Corus Entertainment Inc. (CJRB) Earnings Call Transcript & Summary

Good morning. My name is Margarie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Corus Entertainment Q1 2023 Analyst and Investor Conference Call. [Operator Instructions] This call is being recorded. I will now turn the call over to Mr. Doug Murphy, President and CEO of Corus Entertainment. Mr. Murphy, you may begin your conference.

Thank you, operator, and good morning, everyone, and Happy New Year. Welcome to Corus Entertainment's Fiscal 2023 First 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-Events and Presentations section. Now let's move to the standard cautionary statement found on Slide 2. We note that forward-looking statements may be made during this call. Actual results could differ materially from forecasts, projections or conclusions in these statements. We'd like to remind those on the call today, in addition to disclosing results in accordance with IFRS, Corus also provides supplementary non-IFRS or non-GAAP measures as a method of evaluating the company's performance and to provide a better understanding of how management views the company's performance. Today, we'll be referring to certain non-GAAP measures in our remarks. Additional information on these non-GAAP financial measures, the company's reported results and factors and assumptions related to forward-looking information can be found in Corus' first quarter 2023 report to shareholders and the 2022 annual report, which can be found on SEDAR or in the Investor Relations-Financial Reports section of our website. I will start on Slide 3 with an update on the impact of the current macroeconomic environment on our business. I will then briefly review the progress we are making in advancing our strategic plan and its priorities. I will also discuss our cost structure and go-forward actions that will address recent increases. To begin, I will reiterate my comments from last quarter. We are in an advertising recession. This is clearly visible in our revenue results for the quarter and evident across the entire media sector as reported by all of our peers recently. The decrease in advertising revenue is the logical result of companies trying to manage their profitability as they contend with inflation-induced cost increases and the impact of supply disruptions on their businesses. One of the first choices companies make is to reduce costs and cut discretionary spending such as advertising. Again, to repeat, we do not know the depth nor the duration of this economic contraction. Based on our prior experience, in the early stages of a recession, the broader media industry experiences abrupt declines in advertising revenues, followed by an equally quick recovery once the economy recovers. The declines in advertising revenue this quarter are ongoing evidence of the cross currents and riptides that we are experiencing in today's advertising marketplace. These remain mostly pandemic and supply chain-related. Let me cite a few examples. With restaurants and out-of-home dining now fully open, consumers love affair with food delivery to their home and the related expensive service charges and delivery fees has ended. Accordingly, the direct-to-consumer food delivery category advertising spending is down. You've all seen the stories about this year's cold and flu season, not to mention the empty medication aisles in grocery stores and pharmacies. That category's advertising spending was down given depleted inventories. Supply chain issues persist in the automotive category with many cars arriving, but they're presold. Presold inventory does not need to be advertised. Other categories with reductions in advertising spending include household goods, appliances, electronics and toys, again, impacted by pandemic-related disruptions. Now within categories, there's also much variability. As each advertiser adapts to the macroeconomic conditions in their own way based on their business strategies, adjusting their spending for their own unique challenges and opportunities. For example, there are new growth categories such as gaming, a welcomed new arrival to the advertising marketplace. Within the packaged goods sector, while some clients ebb, other clients flow, investing to increase their brands' impressions and presence to take advantage of their competitors' void. Our talented sales team is there to serve the needs of our advertisers, whatever they may be. Corus delivers strong differentiated brands that can be bought across an expanding linear and digital multi-platform offering with improved targeting, automation and a suite of customizable advertising options