Confusion reigns in CRTC Shomi, Crave TV ruling

Observers expect tied selling of services to continue, but that may not be the case.

blais, crtc, crtc shomi

CRTC chairman Jean-Pierre Blais.

CRTC Shomi, Crave TV Confusion:

The CRTC announced a raft of changes to the Canadian broadcasting system on Thursday. Most are pretty straightforward, but the regulator’s decision on what to do about the peculiar issue of Shomi and Crave TV – and the rather selective way they’re offered to consumers – has sown a good deal of confusion.

For the uninitiated, Shomi is a Netflix-like service from cable providers Rogers and Shaw. To get it, you need to have either TV or internet service with one of the two companies. Crave TV, from Bell, is similar except you specifically have to subscribe to the company’s TV service, or to a TV service from one of its partners, such as Telus.

In a recent complaint to the CRTC, consumer advocacy groups said Shomi and Crave TV were anti-competitive and violated various telecommunications or broadcast rules. By offering the services only to their own customers and selected partners, Bell, Rogers and Shaw were discriminating against other TV and internet providers, they said.

Another complicating factor is that unlike Netflix, Shomi and Crave TV can also be viewed over their respective TV providers’ set-top boxes. The services aren’t as sleek or deep using this method, but they also don’t count against monthly internet usage caps the way that true streaming options such as Netflix do.

As a remedy, the Public Interest Advocacy Centre and the Consumers Association of Canada asked that the CRTC require the parent companies to open Shomi and Crave TV to all Canadians, regardless of their internet provider of if they even have a TV subscription.

Failing that, if the services are to be considered more cable adjuncts than true internet streaming options, they should be subject to Canadian content funding rules like all other TV channels, the groups said. That would mean paying a percentage of their revenues into a fund that helps create TV shows and movies.

In its Thursday decision, the CRTC seemed to rule clearly that it was indeed taking the consumer groups up on their demands:

The Commission has separate rules for video-on-demand services available to cable and satellite subscribers and online video services. In the case of video-on-demand, these services must invest in Canadian productions and include these programs in their libraries, among other requirements. They are also not allowed to offer exclusive programs, since not all Canadians would be able to access them. Online video services, on the other hand, are exempt from these requirements.

The CRTC is introducing an important change to ensure Canadian video-on-demand services can compete on an equal footing with online video services. Canadian video-on-demand services will be able to offer exclusive content as long as they are available to all Canadians over the Internet. This means that Canadians would not need to have a cable or satellite subscription in order to access these services.

Since both Shomi and Crave TV are both built on the idea of exclusive content – Crave TV, for example, boasts a catalog of exclusive HBO shows – this looked like a slam-dunk. Observers and media reports proclaimed that the CRTC was forcing the services to open to the public, as the URL on The Globe and Mail’s original story shows:

globe-url

But not so fast. The actual text of the policy suggests a more nuanced outcome with the creation of a third, hybrid model on top of regular cable video on demand or true internet streaming, as this graphic illustrates:

crtc, vod

This gave many observers pause, since the CRTC doesn’t appear to be forcing anything, but rather giving Bell, Rogers and Shaw choices.

PIAC issued a press release saying it is “skeptical” that the decision will motivate the companies to open their services:

What today’s decision does not do is declare that Bell, Rogers and Shaw are such “hybrids”, and therefore it appears that the Commission will allow the closed, tied model to continue. The CRTC appears to be trying to provide an incentive to become a hybrid VOD – if you do that, you don’t have to abide by the traditional licensing requirements (namely CanCon financial obligations). It’s a way to lighten the financial burden on those services in exchange for a requirement to make it available online.

Greg O’Brien, editor of regulatory website CARTT.ca, saw it the same way:

Bell also feels it can continue doing what it has been doing. “We make Crave TV available to all Canadian TV providers and that’s been a successful approach we can continue,” a spokesperson told The Globe. “We now have the option of instead keeping Crave TV exclusive to Bell TV if we also offer it as an over-the-top service.”

Shomi representatives have not yet commented.

The CRTC, however, seems to disagree with this assumption. Two individuals at the regulator told me that Shomi and Crave TV will not be able to continue on as they have since their respective launches. Their parent companies will have to choose one of the three models in the graphic above and accept the applicable rules.

They can choose to be governed by traditional video-on-demand rules, in which case they won’t be allowed to have exclusive programming – Bell, for example, would have to offer up HBO programs to competitors – and they would have to contribute a portion of their revenue to creating Canadian content. They would also have to ensure that a certain percentage of their programming is Canadian.

Or, they can choose to be governed as a Netflix-like over-the-top internet service, in which case they can have exclusives and don’t need to pay into the CanCon fund or show Canadian content. In this case, however, Shomi and Crave TV need to be available over the internet to all Canadians. No more tied selling.

The third, hybrid choice would allow the services to continue on as they have, where exclusives are allowed and no CanCon rules apply, with the important caveat that they have to be available to all Canadians on the internet regardless of service provider. Again, no more tied selling.

“Shomi [or Crave TV], if they choose to become hybrid have to offer the service through internet to all Canadians, for a fee, of course,” a CRTC spokesman said. “This way they don’t have to contribute to the Canadian broadcasting system. They can opt to stay with the existing system and have exclusivity, but they contribute to the system.”

The early belief that the CRTC was forcing Shomi and Crave TV open to the public wasn’t correct. But neither, it seems, is the belief that they’ll be able to continue on with subscriptions tied to other services – at least not without becoming subject to CanCon rules.

That’s my read of it anyway and it seems to be the intention of the CRTC.

Is it confusing? Absolutely. And confusion is bad, because it usually results in court challenges.

The CRTC is seeking input on the specific wording of this new, third hybrid model, and is accepting comments until Apr. 27. Hopefully, the process will add some clarity to the situation.

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2 Comments on Confusion reigns in CRTC Shomi, Crave TV ruling

  1. Ed Sadowski // March 13, 2015 at 11:43 am // Reply

    Prediction: Crave & Shomi will go the hybrid route, allowing anybody to subscribe but with economic F U pricing for non-subscribers. Say $20/month if you’re not their cable/ISP subscriber. If CRTC complains, they will charge everyone $20/month but give a “bundling” of $10/month to their subscribers.

    You heard it here first.

  2. Peter Nowak // March 13, 2015 at 2:20 pm // Reply

    A very good point, although I have to admit to hearing about it on Twitter first. ; ) More on this in the next post…

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