Wireless growth to remain strong, too
ALTHOUGH THERE ARE far fewer over-the-top video options in Canada as compared to the U.S., if Amazon, DAZN, and Netflix (not to mention the possibility of Apple, Facebook or Google entering the Canadian market in the way they have Stateside) are willing to spend big on programming, we may soon see them outbid the likes of Bell Media, Corus or Rogers for key programming, despite not having a traditional TV platform.
As well, even if Amazon, DAZN, or Netflix can’t win the best content from the Canadian companies, this dynamic can only benefit U.S. (and other) programmers in terms of upping prices on deals with Canadian players.
So says 119-page 12th annual Battle for the Canadian Couch Potato: OTT, TV, Online from Victoria's Convergence Research.
Further, it says, with CBS All Access entering the Canadian market in sometime before the end of June (not to mention Disney’s much ballyhooed OTT entry on its way), CBS “will function as both supplier and competitor to Canadian programmers/TV access providers,” reads the report. So, “the question also becomes how much CBS content will Canadian programmers/TV access providers, Amazon, or Netflix be able to obtain? CBS All Access being in Canada gives the U.S. broadcaster more leverage in negotiating with Canadian programmers, as well as Amazon and Netflix – especially when it comes to original content.”
On the one hand U.S. programmers certainly don’t want Canadian television companies to sink too quickly given the reliable revenue that comes from programming sales to them, on the other there is a direct to consumer opportunity as well as an opportunity to sell to the OTT players. “In the end it comes down to maximizing revenue/margin. HBO, Showtime & Starz chose not to go direct instead making deals with Bell Media,” notes the report.
When it comes to numbers, Convergence Research estimates Canadian OTT access revenue (based on 24 OTT providers led by Netflix, we have not assigned revenue to Amazon Prime which did not increase price with the recent addition of video in Canada) grew 29% to $872 million in 2017, and forecasts $1.11 billion for 2018, and $1.58 billion for 2020. In 2020 there will be more OTT subscriber households than TV subscribers in Canada, says the report.
The research says 2017 Canadian cable, telco satellite TV access (not including OTT) revenue declined 2% to $8.74 billion and forecasts a 1% decline to $8.64 billion for 2018. “We estimate 2017 saw a decline of 216,000 Canadian TV subscribers, 2016 a decline of 225,000 TV subscribers, and we forecast a decline of 267,000 for 2018,” reads the research.
“Canada’s TV subscriber base declined by 1.9%/annum 2016-2017, we forecast 2.6%/annum on average 2018-2020. Telco TV additions have started to mature (cable and satellite have not added subscribers since 2010), we forecast 2018-2020 will see fewer telco TV additions accelerating Canadian TV subscriber declines and cord cutter/never household additions.”
When it comes to cord cutters or cord nevers, the research estimates 4.14 million Canadian households (28.1% of HHs) did not have a traditional TV subscription with a cable, satellite, or telco TV access provider at the end of 2017, up from 3.78 million (25.9% of HHs) at the end of 2016. The report forecasts that number will rise to 4.55 million (30.5% of HHs) by the end of this year.
It’s rosier on the broadband side as Canadian residential broadband subscriber additions are estimated at 422,000 in 2017, says the report (the largest annual additions since 2009). Revenue grew 8% to $8.06 billion, and “we forecast 370,000 and $8.7 billion for 2018 – exceeding 2018 Canadian TV access revenue. Canadian residential broadband subs surpassed Canadian TV subs in 2015.”
When it comes to the company’s 137-page “Bundling, TV, Internet, Telephone, Wireless” report (in its 16th year) that research shows Canadian residential wireline telephone lines declined by 5% in 2017 and are forecasted to fall 6% in 2018. Telco residential wireline telephone line loss was 7% in 2017, while cable residential wireline telephone line loss was 2%. Convergence estimates cable represented 43% of residential wireline telephone subs YE2017 and forecast 44% for YE2018.
On the wireless side, the report says 1.06 million Canadian wireless subscribers were added in 2017 and wireless service revenue grew 7% (on strong ARPU growth) to $23.7 billion. In 2018, the company forecasts 1.14 million sub additions and wireless service revenue will grow 6% to $25.2 billion in 2018, reads the report.
“We forecast Canadian wireless new entrants (Eastlink, Shaw, Videotron) will have 8.4% of subscribers YE2018, up from 7.5% year-end 2017. We forecast Canadian wireless subscriber smartphone penetration at 80% YE2018 up from 78% YE2017. We estimate Canadian wireless-only households at 41% YE2017 and forecast 52% YE2020,” it says.
For the reports (as well as U.S. market research), which contain detailed analysis by company and market, please visit the company’s web site.
