SEVERAL SOURCES have told Cartt.ca over the past number of weeks that Rogers Communications has grabbed the over-the-top bull by the horns and has been signing a massive number of content deals and at least one significant partnership agreement (if not more) in an effort to battle back against Netflix in Canada by launching a new, national, OTT video portal.
Our multiple sources (all of whom requested anonymity for business reasons) have told Cartt.ca that Rogers is spending over $100 million buying all the video content windows available from as many rights holders (such as Disney/ABC, Warner Bros., 20th Century Fox, and even Bell Media and Shaw Media) as they can in a push to launch the brand new over-the-top video service in April currently being called Showmi during negotiations with rights holders.
The company has also apparently pulled Canadian movie theatre operator Cineplex in as a partner in the new operation. Cineplex has a growing digital content rights library currently made available through its online viewing and DVD sales portal Cineplex Store.
Of course, all of this is at the “sources say” stage right now because no one wants to go on the record, lest they hurt their own business with Rogers, and RCI has declined our requests to comment on this story. We have not seen the contracts in question but have talked to those who have – and with others who have had discussions with those who have signed them. The industry is buzzing over this.
“They are buying up all the rights, all the windows, to everything in order to keep them out of the hands of Netflix in Canada."
“They are buying up all the rights, all the windows, to everything in order to keep them out of the hands of Netflix in Canada,” one source who has seen the Rogers contracts told us. “What they also say they want to do is target all the twentysomethings who don’t have cable with this – and then hopefully pull them into the system.”
The new service is said by the sources to be modelled after Hulu Plus, the ad-supported, subscription video portal which grew out of free online viewing site Hulu, an over-the-top U.S.-only video provider jointly owned by Fox Broadcasting, Disney/ABC, and NBCUniversal. Hulu Plus subscribers, pay $7.99 a month for access to full current and past seasons shows from ABC, Comedy Central, The CW, FOX, NBC, MTV and Univision.
According to Hulu’s CEO, Hulu Plus has north of five million U.S. subscribers watching via their computers, smart TVs, gaming consoles, tablets and smartphones – and earned more than US$1 billion in revenue in 2013.
Right now, the online viewing options for many TV shows popular to Canadians is far more limited compared to Americans. Online, TV shows are available for two weeks or less after their original airing on television and Canadians must log into a number of different sites or new portals or apps like Shaw Go, TMN Go, CTV Go, EastLink to Go, Optik on the Go, Rogers Anyplace TV, to see their favourite programs. So, mobile, on demand viewing depends on who your TV provider is and whether or not they have a TV everywhere agreement with certain broadcasters.
It’s clunky and it’s not working well.
Plus, the advertising within the shows posted online is either removed after seven days at which time the broadcasters try their best to sell pre-rolls and other web advertising around and in the shows. The broadcasters know they are not maximizing their ad take under this current hodge-podge.
Rogers’ Showmi aims to change a lot of that, too. According to our sources, the company wants to dramatically extend the online viewing windows from two weeks to at least 60 days (and on its own traditional cable VOD platform, too) and begin offering dynamic ad insertion into the older episodes once the initial seven days after initial airing has passed, since it can directly measure viewership either online or on cable VOD.
DAI would see new ads (which are not skippable) inserted into shows aired weeks or months ago, earning, it’s hoped, new additional revenue for the carrier and the broadcaster. That would suggest Rogers has worked out an acceptable revenue split between the company inserting the ads (Rogers) and the broadcaster which owns the rights and is selling the spots – something that for many years has been a contentious issue even while the technology has been ready.
Rogers is also pushing the rights holders hard to get the stacking rights to in-season current shows so that it can offer Showmi customers the opportunity to binge-view seasons so that users can catch up to programs they have not seen prior (and don’t want to wait for summer reruns). This is something that has proven hugely popular with Netflix customers.
In fact, the studios worry that all this stacking will damage linear television since binge-viewing makes the summer rerun season redundant. However, this is just the new way of the world to which everyone must adapt, said another source. “Everybody will be buying the stacking rights at the LA screenings (in May) just to keep them away from Netflix… and Canadian broadcasters have to pay for them to keep the U.S. broadcasters from just going direct.”
Some may point to how this new national OTT portal sure makes it seem like Rogers will be cannibalizing itself, not to mention chipping away at the likes of Bell TV and Shaw Cable on the pay TV front (all the more reason to suspect Bell and Shaw will ultimately be partners in this) but it’s also a necessary move.
“The rationale is that it is better to cannibalize your own base before Netflix or other OTT providers do and to address the at-risk TV subscriber base that is not addressed by sports." – Jeff Fan, Scotiabank
“We expect that Canadian Pay-TV operators will enter the OTT market in a more meaningful way in 2014 to combat the OTT threat,” wrote Scotia Capital telecom and media analyst Jeff Fan in a new report to investors this week. “The rationale is that it is better to cannibalize your own base before Netflix or other OTT providers do and to address the at-risk TV subscriber base that is not addressed by sports.
“Although most Pay-TV operators have introduced authenticated TV Everywhere (TVE) options to their subscribers over the past two years, usage has been below expectations. Disparate and incomplete content and log-in complexities have been noted as barriers. Without a meaningful impact from TVE and with cord shaving/cutting/nevers becoming more visible, we believe Pay-TV operators will, either on their own or in a coordinated fashion, launch a separate entity to combat Netflix.”
Rogers has done its level best to nail down sports with its recent $5.2 billion agreement with the NHL and Wednesday’s Major League Baseball announcement (not to mention their ownership interests in the Toronto Blue Jays and Maple Leafs Sports and Entertainment), but that matters to only about half of its subscribers, Fan estimates.
“While TSN’s national penetration of households is ~85%, we believe its popularity may be artificially inflated by the inclusion of the channel in basic TV packages. Telus, which does not include TSN in basic channel packages, has a TSN penetration of only 50%-55%,” he wrote. “The 2013 CRTC Monitoring Report also showed that sports viewership was ~15% of total viewership of all genres combined. We believe sports will remain an important preventive measure against cord cutting, but this is only relevant for about half of Canadian households. The current Pay-TV penetration is at approximately 87%. How will Pay-TV providers address the other 32%-37%?”
Perhaps Showmi will be the way to capitalize on Canadian cord shavers and cord nevers who aren’t sports fans, and who don’t want to pay for the increasing cost of a subscription television package – and before the bulk of them figure out just how easy it is to mask your IP address and view foreign content online here in Canada. (That said though, if ABC’s decision to remove some shows from its web sites in favour of Hulu Plus and cable/satellite/telco TV is an early indicator of a new trend, maybe it won’t be so easy to view foreign content online via IP masking. Then again though, that may then lead to the re-rise of P2P activity, come to think of it).
Rogers reports its full year 2013 results in early February but in the first three quarters of 2013 it lost approximately 100,000 cable subscribers. That’s just 4% of its cable base, but at an average of $70 of revenue per month per video customer, that works out to $84 million of annual revenue lost to Rogers.
So, it would seem the company believes it can earn some of that back by going after Netflix which, with reportedly well over three million Canadian subscribers now, is earning about $290 million, and growing, in Canada) by using Showmi (or whatever it might be called) to grab some revenue back by attempting to corral those shavers and nevers while earning new ad revenue.
Our sources, however, are not yet sure how Rogers will go to market with this new OTT service, what its price point might be, or whether or not it will be a value-add to existing subscribers but all say a Q2 launch is currently the plan.
Stay tuned for more on this from us as information becomes available.
