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Why the Rogers, Shaw shomi streaming service won’t stop Netflix in Canada

Carmi Levy
The Netflix sign on is shown on an iPad in Encinitas, California, April 19,2013. REUTERS/Mike Blake

Canadian consumers waiting for a viable competitor to Netflix will have to wait a bit longer. As ambitious as shomi, an online streaming service launched by Rogers and Shaw on Tuesday, claims to be, it suffers from more than its fair share of legacy telecom carrier culture.

It could have been much more. In fact, what we're getting is somewhat watered down from the original promise. Reports earlier this year suggested Bell Media and Cineplex would join Rogers and Shaw in locking down the distribution rights for major Hollywood content. The broader partnership would have given the Canadian operators greater leverage when negotiating with Disney/ABC, NBC Universal, Warner Bros. and 20th Century Fox, among others.

Less leverage

Between then and now, however, Bell and Cineplex seem to have fallen off the bus, leaving only Rogers and Shaw to carry on. Despite shomi’s initial library of 1,200 movies and 11,000 hours of television, the smaller-than-expected partnership limits its future ability to grow that library and keep consumers engaged.

The service is also subscriber-authenticated - meaning customers, at least initially, must already be either Rogers or Shaw subscribers to be eligible to subscribe to shomi. While this potentially hinders the carriers' quest to choke off a fast-growing Netflix, telecom consultant Mark Goldberg says consumers may not necessarily face an either-or decision.

“What you have here is two of the three largest English language broadcasters who have some significant holdings of content distribution rights for Canada across various platforms. While some people may ask if shomi will be a substitute for Netflix, I wonder if it will emerge as more of a supplement,” Goldberg, who also founded the Canadian Telecom Summit, told Yahoo Canada Finance. “In TV, subscribing to one movie channel doesn't have to replace subscribing to other channels.”

Forced to pair up

Although shomi launched with only two supporting partners, the fact that the carriers are hooking up at all is notable, as it illustrates the urgency they face in maintaining revenues amid a growing shift away from conventional broadcast and distribution models. While chord cutting – where consumers abandon cable and satellite television subscriptions and instead consume content online – remains in its infancy, a streaming-first future is inevitable as subsequent generations of consumers weaned on an Internet-fed content diet come of age.

To compensate, carriers must replace their threatened revenues with online, streaming services. Partnership maximizes their buying power, lets them build better networks, secure more content, and roll out new experience-enhancing apps. All this takes place within a regulatory landscape that continues to evolve – and where it ends up is anyone’s guess.

“We need to see whether regulators will interfere with the evolution of business models that are trying to adapt to changing patterns of consumption of programming and other media content,” Goldberg said. “Canada already has a significantly different framework from the U.S. and many other countries, regulating broadcast distribution and Internet carriage. How do these rules impact the ability and incentives for services providers to respond to consumers?”

Is stopgap innovation enough?

While Rogers, Shaw and others wait for definitive guidance from Ottawa, they continue to introduce new capabilities they hope will pull customers more deeply into their respective ecosystems. For example, shomi attempts to address a key shortcoming of virtually all online services, namely the difficulty of finding or discovering new content. Rogers and Shaw say shomi's algorithmically-driven process reduces selection gridlock and further differentiates the service.

But is it different enough from Netflix to truly stand out? Even its $8.99 per month price puts it in the same head space as the streaming pioneer. And with so many Canadians already firmly entrenched in their online viewing habits, it'll take something truly extraordinary to unseat them. Good enough won't be good enough, and shomi’s first shot across Netflix’s bow hasn’t proven to Canadians it’s sufficiently better to get them to switch.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca