actually, could...
John Gossling
Sure.
Adam Shine
Sorry, John. Doug, can I just follow up, and obviously the context there being that perhaps if may be the advertising in Q3 is perhaps a little bit softer than otherwise previously anticipated ex these latest government restrictions. Can you speak at all to maybe some backfilling on the other revenue side of the TV line? Obviously, you talked about the big Corus Studios announcement today. You obviously put up some pretty strong double-digit growth in other revenue in Q2. Can you just speak to that particular line item and your confidence in double-digit traction there through the remainder of the year?
John Gossling
Yes, I mean, that's part of the story here, right, is that subscriber revenue is flat this quarter, but I mean, we're still comping against some channel shutdowns and some carriage agreements -- adjustments in the prior. We expect subscriber revenue to be growing single digits in the back half of the year. Content is really hitting us straight right now. Two really good quarters, Q3 looks promising as well, and that's good. I think it is back to advertising. We're also seeing, again, up until the most recent lockdown, we were seeing local coming back, which is encouraging. So, the revenue portfolio is sort of designed, if you would, to be resilient and the back fill as you might know, some of the softness that may occur given the pandemic situation. So, that's really part of the story here, is that we're focusing on diversifying our revenue across the whole company and looking for pockets of growth and there's a number of them that we're pursuing aggressively as we await the inevitable return to advertise and recovery once the vaccinations are fully distributed.
Doug Murphy
And Adam, just to add on the announcement this morning. About 80% of that revenue is actually in Q2, that probably was large, which is a little piece to come in the second half. So, on programming, it's been super difficult or more difficult than usual, obviously, to predict, given the timing of things. I'd say Q3 right now is looking like, we're getting everything that we would usually get and then maybe a little bit more as we catch up a little bit. The other dynamic there is that Canadian is ramping back up. It came [ph] and shut down very quickly last year, even faster than the Hollywood stuff did for us. So, I'd say as much as we have an estimate today, it could change by material amount by Monday. I guess the good news, if you want to call it that, is it's tending to go down from the estimates we have. So, Q3, big quarter. It's probably going to be up kind of mid-single digit percentages and when we saw a little bit of growth in Q2 on that line and then Q4 is a little harder to call this given Olympics and we're starting to see what the programming strategies in the U.S. look like against the Olympics. So again, there's probably growth there, but I'd say for the full year. We're looking at a flattish to maybe a slight increase on total programming costs, is the latest view, but it can change. We had a change in this last week down by pretty material amounts, so we're keeping a very close eye, obviously. And it's important obviously as well for the revenue side of the business to make sure we've got the audiences.
Adam Shine
Right. Okay. Thank you very much.
John Gossling
Thank you.
Operator
And your next question will come from Vince Valentini from TD Securities. Your line is open.
Vince Valentini
Yes, thanks very much. First off, to clarify on the digital and streaming revenues, John, if it's 8%, that seems like it's about $25 million. You can correct me if I'm wrong.
John Gossling
Yes.
Vince Valentini
So, even if there's no growth, you're analyzing at a pace of $100 million from those new businesses. Is that correct?
John Gossling
Yes, the digital piece has a bit of seasonality as the TV advertising, traditional business does, but the subscription business right now is only growing. So, that's probably not bad estimate.
Vince Valentini
Thank you. The Hulu deal, if I can just hit on that from a couple angles, I assume that they have not bought any rights for Canada for those 200 episodes you sold them. Correct?
John Gossling
Yes.
Vince Valentini
And the quantum of it, you say it's 80% is in the second quarter. But I don't know if you can answer it this way. If it's your largest single source of output deal to date, can you tell us what your second largest was historically if you don't want to talk specifically about the Hulu deal?
Doug Murphy
Discovery deals. Am I right? The 85 hours we did last year to Discovery?
John Gossling
Yes. We can come back to you on that. I don't have the stuff in my hand.
Vince Valentini
Is it fair to say it's got to be like, several million dollars, if not north of $10 million given how many episodes?
John Gossling
That's not quite that big, but definitely in the several category.
Vince Valentini
Okay. And in terms of your own content buying, still lingering concern for a lot of investors I talked to, that you're doing well now, you've done the deal, obviously, with Peacock and others and you've got a very good partnership with Discovery, but people are still worried about their future. Can you give us any sense on two fronts? Given all these U.S. broadcasters have moved to the streaming platforms and they seem to be rewarded for it with their share prices, are you getting any sense in your negotiations and discussions with them that they'll be reluctant to renew linear or digital rights the next time around? And the second aspect of that is, can you give us any sense of the renewal cycle? Like how many of your sort of key deals would expire in the next 12 months, versus 24 months, versus ones that may be longer term?
Doug Murphy
I'll start, John. You can jump in. So, I think what's important to recognize here is -- and I alluded to it in my remarks -- around the sustainability and resilience of the channels business in Canada, in particular, the fact that almost three quarters of Canadians subscribe to a channel offering. And what's notable is that Canada is one of the most lucrative content licensing markets for our U.S. partners. And because of its market structure and Vince, you and I talked about this and I could talk to most of you on the call about this. I'll take a minute to remind everybody, because of the market structure in Canada, number one, very concentrated, three broadcasters representing 83% of all audiences. Two of those broadcasters are vertically-integrated with distributors. Those two broadcasters are 59% of all audiences. Those two distributors are rolling out the two de facto video platforms in Canada, X1 and Media Room. We are a regulated as well. Highly-regulated marketplace. We're looking for that to change, but for the minute, that's what's happening and there's a high degree of collaboration within the country in terms of shared books on audience segments, selling, using automation, and in terms of audience, buying. And for all those reasons, the resiliency of the channels business in Canada, it remains very strong as opposed to the U.S. where the market structure is different, a lot more competition, different regulatory environment, experiencing what some have described as a 'pay TV apocalypse'. So, when all is said and done, the U.S. players are evaluating their strategies in every given market based on each market's unique structure and evaluating it based on the licensing revenues that they plow those markets. And in our opinion and we've been consistently able to demonstrate this, we will be able to renew all of our deals and we're working in concert with all of these channels providers to explore ways to work together, to pursue the digital streaming opportunities. In some cases, we'll work collaboratively like we did with Peacock and others. As in terms of Disney, they'll go on their own, but the Disney channel business, for example, remained extremely important to Disney and we have every piece of confidence that we'll continue to be in that business for years to come. As far as what renewals are when, we do not disclose that as a matter. But what I can say is that every year for the last decade, we've been working on various sorts of renewals, extensions, or recharacterization of our output deals or our content supply agreements. So, we have every confidence we'll be successful in renewing those to come up in the years ahead.
Vince Valentini
That was good, thanks. And let me just grab one to try to clarify on Adam's question. In terms of the advertising sort of pacing in the third quarter. I want to make sure we interpret this properly. You were down 31% in the third quarter last year and by all accounts, things just fell off a cliff from mid-March through till at least the end of April, maybe through a lot of May. So when you say things could be better if we were more vaccinated and there was more reopening, is it fair to say you're blue sky optimistic scenario, a few months ago? You may have hoped that you'd recover all that 31% in Q3 of this year and now you're only recovering closer to half of it? Or can you give us any sort of context? I don't want to believe the impression that you're not going to be up a lot in Q3 despite the renewed lockdowns.
Doug Murphy
So we're going to be up a lot in Q3, full stop. The question is how big? And so the categories that have been working, are still working communications direct to consumer, working government is working -- all the usual suspects, food is working nicely, health communications working nicely. It's just some of the categories that would be more attuned to the opening up. So, entertainment, at-home dining, retail, those are more effective. But not to confuse anybody, we expect to be up significantly in Q3 and in Q4. It's just the question of how big?
Vince Valentini
Thank you.
Doug Murphy
You're welcome.
Operator
And your next question will come from Drew McReynolds from RBC Capital Markets. Your line is open.
Drew McReynolds
Yes, thanks very much. Good morning and sticking with the high or big picture, Doug, just to some of your opening remarks and closing remarks. Two questions. Just comment on what you're seeing with aggregate audiences in your TV business when you combined linear and digital. And second, you're probably one of the smartest minds out there on content cycles. Clearly, everyone on this call is aware. Corus Studios, Nelvana both benefiting from the current content cycle, which everyone says is unprecedented, leaps strong. I'm wondering if you could from your perspective where you stand today, just give an update on that content cycle here in 2021 versus maybe what it would have looked like a couple years ago and perhaps, where you think it's headed over the next couple of years?
Doug Murphy
Okay. Was there two questions there or just the one, Drew? Was there one before the content cycle?
