Rogers scrapping IPTV development
Telecom giant to use Comcast’s X1 platform in delayed launch
TORONTO Rogers Communications Inc. abandoned its plans to launch its own long-awaited Internet protocol television product and instead will use Comcast’s X1 platform to offer the technology to consumers in 2018.
Rogers will take a hit of between $475 million and $525 million in the fourth quarter of 2016 and stop further investments into its IPTV product development, the cable giant announced Friday.
Rogers started developing its IPTV service five years ago when there wasn’t an off-the-shelf option that met its needs. IPTV uses different technology than cable, and Rogers wanted the product to compete with offerings from BCE Inc., whose IPTV subscriber base continues to grow as traditional cable firms bleed TV subscribers.
Executives received positive feedback when they showed off the prototype to investors in July and repeatedly said the product would launch by the end of the year. But Rogers started discussions to use Comcast’s platform this summer given how fast the technology was evolving. It signed the deal with Comcast on Thursday.
The decision is not related to the company’s new leadership after former CEO Guy Laurence was fired in October, spokesman Aaron Lazarus said. “This was about making the right long-term decision for our TV and video business, not about one person,” Lazarus said.
The IPTV launch has been pushed back to 2018. Meantime, Rogers will offer more 4K content on its existing platform. It hopes to keep cable customers due to its strong Internet offering with 1 gigabit speeds.
In a statement, interim CEO Alan Horn called the partnership “great news for our customers.” He added that Comcast’s platform is “future-proofed” and has a commitment to further innovation.
Rogers isn’t the first Canadian cable company to give up on developing an IPTV service. Shaw Communications Inc., which competes with Telus Corp.’s growing IPTV offering in Western Canada, signed a deal to use Comcast’s X1 platform in 2015 after ditching its attempt and Cogeco dumped its IPTV development. Desjardins analyst Maher Yaghi said Rogers’ decision was “slightly negative.”
“While we are not completely surprised by this morning’s announcement, we are surprised by the size of the expected writedown,” Yaghi wrote in a note to clients, noting that when Shaw and Cogeco canned IPTV development they took writedowns of $55 million and $32 million respectively.
The delay in launch could mean another year of losing subscribers to Bell, Yaghi added. Bell is now the largest television provider in Canada.
“That being said, we think the decision to go with the X1 platform is actually a better solution for the long term given that the costs to not just develop but maintain and upgrade the system should now be spread over multiple users rather than being borne by Rogers alone if it had launched a proprietary IPTV product,” Yaghi wrote.
RBC analyst Drew McReynolds was more optimistic as Rogers “joins its peers in the ‘IPTV graveyard.’” While it could hurt Rogers TV numbers next year, it lowers the risk around the IPTV rollout, will likely lower capital expenditures for cable and will help Rogers compete with teleo IPTV offerings at a reasonable cost, McReynolds wrote in a note.