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Big Canadian MSO is reportedly spending $100 million to roll out Hulu-like OTT service that would compete with Netflix.

Rogers Preps Online Streaming Service

Alan Breznick
1/13/2014
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TORONTO -- Seeking to stem the erosion of its cable customer base, Rogers Communications is reportedly planning to launch its own online media streaming service to compete with Netflix across Canada this spring.

Rogers Communications Inc. (Toronto: RCI) is negotiating with most of the major Hollywood studios and rival media groups in Canada for the streaming rights to movies and TV shows, according to various press reports here. As first reported by Cartt.ca (subscription required) late last week, Rogers has already spent more than C$100 million (US$92 million) to build a catalog of on-demand programming for the new streaming service.

Rogers officials have declined to discuss their streaming plans so far. But they've made no secret of their interest in establishing such a service. The company, which was one of the first North American service providers out of the gate with a TV Everywhere service several years ago, has said for months that it's seriously exploring the video streaming market.

Industry sources told Carrt.ca that the new over-the-top (OTT) video service, tentatively called Showmi, will be modeled on Hulu Plus, the premium, ad-supported service run by Hulu LLC . In a blog post on the company's website last month, new Hulu CEO Mike Hopkins boasted that the pay service has now signed up more than 5 million subscribers, up from slightly more than 3 million a year earlier. Largely as a result of Hulu Plus, Hulu surpassed $1 billion in revenue in 2013 (See Hulu Flexes Fresh Muscles.)

With Showmi, Rogers aims to stave off Netflix Inc. (Nasdaq: NFLX), which has made big inroads in Canada since crossing over the US border in September 2010. Although it offers far less content than its US counterpart, Netflix Canada signed up more than 1 million subscribers in its first year and now has an estimated 2 million to 3 million customers in a market with no more than 12 million TV households and close to 90% pay-TV penetration.

Rogers also hopes to stem the growing tide of video "cord-cutters" and "cord-shavers," who have either been eliminating their cable video subscriptions entirely or downgrading to much lower levels of service. Like just about all major North American MSOs, Rogers has been shedding basic cable subscribers for at least the past year, losing 100,000 video customers in the first three quarters of 2013 alone.

Indeed, cord-cutting has become a serious concern for video providers in Canada, just as in the US. In a study released in November, the Convergence Consulting Group estimated that about 400,000 Canadian TV households, or about 3.5% of all TV homes here, have jettisoned their pay-TV subscriptions since 2011.

Likewise, Rogers is looking to attract the growing number of "cord-nevers," mainly younger consumers in their teens and 20s who have never subscribed to pay TV and quite possibly never will because of all the free, or much cheaper, online fare available. Rogers executives have estimated that these consumers already make up nearly half of the Canadians who don't subscribe to a pay service now.

In making this move, Rogers appear to be aping the strategy of Comcast Corp. (Nasdaq: CMCSA, CMCSK) south of the border. Comcast launched its own media streaming service, StreamPix, for its Xfinity TV subscribers, to compete with Netflix. The service costs subscribers up to $4.99 per month. (See Comcast Goes OTT to Target Netflix, Hulu Plus.)

But StreamPix hasn't exactly knocked Netflix for a loop in the US quite yet. Nor has it apparently stemmed Comcast's video subscriber losses all that much. Possibly as a result, Comcast is one of several major US MSOs reportedly negotiating now with Netflix to offer the media streaming king's service to cable subscribers.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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albreznick
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albreznick,
User Rank: Blogger
1/15/2014 | 12:06:01 PM
Re: Too little,too late?
Sure sounds like it, David. I'm not sure whether Rogers, or just about any MSO, is up to that task. This idea would make a wonderful blog for us, tho. (Hint hint, Nudge nudge)    
David Dines
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David Dines,
User Rank: Blogger
1/13/2014 | 5:28:26 PM
Re: Too little,too late?
I do not have the Netflix market share numbers for Canada available so it is hard to know how much of headstart they have.  I would say that Rogers' success is more dependent on their own executiion: the pricing, content library, user interace/ease of discovery, marketing and customer care.  I have noticed that most consumers don't like 1) their cable companies, 2) being nickel and dimed on charges and 3) suprises on their bills.  

Therefore, in order to be a credible competitor to Netflix, MSOs have their work cut out for them.
albreznick
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albreznick,
User Rank: Blogger
1/13/2014 | 1:11:33 PM
Too little,too late?
I think this is a good move by Rogers. But I wonder if it's a bit too late. They gave Netflix an awfully big head start in the Canadian market. It might not be possible to cut Netflix off at the pass anymore.
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