TORONTO (Reuters) - Netflix launched an online video-streaming service in Canada for films and television on Wednesday, its first foray outside the United States and a direct threat to established cable companies.
Adding another content distributor to an increasingly congested market, Netflix said it will offer unlimited streaming of movies, documentaries and TV shows for C$7.99 ($7.81) a month.
Consumers will be able to stream video to compatible TVs or Internet-connected computers. Video game consoles such as Nintendo’s Wii, Sony’s PlayStation, and devices such as Apple’s iPhone and iPad will all be able to stream from Netflix.
“It’s disruptive clearly, but with a few limitations,” said Dhai Ghose from Canaccord Genuity. He said the relatively low cost, decent content supply and ability to watch on multiple platforms would pressure incumbents such as cable and wireless company Rogers Communications but a lack of sports coverage and newly released films may limit the damage.
“Initially, people will scale back their video on demand usage because it’s much cheaper,” Ghose said. “Over a period of time it could be a substitute.”
Netflix said it has signed licensing agreements with studios Lionsgate, MGM, Sony, 20th Century Fox as well as Canadian distributors Alliance Films, Maple Pictures, eOne, and Mongrel.
Netflix Chief Executive Reed Hastings downplayed the threat to established cable operators at a launch event in Toronto.
“We’re not really an effective competitor to cable because we don’t have sports, we don’t have the vast majority of programing that cable has,” he said. “We’re like a bicycle compared to their car.”
Hastings dodged a suggestion that major Internet providers such as BCE Inc’s Bell Canada unit and Rogers Communications had reacted to Netflix’s imminent arrival by reducing bandwidth limits in some Internet plans for new subscribers.
“Netflix streaming is very efficient in how little data it uses,” he said. “We hope it won’t be a significant problem.”
He told Reuters that Netflix uses caching technology to limit draining of network bandwidth.
“Our videos never go across the backbone of the Internet, the thing that’s expensive, they get cached locally in all the different (Internet service providers),” he said.
Hastings said Netflix was focused on streaming at a single low price and would not offer a mail-in service in Canada.
The Los Gatos, California-based company started in the United States as a mail-in DVD service but Hastings said the vast majority of Netflix’s 15 million U.S. subscribers now streamed content.
While Netflix’s subscription model offers unlimited access for a flat fee, most customers’ use of the service will be restricted by the data limits set by their Internet service providers. An average offering is capped at between 40 gigabytes and 60GB a month.
Hastings said Netflix file size would range between 300 megabytes and 2GB an hour depending on quality and average around 1GB an hour.
Canada has seen a convergence in its telecom, Internet and broadcasting sectors in recent years as once-dominant regional telephone carriers compete nationally against cable companies, upstart wireless companies and smaller Internet service providers.
The fight for media content has also heated up this year.
BCE said earlier this month it would buy CTV, the country’s biggest private broadcaster, for C$1.3 billion as it moved to bolster its position as a content provider.
BCE already offers a satellite-TV service and is now starting to roll out Internet TV.
Cable company Shaw Communications said earlier this year it would buy the television assets of Canwest Global Communications, which is under bankruptcy protection.
Additional reporting by Solarina Ho; editing by Rob Wilson and Peter Galloway