 |
| So long, shomi, we hardly knew you. (Image Source: http://www.cbc.ca/news/entertainment/shomi-shut-down-1.3779675) |
Today the sun sets on shomi, the Canadian Subscription Video on Demand (SVOD) service created as a homegrown alternative to Netflix.
As a shomi user, and I'm not happy to see it go. And to be clear, I think most shomiesdeserve some serious accolades for taking on a bigger, stronger rival and coming up with a good competitive product: the shomi interface was familiar and easy to use, and while it's breadth of content proved no match for Netflix, it did succeed in offering some unique television shows and films you couldn't (legally) find anywhere else in Canada.
But good wasn't good enough.
My family received a concise letter in October to officially announce the decision, which explained, "while [shomi] was embraced by people across the country - people like you and me - ultimately it was not in great enough numbers to sustain it."
What were those numbers? A report released in June by Solutions Research Group (as reported in The Globe and Mail) estimated, "only about 4 per cent of Canada’s 11.6 million online households – fewer than 500,000 – were actively using Shomi, even though 83 per cent of households were at least vaguely aware of the service. By comparison, 46 per cent of households use Netflix."
The key question: what could shomi have done differently to achieve subscriber numbers that were "great enough"? With the benefit of hindsight, I will suggest there were at least five areas where different decisions could have been made, all of which can serve as important business lessons.
Lesson #1: Ensure key players are equally committed.
shomi was created as a joint effort between Rogers Communications Inc. and Shaw Communications Inc. But as The Globe and Mail reported back when the decision was first announced, "Questions had swirled about Shomi’s future ever since Corus Entertainment Inc. acquired the media arm of Shaw Communications earlier this year, but decided not to buy Shomi. That left Shaw’s 50-per-cent stake in the streaming service orphaned inside a company that had decided to concentrate on its cable and wireless businesses, and Rogers without a partner willing to invest in growing the streaming service."
Rogers and Shaw decided to partner on the shomi initiative. That's not a bad decision, on its own, and it's certainly overly-simplistic to say, "Rogers (or Shaw) should have just launched shomi on its own!", despite the fact both Netflix and Bell managed to launch their SVOD services independently. (Netflix had the benefit of experience; they've been investing in the streaming game for almost 10 years. Bell had the benefit of size; they're significantly larger than Rogers and Shaw combined. How much larger? In 2015, Bell had revenue of $21.5 billion and net earnings of $2.73 billion; Rogers had an operating revenue of $13.4 billion and net income of $1.38 billion, and Shaw had operating revenue of $5.5 billion and earnings of $880 million.)
Having a partner isn't necessarily a mistake. It's often a huge advantage. But if you do decide a partner is your best option, you need to ensure you both have the same level of commitment and vision. This clearly didn't seem to be the case with shomi.
Lesson #2: Don't be afraid to disrupt your core business.
When shomi launched in November 2014 , it was only available to current Rogers and Shaw cable subscribers; if you already paid for cable, you could choose to pay an extra $8.99 each month and also have access to the new streaming service. If not? No shomi for you!
Let's ignore the fact that just a few months after shomi launched, a complaint was brought before the Canadian Radio-television and Telecommunications Commission (CRTC) arguing that making the service exclusive to cable subscribers was a form of tied-selling, "designed to favour legacy business models and to discriminate against customers who wish to only view programming through an Internet service provider of their choice." Even without the complaint, why would shomi's leadership think it was a good idea to artificially limit the number of people who could possibly subscribe to their new service?
A reasonable assumption would be fear. The fear of losing a cable customer worth significantly more than the $8.99 a month the streaming service would generate.
But that fear was misplaced. According to this CBC article from early 2016, "190,000 Canadians ended their ties with traditional TV in 2015... an 80 per cent increase from the previous year when 105,000 people cut the cord." Are a greater number of households choosing to cancel their traditional cable subscriptions in favour of alternative viewing options like SVOD services? Absolutely! But that same article goes on to point out the reality of the current situation: "most Canadian households still subscribe to traditional TV — more than 11 million at last count."
Restricting the service to existing cable subscribers meant that someone like me couldn't subscribe to shomi. That's a huge problem, since I was arguably the exact type of customer that shomi wanted to reach: an existing cord-cutter who had already stopped paying for cable (so no risk of revenue loss for the cable business), and who had already decided I was comfortable spending money each month on a legal streaming service (so no change of behaviour required).
In "The Innovator's Dilemma", author Clayton Christensen warns companies about the dangers of focusing too much on current customer needs while ignoring what those customers will need in the future. shomi certainly might have cannibalized some cable revenue in the short-term had it opened up the service to all Canadians right from the start, but doing so would have a) given them a first-mover advantage over CraveTV (who also initially restricted their service to current subscribers) and b) made a serious strategic commitment towards protecting revenue in the future as an increasing number of households cancelled their cable in favour of alternative content options.
Lesson #3: A brand can't be built in a day.
Too many companies make the mistake of launching a product or service with great fanfare (and high expectations), then pulling back investment a short while later. I've seen this first-hand during my career as a marketer, and it never ends well.
shomi's marketing wasn't bad. In fact, Marketing Magazine even named them the Marketer of the Year in 2015. But marketing can't just happen at the launch. It takes time and money to drive awareness and trial of a service, and the bigger the innovation you try to introduce, the more time and money it usually takes to get to a point where the innovation can sustain itself.
Giving up on investment for shomi due to subscriber numbers that were not "great enough" after just two years is a little like being disappointed with your baby because you discover he isn't able to read to you at night: if you thought that would happen, your expectations were unreasonable from the start.
Why wasn't shomi more patient? The head of Canada’s telecom regulator, CRTC Chairman Jean-Pierre Blais, recently shared a thought: “Far be it for me to criticize the decisions taken by seasoned business people, but I can’t help but be surprised when major players throw in the towel on a platform that is the future of content – just two years after it launched. I have to wonder if they are too used to receiving rents from subscribers every month in a protected ecosystem, rather than rolling up their sleeves in order to build a business without regulatory intervention and protection.”
Ouch.
Lesson #4: Understand your true value.
The Globe & Mail neatly captured the difference in strategies employed by Netflix, CraveTV, and shomi as follows: "Where Netflix has been investing more heavily in original productions and CraveTV focused more on television, including a library of content from HBO, Shomi tried to stand out by betting on movies and collections curated by humans rather than algorithms."
shomi believed the value it could beat Bell's CraveTV by offering broader content (television shows AND movies), and beat Netflix by offering better content recommendations. I'd argue it was only half-right.
shomi's content offering, even without the HBO titles, was quite good. (And its kid-friendly content bordered on excellent.) But why would I prefer a group of individuals (who don't know me, or anything about me) to suggest content for me, when I could have a powerful computer analyze everything I've already watched or rated and serve up personalized recommendations? shomi bet on "human-curated content" as its primary point of differentiation, but it doesn't appear consumers saw enough value in that feature.
Promotions (like this one) take time to develop and execute at any organization, and take a lot longer in large organizations. Ideas have to be pitched, partnership agreements have to be negotiated, approvals have to be secured, marketing material needs to be created, then printed, then distributed. If I noticed this promotion inside a Rogers store window on August 16th (and keep in mind, that's when I noticed it, not necessarily the first day the promotion was active), I'm willing to bet people were working on this back in May. Which begs the question: why wasn't the Rogers offer for shomi instead of Netflix?
I'd suggest that one of the following was true: either Rogers determined that shomi was a non-viable proposition a lot earlier than the management team has indicated (in which case, the Netflix promotion was a strategic attempt to drive business for the wireless division using an SVOD that wasn't going to disappear a few months later), or there were silos within Rogers that didn't have faith in its own SVOD service.
If it was the former, then shomi was given less than 18 months to prove itself before the ax was dropped, an almost impossible ask for an initiative of such magnitude. (Remember, Netflix has been at this for almost 10 years.) If it was the latter, then shomi didn't have the level of internal support it needed to survive... and it's tough to win when your colleagues are against you to the point where they're helping your major competitor.
So long shomi.
These likely aren't the only reasons shomi failed. (This article suggest three additional reasons that I didn't mention in this post, all of which are difficult to refute. It also suggests that Bells' CraveTV is next, so it's worth a read if you're in the media business.)
In fairness, hindsight is 20/20. It's easy for anyone to look back and say, "they should have done this" and "they should have done that" after the fact when all scenarios have played out and the outcome is already known. But a post-mortem of the business is important, since every business failure offers important lessons for future enterprises that follow.
I believe shomi could have found a place in the Canadian market, which clearly has an appetite for SVOD services: it's estimated that roughly 5.2 million Canadian households currently pay for a Netflix subscription, which represents about half of all Canadian households.
But at this point, all we can say is this: so long shomi, we hardly knew you.
** If you enjoyed this article, please share it. If you really liked it, subscribe to this blog by submitting your email address to the "Follow By Email" box at right and follow me on LinkedIn or Twitter (@pullara) so you'll know when my next piece is ready. **
As a shomi user, and I'm not happy to see it go. And to be clear, I think most shomiesdeserve some serious accolades for taking on a bigger, stronger rival and coming up with a good competitive product: the shomi interface was familiar and easy to use, and while it's breadth of content proved no match for Netflix, it did succeed in offering some unique television shows and films you couldn't (legally) find anywhere else in Canada.
But good wasn't good enough.
My family received a concise letter in October to officially announce the decision, which explained, "while [shomi] was embraced by people across the country - people like you and me - ultimately it was not in great enough numbers to sustain it."
What were those numbers? A report released in June by Solutions Research Group (as reported in The Globe and Mail) estimated, "only about 4 per cent of Canada’s 11.6 million online households – fewer than 500,000 – were actively using Shomi, even though 83 per cent of households were at least vaguely aware of the service. By comparison, 46 per cent of households use Netflix."
The key question: what could shomi have done differently to achieve subscriber numbers that were "great enough"? With the benefit of hindsight, I will suggest there were at least five areas where different decisions could have been made, all of which can serve as important business lessons.
Lesson #1: Ensure key players are equally committed.
shomi was created as a joint effort between Rogers Communications Inc. and Shaw Communications Inc. But as The Globe and Mail reported back when the decision was first announced, "Questions had swirled about Shomi’s future ever since Corus Entertainment Inc. acquired the media arm of Shaw Communications earlier this year, but decided not to buy Shomi. That left Shaw’s 50-per-cent stake in the streaming service orphaned inside a company that had decided to concentrate on its cable and wireless businesses, and Rogers without a partner willing to invest in growing the streaming service."
Rogers and Shaw decided to partner on the shomi initiative. That's not a bad decision, on its own, and it's certainly overly-simplistic to say, "Rogers (or Shaw) should have just launched shomi on its own!", despite the fact both Netflix and Bell managed to launch their SVOD services independently. (Netflix had the benefit of experience; they've been investing in the streaming game for almost 10 years. Bell had the benefit of size; they're significantly larger than Rogers and Shaw combined. How much larger? In 2015, Bell had revenue of $21.5 billion and net earnings of $2.73 billion; Rogers had an operating revenue of $13.4 billion and net income of $1.38 billion, and Shaw had operating revenue of $5.5 billion and earnings of $880 million.)
Having a partner isn't necessarily a mistake. It's often a huge advantage. But if you do decide a partner is your best option, you need to ensure you both have the same level of commitment and vision. This clearly didn't seem to be the case with shomi.
Lesson #2: Don't be afraid to disrupt your core business.
When shomi launched in November 2014 , it was only available to current Rogers and Shaw cable subscribers; if you already paid for cable, you could choose to pay an extra $8.99 each month and also have access to the new streaming service. If not? No shomi for you!
Let's ignore the fact that just a few months after shomi launched, a complaint was brought before the Canadian Radio-television and Telecommunications Commission (CRTC) arguing that making the service exclusive to cable subscribers was a form of tied-selling, "designed to favour legacy business models and to discriminate against customers who wish to only view programming through an Internet service provider of their choice." Even without the complaint, why would shomi's leadership think it was a good idea to artificially limit the number of people who could possibly subscribe to their new service?
A reasonable assumption would be fear. The fear of losing a cable customer worth significantly more than the $8.99 a month the streaming service would generate.
But that fear was misplaced. According to this CBC article from early 2016, "190,000 Canadians ended their ties with traditional TV in 2015... an 80 per cent increase from the previous year when 105,000 people cut the cord." Are a greater number of households choosing to cancel their traditional cable subscriptions in favour of alternative viewing options like SVOD services? Absolutely! But that same article goes on to point out the reality of the current situation: "most Canadian households still subscribe to traditional TV — more than 11 million at last count."
Restricting the service to existing cable subscribers meant that someone like me couldn't subscribe to shomi. That's a huge problem, since I was arguably the exact type of customer that shomi wanted to reach: an existing cord-cutter who had already stopped paying for cable (so no risk of revenue loss for the cable business), and who had already decided I was comfortable spending money each month on a legal streaming service (so no change of behaviour required).
In "The Innovator's Dilemma", author Clayton Christensen warns companies about the dangers of focusing too much on current customer needs while ignoring what those customers will need in the future. shomi certainly might have cannibalized some cable revenue in the short-term had it opened up the service to all Canadians right from the start, but doing so would have a) given them a first-mover advantage over CraveTV (who also initially restricted their service to current subscribers) and b) made a serious strategic commitment towards protecting revenue in the future as an increasing number of households cancelled their cable in favour of alternative content options.
