When video streaming service Shomi launched less than two years ago, it was billed as a necessary step – cable and media giants believed they couldn't afford not to be in the streaming game. But the decision to shut down the service reveals the industry's struggle to make online content pay off.
With Shomi set to go dark on Nov. 30, some subscribers are frustrated that finding their favourite shows in an already fragmented streaming landscape may only become more difficult. But the breaking point for Rogers Communications Inc. and Shaw Communications Inc., friendly rivals that ran the service as a joint venture, was that those paying customers were always in short supply.
Streaming is increasingly taking over as viewers' preferred way to watch television and movies, eating away at the base of traditional TV subscribers whose fees still pay for much of the content that gets made. In response, cable giants have tried to turn exclusive online content into a competitive edge that could help keep TV, Internet and cellphone customers in the fold. But that has proven a tough sell.
A report published in June by Solutions Research Group suggested fewer than 500,000 people, or about 4 per cent of Internet-enabled households in Canada, were using Shomi. The streaming service's general manager insists the total tally was "not far off" 900,000, but not all of them were paying full price, and the service faced stiff competition from CraveTV, owned by Bell Media parent company BCE Inc., and from Netflix Inc.
Part of the challenge comes from the fact that the most in-demand content is dispersed among so many providers. In addition to its contracts for Shomi content, Rogers alone has separate deals to let its customers stream NHL games, the Sportsnet TV channels, daily video from Vice Media, music from Spotify and more recently, to use Netflix Inc., which dominates the streaming space.
Though speculation has swirled for some time about a potential merger joining Shomi with CraveTV to form a single Canadian streaming powerhouse, early discussions never made it past an informal phase. Bell showed little interest, and while some Rogers executives wanted to explore the idea, Rogers never pressed the matter.
"The TV and film industry is much more fractured than the music industry," said Lee Dale, 39, who runs a design studio in Toronto and pays about $8 a month to watch shows like New Girl, Modern Family and Transparent on Shomi. "It's really a pain in the butt to find something specific to watch. I would rather pay $20 a month to one service and have everything than pay $8 or $10 a month and have to hunt for stuff."
Viewers' frustration is compounded by uncertainty about what will happen to the content that was licensed to Shomi, which included original shows commissioned by Amazon.com Inc. Some of the rights could be divided between Rogers and Shaw to feed their on-demand TV platforms, but the rights could also be sold off to rival services. The leading bidders would likely be Bell and Netflix, but there are numerous contractual details that would need to be ironed out.
"We are in the process of working with suppliers on next steps and the details of which are a proprietary matter," said Shomi spokesman Owen McCorquodale, in an e-mail. Subscribers are being encouraged to binge-watch shows before Nov. 30, just in case.
The decision to close down Shomi will affect 74 full-time and 33 part-time or contract staff, though a Rogers spokesperson said the company is looking to see whether some could be moved to related departments at Rogers.
Edward Rogers, the company's deputy chairman and a prominent member of the family that controls it, is disappointed to see Shomi fail. "But it doesn't diminish our bullishness on the future of customers wanting content, wanting to consume content, watching that content more often on more platforms on more cellphones and tablets," he said in an interview. "So Shomi didn't work out as planned but I'm confident in the team's ability to still realize that dream."
Even so, it isn't clear that the obvious desire among consumers to stream and binge-watch TV shows, movies, sports, news and music across a range of devices has so far translated into a business model for making steady returns or boosting customer loyalty.
Owen Lett, 33, a graphic designer in Victoria, first discovered Shomi through a cable TV subscription he has since cancelled. But he resubscribed to the streaming service to catch up on shows such as Outlander and Battlestar Galactica, and to access programs his children enjoy that aren't on Netflix. He is still a customer of Shaw Communications, and will miss Shomi, but its demise is hardly a deal-breaker.
"Losing Shomi doesn't make me mad at Shaw," he said. "Having Shomi didn't make me happier to be a Shaw customer."
With a report from Christine Dobby