Canadian advertisers increasingly opt for social media sites, such as facebook or twitter, over traditional media companies, industry insiders say; TV broadcasters lost C$69M in 2013, while Torstar's print and digital ad revenue fell 9.5%

TORONTO , May 7, 2014 () – Executives at some of Canada's biggest media companies say they're feeling the pinch as major advertisers take their money to social media operators like Facebook and Twitter, leaving the country's biggest television networks and newspapers with the scraps.

The shift is happening faster than many players expected and is a driving force behind changes across the industry as more Canadians migrate to the Internet for their news and entertainment.

On Tuesday, the CRTC released a financial report for the TV industry showing that conventional broadcasters, which send over-the-air signals, together lost more than $69 million before taxes last year.

National advertising sales took the brunt of the impact, dropping 5.3 per cent to $1.28 billion in 2013.

Just a few years ago, the consensus among big media companies was that restrained spending by advertisers would evaporate after the economic downturn and give way to a new era of digital advertising where banner ads on their websites and streaming video commercials would become increasingly lucrative.

What happened was a little more complicated as social media companies swooped into the equation and outside forces like Google's advertising division attracted a bigger chunk of marketing dollars.

"Deals are being made on a global basis," said Jack Tomik, chief sales officer at Rogers Media, which owns a slate of television channels and magazines.

"Money is coming out of budgets for a lot of national advertisers before it even gets to this side of the border."

Deals with social media companies are typically massive in their reach and their costs. Photo app company Instagram secured a $100-million contract with Publicis Omnicom, the world's biggest advertising agency, that runs for a year. Now Instagram is shopping around month-long advertisement campaigns that cost nearly US$1 million apiece, according to a report in trade magazine Ad Age.

Last month, Keith Pelley, Tomlik's boss and president of Rogers Media, stood before the CRTC to emphasize what he characterized as a shocking foundational shift.

"The industry is not changing yearly, it is changing monthly, weekly, daily," Pelley said. "For example, the financial projections we filed in December no longer reflect the current reality."

Fellow media company Torstar Corp. (TSX:TS.B) is expected to tell a similar story when it reports its first-quarter financial results on Wednesday.

Torstar, which owns the Toronto Star and other community papers, announced the sale of its romance novel division Harlequin Enterprises last week for $455 million, in a move that would free up cash to pay down debt and potentially chase other business opportunities.

Torstar's print and digital advertising revenue has been in decline, falling 9.5 per cent last year.

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