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ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 43
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
five Citytv television stations located in Toronto, Ontario;
Winnipeg, Manitoba; Edmonton and Calgary, Alberta; and
Vancouver, British Columbia.
MEDIA’S STRATEGY
Media seeks to maximize revenues, operating profit and return on
invested capital across each of its businesses. Media’s strategies to
achieve this objective include:
• Focusingonspecializedcontentandaudiencesthroughradio,
publication and sports properties, as well as continued develop-
ment of its portfolio of specialty channel investments;
• Continuingtoleverageitsstrongmediabrandnamestoincrease
advertising and subscription revenues, assisted by the cross-
promotion of its properties across its media formats and in
association with the “Rogers” brand;
• Focusingongrowthandcontinuingtocross-selladvertisingand
share content across its properties and over its multiple media
platforms; and
• EnhancingtheSportsEntertainmentfanexperiencebyadding
talented players to improve the Blue Jays win-loss record and by
making physical upgrades to the Rogers Centre.
RECENT MEDIA INDUSTRY TRENDS
Increased Fragmentation of Radio and TV
In recent years, Canadian radio and television broadcasters have had
to operate in increasingly fragmented markets. Canadian consum-
ers have a growing number of radio and television services available
to them, providing them with an increasing number of different
programming formats. In the radio industry, since the introduc-
tion of its Commercial Radio Policy in 1998, the CRTC has licenced
numerous new radio stations through competitive processes
in most markets across Canada. In that time, the CRTC has also
licenced a large number of additional new FM stations through
AM to FM station conversions. In 2005, the CRTC licenced two satel-
lite radio providers, both of which are affiliated with U.S. satellite
operators and both of which began offering service in Canada. In
the television industry, the CRTC has licenced a number of new,
over-the-air stations and a significant number of new digital tele-
vision services. The new services and the new formats combine to
fragment the market for existing radio and television operators.
Ownership of Canadian radio and TV stations has consolidated
through the recent acquisitions by CTVglobemedia of CHUM
Limited, by Canwest Global Communications Corp. of Alliance
Atlantis Communications Inc., and by Astral Media Inc. of Standard
Radio Inc. This results in the Canadian industry being left with
fewer owners but larger competitors in the media marketplace.
MEDIA OPERATING AND FINANCIAL RESULTS
Media’s revenues primarily consist of:
• Advertisingrevenues;
• Circulationrevenues;
• Subscriptionrevenues;
• Retailproductsales;and
• Salesoftickets,receiptsofleaguerevenuesharingandconces-
sion sales associated with Rogers Sport Entertainment.
Media’s operating expenses consist of:
• Costofsales,whichisprimarilycomprisedofthecostofretail
product sold by The Shopping Channel;
• Salesandmarketingexpenses;and
• Operating,generalandadministrativeexpenses,whichinclude
programming costs, production expenses, circulation expenses,
player salaries and other back-office support functions.
Summarized Media Financial Results
Effective June, 2006, due to increased ownership, the results of
operations of The Biography Channel Canada and G4TechTV Canada
are consolidated with the results of Media. The operating results of
five Alberta radio stations and Citytv, which were acquired in 2007,
are included in Media’s results of operations from the dates of
acquisition on January 1, 2007, and October 31, 2007, respectively.
2007 MEDIA REVENUE MIX
(%)
Radio 20%
The Shopping Channel 21%
Television 22%
Publishing 23%
Sports Entertainment 14%
Years ended December 31,
(In millions of dollars, except margin) 2007 (1) 2006 % Chg
Operating revenue $ 1,317 $ 1,210 9
Operating expenses before the undernoted 1,141 1,054 8
Adjusted operating profit (2) 176 156 13
Stock option plan amendment (3) (84) – n/m
Stock-based compensation expense(3) (10) (5) 100
Operating profit (2) $ 82 $ 151 (46)
Adjusted operating profit margin (2) 13.4% 12.9%
Additions to property, plant and equipment (2) $ 77 $ 48 60
(1) The operating results of Citytv are included in Media’s results of operations from the date of acquisition on October 31, 2007.
(2) As defined. See the “Key Performance Indicators and Non-GAAP Measures” section.
(3) See the section entitled “Stock-based Compensation Expense”.