Drew McReynolds
Yes, just the aggregated audiences to your TV properties, yes.
Doug Murphy
Okay. Yes. So linear television continues to be in decline from a total audience delivery perspective. I think the recent stats are somewhere between 8% and 10% to 12%, somewhere in that kind of category. But digital video views, not surprising are growing. So when you aggregate audiences, they're offsetting and then some. And so the opportunity for Corus is to super-serve those linear television subscribers as I mentioned on my remarks to 73% with investments in Global TV app, which because it's got a free in front of the wall offering can also reach a lot of those non-subscribing people as a sample mechanism to get them to potentially come into the bundle. And that's how we're working in concert with our distributors to ensure the resiliency of the channel's business. And then we're pursuing those new audiences [indiscernible] or importantly, one user profile is sort of the super user, which people that have bundles and have the variety of different streaming services and that's STACKTV and other SVOD products appeal. So overall, total content consumed video is up. And our job is to make sure we can participate in all of that demand for viewing. And accordingly, those are impressions that become inventory for sales, hence, the growth we're seeing in our digital video business, both advertising and new platforms subscriptions. So that's just the common on that. There's a big market out there that we're participating in. It's not just the one that's on the linear one. There's lots of opportunity. As far as content cycles are concerned, we've been extremely prudent about where to play and how to win decision-making. And animation remains an area we're quite excited about, with ramping up our production investments and development investments, not just in television, but now in YouTube Shorts form product and also in feature animation, which we feel both areas have some enormous promise and still lots of growth opportunities there. As we all know or most of us probably know, the kids part -- I talked about NFL anchoring the linear bundle, kids content anchors the SVOD appeal for subscribers. Your Netflix, or Apple, or Amazon, everybody wants kids' content. So there is unlimited upside in there. The real gating mechanism for us on animation, is having that projects in the pipeline and ensuring that we make high quality creative that gets to two, three, four or five seasons and the team knows that that's their job to deliver. The other part of our content cycle strategy is around in lifestyle and factor reality. The team is doing a phenomenal job. There witness today's big announcement with Hulu. We're making really smart, creative decisions on the kind of content we're making to continue to resonate both with our audiences here in Canada, but worldwide, and we're putting the pedal down in that piece of the business as well with increased development spending. So expect significant continuous growth on both Nelvana and Corus Studios. And then we're continuing to look for other investments and content. At the moment, they are all organic. We do not believe that there's any values out there in terms of M&A. So, we're delivering consistent growth by just investing in our own ideas. We'll continue to do that, but I think this cycle for content is going to be here for a very long time because there's so much demand out there on behalf of broadcasters and streamers alike.
Drew McReynolds
And just a last quick follow up on that, Doug, from a supply-demand perspective. When you look at the supply and your component of that supply, do you think there should be any concern here on oversupply or just nowhere near that from your perspective?
Doug Murphy
Here is where our model is so attractive. The Corus advantage -- you've been following us probably almost as long as anybody else -- we take money that we require to spend anyways and spend it on ourselves and we use it to drive audiences in Canada. Those shows are virtually fully-financed by the time they leave Canada. So, we don't have a big deficit investment like most producers do. We don't have to cover a big deficit when they go to sell. So, the margin on our product is extremely attractive, which is kind of why it's hard. Every time we look at any potential piece of M&A, we're going, 'Well, we can make that show'. So, for us, I don't really worry about the demand weakening because we don't have a lot of risk exposure. And I also know that the real key -- this is the same that we keep talking to our teams about over and over again, you've got to get at the multiple seasons. One-and-dones don't work. We can build franchises like Islander Bryan or Home To Win -- those are what work because volume and repetition is what's really important to audiences and the buyers alike. I'm sure all of us on this line have watched our wives bingeview Property Brothers, Love It or List It, or, whatever the show is and that's part of the appeal of that sort of content.
Drew McReynolds
That's helpful. Thank you.
Doug Murphy
You're welcome.
Operator
And your next question will come from David McFadgen from Cormark. Your line is open.
David McFadgen
Hi. Yes, a couple of questions. So maybe just pushing you a little bit further on Q3 TV. Trends. Would it be safe to assume -- you said that it's going to be up, it's going to be up big, but not sure how much. But would it be safe to assume that it's going to be up at least, 10% plus? Is that a safe assumption?