providing a 360-degree solution that is highly attractive to advertisers and agencies alike. Visibility is still a bit limited and advertising revenue softness in television will likely persist. However, right now, we expect to see sequential improvement in the rate of decline in television advertising revenue in the quarters ahead as these cross turns and riptides do appear to be stabilizing. With this backdrop in mind, let me now take a moment to talk about our strategic plan and its priorities. Our long-term strategic plan remains unchanged. We are focused on transforming how we sell media. We are putting more content in more places. We're investing in our owned content business. Recent highlights demonstrate the progress we were making advancing our strategic priorities in the face of these advertising headwinds. Let me cite these. We have improved the value proposition of STACKTV by adding our English Language suite of Disney channels. We have expanded our streaming portfolio to broaden the scale of our advertising offerings with the launch of Pluto TV. We launched TELETOON+, a new premium kids and family S5 streaming service available on Amazon Prime Video and Bell Fibe TV. We have expanded our authenticated content offering on the Global TV app as well as on STACKTV, both now including more back seasons of big network franchises, such as NCIS and FBI, full in-season stacking for Saturday Night Live, and a winning slate of Peacock Originals that include the Resort Vampire Academy and a new season of the Top Item Driver of Bel-Air, launching in March. These purposeful moves demonstrate how we are innovating in this challenging market to grow our total video audience delivery by adding new premium digital video impressions in addition to those large audiences delivered by our traditional TV channels platform. Further, we are growing our slate of content that we will sell into the international marketplace that diversifies our business from the Canadian economy. This successful implementation of our strategic plan is building a more resilient business for the long term. Moving to Slide 4 and the key financial highlights for the quarter. Our consolidated revenue of $431 million was down 7% for the quarter, resulting from lower advertising revenues. Total consolidated segment profit was $132 million for the quarter, with free cash flow of $21 million. These revenue declines, combined with the higher amortization of program rights, resulted in leverage of 3.38 net debt to segment profit at the end of the quarter. More detail to follow on this. Over to Slide 5. Canadians have more ways than ever to consume video content, whether through their traditional set-top box, where 2/3 of Canadians enjoy their channel subscription, or through streaming and other nonlinear on-demand services. Overall, multi-platform audiences in Canada are growing. Corus is well positioned to benefit from the large and expanding total video addressable market, leveraging our fan-favorite linear channels to pursue opportunities in premium digital video. Equity capital markets are no longer rewarding growth at all cost direct-to-consumer streaming ventures. As a result, the entire media and entertainment industry now is acutely focused on optimizing their programming investments and audiences across both traditional linear and on-demand streaming platforms as most direct-to-consumer streaming platforms struggle to generate positive cash flow and earnings. In contrast to this, at Corus, we have taken a different approach by building a capital-light, partner-led, direct-to-consumer strategy. We are leveraging our asset base in existing channels platform to pursue premium digital video without making bet-the-company type investments and out of the production of the content or in the technology platform stack or both. To be crystal clear, when I say leveraging our asset base, I refer to optimizing our linear channels business while simultaneously pursuing streaming opportunities in this growing digital video marketplace. Our strong, innovative and long-standing partnerships with all the U.S. studio majors has been the key that has now unlocked these new digital on-demand premium video opportunities. Moving to Slide 6. On December 1, Corus and Paramount Global celebrated the launch of Pluto TV in Canada with over 117 channels and more than 20,000 hours of free content. This represents the most robust content offering on launch of any international market. Our early results from Pluto TV are encouraging, with the app ranking among the top 2 free apps on Canada's Google Play store, Amazon App Store and Apple TV. Our Corus