DHX Media poised to tap exploding demand for premium video content

TORONTO _ DHX Media Ltd. (TSX:DHX.B) says it’s well-positioned to take advantage of exploding budgets as industry giants like Netflix, Disney and others look for family-friendly premium content for their video-on-demand services.

Executive chairman Michael Donovan told analysts Thursday that the price per-episode for some programming has jumped recently after being virtually unchanged for about 20 years.

“I have been in this business for 37 years and it has never been this positive,” Donovan said.

He and Josh Scherba, the company’s executive vice president for content and distribution, said they see opportunity from a Netflix commitment to spend $500 million over five years in original productions in Canada but awaited details.

“I will be catching up with our friends at Netflix later,” Scherba said.

Donovan said the new subscription video services are able to “monetize” content to a much higher degree than other forms of video and they are in a race to win market share with new and re-used content that Halifax-based DHX Media can provide.

“Core to our strategy has been to leverage our production advantage _ our studios et cetera and our finance advantages with respect to production _ into developing the old brands . . . into new content.”

For example, DHX Media recently acquired rights to the Peanuts comics characters through a US$345-million deal that closed June 30, the last day of the company’s 2018 fiscal second quarter.

The size and complexity of the Peanuts deal, however, was a major distraction for DHX management and one of the reasons for the underperformance of its “Teletubbies” programming for pre-school children during the second quarter.

Donovan said the integration of the Peanuts business has gone extremely well but added “there was some collateral damage, to my view, as chair of this company.”

Earlier in the call, DHX chief executive Dana Landry apologized to shareholders for second-quarter results that were disappointing on several fronts but added that his management team has begun taking corrective actions.

“These results are not acceptable to management and we would like to provide reassurance to investors who, after many years of solid growth, expect stronger performance from DHX Media,” Landry said.

DHX reported Wednesday that its revenue for the three-months ended June 30 was down 16.3 per cent from a year earlier, falling to $87.6 million, while its fourth-quarter loss ballooned to $18.3 million.

Shares of DHX plummeted more than 16 per cent on the news, to $5.04, their lowest level since June 2014.

Despite the disappointing financial results, DHX Media is raising its quarterly dividend by five per cent to two cents, payable Oct. 25.