Carriers debate ‘freemium’ versus paid online programming distribution

As communications companies like Bell Canada Enterprises Inc. and Rogers Communications Inc. dive headlong into the competitive world of online programming, industry insiders are evaluating the positives and perils of giving away free content to subscribers. Rogers is the latest service provider to ramp up an online, on-demand video service. Known as Rogers On Demand Online (RODO), it offers 1,500 hours of video from Rogers’ broadcast entities, including Citytv, OMNI, and Sportsnet. It also offers content from more than 35 other content providers, such as Canwest Global Communications Corp. (HGTV Canada, Food Network Canada), Corus Entertainment Inc. (Treehouse, W Network), and CBC (Bold, CBC News Network, FIFA World Cup). RODO has three service tiers: a sample tier that anyone can access; a higher level for Rogers phone, Internet, cable or wireless service subscribers, which offers specialty programs such as World Cup coverage and music concerts; and a “TV anywhere” level for Rogers cable subscribers, giving them access to all television channels via the web portal. Jeremy Butteriss, Rogers’ senior director of broadband entertainment, told The Wire Report that Rogers completed tests two weeks ago. “We were letting our customers try the service, give us feedback—and we acted on that feedback. We added ... social features, the ability to send content to your friends on Facebook or Twitter, the ability to comment on a video and rate it.” Bell, meanwhile, has been offering on-demand, online programming since last year with TMN Online, a service free to Bell TV customers who subscribe to the TMN television channel. Since its launch, the carrier has added Family Channel, Playhouse Disney and HBO. Although Rogers provides a “sample level” that’s free to anyone, all of Bell’s online programming is available to Bell TV customers only. “We are still the only one in the market that offers the best content,” Shawn Omstead, vice-president of products for Bell’s residential services, said in an interview. “We didn’t start at the bottom of the pyramid, which is stuff I can find on CTV’s website, or Global’s website, or Citytv’s website, and just aggregate it.” Chris Gardner, chief marketing officer of ExtendMedia Corp., an online-video technology company in Boston, Mass., said it’s no surprise that carriers are moving toward online, on-demand programming. He described Apple Inc., Google Inc., Netflix Inc., and Amazon.com Inc. as “the emerging incumbents ... These guys want to be television companies.” Apple has the devices and content rights, as well as a loyal user base, Gardner said. Google has network capacity and “eyeballs” going to YouTube, and Netflix has become the de facto standard for renting video online in the United States. “These guys are real threats. The traditional cable companies ... have to do this,” he said, referring to putting their video content online. If not, others will beat them to it. Amit Kaminer, a communications industry analyst at SeaBoard Group in Toronto, pointed out that Bell and Rogers have “different world views” when it comes to online video services. “Rogers is using the ‘freemium’ model. You get the subscribers, you whet their tongues, show them what they can see, and if they want to see more content or have a better selection ... they’ll pay for that.” Peter Bissonnette, president of Shaw Communications Inc. in Calgary, said he isn’t convinced that free is the way to go. “Free is not a really good business model,” he said in an interview. “What we like is value-adding ... If you are an Internet, and a telephone, and a digital customer, we’d like to give you as much value as possible, and we want to make sure you continue to enjoy that experience.” Shaw, which is in the process of purchasing Canwest Global’s broadcasting assets, is now developing an online, on-demand video portal. Bissonnette said the system could be based on the portal that Canwest developed for its Global TV network. “Global has one of the most actively frequented sites of all of the broadcasters, and of course, subject to the CRTC, we’ll be the owner of that,” Bissonnette said. “We’ll be working with them on how we bring that to the next level ... How do you monetize it? How do you make it rich in programming content? Who do you make it available to?” One difference between the carriers is their relationships with content providers. Rogers owns a number of services, including the Biography Channel and G4techTV. Shaw is on track to own Canwest’s television assets, including the Global TV network and specialty channels. But Bell doesn’t own any of the content it’s featuring. All of its online, on-demand programming is licensed from others. This may not give Rogers or Shaw a big advantage. Some point out that the carriers won’t have to tread carefully when it comes to promoting content. “If they show favouritism to , it may not play well with their other broadcasters,” Gardner said. Kaminer said the carriers can monitor users’ online, on-demand experiences to glean information that will improve their TV services. “You can retrieve valuable analytics,” he said. “When you actually know your subscribers' behaviour, you also have better idea of what content are you missing, to make your TV product better.” Butteriss said Rogers is keeping that in mind. “This online space enables us to try out new programming that one might not traditionally see on television services ... One could see even moving to trying things out online, and then doing it on TV.” news@thewirereport.ca

Carriers debate ‘freemium’ versus paid online programming distribution

Broadcast | June 9, 2010

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