channels, including content from across our family of brands as well as our 24/7 global news feeds are performing very well as expected, given their strong local appeal. We want to recognize the extraordinary efforts from the Corus team and our partners at Paramount Global in making this highly anticipated launch a reality. Over to Slide 7. We are encouraged by the early results from our 3 Cheers for the Ears! marketing campaigns, celebrating the arrival of the suite of Disney channels on STACKTV. This marketing push harnesses the power of the Disney brand to drive awareness and subscriber acquisition to the platform. Although it is early days, we are seeing promising traction in our trial subscription numbers. We are confident that these powerful channel additions and other improved value proposition initiatives, such as the addition of more back seasons of popular content will further momentum of STACKTV in the quarters ahead. Moving to Slide 8. As operators, the streaming platforms look to optimize spending on production investments, they are seeking other sources of content supply, which is a perfect setup for our owned content ambitions. Our growing slate of content in production and for sale will benefit from this demand in the international marketplace. While we saw modest declines in our distribution, production and other revenues in Q1, Nelvana and Corus Studios did grow. We expect strong growth in our content business in the coming quarters when compared to the same quarters last year. Over to Slide 9. It is clear that as advertising revenues decline, we are also experiencing an increase in programming costs, not an ideal combination. At Corus, we have been steadfast in our strong conviction that our U.S. studio partners needed us as much as we needed them. This has been proven out as we have successfully renewed, extended and broadened the rights acquired through our content supply agreements well into the next regulatory regime. These investments ensure the long-term viability of our traditional channels business, and now provide us with an opportunity to grow our streaming portfolio, in addition to our large television audience delivery with new premium digital video impressions. These are smart programming decisions that require increased programming investments. The other increases in programming costs are required as part of our regulatory obligations. These result from the dated regressive spending requirement calculated as 30% of prior year's regulated revenue, along with the many other restrictions that limit our ability to compete. Unfortunately, our broadcast regulator decided December before last, the course would be required to make up the approximately $50 million in Canadian production expenditures that we could not spend given the COVID-19-related production shutdowns in 2020. This unexpected decision made us spend more on Canadian programming in this challenging economic environment. Now while we are excited about our successful programming investments with our U.S. studios that ensure the long-term resiliency of our business, the dated off strategy, regulatory spending requirements is currently affecting our financial performance. The only good comment I would make is that these will pass, and we expect reduced Canadian programming expenditures on a run rate basis of $20 million in the years ahead. Every company and every industry these days must address the changing labor market as well as the additional costs from the post-pandemic return to normalized business operations. Companies must adjust to new workforce dynamics, whether or not that's disruptions from early retirement or an unwavering demand for remote work flexibility requested on behalf of workers, especially younger ones. At Corus, we are making necessary investments to accommodate the needs of our people. In addition, given the investments we have made in acquiring content for our channels and on-demand streaming platforms, a companion marketing investment is required to promote these new offerings to our audiences. So that's important context. The CP catch-up cost will pass. The incremental U.S. program investments will generate margin-accretive new digital revenues. We will always invest in our people, and we must market our products. Importantly, and in light of our revenue weakness, we are conducting an enterprise-wide cost review that is looking at all expenses and operations. We will both streamline our operating model and asset base over the coming quarters and identifying meaningful cost savings on a run-rate basis. With that, I will now turn it over to John to discuss our Q1 results. John?

