Netflix Inc. has presented a fundamental shift in the business model of providing TV and movie content to viewers – and how to charge for it. Now one of Canada’s largest legacy cable providers is buying into that model.
Rogers Communications Inc. is in active negotiations with most of the major Hollywood studios to acquire the digital rights it would need to launch a Netflix-like streaming video service, according to an industry source with knowledge of the negotiations.
Netflix has built up a healthy subscriber base in Canada since launching here in September, 2010. It passed the one million mark in August of 2011, and though it no longer discloses Canadian subscriber numbers, a survey conducted in the spring suggested that Netflix may have doubled its subscriber numbers in a year. While Netflix has been criticized for having a more limited selection of movies and television shows on the Canadian service compared with its U.S. version, it has won over customers with a flat monthly fee of $7.99 for all content viewable on Internet-connected devices such as tablets, laptops, and Apple TV.
That service has been an attractive proposition to many consumers who feel they have been gouged by their cable and satellite television providers for years.
In recent years, those providers have frequently told the federal broadcast regulator they need more leeway when doing business in Canada because of the new competitive landscape presented by what are known as “over the top” services such as Netflix. It has raised the challenge of Canadian “cord-cutters” who opt to ditch their traditional cable television packages in favour of these services, and “cord shavers” who slim down their packages to save money while supplementing traditional television with online streaming.
Rogers is now preparing to embrace that “over the top” business model to compete with those services directly.
The Globe first reported that Rogers was developing this service in May.
“It’s my belief that all major [broadcasters] will roll out a Netflix competitor,” David Purdy, vice-president of digital television products at Rogers told The Globe at the time. “It’s a common strategy to try and figure out how to roll out products that allow viewers to binge watch and to offer all-you-can-eat movie services.”
This week, online industry publication Cartt.ca renewed talk of the launch with a report that Rogers has spent more than $100-million to secure digital video rights. Rogers would need those rights to offer a selection of movies and TV shows viewers could stream on-demand over an Internet connection.
“As previously reported, Rogers is exploring opportunities to deliver an [over-the-top] service. There are no additional details at this time,” a Rogers spokesperson wrote in an e-mail.
The source familiar with the current negotiations did not have information on how the service would be priced.
“The vision is to formulate a competitor to Netflix,” the source said.
Until now, cable and satellite TV companies have mostly responded to the increasing habit of people watching television online by offering digital content that acted as a bonus to their traditional TV packages. Customers who stay within that legacy system generally have access to password-protected “TV anywhere” services to let them watch the same content on Internet-connected devices. This is how the Rogers On Demand Online service functions.
Now, Rogers’ move to add subscription streaming is a signal that those companies see a need to change their business models as the system that has existed for charging people for TV and movie content is fundamentally changing.
It has been a concern in the media industry for some time. During regulatory hearings into BCE Inc.’s acquisition of Astral Media Inc. in 2012 and 2013, the companies argued before the Canadian Radio-television and Telecommunications Commission that they needed to be able to compete with Netflix. The companies also suggested BCE could launch a Netflix-like service of its own.
In the United States, the networks have attempted to address this shift by collaborating to launch the online streaming service Hulu. Just like traditional network television, that service is free and supported by advertising; offering shows from NBC, Fox, and CBS, for example. Hulu also has a subscription service, Hulu Plus, which like Netflix charges a flat fee of $7.99 per month and offers a wider catalogue of movies and back seasons of television shows.
The difference from Netflix is that Hulu Plus is not advertising-free. It is not known whether Rogers’ service will include ads.
There was talk of Hulu coming to Canada a couple of years ago (it is currently blocked to Canadian viewers, though some have circumvented that geoblocking with services that essentially trick Hulu into thinking their computer is in the U.S.) At that time, according to another industry source, Canadian media companies such as Rogers and Bell were in talks to launch a Canadian version of the service. Those talks fell apart, however, according to the source.
Bell was not available to respond to questions on Friday.
Rogers has been investing heavily in building up its stores of digital content. In November, the company struck a blockbuster $5.2-billion deal with the National Hockey League for the national broadcast rights for hockey. A major factor in the negotiations was sewing up all digital rights for those games; including NHL archives that Rogers could use to put together classic games packages.
Most of the Canadian networks’ most popular programming – shows such as The Big Bang Theory and NCIS – are purchased in yearly negotiations with the American studios that produce them. The deals allow not just for the Canadian rights to put those shows on television, but in recent years they have also included a window of digital availability. That means that networks such as Rogers-owned City and Bell’s CTV can stream their shows online, often in a limited backlog of recent episodes, to allow viewers to catch up on shows they missed.
Rogers’ current negotiations would be necessary to solidify longer-term digital rights and more robust back catalogues of shows and movies.