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Canada's Netflix revolution seems to have plateaued, as television viewers hang on to their existing cable and satellite packages rather than cut their cords and rely exclusively on online programming.
The American company said Tuesday that although it considers Canada a "strong" market, it isn't seeing much growth, echoing comments made by Canada's broadcast regulator last week when it rejected BCE Inc.'s $3-billion takeover of Astral Media Inc.
"Two years have passed since launch and our subscriber growth is steady to slightly accelerating," the company said as it released its third quarter results. "Both retention and engagement are high among our Canadian members."
Bell Media told the Canadian Radio-television and Telecommunications Commission it needed to buy Astral to compete with services such as Netflix, which is now in about 10 per cent of Canadian homes and accounts for about 3-million hours of viewing per week in this country.
Canada's broadcast regulators rejected Bell's claims that its business model was under threat by companies such as Netflix that not only steal subscribers but also bid up the cost of programming, saying that the country's Netflix subscribers (at least so far) have been using the service as an enhancement to their cable and satellite packages.
"The commission does not consider there is compelling evidence on the record to demonstrate that foreign, unlicensed competitors are having a significant impact on negotiations for program rights," the CRTC wrote last week. "Based on available date, Internet platforms continue to be complementary to the traditional broadcasting system."
Netflix doesn't break out Canadian numbers when it reports its quarterly results, but does offer insight into how it is performing in the country. It said the company "expanded its profitability" as revenue increased faster than the cost of acquiring new content.
The company reported a profit of $8-million for the quarter on revenue of $905-milion. It added fewer subscribers in the United States than expected at 1 million, and will likely have trouble meeting its full-year forecast of 7 million new subscribers.
As part of Bell's rejected bid for Astral, Bell vowed to create a "Canadian Netflix" that would use shows from HBO Canada and movies from the Movie Network to compete with the company.
There were important differences – you would have had to be a subscriber to a traditional cable or satellite service to access the new platform – but Netflix said it knows other companies are trying to diminish its market share.
"With big markets comes competition," the company said. "Since the transition from linear TV to Internet TV provides a staggeringly large long-term opportunity, it is not surprising that we are seeing more competitors vying for consumers' time and money."