While Netflix has grown like wildfire across Canada, providing unlimited streamed video entertainment for $8 a month, a few cable operators at risk of premium channel cord-cutting have responded with their own movie streaming services, at least one that temporarily found itself the subject of controversy when it was introduced a few weeks ago.

Shaw Communications’ Movie Club is that cable company’s answer to Netflix — offering a flat rate streaming service available over broadband or through your Shaw set top cable box for $17 a month ($12 if you forgo HD movies).  For that, Shaw promises unlimited viewing, without any usage caps so long as you stream movies from your cable box and not from your home computer.

But is it worth it?

With the assistance of one of our readers in Calgary, we were able to give Shaw’s Movie Club a trial run.

Availability

Evidently, Shaw Movie Club works best if you live in Calgary or Edmonton, where Shaw has been testing their new “Gateway” system, which is a combination home video terminal/DVR designed to compete with phone company DVR boxes which can record 4-6 shows simultaneously and deliver recordings to multiple sets in the home.  A number of Shaw customers on less-advanced, older cable systems may find the service a lot less convenient to use.  Outside of urban Alberta and in British Columbia, we found instances where customers could request to view Shaw Movie Club titles, but they had to be watched on your cable set top box.  For now, the most aggressive marketing for the service seems to be in Calgary and Edmonton, perhaps for this reason.

The Selection

When we sampled the service, we found about 150 titles available for viewing — hardly a wide selection.  Although many popular, semi-recent movies were available for viewing, the selection was comparable to what one would find from one or two premium movie channels.  Existing premium subscribers may find more than enough to watch from Super Channel or Movie Central On Demand, which are included with your subscription to one or both networks.  In the States, HBO, Cinemax, and Showtime all offer their own virtual “on-demand” channels that let viewers select most of the titles shown on each respective network for instant, on-demand viewing.  Shaw Movie Club felt very much like one of these channels, based on the limited selection.

In comparison, Netflix does not make it easy to count the actual number of streamed movies they have on offer at any one time, but the selection was clearly more substantial on Netflix, with a much deeper catalog.  But Canadians are also punished by Netflix because the service does not yet have agreements in place with studios to stream the same titles to both American and Canadian audiences.  Americans have a much larger selection of titles to stream.  Shaw’s agreements with studios clearly emphasize more current titles, and there are titles available on Shaw’s service that are not available from Netflix.

Winner: Netflix – You have a better chance of finding something to watch on Netflix.

Loser: Shaw Movie Club – But the service may have access to movies you wish Netflix provided.

Shaw's biggest competitor

The Value

At up to $17 a month, Shaw Movie Club is expensive.  In fact, it’s a lot more expensive if you do not subscribe to Shaw’s cable television.  It’s required to sign up for the streaming service.  That seems counter-intuitive to provide video streaming but deny broadband-only customers the opportunity to buy, but not when you consider such services are designed to prevent cable-TV cord cutting, not enable it.  Shaw charges nearly $40 in Alberta for basic cable service, so that’s a steep entry fee to pay before handing over another $12-17 just to stream movies.

For those uncomfortable video streaming on home computers, Shaw’s set top box solution lets you watch shows on-demand directly on your television.

Shaw initially found itself mired in controversy when it appeared they would exempt their video streaming service from their own usage caps — a clear anti-competitive move against Netflix, which does count against your cap.  But Shaw quickly clarified their position to state only set top box viewing was exempt from their caps.  We’re not certain exactly what distinction Shaw is trying to make beyond the political, because data is data — it all arrives on the same cable.  Shaw would argue their video may travel over their “television” bandwidth when delivered to set top boxes and their broadband network when delivered over the Internet.  But Time Warner Cable has shown it can deliver video over its Apple iPad app to cable subscribers over Time Warner’s internal network, which means it costs next to nothing to provide.  We suspect there is nothing technically precluding Shaw from exempting all of its Movie Club viewing from usage caps, beyond the political implications of doing so.

Winner: Netflix – $7.99 a month is an afterthought when you consider how much you can watch.

Loser: Shaw Movie Club – Up to $17 a month is a very steep price to pay for fewer than 200 movie titles to watch.

Video Quality

Both services delivered high quality video, even over a remote connection we used to sample Shaw Movie Club.  Shaw’s HD streaming performed with absolutely no technical flaws, evidence they are paying careful attention to deliver video from networks as close to their customers as possible.  Shaw’s HD streaming was often better than Netflix’s online streaming, but Netflix’s network consumes a lot less bandwidth, an important distinction if you have a large family piling on your broadband connection at the same time.  Shaw’s video is a bandwidth piggy, and will eat into your usage allowance fast if you use it over the Internet.

We recommend watching Shaw’s service over your existing set top box whenever possible.  It’s convenient and won’t count against your usage allowance.

A Tie: Netflix and Shaw Movie Club both deliver excellent quality video with no technical flaws experienced.  Shaw Movie Club has a larger selection of HD movies, but that is tempered by the fact watching them will rapidly erode your usage allowance if watching online.

Netflix knows many customers are upset over the company’s recent decision to raise prices up to 60 percent, but company officials are shrugging their shoulders, suspecting the vast majority won’t actually follow through on their threats to cancel service. But Netflix is preparing investors for a possible third quarter decline in revenue, just in case.

CEO Reed Hastings downplayed the vocal protests with shareholders on an investor conference call.

“Believe it or not, the noise level was actually less than we expected,” Hastings said. “Given a 60% increase, we knew what we were getting into.”

Netflix expects revenue will decline temporarily in the third quarter as customers drop either the streaming or mailed DVD component from their rental plans.  The company effectively separated the two options into individual plans, and suspects many customers won’t retain both under the new pricing that takes effect next month.

Company officials also sent letters to major investors defending the new pricing as still reasonable when compared with the alternatives.

“We expect most to stay with us. We hate making our subscribers upset with us, but we feel like we provide a fantastic service,” the letter read.

Dan Rayburn, an analyst at Frost & Sullivan, believes the price changes are part of a master plan for Netflix to get out of DVD rental business altogether to save costs.

Many analysts predict Netflix will eventually adopt streaming video exclusively, but some are asking at what cost.  Predictions are widespread that Netflix will be forced to raise prices on streaming, perhaps by double, just to remain profitable in light of growing rights fees.  Sacrificing the labor-intensive DVD rental business, with associated warehousing and postage costs, could provide a savings cushion to protect subscribers from sticker shock should streaming rights fees get out of hand.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Williams Says Netflix Future Is Streaming Based 7-26-11.mp4[/flv]

Netflix stock is falling fast after consumer dissatisfaction over Netflix’s new pricing plans.  Bloomberg covers who wins and who loses after the price changes.  (2 minutes)

Rogers Communications has announced usage cap and speed adjustments for many of its Internet service plans — changes that will bring increased allowances for some of the company’s most premium customers.

Rogers has modestly adjusted usage caps on its popular Extreme Internet Plan a year after slashing them, and brings dramatic increases for the company’s most expensive service tiers, even as it leaves usage caps unchanged for the bulk of their customers subscribed to the basic Express service plan:

A Rogers spokesman explained the changes.

The bar gets raised only for those who agree to spend more.

“With the rapid rise of online video, social media and online gaming, the way Canadians use the Internet is changing dramatically. We’re always reviewing our plans to ensure they meet your changing needs so starting later this month, our Hi-Speed Internet tiers are being upgraded with faster download speeds and higher data allowances for customers on Rogers DOCSIS 3.0, our best and fastest wireline network,” wrote RogersMarina on the company’s RedBoard blog.

Apparently the way Canadians use the Internet with Rogers’ most-popular Express plan hasn’t changed much, because Rogers leaves that cap unchanged at 60GB of usage per month.  Rogers previously reduced its usage cap for its Extreme level of service from 95 to 80GB, days after Netflix announced it was bringing its streamed video service to Canada.  Rogers’ latest increase amounts to just 5GB more usage than customers had during the spring of 2010.

