HOPES WERE HIGH EARLIER this year when word leaked out that an ambitious over-the-top video partnership aimed at taking on Netflix in Canada (dubbed “Showmi”) was soon to launch. Cartt.ca was the first to report on it and we have been following it through the year.
The service was to be a one-stop online space where TV and film content whose Canadian rights – owned by Rogers Media, Shaw Media, Bell Media and Cineplex – would be stacked and available to Canadians for binge watching anywhere, anytime and on any device. At the time, the business plan (Ad-supported? Authenticated? Pure OTT subscription video-on-demand like Netflix or Hulu Plus?) was not yet set.
Rogers has been driving this and according to several sources with direct knowledge of the negotiations (including some who have seen the contracts), the company has signed exclusive content deals all together worth well over $100 million with several U.S. studios and distributors, such as Disney/ABC, Warner Bros., 20th Century Fox, NBC Universal and others, to stock this venture. “They are deeply committed to this,” said one source. “They’ve started paying for the rights already.”
But the larger partnership has, perhaps not surprisingly, fallen apart, with only Rogers and Shaw pushing ahead with Showmi, which is disappointing.
The online viewing efforts put forth by the major Canadian broadcasters so far have been uneven, to say the best and utterly terrible to say the worst (just check out the many often angry one-star consumer reviews of the likes of Rogers Anyplace TV, CTV GO, Global GO and others in the Apple App Store or Google Play). Canadians have to navigate myriad sites and apps of varying quality in order to try and catch a show they may have missed (after first figuring out who the heck owns the show and under what banner) and woe be it to any who aren’t subscribers of Bell, Shaw or Rogers. They are often just out of luck.
Online viewing of the content from the vertically integrated Canadian companies is a space which sorely needs a reboot because the TV everywhere efforts put out so far are not only badly missing the mark on consumer expectations and satisfaction, but have also fallen below the VI companies’ internal subscriber forecasts, according to our sources. Canadians could certainly benefit from a consumer-friendly portal with an excellent user interface where all content is easily and quickly accessible from the device of their choosing.
According to our sources (all of whom spoke on condition of anonymity, because they do not want to damage their business relationships or careers with the vertically integrated Canadian powerhouses) just Rogers and Shaw continue to work together on Showmi, which is now scheduled to launch in the first half of November as a subscriber-authenticated service, meaning only Shaw and Rogers television customers will be able to gain access when it goes live.
This runs contrary to what I have sometimes heard from Canadian TV executives who have quoted Apple founder Steve Jobs, who famously said “If you don't cannibalize yourself, someone else will.” If what we have been told is true, Showmi seems a tepid launch of something meant to keep people inside the regular system instead of a bold launch of a pure OTT SVOD play made available to all Canadians. However, there is some hope among some we have talked to that it will be offered later to Shaw and Rogers broadband-only customers and then to Rogers Wireless customers – and then later on as an SVOD to other Canadians.
"With all the good shows, the broadcasters are going to try and squeeze Netflix out."
These sources have also told us Cineplex reportedly left the partnership because of the decision to make it a subscriber-authenticated service instead of a pure SVOD OTT play – and that Bell passed because it did not like the content rights terms Rogers had signed for Showmi and instead will launch its own viewing portal in January 2015. (We have asked Rogers, Bell and Cineplex officials for comment on this story. Bell and Rogers declined comment and Cineplex has not responded as yet.)
SHOWMI IS ROGERS’ BIG PUNCH BACK AT NETFLIX, which reportedly has more than 4 million subscribers in Canada, which is more video subscribers than anyone in Canada (and nearly 50 million worldwide). That said, Netflix earned US$1.14 billion in revenue during the second quarter of this year with a net income of US$71 million. So, financially speaking, Rogers is still much larger than Netflix. Its Q2 revenue was C$3.2 billion and net income, $406 million, according to their Q2 results.
Netflix may be growing by leaps and bounds in North America and beyond, but Rogers and the other Canadian vertically integrated companies still have very, very large bats to swing within our own small ballpark if we break down the numbers (and we confirmed with studio contacts that these numbers are in the correct range of costs).
For example, let’s say an hour of popular prime time drama costs $80,000 per episode for a Canadian broadcaster to purchase for linear broadcast. It is still the highest cost window to buy and the highest value one to own. Along side that, studios and other distributors have been selling their online SVOD rights window to Netflix (a year or so later) for about half of the linear rights fee, according to our sources.
In these deals that involve Showmi, for example, Rogers is buying all of the windows (linear, cable, pay, cable VOD, online SVOD…), but let’s just look at the linear and online SVOD. Rogers, in this scenario, would pay $120,000 per episode, or 50% more than just the linear rights, to procure the SVOD and linear rights. If Netflix wanted to outbid Rogers for that particular title, it would cost them three times the $40,000 they would pay normally for the SVOD rights – and Netflix has no way to broadcast or air the show “live” and monetize what it has paid for.
“With all the good shows, the (Canadian) broadcasters are going to try and squeeze Netflix out,” a studio source told us. Basically, as long as the VI companies are willing and able to outbid Netflix in our market, the popular shows will continue to go to the traditional broadcasters, who will monetize them how they see fit. The studios will simply do their level best to “never let the windows collapse,” said another source, in order to maximize their revenue.
However, the hardest part of all this, everyone admits, is that as the video market continues to grow and splinter, when will online SVOD rights become more valuable than the linear broadcast rights? “Studios are scratching their heads trying to figure out how we maintain these windows and the value we get for a show,” added that source.
Another aspect to consider with Showmi’s impending launch are the changes made to content availability on the cable VOD platform beginning this fall. New agreements recently ratified with various creative guilds (like the Director’s Guild) say show episodes can only be available on the cable platform for seven days after its original airing, rather than the 17 or 24 days in which shows had been made available on cable (or other subscription television) VOD in the past. It will be a little harder to catch up now.
So, there will be no content-stacking or binge-viewing of current popular shows on set top boxes anywhere in North America. But on Showmi and other online SVOD portals, those rights are treated differently and so to binge-watch Rogers or Shaw shows, consumers will have to go to there – or to the Bell portal for its programming. That is, unless the TV fans remembered to do a series-record on their DVRs, or if they have figured out their Smart TVs in order to toggle over to Showmi, online.
So to continue to use Rogers as an example, XYZ show will air on linear TV, then spend seven days on the traditional cable VOD platform and then shift over to Showmi. Or the Bell portal. Or maybe it’s on Netflix after all. Or an independent web site. Hands up if you think consumers will find that a little frustrating – especially those who are not VI customers.
Thought so. Our high hopes have been dashed.
