Don’t underestimate Netflix rival Shomi

There could still be room in the market

Shomi screenshot showing the cast of New Girl

There is a tendency to be skeptical, if not downright cynical, about a telecom company launching a new product that is designed to compete with a true technology concern. It’s a deserved doubt, since telcos don’t have a good track record at such things.

There was, for example, Bell’s attempt a while back at an iTunes competitor, or Rogers’ effort to get video calling off the ground. Neither set the world on fire for a variety of reasons, not the least of which is that such software-heavy endeavours are generally outside the companies’ core competencies.

It’s understandable, then, that there’s now skepticism surrounding Rogers’ and Shaw’s joint effort Shomi, a software-intensive TV-and-movie streaming service that aims to take on Netflix. Worried that the Silicon Valley giant is going to increasingly eat their TV lunch, the two cable companies have decided to fight fire with fire.

MORE: Rogers and Shaw announce joint digital video service Shomi to challenge Netflix »

On its surface, Showmi looks and sounds good. The service is promising 14,000 episodes of more than 340 TV shows, plus 1,200 movies, when it launches in November. Like Netflix, it’ll run on a host of devices including tablets, phones, Xbox 360 consoles and set-top TV boxes. In demos on Tuesday in Toronto, the service appeared to work well.

All that will cost $8.99 a month, or a dollar more than what Netflix currently charges, although the service will soon be raising its subscription fee.

The cable companies are almost gleeful in pointing out the advantages their service will have, with the press release asking viewers if they’re tired “of endless scrolling” or “outdated series” – clear digs at Netflix.

Shomi will have exclusive rights to past seasons of hit shows such as Modern Family, Sons of Anarchy, Sleepy Hollow, Shameless, 2 Broke GirlsVikings, New Girl, 24: Live Another DayChicago FireThe Strain, and American Horror Story.

On top of that, humans will also curate the service to suggest other titles that viewers might like, which differs from Netflix’s algorithm-centric recommendation engine. The result will be “more bang, less blah,” the cable companies say.

How all this will work in actuality remains to be seen. One of Netflix’s big advantages is that it is a hot Silicon Valley company, with all the top-notch software talent that goes with that. Netflix works amazingly well, a big reason why people around the world have flocked to it.

And while Rogers and Shaw say their service will have better, more up-to-date content than Netflix has in Canada, that also remains to be seen. All things being equal, the real showdown may come down to who has the better stuff.

Shomi’s biggest disadvantage is the cable companies’ own legacy concerns. At least for the time being, the service will be restricted to their own internet and TV customers, which amounts to about 4.5 million potential customers. Netflix, by way of comparison, has 10 times more subscribers.

“We’ll look at distribution models as we learn from the beta [test],” a spokesperson for Rogers said, which means that non-Rogers and Shaw customers are out of luck, at least for the first six to 12 months that the test will run.

With a slightly higher price than Netflix and the requirement of having an existing connection, Shomi looks like a defensive effort for now, rather than an aggressive attempt to push back Netflix’s encroachment. If Rogers or Shaw were to make the service cheaper than their rival, as well as open it to all Canadians, they could indeed force the U.S. company to break a virtual sweat.

Skeptics may not believe so – that the very reason for Netflix’s success is because it’s not a cable company service – but that’s overstating it.

MORE: Why Netflix won’t conquer Canada »

About 3.6 million households subscribe to Netflix in Canada, according to Toronto-based tracking firm Solutions Research Group, and a large majority of those – three million – also have paid TV service. It is largely a complementary service, with a small minority of subscribers consisting of cord cutters or “cord nevers,” or people who never subscribed to TV.

These are not people who are slavishly loyal to the great emancipator Netflix, nor do they necessarily have a particular burning hatred for their cable provider. In other words, there is indeed an opportunity for Showmi to succeed.

As Kaan Yigit, president of Solutions Research Group, puts it: “I think there is room in the market for an additional service in Canada because the appetite for movie and TV content online is only increasing and Canada is underserved versus the U.S. where there is, for example, Hulu, in addition to a stronger Netflix offer as well as Amazon Prime.”

Watch the Shomi launch video: