RBC comments Not as detailed as the BNS - but same numbers and same conclusions, though they held off dropping what is now a sky high target.
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Sentiment: Negative Key Details
Corus announced late Friday after market close that the company has been informed by Warner Bros. Discovery that some of its programming and trademark output arrangements will not be renewed upon expiry on December 31, 2024. Corus does not expect any changes to the programming of the channels until 2025.
Implications
This announcement is a negative surprise to us and comes at a challenging time for Corus (advertising recession and high leverage) alongside many known unknowns. We understand the impacted programming and trademark arrangements encompass five Corus channels (HGTV Canada, Food Network Canada, Magnolia Network, Oprah Winfrey Network, Cooking Channel Canada), which based on 2022 CRTC specialty channel data generated approximately $155MM in regulated revenues and approximately $50MM in associated operating income (versus F2023 consolidated revenues and adjusted EBITDA for Corus of $1.5B and $334MM). While we expect Corus to potentially rebrand certain channels and continue to invest in the associated Canadian programming, the known unknowns include: (i) the extent to which these and other initiatives can offset the financial impact with both HGTV and Food Network being flagship lifestyle channels; (ii) the flow-through impact on unregulated assets (such as STACKTV); (iii) the extent to which other programming and trademark output arrangements are at risk; and (iv) the extent to which government/ regulators now see more greater urgency in protecting independent broadc