Thanks, Doug. Good snowy morning, everyone. I will start on Slide 10. Challenging macroeconomic environment that emerged last summer certainly persisted into the fall, impacting television advertising demand in our first quarter and contributing to lower consolidated revenue of $431 million, and that's a 7% decrease from the prior year. As a reminder, in Q1 of the prior year, the pre-Omicron recovery was well underway with strong consolidated revenue growth of 10%, and that was bolstered by TV advertising revenue growth of 16%. Consolidated segment profit was $132 million for the quarter, reflecting the lower TV advertising revenue, coupled with increased programming costs and marketing investments in STACKTV, as Doug has just mentioned. Consolidated segment profit margins were 31% for the quarter. Consolidated net income attributable to shareholders for the quarter was $0.16 per share. We delivered free cash flow of $21 million in the quarter. And as a reminder, last year, our free cash flow in Q1 benefited from a nonrecurring $43.5 million distribution from a venture investment. Net debt-to-segment profit was 3.38x at November 30, 2022, compared to 3.02x at August 31 of last year, reflecting the impact of the lower segment profit and slightly higher debt balances. Now let's turn to our TV results for the first quarter, as detailed on Slide 11. Overall, TV segment revenues were $402 million for the quarter, and that's down 8%. This was mainly driven by lower TV advertising revenue, which declined 11% in Q1, and that's compared to a strong growth of 16% in the prior year, as I mentioned. Subscriber revenue was consistent with last year, with streaming subscriber growth from expanded distribution of streaming services acting to offset declines within the traditional distribution system. As a reminder, in Q2 of fiscal 2022, we did benefit from approximately $6 million of retroactive adjustments from the renewal of distribution agreements, and that's going to set up a difficult comparable for us in the coming Q2. Distribution, production and other revenue was 3% lower for the quarter, and that was driven by the timing of content licensing sales and lower publishing revenues, but partially offset by the addition of Aircraft Pictures last February and modest increases from Nelvana and Corus Studios. We do expect significant growth from our content business in the coming quarters, supported by a robust international sales pipeline. We remain encouraged by our progress in creating incremental new platform revenue, increased adoption of optimized advertising and prospects for our slate of original content to position us for longer-term growth opportunities. Direct cost of sales was up 8% for the quarter, and that's driven mainly by the 7% increase in amortization of program rights, which resulted from the investments in U.S. studio output deals and an increase in original programming deliveries. On a full year basis, we anticipate that programming costs will grow modestly, with approximately 1/3 of this driven by the CRTC's catch-up decision. TV G&A expenses were up 5% from the prior year quarter. And in the current quarter, G&A mainly reflects an increase in marketing investments to promote our fall programming in STACKTV, higher development costs in our content business and other costs related to growth areas. Overall TV segment profit was down significantly in the first quarter, primarily as a result of the contraction in advertising demand, higher amortization of program rights and film investments and G&A expense increases. TV segment profit margins were 33% in the current year quarter compared to 41% in the prior year comparable period. As detailed on Slide 12, despite the contraction in advertising demand, we are encouraged by the growth in our new platform and optimize advertising revenues. New platform revenue was $40 million or 10% of total TV advertising and subscriber revenues in the first quarter, and that was up 13% or $4 million from the prior year quarter. The continued growth reflects the disciplined execution of our strategic plan as we deploy our expanded content rights in new places and connect with audiences in new ways to drive additional sources of revenue. As a reminder, this metric demonstrates some seasonality from quarter-to-quarter due to the higher linear advertising revenue mix in Q1 and Q3 compared to the lower demand quarters of Q2 and Q4. Optimized advertising revenue was also up significantly in Q1, representing a new milestone of 55% or $138 million of total television advertising revenue in the quarter. This is an increase of 31% or $33 million in the prior year quarter as more advertisers explore the benefits of our targeted and automated advertising solutions. Now let's turn to our Radio results on Slide 13. Radio is certainly benefiting from resiliency in key advertising categories, including entertainment, travel, restaurant and retail, offset by continued softness in automotive. Radio segment revenue increased 2% for the quarter as a result of stronger local revenues, but partially offset by the impact of broader macroeconomic conditions on national sales. Radio segment profit increased 5% in the quarter, benefiting from the revenue growth, and Radio segment profit margin was 20% in Q1, that's consistent with last year. Right, over to Slide 14. Since introducing our new capital allocation policy in September of 2018, we have demonstrated our commitment to reducing bank debt, and we also termed out our bank debt with the issuance of 2 long-term, high-yield notes. In just over 4 years, we've repaid over $500 million of bank debt, which, combined with the funding of our dividend and share repurchases, has contributed to a total shareholder yield of $958 million. At the end of Q1, our net debt-to-segment profit increased to 3.38x compared to 3.02x at the end of the prior year, driven by the impact of lower advertising demand on our segment profit and lower free cash flow for the quarter. We exited the first quarter with $81 million of cash and cash equivalents and $214 million available to be drawn under our revolving credit facility. Our financial priorities remain unchanged. Importantly, we remain committed to increasing our financial flexibility over the longer term. In this low visibility environment, however, we believe it is prudent to conserve cash out of an abundance of caution. As Doug noted, we have and continue to take serious cost reduction measures. But given continuing uncertainty in the advertising environment and the macro conditions, the company has decided to take additional prudent measures. We will not renew our share buyback program when it expires next week. And consistent with this approach, the Board has decided to defer its decision on the declaration of the dividend at this time. The outside date for this decision is March 15, by which point the company expects to have more clarity on advertising market conditions and Q2 results. To be clear, we are not reducing, eliminating or temporarily suspending the dividend at this time. We will take this opportunity to consider the alignment of dividend declaration and payment dates. We completely understand the importance of our dividend to our shareholders and remain committed to our long-term dividend philosophy. Our foremost priority is to navigate this difficult environment as we have successfully done many times before, while carefully managing our expenses and our cash. We are confident in our long-term plan to position Corus for the future by investing in the business, delevering and providing attractive returns for our shareholders. And with that, I'll turn it back to Doug.