Lesson #3: A brand can't be built in a day.
Too many companies make the mistake of launching a product or service with great fanfare (and high expectations), then pulling back investment a short while later. I've seen this first-hand during my career as a marketer, and it never ends well.
shomi's marketing wasn't bad. In fact, Marketing Magazine even named them the Marketer of the Year in 2015. But marketing can't just happen at the launch. It takes time and money to drive awareness and trial of a service, and the bigger the innovation you try to introduce, the more time and money it usually takes to get to a point where the innovation can sustain itself.
Giving up on investment for shomi due to subscriber numbers that were not "great enough" after just two years is a little like being disappointed with your baby because you discover he isn't able to read to you at night: if you thought that would happen, your expectations were unreasonable from the start.
Why wasn't shomi more patient? The head of Canada’s telecom regulator, CRTC Chairman Jean-Pierre Blais, recently shared a thought: “Far be it for me to criticize the decisions taken by seasoned business people, but I can’t help but be surprised when major players throw in the towel on a platform that is the future of content – just two years after it launched. I have to wonder if they are too used to receiving rents from subscribers every month in a protected ecosystem, rather than rolling up their sleeves in order to build a business without regulatory intervention and protection.”
Ouch.
Lesson #4: Understand your true value.
The Globe & Mail neatly captured the difference in strategies employed by Netflix, CraveTV, and shomi as follows: "Where Netflix has been investing more heavily in original productions and CraveTV focused more on television, including a library of content from HBO, Shomi tried to stand out by betting on movies and collections curated by humans rather than algorithms."
shomi believed the value it could beat Bell's CraveTV by offering broader content (television shows AND movies), and beat Netflix by offering better content recommendations. I'd argue it was only half-right.
shomi's content offering, even without the HBO titles, was quite good. (And its kid-friendly content bordered on excellent.) But why would I prefer a group of individuals (who don't know me, or anything about me) to suggest content for me, when I could have a powerful computer analyze everything I've already watched or rated and serve up personalized recommendations? shomi bet on "human-curated content" as its primary point of differentiation, but it doesn't appear consumers saw enough value in that feature.
Lesson #5: Don't be your own worst enemy.
In announcing the decision, The Globe and Mail reported that, "The fate of the streaming service was sealed in the last few weeks"... but I don't believe that's entirely accurate.
In announcing the decision, The Globe and Mail reported that, "The fate of the streaming service was sealed in the last few weeks"... but I don't believe that's entirely accurate.
The news about shomi was announced on September 26th, but way back in mid-August I shared the (admittedly snarky) tweet you can see below about a promotion I saw in a Rogers store window...
I'd suggest that one of the following was true: either Rogers determined that shomi was a non-viable proposition a lot earlier than the management team has indicated (in which case, the Netflix promotion was a strategic attempt to drive business for the wireless division using an SVOD that wasn't going to disappear a few months later), or there were silos within Rogers that didn't have faith in its own SVOD service.
If it was the former, then shomi was given less than 18 months to prove itself before the ax was dropped, an almost impossible ask for an initiative of such magnitude. (Remember, Netflix has been at this for almost 10 years.) If it was the latter, then shomi didn't have the level of internal support it needed to survive... and it's tough to win when your colleagues are against you to the point where they're helping your major competitor.
So long shomi.
These likely aren't the only reasons shomi failed. (This article suggest three additional reasons that I didn't mention in this post, all of which are difficult to refute. It also suggests that Bells' CraveTV is next, so it's worth a read if you're in the media business.)
In fairness, hindsight is 20/20. It's easy for anyone to look back and say, "they should have done this" and "they should have done that" after the fact when all scenarios have played out and the outcome is already known. But a post-mortem of the business is important, since every business failure offers important lessons for future enterprises that follow.
I believe shomi could have found a place in the Canadian market, which clearly has an appetite for SVOD services: it's estimated that roughly 5.2 million Canadian households currently pay for a Netflix subscription, which represents about half of all Canadian households.
But at this point, all we can say is this: so long shomi, we hardly knew you.
** If you enjoyed this article, please share it. If you really liked it, subscribe to this blog by submitting your email address to the "Follow By Email" box at right and follow me on LinkedIn or Twitter (@pullara) so you'll know when my next piece is ready. **
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.