Doug Murphy
John, you want to take that one?
John Gossling
I think so, David. As Doug said, there's going be growth, it's just a question of how big? So, pre-Wave Three, I think we would have been well above that. But I think we're still confident of double digits.
David McFadgen
Okay. And then the comeback on radio, is it just going to be a function of we need all the lockdowns to end and all these local merchants to be able to run a business normally and then the third advertising is just a function of that? We're just going to have to wait for that to happen before radio actually starts to come back?
Doug Murphy
Predominantly, yes. We saw very impressive year-over-year comps. Out west [ph] for example, where up until recently, the results on the pandemic were very promising. So, now everybody's snapping back, to emergency measures. As I say, there's a lot of pent up demand to give back to business and open the doors and to get back the marketing businesses out there. So, I think the best forecasting mechanism for everybody would be to just track the jabs in arms because that will be the kind of the leading indicator as to a more rapid recovery in terms of our advertising revenue. And again, we are planning radio. Q3 will be growth and advertising on both radio and television. I'll declare that. This is definitely going to be growth. The question again is just how much?
David McFadgen
Yes. And are there any other potential large output deals in the works? Something similar to Hulu that you're in the negotiation on?
Doug Murphy
Yes, there's a couple out there. And the nice thing is that the team is pretty disciplined about ensuring -- we package together a significant amount of content for a variety of different reasons. I obviously want to get as much revenue in the first instance as possible, but the other thing we're trying to do is to establish ourselves as a priority vendor to some of these big streamers, so that they think beyond a simple acquisition then they'll think about co-productions and co-development arrangements. So, all of those are in motion with the streamers. And again, we're always making sure that we continue to work with our broadcasters. Interestingly, one of the things that we're seeing out there -- and I think it's in part the function of our co-production talents -- we've demonstrated that we're great to work with, we're good with creative and we're smart business people. So, we've got these co-production frameworks, which we've spoken to a lot about and we're able to put that on the table to look for other ways to grow. And broadcasters now are saying, 'I need to get more content because the streamers are out there shopping as well'. So, we can reach out proactively to broadcasters across the world and invite them into co-production agreement. So, it's a very disrupted and yet dynamic market, I guess is the shorthand [ph].
David McFadgen
Okay. All right. Thank you.
Doug Murphy
You're welcome.
Operator
[Operator Instructions] Your next question comes from Jeff Fan from Scotiabank. Your line is open.
Jeff Fan
Thank you. Good morning to you both. Big [ph] numbers we just saw. Looks like your spring forward thesis or chapter is holding very firm, Doug. I want to ask some questions about Stack. Since some of the market participants or the investment communities really focus on the streaming subscriber numbers and the streaming P&L, are you at the stage where you can sort of break out not just the revenue -- I think we can calculate that -- but the P&L related to Stack? Just to give the street a little bit of an idea as to how we may be able to value this separately from your traditional business? And then the second question on Stack is just about the structure and the economics of the deal that you have with Amazon. Looks like we're about two years into the deal. How long is that term of that deal? And then furthermore, are you getting Stack subscribers from other digital distributors at this point? Or is it primarily coming from Prime? Thanks.
John Gossling
Hey, Jeff, I'll start this. There's a lot of questions in there. In terms of Stack, the way we look at it, is it lives within the overall TV ecosystem. Of course it's like our 33 specialty channels all live together. There's not individual operations for each channel. So Stack is living and taking advantage of a lot of that infrastructure, whether it's programming, whether it's marketing, whether it's the technical aspects of up delivering. We don't take any allocated view of cost right now on it. We're just strictly looking at the overall incremental contribution. So, in that respect, it's a very high contribution. But obviously, it has to cover the overheads that support it. But I have to say, we just don't really go to that level of trying to allocate because frankly, you could allocate however you wanted and that would potentially create numbers that aren't necessarily meaningful. So right now as it grows, we're really watching what the revenue contribution is and there are some incremental costs associated with it, primarily around technology and marketing, but not a lot. So it's providing a very good benefit to us for sure. I'll let Doug talk about the deal.
