Exec cites ‘tipping point’ in customer demand as Sportsnet goes OTT

Rogers Communications Inc. will begin offering its Sportsnet channels without a TV subscription for $24.99 per month, the company announced Thursday. Scott Moore, president of Sportsnet and NHL properties at Rogers, said in a phone interview that the company chose to do so because “this is what a certain segment of our consumer base is asking for. You would have to have your head in the sand over the last three to five years if you weren’t paying attention to the way people consume video content.” The Sportsnet Now service includes live streams of the six Sportsnet linear channels and will be available Friday. The company previously offered Sportsnet Now as a TV everywhere service, and it will continue to be included in subscriptions to the linear channel for customers of participating providers, the company said in a press release. The release added Sportsnet is the first “mainstream sports TV channel in North America to be available direct to consumers.” While some people prefer the traditional TV system, “there are other segments of the population — cord-nevers, millenials — who are clearly telling providers, ‘look, we want to have the ultimate choice,’” Moore said. The company made the move now because there’s “enough of a tipping point of the consumer base that want it,” he added. “If you’re not a TV subscriber, if you chose not to enter that ecosystem, this is a place for you to be able to watch sports, as opposed to what some millenials are doing, just going down to the local pub and watching on television.” The timing also made sense because April “has been historically for us our strongest month at Sportsnet with the Blue Jays season opening and now our second year in the Stanley Cup playoffs,” he said. Another “tipping point” was the CRTC’s directive to begin offering standalone channels to TV subscribers by the end of the year, Moore noted. “So we wanted to make sure that if we’re doing that, that we’re giving people a choice of ‘hey, we can either get it as part of a … cable and satellite package or we can get it directly to our phones.’” He added that the service allows customers to sign up and unsubscribe easily. “You can do it month-by-month. You can watch the Blue Jays in September and October and come back again in April,” Moore said. The same advertising that appears on the linear channel will be on the streaming version, “at least to start,” he said. “The key revenue for us here is in additional subscribers who are not currently subscribing on cable or satellite. As we add different features to the product over time, there may be an opportunity for us to be super-targeted for mobile advertising, and that’s something we will explore over time.” The company decided on the $24.99-per-month price tag partly because it’s an amount that wouldn’t lead “people to migrate off their cable packages,” Moore added. “The greatest source of revenue for us is our cable and satellite subscriptions, and we’re not in the business of undercutting our partners,” he said. David McFadgen, an analyst with Cormark Securities, said in a phone interview that the monthly price tag for the service is “quite steep,” especially compared to the much-lower cost to subscribe to the channel through traditional TV, and as a result he doesn’t expect the take-up to be high. He said “everybody always considers sports to be the anchor product to get people to subscribe to multi-channel television,” though he noted a recent survey by financial services company BTIG LLC that found half of people surveyed would drop ESPN to save $8 on their cable package “would kind of say otherwise.” The Wire Report reported last year OTT sports products were beginning to make their way into the market, though live sports continued to be crucial for the traditional television system. 3Macs telecom analyst Troy Crandall said in a phone interview a TV service customer who currently has Sportsnet would look at the new offer and say “wow, I’m getting a pretty good deal right now.” He said the online offering might fill a void among “a few sports fans” whose only reason for having cable is sports, though such individuals may also want access to other sports channels, like BCE Inc.’s TSN. Both McFadgen and Crandall noted that if a customer wants to subscribe to Sportsnet Now and supplement with streaming services like Rogers and Shaw Communications Inc.’s Shomi, Bell’s Crave TV and service from Netflix Inc., the total cost quickly climbs to same range as a cable subscription. “It’s hard to estimate what the uptake on this might be. Just given its price point, it to me seems like it’s quite high on a standalone product,” Crandall said. Gord Hendren, president of Charlton Strategic Research Inc., said the timing of the offer makes sense given the start of the Blue Jays season and the NHL playoffs. “We know that the Blue Jays have been very compelling content for Sportsnet,” he said. He predicted other channels could follow in the same footsteps. “There’s no question that there’s some real competition between Sportsnet and TSN. So I would say once you see one doing it, I think you’re probably going to see the other one matching it,” he said. RBC Capital Markets analyst Drew McReynolds said in a research note that the announcement is “an important development in the growing availability of premium OTT programming.” He added that the announcement “is consistent with our view that the Rogers' asset mix (wireless exposure, cable/DOCSIS network, sports) is among the best positioned to benefit from key emerging industry trends over the next few years (i.e., video-driven data growth, cord-cutting/cord-shaving, television unbundling).” Aravinda Galappatthige, an analyst with Canaccord Genuity, said in a research note that he sees “no downside to the subscriber revenues of Sportsnet. Even if certain subscribers cut the cord and switch to the OTT product, Sportsnet stands to gain significantly, as the average sub fee per month to Sportsnet is under $3 per month.” Galappatthige added there is likely a component among Canadian TV subscribers who keep their subscription “almost entirely” for sports. “Sports has generally been considered the mainstay of linear TV and this step marks a significant challenge to that thesis,” he said, noting that the decline in Canadian TV subscribers accelerated last year. Considering the “rather elevated price of $24.99/month, the take up of the product may be limited at the outset, hence the damage to the industry seems modest at this stage,” he said. “However, it could arguably set events in motion (e.g. if TSN follows suit) that could accelerate cord cutting.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca

Exec cites ‘tipping point’ in customer demand as Sportsnet goes OTT

Broadcast | March 31, 2016

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Exec cites ‘tipping point’ in customer demand as Sportsnet goes OTT

Broadcast | March 31, 2016

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

Heritage and Justice ministers to appear before CHPC to address charter concerns

Local news funding needed in C-10: Bell

Cogeco accuses Wildbrain of “glaring abuse” of CRTC process over Part 1

Helped by Fizz, Quebecor reports strong Q4 earnings

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us