Shaw, Rogers ramp up IPTV efforts
Shaw, Rogers join move to IPTV
The blow from cord-cutting wasn’t as bad as expected for Canada’s top two cable companies in the last stretch of 2016, but the final verdict on how the $8.9-billion television market fared will depend on how well TV products offered by telecom companies performed amid increased pressure from online video streaming.
Cable giants Rogers Communications Inc. and Shaw Communications Inc. both beat analysts’ expectations for their traditional cable business in the latest reporting period, according to financial reports released earlier this month.
They lost 13,000 and 16,000 cable subscribers respectively, a few thousand fewer customers than Bay Street predicted on both counts. Over the full calendar year, Rogers lost 76,000 cable subscribers, down from 128,000 in 2015. Shaw lost 131,000 cable and satellite subscribers, down from 152,000 in 2015. (Shaw’s reporting period ended Nov. 30 instead of Dec. 30.)
While cord-cutting escalated in the first nine months of 2016, the solid performance in the final quarter could ease the pressure the trend has been putting on the flattening television market.
Now it’s the telecoms turn to reveal whether they continued to gain steam with their Internet protocol TV products, which have enticed subscribers away from cable companies over the past five years. BCE Inc. and Telus Corp., the cablecos’ top rivals in eastern and western Canada respectively, report their financial results this week and next.
Bell, which reports Thursday, is expected to add 7,000 TV subscribers, according to consensus estimates. The growth is expected to be more muted than last year.
Rogers’ strong Internet additions in the previous quarter, with subscribers often buying bundled packages, could have come at the expense of Bell’s wireline business given Bell has been more disciplined with pricing, Desjardins analyst Maher Yaghi wrote in a note to investors.
Telus is scheduled to report the following week. It is expected to add 17,000 customers, predicts RBC analyst Drew McReynolds, as Shaw has yet to gain traction with its new TV product. If both telecoms post significant gains, the industry could beat expectations of approximately 200,000 lost subscribers in 2016 as people, especially those younger than 35, cancel subscriptions in favour of cheaper online video streaming services.
Shaw and Rogers are both ramping up efforts to gain market share back from the telecoms with their own IPTV products. After failed and costly attempts to build their own services, both companies signed deals with Comcast to use its X1 platform, an IPTV-type product with novel features that has seen success south of the border.
Shaw launched the platform in January to the delight of analysts, who expect to see a decline in subscriber losses over the next few quarters.
It’s tough to “move the market share needle” given cord-cutting, rising consumption of over-thetop platforms including Netflix and Amazon Prime Video and an increased preference of Internet to TV, RBC analyst Drew McReynolds wrote in a note to clients. Still, McReynolds said he’s “incrementally more optimistic” that the product will improve consumer numbers since it has Internet of Things capabilities and is updated frequently.
Rogers plans to launch X1 in 2018.
Getting consumers to sign up for IPTV services could help stem cancellations for cable companies like Rogers and Shaw.