The War on Netflix – Canadians are Losing their Free Market Option

netflix-logoIf you are a Canadian, there’s a good chance are you are a Netflix subscriber, because Canadians per capita, are the No.1 users of Netflix in the world.

Either an indicator that we as a people are rebelling against our traditional TV service provides, or we are a nation of couch potatoes, regardless, we as a people eat their stuff up.

You know who isn’t happy about that?

The traditional TV service providers, or as we call them, the “Big Three” incumbents: Bell, Rogers and Telus.

The fact that so many of us are abandoning them for the cheaper alternative is driving them a wee bit nuts, and they are now taking collective action to first, make Netflix a not-so-cheap alternative, and second, to start up their own Netflix-like products.

Hey, if you can’t beat ’em, drive ’em out of the country instead. Here’s how they are doing it.

Stage 1 – Institute data caps

When Netflix showed up in the Great White North there was an almost staggering instantaneous response – we signed up in droves. The online TV service requires only an Internet connection to provide Canadians with a ton of excellent content for a fraction of the cost the incumbents charged.

What did they do about it? Almost at the exact same time they introduced new data limits on all of their subscribers, and suddenly that $7.99/month charge for Netflix was being topped with overage charges that sometimes amounted to hundreds of dollars a month.

What did Netflix do? The only thing they could. To reduce the bandwidth requirements they cut the quality of their service to Canadians so their HD became more like “HD lite” and made huge press by stating unlimited Internet is a “human right.”

That did it. The big three backed off, and started taking major heat for their blatant cash grab on data (not that it stopped them from keeping the data caps or anything).

Now comes their next attempt to kill the “killer app” that is Netflix…

Stage 2 – Paint them as a “Foreign Threat”

Netflix CEO Reed Hastings was in Toronto this week talking about the Big Three’s strategy: “It’s a deterrent to Canadian society that exists nowhere else in the world. In Britain, everything is uncapped,” he told the National Post. “In the U.S., on Comcast for $45 a month [you get] 300 gigabytes and then [each extra] 10 gigabytes is like a dollar.” *

Here’s a nice take on what’s going on from Sunny Freeman at the Huffington Post Canada:

Netflix has been painted as a foreign threat by Canadian cable operators seeing their viewers cut their cable in favour of cheaper, more flexible online options such as subscription services like Netflix, free options like networks’ websites, or unauthorized downloading.

The company’s “over-the-top service” (meaning it’s delivered on another company’s broadband infrastructure) has been painted as a threat both by telecommunications companies who blame it for eating up their bandwidth and taking eyeballs of their shows, as well as by cultural groups and content providers who say it is eroding Canadian content.

George Cope, CEO of BCE Inc., Bell’s parent company, told a CRTC hearing last week that its controversial takeover of Astral Media should go ahead as is because it would provide a crucial Canadian alternative to U.S.-based Netflix, which has been in Canada for two years now and has some two million subscribers.

Rogers Communications Inc. has also said it will launch a Netflix-type service and Quebecor’s Videotron has already done the same for Francophones.

From the Big Three’s perspective, it does make perfect business sense. They’ve identified a competitor, and now they are trying to do everything they can to drive that threat out of business.

wl_save_internetBut it’s the cynical way they are going about it that’s so bothersome. Instead of simply providing a “just-as-good” service to compete, they’ve instead used their own customers as a weapon to defeat Netflix, overcharging them for data to make the cheaper alternative more expensive.

Now they are pulling the “Oh Canada” card.

I wonder… considering how they’ve suddenly become so nationalistic, when they launch their Netflix alternatives, will they have have all-Canadian programming?

Just wondering.

* Reed doesn’t know about Worldline apparently because starting at $29.95/month you can get Unlimited High Speed Internet right now! (We’ll forgive him this time.)


2 thoughts on “The War on Netflix – Canadians are Losing their Free Market Option

  1. When our satellite bill was $100+ per month we decided it was time for a change! So we got Netflix, cancelled our satellite and went with Cable at only $42/month. If cable offered much more affordable packages, and made it a flat rate for all of their channel lines rather than making you pick and choose they would have a lot more people keep their accounts. I hated paying over $100 a month to have 20 channels showing the same program hour after hour!

  2. Canadians can now retaliate and cut the bill from not just tv but Internet as well. There are still many companies who provide a decent internet package for a fair price, even unlimited if you need it. Cut Rogers and bell altogether, then see if they play any nicer.

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