Thank you, John. Over to Slide 15. I want to take a moment to touch on an important journey we embarked upon 1 year ago. For more than 2 decades, Corus has supported a broad range of what is now referred to as ESG initiatives. This year, we are taking the next step and making it a priority to embed sustainability into all areas of our organization. Our commitment to bring a more sustainable company is outlined in our inaugural 2022 sustainability report. Our ESG goals that reflect people, planet and responsibility will be an integral part of how we deliver against our strategic plan and financial priorities, build resiliency, and demonstrate our ongoing efforts to make Corus a great place to work. The full report is available on www.corusent.com under the Sustainability section. Moving on to Slide 16. There has been significant change at the CRTC recently. We'd like to thank the outgoing Chair, Ian Scott, for his efforts, and welcome the new Chair, Vicky Eatrides. The new Chair takes the helm of perhaps the most poignant moment of change in the history of the Canadian broadcasting sector. This important sector, which brings the Canadian voice and contributes to the Canadian creative and cultural industry while providing necessary information in news across the country, yet it continues to be completely disadvantaged by decades-old laws and policies. At the same time, foreign players are allowed to enter the Canadian market unfettered by any obligations nor restrictions. We encourage the CRTC to move with purpose and act quickly. It is long past time for more modern equitable broadcasting regulations in this country. And now to briefly highlight today's key messages. While we are firmly of the view that we are in an advertising recession, our expectations are that we will see sequential improvement in the rate of our advertising revenue declines as we progress through the coming quarters. We are conducting an enterprise-wide cost review that's looking at all expenses and operations with a review to streamline our operating model. In addition to our CPE catch-up burden, that will pass. And when it does, we expect to see approximately $20 million of recurring cost savings. The immediate term challenges will not deter us from our purposeful execution of the strategic plan as we grow our total video audience delivery by adding new premium digital video impressions in addition to those large audiences delivered by our traditional TV channels platform. Our own content business will reap the rewards of our increased investments in our content slate with growth in episodic deliveries expected from Nelvana, Corus Studios and Aircraft Pictures in the coming quarters. It's a new year, and we want to take a minute to congratulate our team for their tireless efforts to provide news and entertainment programming for Canadians each and every day. The Corus team produces and distributes great content for radio, television, our streaming portfolio and our international buyers working in ways that we never thought possible not too long ago. Our commitment to our employees is to provide flexibility with working conditions that support the well-being of our people as a priority, which remains paramount to our future success. Thank you, and over to you, operator.

