Rogers 2003 Annual Report Download - page 57

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2003 Annual ReportRogers Communications Inc. 55
Publishing
Revenue at Publishing was $289.9 million, a reduction of $1.7 million, or 0.6%, from $291.6 million in 2002. Publishing expe-
rienced strong growth in its Women’s group of magazines, which was offset by modest declines in its other groups,
resulting in the overall 0.6% decline year-over-year. The modest decline in revenues was offset by year-over-year reduc-
tions in operating, general and administrative expenses, as Publishing focused on tightening its cost structure. The efforts,
offset somewhat, by increased spending on advertising and promotion initiatives, resulting in a 6.1% improvement in
operating profit.
Radio
Radio revenue was $177.2 million, an $11.0 million or 6.6% increase from $166.2 million in 2002. Fiscal 2003 included the full
year results of the 13 radio stations acquired from Standard Radio Inc., effective May 1, 2002 and contributed to the
majority of the year-over-year increase in revenues. Excluding the newly acquired radio stations, Radio’s revenues were
up only modestly from 2002 reflecting a slow turn-around in the demand for local advertising and the reformatting initia-
tives at several of its stations, the expenses for which were included in general and administrative expenses. In addition to
the reformatting initiatives, Radio increased spending on sales and marketing by 13.1% in 2003 as compared to 2002 in an
effort to promote the reformatted stations as well as reinforce the positioning in the market of certain stations in key mar-
kets in Canada.
Radio’s operating profit decreased by $3.3 million, or 7.9%, from 2002 to $38.7 million. The decline was attributable
to format changes which generated additional sales and marketing costs during the transition, and which also generally
create a significant temporary decline in revenues during the initial reformatting period.
Television
Television includes the results of OMNI.1 (formerly CFMT-TV), OMNI.2 and Rogers Sportsnet. Canada’s only regional all-
sports network, Rogers Sportsnet derives revenues from both advertising and subscriber fees from cable and satellite
customers across Canada. Revenue from Rogers Sportsnet increased year-over-year by $16.5 million in 2003. OMNI.2 tele-
vision began broadcasting during the third quarter of 2002 in the Toronto, Hamilton, Ottawa and London, Ontario
markets only five months after receiving licence approval. The licence allows Media to combine the infrastructure of the
new station with its existing Toronto multicultural television operation, OMNI.1, creating an efficient combined operation
with a dual broadcasting stream. Revenue at the OMNI Channels increased by $10.2 million to $63.3 million compared to
2002. Expense increases at both OMNI and Sportsnet were 4.7% in 2003 as compared to 2002 with much of the increases
related to programming. The year-over-year increases in revenues at both the OMNI channels and Rogers Sportsnet trans-
lated into a $20.0 million, year-over-year increase in operating profit.
The Shopping Channel
The Shopping Channel’s revenue increased $8.3 million, or 4.1%, to $210.5 million from $202.2 million in 2002. In 2003, off-
air sales represented 26.8% of revenue, up from 25.1% in 2002, and included catalogue, Web site and physical store sales.
Operating profit at The Shopping Channel was $19.2 million, a $0.8 million or 4.4% increase from $18.4 million in 2002.
Results at The Shopping Channel were impacted by regional issues such as the SARS epidemic, the blackout in Ontario
and other world affairs such as the war in Iraq, all of which served to detract viewership and in turn required The
Shopping Channel to spend more on sales and marketing activities.
Media Employees
Media ended 2003 with 3,025 FTEs, a decrease of 175 from 3,200 at December 31, 2002. The reduction in staff at Media was
directly related to the focus on obtaining operational synergies across its properties and the implementation of cost
reduction initiatives.
Total remuneration paid to Media employees (both full and part-time) was approximately $204.9 million, an
increase of $7.6 million or 3.9% from $197.3 million in the prior year.
Media PP&E Expenditures
Total Media PP&E expenditures in 2003 were $41.3 million compared to $42.7 million in 2002. The decrease in 2003 was pri-
marily due to one-time spending in 2002 on the construction of a national distribution centre for The Shopping Channel
and the startup costs related to OMNI.2.
MEDIA RISKS AND UNCERTAINTIES
Media’s business is subject to several operating risks and uncertainties that may result in a material adverse effect on its
business and financial results as outlined below.
Dependency upon Advertising
Media depends on advertising as a material source of its revenue and its businesses would be adversely affected by a fur-
ther material decline in the demand for local or national advertising. Media derived approximately 53.4% of its revenues
Management’s Discussion and Analysis