Rogers-Netflix collaboration benefits both, experts say

While the announcement that Rogers Communications Inc. and Netflix Inc. are working together on an original TV series marked an unprecedented collaboration between the two rivals, it’s a logical move, experts said Monday. In Canada, the drama series, called Between, will be broadcast on Rogers’ conventional City network and on Shomi, the over-the-top (OTT) service Rogers launched with Shaw Communications Inc. in August. Netflix will distribute the show outside of Canada for the first year, and will also make it available on its Canadian service after that time, the companies said in a release. Analyst Troy Crandall of 3Macs said in a phone interview Monday that while Shomi and Netflix are competitors, it’s a deal that makes sense for both parties. “It looks like Rogers has found a way to help further subsidize … production of original content by basically selling off the rights, or at least the international rights, to this show as it’s being made,” he said, noting that Canadian broadcasters have to produce a certain amount of Canadian content. The deal also benefits Netflix, since it gets “original content for everywhere other than Canada,” while “Rogers gets somebody to chip in on the cost of creating some of this content.” TV series hold on to value longer than sports content, which becomes outdated very quickly, he added. Rogers has recently been investing in sports content, most notably in a $5.2-billion purchase last year of Canadian rights to NHL hockey. When Rogers and Shaw announced Shomi, many observers wondered how it would compete with Netflix, though Rogers CEO Guy Laurence later said Shomi wasn’t meant to “kill Netflix” and that it was a “complementary play.” Mario Mota, a broadcasting analyst with Boon Dog Professional Services, said he does not find the deal surprising. “In order to finance shows today, you’ve got to look at all kind of partnerships,” he said in a phone interview. “It’s no different than going and using Syfy as your U.S. broadcaster to help finance an original Canadian production.” Canadian shows like Shaw's Lost Girl and BCE Inc.’s Bitten are on Syfy's lineup. “It just happens that the foreign broadcaster, per se, is Netflix and not a traditional broadcaster, that’s all,” Mota added. “It’s probably maybe a bit of a first, but it’s not something that’s a surprise, and it’s … something that we’re definitely going to see more of.” The Rogers-Netflix collaboration followed two significant announcements in the OTT space in the U.S. last week. Home Box Office (HBO) Inc. said it would launch a long-anticipated over-the-top service that does not require a paid TV subscription. A day later, CBS Corp. said it would launch a standalone subscription-based OTT service of its own. Barry Kiefl, president of Canadian Media Research Inc. noted that Canada is a smaller market and “totally dependent on the American product, when it comes to that kind of service.” Bell is also likely to get into an OTT service, and CBC/Radio-Canada might consider one as well, Kiefl said in a phone interview. Canada is more likely to see bigger services encompassing a variety of content, like Shomi, than channel-specific apps like CBS’, he said. “I think there is such concentration in the industry that it’s these big players that will do it, not individual channels, because they’re all owned by the big players, for the most part,” he said. Mota said there won’t be “an immediate impact” on the Canadian market from the HBO announcement, since Bell and Corus Entertainment Inc. have exclusive rights to HBO content in Canada until 2018. “So you’re looking three years away before there’s even a possibility that a service like that might come into Canada,” he said. A lot of foreign TV programming services have used the possibility of going OTT “as a potential threat in negotiations with Canadian distributors, to say, 'You know if you don’t give me the rate that I want … the right packaging, then I’ll go over-the-top,' ” Mota said. “There’s many analysts who believe even the HBO announcement and the CBS announcement … is simply a way to send a message to the cable distributors and satellite and IPTV distributors that they want better deals.” Crandall agreed the HBO and CBS announcements wouldn’t have a direct impact on the Canadian market because broadcasters here have their own licensing agreements for the content. While some Canadians might be tempted to use VPNs to access American OTT services, their numbers would be small, he said. He said because these services allow subscribers to bypass cable companies, their existence, and the possibility that more such services could pop up, do pose a threat to American cable companies. If more companies launched OTT services in Canada, then that could pose a threat to TV distributors here too, he said. For instance, a premium channel like AMC can cost $15 or $16 a month because it’s bundled with other channels. “If AMC came out and said, 'You know what, we’ll charge $5 if you come directly to us,' as a customer you’re saving $10,” he said. Crandall added that even at $5, AMC is probably making more than they’re getting in fees from the current system. Should more such services be launched in the future, that could have an effect on Canada, Crandall said, “but as per these specific two announcements, I don’t see there being a lot of implications for Canadians.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Rogers-Netflix collaboration benefits both, experts say

Broadcast | October 20, 2014

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Rogers-Netflix collaboration benefits both, experts say

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