Thank you, Mr. Murphy. We'll take our first question from Vince Valentini from TD Securities.

A couple of things. First, John, the CPE catch-up, you said is about 1/3 of the modest year-over-year increase in program costs for 2023. I'm just trying to clarify what the pacing is here. For it to be 1/3, that would suggest a pretty big increase in what you have to catch up in this fiscal year versus fiscal 2022. I thought you already had a $15 million to $20 million of catch-up costs that was incurred last fiscal year. So maybe you can just clarify the $50 million, how it's spread over these 3 years?

Sure. We were just under 20 -- it's a good point, Vince. And just to be clear, in Q1, there really wasn't a year-over-year impact on Canadian. It tends to hit us more in the back half of the year and a little bit as well you can expect in Q2. So in big numbers, the $50 million rolls through is [ 2020's tens ], so that's 2022, 2023 and 2024. So this year, you're not going to say to me, well, you said there's going to be an increase. And it's really a few million dollars, and it's subject to sort of what's our ability to really measure the exact delivery dates and amortization impact of it. But, yes, it's a few million dollars' increase this year is the current view of it.

Okay. I'll bounce back and forth. Doug, one for you on the advertising outlook and your comment that -- I assume you don't have much visibility into Q3 and Q4 yet. So I assume your comment that things are getting a little bit better, it means that your Q2 advertising revenue decline looks better than Q1. Normally, you say you can't make those kind of predictions because so much comes in last minute. So what's giving you that confidence? Do you actually have confirmed bookings throughout January, February that you'd be confident you'll be down less than 11% this quarter?

Yes. We're feeling better about the trending of the business. The -- we do expect the decline level to be better in this quarter than it was in last quarter. And we're comping on, I think, December of last year, which, I think, is helpful. The general comments I'd make on it is the pandemic -- most of our advertising kind of riptides and cross currents are -- still looks like primarily pandemic-related. So there's disruptions that our advertising category partners are having in their businesses, and I cited a few. There's others like I mean just pet food shortages and there's many businesses that are having trouble packaging their products so they can't get labor and that's limiting their inventory availabilities. We did -- we asked our sales team to come back with some anecdotes so we'd have some color for this call. And so we expect those and we're seeing that in terms of the dollars that are coming on the books. We're seeing a general improvement, and that's why we're seeing sequential improvement in the rate of decline. The risk on the horizon, I think, is less the sort of adjusting pandemic outlook and is more the macro outlook recession, and that's a concern that we have. And so that's why we're still cautious and still the visibility is somewhat limited, but we're comfortable declaring that we expect sequential improvements in the rate of decline of television advertising.

Okay. And I want -- somebody else asked about it but I'll leave it. The -- go back to John, just on the debt covenants. Do you mind reminding people, given the increase in leverage that you incurred this quarter, what the covenants are on your bonds and/or credit facilities?

Yes. The credit facility is the one that, I'd say, the most restrictive. So the leverage measurement under the bank credit facility is a little different than what we report. It doesn't include net debt, it's gross debt, and there's some adjustments for minority interest. So I've said in the past that if you look at the reported leverage of 3.38x, we would be typically for bank measurement purposes about 1/4 to 1/3 of a turn higher than that. And the covenant, I think, is pretty well known as 4.25. So we've still got lots of room there. And obviously, with the way leverage has gone pretty rapidly, we're watching that carefully.

Great. And last, I will bounce back to Doug and then pass the line. You mentioned -- you talked about streamlining costs, but you also said streamline the asset base in your prepared remarks. Just wondering if you can flesh out what that might mean a bit more. And specifically, is there any consideration to think about radio now that we have these new sort of halfway movements in ownership rules to allow 3 FM stations versus 2?

Thanks, Vince. We're looking effectively at what streamlining means for our business, and that's cost and that's assets. It's clear, I think, to everybody that we made demonstrable strides in our video business. With the significant addition of our streaming portfolio in these last number of years, we now have a path to actually increased total audience delivery and provide advertisers premium digital video impressions that they desperately seek. Agencies have been asking us this for years, and now we're at the table and delivering that. Radio is a good business. It's complementary on a local basis, contributes lots of free cash flow. It connects us to local communities. And we've synergized like crazy with television and radio teams. The slight easing of common ownership restrictions is part of the decision. It doesn't really go far enough to address the current realities of the radio marketplace. But as ever, everybody knows my phone number, and if we have an inbound to consider any asset that we think we can get a good value for, we'd consider a conversation.

We'll take our next question from Maher Yaghi from Scotiabank.

