Canadian television providers are losing their decades-old grip on consumers, as viewers turn increasingly to online alternatives to find their favourite shows and movies.
While the country’s broadcast regulator has suggested that services such as Netflix are being used to supplement traditional cable, satellite and IPTV subscriptions, a new report from Convergence Consulting Group Ltd. suggests that about 1.5 per cent of Canadian TV subscribers cut the link last year, and the pace has picked up since 2011.
“Netflix and more free online TV episodes are the major reasons for the shift,” said Brahm Eiley, president of Convergence. “Both of these have only really become elements in the Canadian market in the last two years.”
Canadian companies such as BCE Inc. and Rogers Communications Inc. are still adding to their subscriber bases, but the rate of growth has slowed dramatically in the past year. Only 52,000 TV subscriptions were added in 2012, down 77 per cent from the year before, and bringing the total to 11.9 million households, according to the report released Tuesday.
The slower growth poses challenges for television companies, which face higher costs for content and delivery each year whether they are increasing their subscriber bases or not.
But traditional providers aren’t going to lose subscribers without a fight. With digital video recorders making it easier for viewers to control when they watch shows (Convergence expects 50 per cent of subscribers will have the devices by 2015, up from 40 per cent at the end of 2012), and a new emphasis toward restricting access to online viewing to paid subscribers, the companies hope to persuade viewers that subscriptions are worth the money.
“Video consumption continues to explode online and in mobile,” David Purdy, senior vice-president at Rogers Communications, said in an interview last week. “We have to embrace change.”
Here are four business models changing the way Canadians watch television and movies:
Ben Lucier photographed while watching the tv signal that he gets from Bell's IPTV.Fernando Morales
What they offer: Companies such as Bell, Vidéotron, Rogers and Shaw Communications offer access and selection that online providers can’t challenge, with hundreds of channels showing every type of content imaginable in exchange for a monthly fee.
Pro: Many companies also offer personal video recorders, which allow viewers to store content on a hard drive to watch at their convenience.
Con: Monthly bills are a sore point for consumers. Viewers must sign up for packages that include channels they don’t want, and although video-on-demand services have improved greatly, most providers still don’t offer access to previous seasons or older episodes of hit shows.
Quote: “I think the value proposition that television gives Canadians is astonishing,” Bell Media president Kevin Crull said recently. “When you calculate the average $70 bill by the hour the average family watches, it’s about 25 cents an hour.”
Apple Chief Executive Steve Jobs introduces programming for Apple TV at Apple's music-themed September media event in San Francisco, Sept. 1, 2010.Robert Galbraith
What it offers: Through Apple’s iTunes software, users can download thousands of TV shows and movies. The Convergence report estimates that iTunes represented 6 per cent of Canadian movie/TV sales revenue and 2 per cent of movie rental revenue in 2012.
Pro: Set-top boxes, which cost about $100, make it easy for viewers to stream content from their iPhones and iPads using their TVs. Many television shows are available soon after they air, and the movie selection is vast. Most Canadians are comfortable using iTunes software, which has been packaged with computers for many years and is on millions of smartphones and tablets.
Con: At up to $3.50 per high-definition TV show and $25 a movie, the service doesn’t make any sense to users looking to cut costs. And users can only buy TV shows; Apple tried a rental service similar to what it offers movie watchers, but it did not catch on and was cancelled relatively quickly.
Quote: “There has been a perpetual hype and buzz about Apple taking over the TV (and movie space), but this is far from the reality. Unless Apple can obtain TV episodes (or movies) for a much lower price … it is relegated to being a premium-priced provider,” the Convergence report said.
Netflix selection page
What it offers: Thousands of movies and TV shows streamed via the Internet into about 1.9 million Canadian homes via devices such as computers, video-game consoles and smartphone and tablet apps.
Pro: At less than $8 a month, Netflix offers consumers access to an estimated 7,000 TV shows and movies. It is also producing its own exclusive shows, including a new season of Arrested Development due this spring, and is now in about 14 per cent of Canadian homes.
Con: The Canadian library is limited: U.S. users (who pay the same as Canadians) have access to about 60,000 TV shows and movies. The Canadian library isn’t likely to expand, because content costs are increasing and the country’s deep-pocketed cable and satellite companies are now lining up to bid for the same online rights that were once only of interest to Netflix.
Quote: “Netflix will continue to make some programming deals for the Canadian market but we doubt it will ever have anywhere near the type of content library it has for the U.S. market,” the report stated. “We forecast Netflix will continue to grow Canadian rental market share though we forecast market share growth will slow down in the coming years.”
Student Efren Enriquez rents a DVD movie at a Redbox, a $1-per-night DVD movie rental kiosk, outside a 7-Eleven store in Silver Lake area of Los Angeles on Aug. 7, 2009.Damian Dovarganes
What it offers: With the demise of the corner video store, rental kiosks have sprung up across the country to meet the demand for physical rentals. Redbox, a large U.S. player, has been in Canada for less than a year but has matched its competitors by setting up 400 kiosks across the country.
Pro: Access to new releases in easy-to-get-to locations such as pharmacies and grocery stores. Rentals are inexpensive, with Blu-Rays costing only $2 for a period that lasts until 9 p.m. the next day.
Con: There aren’t many kiosks sprinkled across Canada, but Redbox plans to open another 2,000 this year (there are more than 40,000 kiosks in the United States). And users have to leave their homes to get their hands on a movie.
Quote: “The selling cycle has been a bit slower than what we first anticipated, but we are beginning to gain some real nice traction … We think, just given the collapse of the brick-and-mortar players [in Canada], that we’re well-positioned to carve out a nice market share,” said Paul Davis, chief executive officer of Redbox’s parent company Coinstar Inc.