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Shomi gives Rogers, Shaw a toehold on Netflix’s turf

People using mobile devices outside Rogers Communications head office in Toronto.

Fred Lum/Fred Lum/The Globe and Mail

Two of the most powerful distributors in Canadian television have joined forces to launch a video-streaming platform, hoping to gain a foothold in the same online TV market that's threatening their business models.

The long-rumoured streaming service for television shows and movies, dubbed Shomi, was unveiled Tuesday by Rogers Communications Inc. and Shaw Communications Inc., which jointly built the new venture to take on competitors like U.S.-based Netflix Inc.

When it launches in November, Shomi will cost $8.99 a month – the same price Netflix charges new customers – and will include 11,000 hours of television from 340 series, as well as 1,200 movies.

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For now, it will be available only to Rogers and Shaw Internet or television customers for use on tablets, smartphones, Web browsers, Xbox consoles and cable boxes. But the friendly rivals are in talks with other distributors to make the service more widely available.

Television distributors and cable broadcasters have faced intense pressure from new competitors, with Netflix and its massive content catalogue attracting an estimated four million-plus subscribers in Canada since launching in 2010. Another major Canadian player, BCE Inc., wrote in a recent regulatory submission: "The system is threatened like never before."

But Shomi executives are pitching the service less as a Netflix killer than as a parallel service that leverages the companies' large combined stable of television rights to give viewers the more personalized experience they increasingly crave.

"We knew that we had to get [a streaming] offering out there that was an option for people," said Barbara Williams, senior vice-president of content at Shaw Media. "And I think we will see lots of different people use this in lots of different ways."

At launch, Shomi will feature back catalogues of popular shows such as Modern Family, New Girl and American Horror Story. Rogers and Shaw will continue to offer new episodes of current seasons through their existing on-demand services. Thirty per cent of the content will be Canadian, and creating original programming is also "definitely on our road map," Rogers Media president Keith Pelley said.

Even so, observers on social media were quick to say the service appeared to offer little that would lead them to abandon Netflix. Mr. Pelley countered that Shomi will give users curated, expert recommendations with a human touch and a dash of "attitude," and expects many households will add the service alongside other streaming subscriptions.

"Our research show that, undeniably, consumers can support two, three, even four [subscription video-on-demand] services," Mr. Pelley said.

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Even as many Canadians complain about the high cost of traditional TV service, Kaan Yigit, president of Solutions Research Group, says there is ample room in Canada's streaming marketplace.

"As much as there's some element of competition with Netflix, I think broadly speaking we're seeing a multiple-subscription world evolving here," Mr. Yigit said.

BCE's Bell Media participated in initial discussions about joining the Shomi project but elected not to. A Bell spokesman declined to comment on rumours that the company will launch its own streaming service in the coming months. (BCE owns 15 per cent of The Globe and Mail).

Shomi is also an attempt to stem the growing rate of cord cutting – cancelling television subscriptions, often in favour of online alternatives – in Canada. According to regulatory figures, total cable and satellite subscribers declined for the first time in the year ending Aug. 31, 2013.

Toronto-based Rogers and Western cable giant Shaw have both been steadily losing television subscribers in recent quarters while making modest gains on the Internet front.

The American broadcasting landscape is also under pressure, owing to falling ratings and advertising revenues. On Tuesday, Turner Broadcasting System Inc., which owns U.S. television networks such as CNN, announced it is offering buyouts to some 600 employees, with layoffs and other cost cutting to follow.

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In the face of such challenges, observers have questioned why a Canadian-made competitor to Netflix didn't emerge sooner and why, even after more than a year in development, Shomi is launching in a "beta" test phase expected to last six to 12 months.

Both companies said they felt they had to get into the streaming game before it was too late: "There comes a point where you just have to get at it," Ms. Williams said.

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About the Authors
Banking Reporter

James Bradshaw is banking reporter for the Report on Business. He covered media from 2014 to 2016, and higher education from 2010 to 2014. Prior to that, he worked as a cultural reporter for Globe Arts, and has written for both the Toronto section and the editorial page. More

Telecom Reporter

Christine Dobby covers the Canadian telecom industry for The Globe and Mail. Before joining the Globe in May 2014 she reported for the Financial Post for three years, most recently writing about telecom and media. She has also reported for the Toronto Star and New Brunswick Telegraph-Journal. More

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