And I will take on the question on the dividend that Vince left off. So you talked about deferring the decision to on the March dividend. But when I look at your dividend yield, and I compare it to other players in the marketplace, other comps, it stands out and it's quite high. I mean, clearly, currently, the stock is not reflecting the dividend that you pay and investors are not willing to value the company based on the dividend. So from a cash management perspective and prudency, why not look at potentially reviewing the dividend level here, especially as visibility on advertising revenues is still low? And I have a follow-up question on that, please.

Sure. Maher, it's John. I think in a way you've answered your question already. So look, it's always subject to the Board's decision, and we understand all of those factors that you just cited. But there's not going to be a decision at this point. There's not really much more we can say about it. But yes, we get where the yield is right now, and we're obviously looking carefully at our results and our cash flow and our leverage.

Okay. That's clear enough. So in terms of the Pluto TV, can you talk a little bit about -- I mean, I've looked -- I've been using it. It's quite -- the content is significant on it. I was just wondering how the advertising revenue model is behaving right now in terms of seeing new revenue coming in? And are you seeing actually new money being spent on coming on Pluto TV from your advertisers? Or is there a realignment of budgets from other broadcasting operations through Pluto TV? Just trying to figure out if it's new money coming in or just realignment that is taking place?

Good question. I think the answer, Maher, is there's a little bit of both. So first off, we're very happy with the early returns on Pluto. It's the number 1 or number 2 most downloaded app on the big -- 3 biggest platforms in the country. That's a great start. I'm sure you've seen the megaphone advertising campaign that we have had in market. We'll continue to have that market, which is certainly driving awareness. Free is a good word in a tough economic environment, and Canadians are rising to the fact that there's a lot of high-quality gold, library and catalog content there that many folks haven't seen for years, and I think it's really quite impressive the uptake. So we are very happy with the early returns, and we will endeavor to provide more detail as the quarters roll out. But you'll see that result, I think, affect our new platform revenue metric in the coming quarters, and that will certainly have a slope change. In terms of where the money is coming from, there's a couple of different answers to your question. We've been asked for better digital video audiences by agencies for years, the only option they had up until a couple of years ago was user-generated content on YouTube or on Facebook's, now Meta, Instagram, Pinterest. And advertisers flock to that because that was the only game in town because digital provided the targeting and the automation and the benefits of user-generated content was not as attractive as the automation and targeting. We've kind of flipped the script now. The whole world has woken up in the last 18 months to this notion of free ad-supported streaming television, or AVOD, generally speaking. And what I believe is happening is, within the media mix, within the digital media mix, you're going to be -- we are seeing dollar shifting out of social media into premium video. So whether or not that's our Pluto product or our Global TV app product or our STACKTV dynamic ad insertion or it's the new Disney+ ad layer or the Discovery Plus ad layer, I think there's going to be more of that money coming out of other platforms that are less attractive to advertisers that have higher brand environmental risk because we can now provide basically long-form premium television content on digital platforms. So that's a big note. And the second comment I would make is that, I do think that money that might have been earmarked for other parts of the media mix beyond digital, now there's your print, outdoor, radio, television, et cetera, is coming into Pluto because it's the biggest game in town in fast channels in Canada and will be for the foreseeable future.

And just my final question on subscription revenue, your second biggest revenue stream. It's been holding steady quite well. Can you maybe provide us maybe just how you see that trending over the next couple of quarters year-on-year on that line, please?

Yes. So Maher, I mentioned in my remarks, we did have several renewals in Q2 last year to the tune of about $6 million. So that's going to affect the comp in Q2. So don't be surprised by slightly negative year-over-year number in Q2. But I think for the rest of the year, I think flat to up, I mean it depends a lot on the conversion of the trial subs we're seeing right now into paying subs on STACK, but I think you can see relatively flat for the back half.

And we'll go to our next question from Scott Fletcher from CIBC.

Something I have a follow-up to Maher's last question. But I'm wondering if on the subscriber line, if you could maybe give us an update on -- if there's been a change in the rate of change of the decline on the linear side because you had seen some sort of modest growth in the last year on the subscriber line? And it sounds like with the digital sort of offsetting the decline, has there been any acceleration in the decline on the linear side?