Doug Murphy
What I got to say, is that it's a multi-year deal with lots of room left. We're smart and cutting a long term deal. There's many years still ahead of us. The economics of the deal are pretty -- again, that's out there for a sleuth-full. Analysts could dig that one up. It's a pretty standard [indiscernible] share of the economics, come to Corus. We're extremely strategic for Amazon as a partnership because it helps on their Prime. Prime is under-penetrated in Canada. We're part of a value proposition as they want to grow. We're helping them grow and they're helping us grow, so it's a very collaborative and symbiotic partnership, which we're excited about. And the opportunities in terms of advertising within Stack on Amazon are only beginning for us. There's another leg up in the coming years as some of the newer technology road maps kind of roll out. So, we're talking about our new platform percentage of 8%. I'll note that Viacom and Discovery were celebrated again to 10%. We're going to be there soon, too. So we're delivering streaming growth on-par with our U.S. peers, yet, with three or four terms of multiple below them. So, we're in part wanting to make sure that everybody recognizes that. That we're able to pursue these growth opportunities very, very well. And in terms of other platforms beyond Amazon, as I was saying to an earlier question, there's a lot of opportunity out there in terms of FAST channels, Free Ad-supported Streaming Television, basically conventional television online with payment video content. It's interesting. One of the lanes, which we think is open is that lane, the SVOD world, the Subscription VOD with no ads is sort of a red ocean. There's a blue ocean out there, we think and as supported AVOD until online. That's beyond Stack, Jeff. So Stack is a product unto itself. We think there could be other iterations of Stack in Canada on new or existing platforms, but nothing that we're able to discuss in any detail at the moment. But we also think there's new opportunities to pursue other digital revenues as I just alluded to. So, again, we're investing to support the channels business in collaboration with our distributors to ensure that that 73% is as robust as possible -- and by the way, there's a couple of tailwinds in there, which I can get back to, which you probably know, but also, we're ensuring that we have lines in the water for all of these new digital video opportunities. I think the tailwinds real quickly, again, the narrative always is about the challenges as this is going away. I'm here to tell you, it's not. There's two interesting trends that we're seeing: one isn't surprising, that new Canadians are very likely to subscribe to a linear channel bundle of some sort; and what interestingly is it the STACKTV [ph] mandated unbundling has actually helped in some way, ensure the resiliency of the of the bundle. Our pay TV bundle is roughly half priced as to that in the U.S. So that's interesting. And then we've all heard about the millennials buying homes. Guess what? More than half of every millennial advisor first home subscribes at their first channels package. And so there are things underneath the surface that aren't being caught in the narrative of the decline of television, which, we're pursuing to ensure the resiliency of the channels business.
Jeff Fan
That's helpful. If I can just follow up on I think it was Vince's question, regarding supply of content into Canada and the resiliency and your ability to secure those. My question is, as you are able to sign some of these larger output deals, like your own supply deals to studios and distributors like Hulu, does it help the negotiation in terms of them thinking about how to bring shows into Canada? Like is there a better balance that you become better partners so that you're able to sell to them and they in turn would sell it through you, so that there is some kind of a protected relationship there from your perspective? Just curious if you have any thoughts there?
Doug Murphy
Yes, that's precisely our approach. We've changed the conversation from a number of years ago, from what we have a one-way rental to a two-way content partnership. And so we're doing that now. We started that with Nickelodeon. We now have various conversations going on with all of our content providers for our channels business and we're engaging in discussions with our streaming partners about, co-producing content. So the key for us is to establish ourselves as a source of revenue in the Canadian market. As I mentioned, a lucrative market for many, but at the same time as a source of content for the global market in partnership with these same players. So that's this notion we talked about at Corus about becoming indispensable to our partners. So that there's a lot of stickiness in the business in the commercial relationships and that's a fundamental part of our confidence in terms of being able to retain content for our linear business and be able to continue to work to pursue new revenues on the digital platforms whilst all the time, growing our content business internationally in partnership, potentially with those very same content players.
Jeff Fan
That's great, thanks, Doug.
Doug Murphy
You're welcome.
Operator
At this time, I have no further questions. Thank you. I turn the call back over to our presenters for closing remarks.
Doug Murphy
Thank you, operator Michelle, and everybody. We appreciate the time today on the call as ever. We're always into talking more, so feel free to reach out if you have any questions. I'd like to thank the team of Corus for their commitment to the business and each other and I want to encourage all of us to hang in there, stay safe. We'll get through this. Look forward to talking to you soon. Thanks, everybody. Bye, bye.
Operator
Thank you, everyone. This will conclude today's conference call. You may now disconnect.
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