The end of channel surfing, thanks to Netflix

For Canadians, the idea of watching television or movies over the Internet has not yet caught on in a big way. And that’s partly because there has so far been relatively little on the Web for us to watch (many popular U.S. sites like Hulu.com are blocked to Canadian surfers to protect licensing deals with Canadian broadcasters).

But now one company—an American one—is hoping to finally shake things up north of the border. Netflix, which built its U.S. business on mail-order DVD rentals and generated US$1.4 billion last year, is planning to launch a television and movie streaming service in Canada this fall, its first effort at international expansion. Details are scarce, but spokesman Steve Swasey says Netflix plans to offer Canadian consumers a “robust” selection of TV shows and movies, though he declined to say how many titles would be available and how much the service would cost per month (U.S. customers pay US$8.99 for unlimited mail-order DVD rentals and streamed videos to their computers). “Streaming is really going to be the way of the future,” says Swasey, who adds that Netflix doesn’t plan to offer a DVD mail-order rental service in Canada.

As a well-known U.S. brand, Netflix represents the first real threat to the dominance of Canada’s traditional cable and satellite companies. An “all you can eat,” on-demand subscription service with desirable content would offer a promising alternative to existing pay-per-view services—particularly since Netflix has deals with makers of video game consoles and Blu-ray players that allow its content to be streamed directly to consumers’ flat-screen TVs. That’s in contrast to existing online services like Apple’s iTunes, which sells downloadable TV shows and movies that typically remain stuck on people’s computers (Netflix also has an agreement to stream content on Apple’s iPad). Netflix’s proposed service is “something that would really be disruptive in this market,” says Jayanth Angl, a senior research analyst at Info-Tech Research Group.

But experts warn that Canadians may not be ready to ditch their TV subscriptions just yet. Brahm Eiley of Convergence Consulting says it will all depend on Netflix’s prices, content and timeliness (in the U.S., Netflix has agreements with studios that force it to wait up to a month after a DVD release before offering movies). Meantime, television providers like Rogers Communications, which owns Maclean’s, Shaw Communications and Bell Canada are taking steps to guard their profitable television businesses from new Internet players. Rogers and Bell, for example, both have new online portals where movies and TV shows are available on-demand, although only to existing subscribers.

Netflix will also have to find a way to work around a preference among Canadian Internet service providers (including Bell and Rogers) for limiting their users’ downloads and charging them extra when they go over. “Unlike the U.S., where bandwidth caps are mostly a non-issue, in Canada they have to contend with bandwidth-cap threshold issues,” says Eiley. Rogers, for example, recently tightened its caps for a number of its Internet plans, with its cheapest Lite service now limiting users to 15 gigabytes per month, compared to 25 gigabytes before (a high-definition movie can eat up close to three gigabytes). A spokesperson says the move was unrelated to Netflix’s announcement. Regardless, the rush to personalize the TV set is well under way, promising to do away with channel surfing once and for all.