What happens to VOD in an OTT world?

The launch of new streaming services from Canada’s biggest TV providers adds yet another option for viewers who want to catch up on or try out a new show, raising the question of whether they will complement — or compete with — existing services like video-on-demand (VOD). Rogers Communications Inc. admits the streaming service it recently launched with Shaw Communications Inc. will eat into movie rentals on VOD. David Purdy, Rogers’ senior vice-president of content, said in a phone interview that “there’s no doubt that Shomi will impact the sort of traditional video rental behaviour,” but that Rogers plans to make up for that by having new movies available for renting on VOD sooner after they show in theatres. “We think by doing that, we’ll obviate or mitigate any risk there is to the current video rental business, because we’ll be exploring earlier and better and more robust revenue streams with the earlier window,” he said. Rogers doesn’t intend to remove any content from VOD, he said. Companies have been investing in VOD in recent years; between 2012 and 2013, the availability of titles doubled across Canada’s eight largest TV providers. Despite that effort, as CRTC data showed, revenues for VOD services fell nearly 3.6 per cent in 2013, to $254.5 million, marking a change from the revenue increases reported for the previous four years. “Pure rental revenue … has been harder to grow,” Purdy acknowledged. “But if you take a broader view of monetization, then I think it’s a more interesting story, because we see a huge improvement in both churn rate and household revenue of an active, video-on-demand using household.” He added: “When you’re looking at the churn benefit, the acquisition benefit, the up-sell benefit, that typically doesn’t get factored into those CRTC numbers.” The Television Bureau of Canada recently said VOD drives viewership, too; an additional four to nine per cent, depending on the type of show. Of those additional VOD viewers, 65 to 70 per cent hadn’t watched the program’s original broadcast on live TV. Richard Paradis, president of media consulting firm Groupe CIC, said that despite dropping revenues, VOD remains profitable for TV companies. “Video-on-demand for cable companies has become an extremely lucrative aspect of their business, and they’re not going to shy away from that because it really is a money-maker for them,” he said. “The more we see video stores shutting down, it’s because the cable companies are really doing good business selling their video-on-demand proposals.” As The Wire Report reported earlier this month, Shomi operates under the CRTC’s digital-media exemption order, but because it’s also available through the set-top box, it follows the regulations and requirements of Rogers and Shaw’s existing VOD licences. In response to a question about whether there are plans to integrate the two or whether they will continue as two distinct services, Purdy said that Shomi will exist “side-by-side” with traditional VOD. Rogers also wants to expand the availability of current season episodes on its TV-everywhere platform and have catch-up, or current season episodes, available on VOD, Purdy said. Past seasons will be available on Shomi, the fundamental premise of which is “that there’s binge-viewing, and there’s a growing customer desire to watch back-to-back-to-back episodes.” “So in that way, we’re complementary,” he said, noting that “it’s been fairly orderly right now.” As original and previously unaired content is added, that division could “blur over time,” Purdy added. How other companies will combine VOD and streaming is less clear. BCE Inc., which plans to launch a rival streaming service, currently code-named “Project Latte,” did not return an interview request. Neither did Telus Corp., which plans to carry Project Latte, nor did Shaw, Rogers’ partner in Shomi. Traditionally, broadcast distributors’ customers could only access live TV or episodes that aired within the past three weeks on VOD and TV-everywhere applications, Purdy said. Customers couldn’t “go back to the start of the season, and you certainly weren’t able to go back to previous seasons.” “We feel that we should offer a one-stop, comprehensive shop that’s simple and easy to use, and allows you to watch live, the 21-day catch-up rights, the full season stacking rights and the previous seasons of almost any show that we offer or has been offered,” he said. “Shomi was really critical in terms of being able to access that back catalogue, that library content that historically wasn’t available through a traditional cable offering.” Gord Hendren, president of Charlton Strategic Research, said in a phone interview that there is still a need for VOD. He noted that the majority of video consumption activity, or 69 per cent, is still connected to traditional TV, “whether that’s watching it live, or watching it on a PVR or watching it on demand.” “So you still have to have on-demand services, for sure,” he added. Streaming services will have to differentiate themselves from VOD through the content they offer in order to entice customers happy with their VOD offerings to pay extra for an additional service, Hendren said. “These streaming services will have to be somewhat unique in providing something don’t already get,” he said, giving the example of Netflix’ strength in kids’ content, which makes the service compelling for families. Broadcasting consultant Peter Miller noted in a phone interview that the VOD products offered through IPTV by companies like Bell and Telus are “easier and better to use” than their cable counterparts’. “The television that the telcos use is a more modern, IP-based system. Even digital cable is still basically using digital standards which date back over a decade,” and the base technology of many cable boxes is also that old, he said. We will “probably” see a trend of VOD declining, due to the increasing number of products out there, including TV-everywhere and new streaming services, he said. “I think you will see some shift off traditional VOD, both because these platforms offer better content and because it’s a better consumer experience,” Miller noted. He added that one thing all these services have in common is subscriber retention. “They may not be … enough to bring people back to cable or telco services who have already left, but hopefully they’re enough to keep people,” Miller said. “So in a sense, from a BDU perspective, it doesn’t matter that much what the mix is of services, as long as a subscriber has a mix that works for them.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

What happens to VOD in an OTT world?

Broadcast | November 28, 2014

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