Market Insight

Canadian SVoD service Shomi to close November 2016

September 30, 2016  | Subscribers Only


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Canadian Subscription Video-on-demand (SVoD) service Shomi, has announced it will no longer accept new subscribers and will officially close in November 2016. A joint venture between Shaw and Rogers communications, the service launched in Beta in August of 2014 and then officially in November 2014. However, only for Shaw and Rogers customers (pay TV subscribers) as an “over-the-top” (OTT) add-on to their TV-based VoD viewing options. In May of 2015, Shomi was revamped as a standalone service, and offered in addition, to non-subscribers for CAN $8.99 ($6.83) per month.

Corus Entertainment Inc. acquired the media arm of Shaw in April 2016, but explicitly did not take-up the 50% ownership of Shomi, co-owner Rogers was left without a partner able to invest in seeing the SVoD service through any further attempts to grow its subscriber base. In July of 2016, Rogers began to offer a years’ worth of Netflix Premium (CAN $143.88 value) as a limited time offer to its 4k operator multi-play (TV, phone, broadband combined) customers.

Current Shomi subscribers can continue watching content via their Shaw or Rogers set-top box, on select tablets, mobile devices, Xbox 360 and Xbox One, Apple TV, Chromecast, and PS4 until 30 November 2016. 

Our Analysis

Often standalone SVoD services owned by pay TV providers have advantages in any given market; often in the form of exclusive content, or content that can be exploited earlier in the pay TV window instead of having to wait for the traditional OTT SVoD window. Neither of these factors worked to Shomi’s advantage in Canada.

SVoD rival Crave TV was also at first only available to Bell subscribers (although for an additional Can $4.00 per month).  The decision to spin both services-off as standalone offers had less to do with a firm strategy than the Canadian Radio-television and Telecommunications Commission (CRTC) ruling, that makes these SVoD services only available to pay TV subscribers as a form of “tied selling”, which  discriminated against broadband only customers.

Netflix, having already launched in Canada in September of 2010, grew to 2.9 million subscribers or 22.9% penetration of broadband households in Canada before Shomi entered the market. Netflix, as a purely standalone SVoD service, had gained first mover advantage over Shomi and CraveTV (launched December 2014), and quickly dominated the market for online SVoD in Canada. IHS Markit analysis indicates that Netflix will grow to 5.3 million subscribers by year end 2016.

Canada, like the US, has very high penetration of pay TV services. At year end 2016, 81.6% of TV households will be pay TV households though this is a decline from 90.2% penetration in 2011. IHS Markit analysis indicates that customers “cord-cutting” is a major driver of overall penetration decline for pay TV in recent years and this decline will continue. By charging pay TV subscribers extra fees for access to Shomi and CraveTV (thus not as a bonus for subscribing) and by making their online SVoD services only available to their respective pay TV subscribers for an extended period after launch, it was made easy for Netflix to continue scooping-up any potential cord-never and cord-cutting customers.

Many Pay TV households in Western Europe and North America simultaneously subscribe to standalone services such as Netflix, however, Canada has been traditionally a challenging landscape for long-form online video consumption.  This is due directly to data caps frequently built into broadband services and packages in Canada.  Although Shaw/Rogers customers did not have their Shomi consumption count against their data caps if they consumed the service via their set top boxes, as a standalone subscription, this made Shomi a less attractive offer to non-pay TV customers.

According to local feedback, the situation has been improving, but data caps still restrict the amount of online only video the average Canadian household will be able to economically consume in 2016. Elsewhere this is a core advantage of forgoing expensive pay TV subscription for standalone SVoD services.

This makes Canada a challenge for both standalone competitors Netflix and for CraveTV, however, both have been more effective than Shomi at carving-out a content niche.  Netflix has become known especially for its original programming and CraveTV focused heavily on premium TV programming (such as HBO).

 

Geography
Canada
Research by Market
Media & Advertising
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