The increased speeds that some usage tiers are gaining with the introduction of DOCSIS 3 technology come “at no additional cost” according to Rogers, but the company also mentions it charges higher prices — $1.50-$3 more per month — for the required DOCSIS 3 modem.

For customers certain to exceed their allowance, Rogers will sell you an insurance plan to protect your wallet from their $0.50-5.00/GB overlimit fees:

“Also starting later this month, you’ll be able to add a data assurance option if you’re currently using the Express and Extreme tiers. For an extra $20 per month, you’ll receive an extra 80 GB of data on top of your existing allowances. If you don’t need quite as much data, you can also get an additional 20 GB for an extra $5 per month.”

Most customers were not impressed.  Take Matt, for example:

“Speed increases are great but all they allow us to do is to get to our low data caps faster. These days with YouTube, Netflix, VOIP, and work VPN (heavy work from home user) $60 for 100 GB of data is pretty expensive, especially when a GB of data probably costs Rogers pennies per user. Competitors are starting to offer higher data caps for a similar price. In Toronto you can get a plan for same or slightly cheaper starting with 200GB.  In Vancouver you can get 50Mbps for $29 a month with a 400 GB data cap!”

Cambo notes the usage upgrades come easy for higher-priced tiers, but customers on the most popular Express tier have no increase in their usage allowance at all.

“You guys just don’t get it,” he writes on RedBoard.  “Speed isn’t the issue. Usage is. Why is it every tier gets a usage bump except the most popular Express? What is the point of bumping the speeds up and not significantly increasing usage, so we can get to the caps even faster I suppose. Sounds like a ploy to get people to spend more, to me.”

Andrew agreed:

“I also agree with this. I would rather get a larger usage bump than a speed bump — I don’t see a point in raising speeds when the data cap is still extremely restrictive. After all, I’d want to enjoy using the Internet, rather than monitoring my usage restrictions every day. If Rogers really listened to the customers, they’d know that most of us are more critical of their plans’ usage restrictions than their speeds.”

More than 35,000 Netflix subscribers flooded the company’s blog and Facebook page with negative comments less than 24 hours after the company announced major pricing changes for its DVD-by-mail and streaming services.

News that Netflix would unbundle discounts for customers who enjoy online streaming and still need to rent an occasional DVD-by-mail went over like a lead balloon for the overwhelming majority, who hit the 5,000 comment limit on Netflix’s own blog by 5:30pm Tuesday, and continue to pound the company’s Facebook page by the tens of thousands this morning.

One of the most “liked” comments came from longtime Netflix customer Scotty Fagaly:

“The only way that this is terrific for the customer is if you plan to offer your entire collection available for streaming,” Fagaly lamented. “Otherwise, this is just yet another way to choke more change out of your customers.”

Only about 20 percent of Netflix’s library is available for streaming at any time, with some titles and studios coming and going.  Several television series are available online, but certain episodes are often missing from the streaming library, requiring customers to rent the DVD to see everything.

Are these discs made of gold now?

The biggest negative response came from the loss of the popular $9.99 plan, which allowed unlimited streaming and an unlimited number of DVD’s — sent one at a time — to customers.  With the unbundling of discounts, that same plan now costs $15.99 — a 60% increase.

Netflix officials have yet to respond to the firestorm of criticism, in part laid at the feet of Jessie Becker, who tried to make lemonade out of the price increase most customers describe as a lemon.

“It’s insulting that Netflix think we’re stupid enough to believe this change is either ‘exciting’ or ‘good news,'” one hostile commenter noted.  “Stop couching this as anything other than what it is — a price hike.”

“So far you have 32,446 people on your Facebook page planning to or already have canceled, and 6,857 on this blog [over an] announcement yesterday. If nothing else there might be an award in it for you guys for most Internet hits for pissing off customers in the shortest amount of time,” said Christine Perry.  “I can go to Redbox and rent a new release for a dollar, watch it and return it the same day and get a new one. Why would I pay $7.99 to wait 3 days to get a DVD, and the another 3 days after I watch it for you to get it back, and then another 3 days to get another one?”

