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Report On Business Rogers, Shaw face Netflix head-on by making Shomi available to everyone

<cutline_leadin>Image: Shomi/Rogers</cutline_leadin><241>

The fight for online audiences in Canada is heating up as Rogers Communications Inc. and Shaw Communications Inc. say they will make their television streaming service Shomi directly available over the Internet, putting them into more head-on competition with Netflix Inc.

Until late last year, Canadians had no homegrown alternative to the U.S.-based leader in streaming services, which lets customers watch an unlimited amount of its television and movie content for a flat monthly subscription fee.

Then Rogers and Shaw launched their joint venture Shomi in November and BCE Inc.'s Bell Media began offering its own service, CraveTV, the following month. Unlike Netflix, the Canadian services were available only to television and Internet customers of Rogers and Shaw in the case of Shomi, and strictly to TV subscribers in the case of CraveTV.

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The companies came out of the gate positioning their streaming services as retention tools for their existing customers, hoping to stem losses as more Canadians cancelled their traditional television services or never subscribed in the first place. Shomi's move shakes up the streaming game in Canada as it steps into Netflix's territory.

Shomi said Wednesday it will soon be available to anyone, regardless of whether they have cable or Internet subscriptions. It has not provided a firm date, saying the service will be available some time between the end of June and the end of September, but says the price will remain at $8.99 per month, the same price as Netflix.

Negotiating the rights to popular content and offering certain programming exclusively can give such services an edge in attracting viewers.

"I'm convinced that our content offering is going to stand up," David Asch, Shomi's general manager, said in an interview. "Seventy per cent of the content that we have, not including kids programming, is exclusive. I think we'll be successful on that front, whether it be competing against Netflix or even just against people's time. People are going to want to watch good things. And we're going to be there."

A spokesperson for Shomi said it is "working out our strategy" for creating original content, which has been a success for Netflix.

Netflix already has a huge lead on other streaming services. New numbers from Internet traffic monitoring firm Sandvine released Thursday indicate Netflix now accounts for 38.5 per cent of downstream Internet traffic during the peak evening hours in North America.

Netflix does not publish Canadian subscriber numbers, but recent estimates based on surveys suggest that it has about four million customers in this country. Neither Shomi nor CraveTV has shared subscriber numbers and Mr. Asch declined to provide a figure Wednesday.

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By making the service available to any interested subscriber and not tying it to a cable or Internet account, Shomi could benefit from a proposed new regime for streaming video services, the Canadian Radio-television and Telecommunications Commission (CRTC) announced in March.

The commission held a consultation that closed in late April. If finalized, the new regulations would allow the owners of such video services to offer exclusive content, avoid a requirement that they contribute to Canadian programming costs and deliver their offerings over television set-top boxes as long as they also make the services available over the Internet.

"The way I look at it, we're going to take advantage of what the CRTC is doing and I think it plays really well to our strategy in terms of being very customer friendly providing a lot of value at a good price," Mr. Asch said.

Shomi is also facing a challenge from the Public Interest Advocacy Centre (PIAC), which filed an application with the commission in April arguing that tying the service to Rogers or Shaw TV or Internet subscriptions violates broadcast and telecom rules. Rogers and Shaw asked the CRTC to "return" the application, as it had done with an earlier complaint filed before the announcement of the proposed new regulations. But the commission said the application could proceed and a response from the two companies is due on Monday.

Mr. Asch declined to comment on Shomi's position with respect to the complaint.

PIAC wrote to the commission Wednesday requesting it rule on the issue regardless of Shomi's new policy. Geoff White, external counsel to PIAC, said a ruling is still necessary for clarity and to address issues PIAC raised about "anti-competitive preferential dealing."

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"The fact remains that Shomi took a many months-long head start here, and it will be interesting to see if any unaffiliated competitors have something to say about that," Mr. White said in an e-mail.

Bell Media spokesman Scott Henderson said the company doesn't have any current plans to make its own streaming service available without a television subscription. "While we are always evaluating our business model in the context of a rapidly changing industry, we remain pleased with CraveTV's performance," he said in an e-mail. He added the company is still negotiating with additional television providers to make CraveTV available to more TV customers. (BCE owns 15 per cent of The Globe and Mail.)

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