Back in August 2014, two of the biggest cable companies in Canada, Rogers Communications and Shaw Communications, launched an SVOD service called Shomi. It was to compete with the SVOD behemoth Netflix.
Well, apparently they lost. Come November 30th they are shutting down their service. Rogers will take a C$100 million to C$140 million loss ($75 million to $105 million), while Shaw had already written down the service for C$51 million.
That leaves Netflix and BCE Inc’s Crave TV as the last standing large SVOD providers.
What went wrong? Here are my 5 best guess reasons:
- Competition. Netflix had a head start and according to Solutions Research Group, the California based company was already in 5.2MM of the 13MM households in Canada. With a nearly 50% penetration, it was beyond critical mass. According to Rogers, Shomi was in 900K homes. Not bad, but how many of those are paying subs. (See #2)
- Helping the Enemy. Rogers offers free Netflix for 1 year in their triple play package. You are either in competition with them or you’re not. Can you imagine those internal meetings between the Shomi product team and the cable marketing group? Awkward.
- Bad Start. Shomi was originally offered as an add-on for loyal customers. That’s great for trying to stem the tide of Pay TV defectors, but what about the cord nevers – people who have never had a Pay TV subscription to begin with – or the cord cutters – those who don’t want their TV service anymore. In hindsight, which is always 20/20, the service should have been a complete stand alone deal. This could have served as a good faith effort to the many people who are dissatisfied with Rogers and Shaw – as evident by the hundreds of angry comments under any post about them.
- Lack of Original or Exclusive Programming. Netflix will spend $6B this year on content alone, which will result in 600 hours of original content. How do you compete with that? Crave TV thinks they can, largely because they have the rights to re-runs of HBO shows. But without the rights to Game of Thrones, how much longer will they last?
- The high price. The service cost $8.99, or only $1 cheaper than Netflix. The difference was too close and made people choose between them, whereas if it was $4.99 then they could have been complimentary.
The closing down of Shomi will no doubt scare away others from launching their streaming service or put doubt into the minds of those already out there. If two well established and well funded companies, who got their subscriber count (paid or free) to 900K subscribers, can’t succeed, how the heck are you supposed to? Well, the lesson here is to not go head to head with Netflix. Instead, be super niche, show exclusive content and charge just enough to be considered an add-on to the other apps/services people are paying for.