Daniel Indiviglio, a former investment banker who works today as an associate editor at The Atlantic, called Netflix’s price changes “boneheaded,” particularly for investors if it backfires:

“How much could Netflix lose? Let’s do a quick analysis. According to one estimate, about 80% of Netflix subscribers currently have by-mail service that includes free streaming. Of that portion, let’s say half cancel streaming but keep by-mail service. Remember, many people don’t use streaming at all. In particular, if you don’t have an Internet-ready device connected to your television with a Netflix widget, then streaming is far less attractive. Through Netflix’s new pricing, by-mail only service will be about 20% cheaper than the current rate that includes free streaming.

[…] “Netflix has been a darling of investors for some time now. In just the past year, its stock price has increased by an amazing 144%. But Wall Street might begin to question its strategy. The company has said that streaming is the future. It’s right. But the future isn’t here yet. If its streaming subscriber base suddenly plummets by 50% or even by a smaller margin like 30%, then investors might worry about whether consumers are really ready to embrace the service on which Netflix has been investing a huge portion of its revenue. And if its profits dive as a result of the rate hike, then investors will be even more concerned with Netflix’s vision.

“So what should Netflix have done? It should have increased its rates slightly, maybe by a dollar or two, and broke out streaming and by-mail service. For example, the company could have increased the cost of its basic plan from $9.99 to $11.98 for streaming plus by-mail service. If you wanted the two a la carte, it could have charged $4.99 for streaming and $6.99 for one DVD-by-mail. Although customers wouldn’t love the rate increase, they’d be better able to stomach it. It would also give Netflix the ability to up its fees in future years gradually, to hit the target that it believes is appropriate. But putting the hike in place immediately may do the company more harm than good.”

Your Alternatives

Bankrupt Blockbuster wasted no time taking advantage, pelting many of their former rental members with e-mail reminding them they can rent Blockbuster DVD’s by mail without a monthly subscription.  Unfortunately, it’s not cheap.  A seven day rental of a single disc will cost $4.99.  Subscription plans offer a better value for frequent renters.  Blockbuster also benefits from not being perceived these days as a “bad boy” by Hollywood studios, who have been penalizing Netflix with longer rental embargo windows.  Many new releases reach Blockbuster a month before showing up in Redbox or on Netflix’s roster.  Customers can also swap out up for five DVD’s a month at BlockBuster retail outlets, and video game rentals are also available.

Prices:

• One DVD out at a time: $12 per month
• Two DVDs out at a time: $17 per month
• Three DVDs out at a time: $20 per month

Hulu Plus has not been a runaway success for its owners, charging $8 a month to paying customers who win the right to watch additional content, but with the same commercial load the free alternative service provides.  People don’t think of Hulu for movies because the service is heavily focused on television series, but Hulu Plus does deliver a small selection.  Amazon Instant Video is another alternative, for those paying Amazon.com $79 a year for the privilege of getting their orders shipped to arrive in 48 hours for no additional shipping charges.  Amazon added unlimited access to their Instant Video streaming library at no additional charge for Amazon Prime members.  Just about anyone signing up with a new account at Amazon can get a 30-day free trial of Amazon Prime, with the movie service.  But you will make due with watching around 6,000 titles, many of which are obscure or a distant memory.

Many of Netflix’s upset customers report they are headed for the Movie Tardis — the 27,000+ giant red boxes erected in front of grocery and drug stores.  Redbox pitches $1 movie rentals, but you need to return them by 9pm the following day.  Blu-ray movies cost 50 cents more.  Redbox carries a healthy selection of current titles, and you only interact with a machine, so you won’t deal with the eye-rolling you might get renting at area video stores.  This option works best if you are within a very short distance from the nearest kiosk.  Otherwise, you may find returning discs a hassle.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/WNAC Providence Netflix raising prices 60pct 7-13-11.mp4[/flv]

Netflix is raising prices and subscribers are not happy, shares WNAC-TV in Providence.  Their advice? “Stick to Redbox.”  (1 minute)

Netflix has dramatically raised prices for their customers who subscribe to both unlimited streaming and renting DVDs-by-mail, several months after their last rate increase.

The company today announced it was unbundling discounts for its plans that include both online video streaming and DVD rentals-by-mail.  Under the old pricing, customers could watch an unlimited amount on online content and still get one DVD at a time mailed to them for $9.99 per month.  Effective today, that same plan will cost $15.98 — a $6 monthly increase.

According to Netflix’s Jessie Becker, the company is effectively pushing customers through pricing to either renting all of their DVD’s by mail or going with unlimited streaming.  Doing both will carry a significantly higher price.

“We are separating unlimited DVDs by mail and unlimited streaming into separate plans to better reflect the costs of each and to give our members a choice: a streaming only plan, a DVD only plan or the option to subscribe to both,” Becker writes on Netflix’s blog. “With this change, we will no longer offer a plan that includes both unlimited streaming and DVDs by mail.”

That’s not exactly true, however.  Netflix is still selling combined plans, just at substantially higher prices.  A three-DVD-by-mail plan that includes unlimited streaming used to cost $19.99 a month, but will now be priced at $23.98 a month, a four dollar increase.

The new pricing does not include the very steep price increases forecast by Wall Street for unlimited streaming.  Content creators, especially large Hollywood studios, expect to aggressively negotiate for dramatically higher fees to renew contracts for Netflix video streaming rights.  Most anticipate Netflix will need to raise streaming prices to cover those costs in the near future.

Customer reaction?  Overwhelmingly hostile, with many threatening to cancel service in favor of Amazo, Hulu, or even Redbox.

Among the comments:

◊ This is a 60% price increase. Netflix sure has some audacity to think they can get away with a 60% price increase in this economy. I currently have the $9.99 one-DVD plus streaming plan. Sept 1st I will have to pay $15.99 ? Not gonna happen. I’ll cancel one or both services. There are other options (I have Tivo, Apple TV, Amazon Prime, etc.) Netflix has peaked. They are going to blow it.

◊ You can spin this any way you want, Netflix, but it comes down to simple greed. With limited new content on your streaming service, I will be definitely be canceling that and will probably cancel DVD service as well just on principle. Time to sign up for Hulu Plus! Go ahead and change your name to Blockbuster, because with more stupid decisions like this, it’s only a matter of time before you go by the wayside like they did.

◊ 60% increase, practically overnight, to get the same service I get now? That sucks. If I rented more than one or two DVDs a month, it might be worth it, but I only use the DVDs as a fallback when the movie I want isn’t on streaming, and they often take several days to arrive. If you had your entire catalogue on demand, then I could pick between two options, but you’re forcing me (and a lot of other customers) to pay full price for both in the hope of getting one complete service. You already increased prices at the beginning of the year, and this kind of hike six months later is unacceptable. Hulu is starting to look very good.

◊ Congratulations. You’ll probably be losing our household subscription. We’re long-time members (since 2002) on the Unlimited 3-disc plan. We just started streaming more because we finally have a game system set up in the living room. However, with these “changes” we’ll no longer be able to afford both. So why bother to keep either? Thanks, a lot, Netflix. I really bloody hate you. And that’s sad because until this year, I didn’t have many complaints about your company. Why the hell can’t you just leave things as they are? If things aren’t broken, don’t fix them. 🙁

◊ The only way I will be sticking with Netflix then is if they offer newer titles and ALL titles in just streaming. Because I’m not paying 15.98 for what I get now at 9.99. This doesn’t make sense. THe only reason I signed up is because I thought “9.99 a month. I can do that.” but 15.98 a month with my minimum wage job, having to pay for college, gas, insurance, cell phone. I’m not adding an un-needed 15.98 a MONTH netflix bill. Count me out.

◊ So, my 2-at-a-time with streaming and Blu-ray plan currently costs $17.99 (up from $16.99 last year and $13.99 when I first joined in 2008). Under this new scheme, I get no new features or services, but I have to pay $22.98? Um, no thanks… I think I’ve had enough.

◊ The whole point is that we use the streaming primarily and only order a DVD when you don’t have it available for streaming… thus the $2 per month for DVDs makes perfect sense.  You guys have really messed up here.