Rogers takes aim at youth with Vice partnership

When Rogers Communications Inc. CEO Guy Laurence wore a leather jacket to the announcement of his company's latest project —a $100 million joint venture with Vice Media Inc. —the unconventional outfit emphasized how the new partnership was aimed at appealing to a younger demographic. The project, targeting those in the 18-34 age range, will “address the dramatic shift in Canada's media landscape, as young people increasingly consume news and entertainment from their mobile and digital devices,” Rogers said in a press release Thursday. Under the deal, Vice will establish a studio in Toronto and “deliver Canadian-made news and entertainment programming across ‘the holy trinity’ of mobile, web and TV,” Rogers added. The deal also includes a Vice specialty TV channel, though Laurence said at the announcement that the partnership will have a “mobile first” priority. “It’s kind of refreshing to see something different being done,” analyst Troy Crandall of 3Macs said in a phone interview, agreeing that the venture is aimed at a demographic with a larger proportion of cord-cutters and cord-nevers. “It’s nice that somebody is finally … at least trying something to address it. We don’t know necessarily if it will work or not, but at least it’s a start.” He added that especially on the younger end of the demographic, many have never had cable service. “There’s a large amount of them, and they’re starting to just now go out there and get jobs. And they’re basically your future revenue source, and if your future revenue source has no intent of buying your product, you’ve got a problem.” “You’ve got to form habits early,” Crandall said. Since the demographic isn’t watching TV in the traditional way, “you need to start doing different things,” and providing content that demographic wants to watch is a good approach. The deal with Vice is a small fraction of the $5.2 billion Rogers paid for NHL hockey rights, and less than the $160 million it paid for Source Cable Inc., news that it announced in one paragraph in the middle of its latest quarterly report. Analyst Drew McReynolds, a telecom analyst with RBC Dominion Securities, said he doesn’t think it’s “material” for the company from a financial point of view. Rogers is “killing a couple of birds with one stone,” he noted, since the studio will produce Canadian content Rogers is obligated to produce anyway, and the deal allows them to do so in cost-effective way. “It’s an initiative that certainly makes sense strategically,” he said. “Even though it’s not financially material, I think strategically it’s along that path of needing to invest in OTT, needing to create content, or at least license content, for mobile and over-the-top, and I wouldn’t be surprised to see just a lot more of these types of initiatives along that same strategy.” Crandall said “it’s a pretty big bet” for Rogers, even though they are sharing the $100 million costs with Vice. He noted it’s not immediately clear how Rogers is planning on earning revenue from the deal. Content distributed over the Internet can be kept exclusive, while content distributed over the traditional TV system has to be shared with other companies, he pointed out. “So that could create some possible payback for them,” he said. Rogers could make the mobile or Internet content available for free to Rogers customers only, which means that extra cost would be embedded in the price of the service, while charging subscribers of other companies. Crandall and independent television consultant Kelly Lynne Ashton pointed out that Rogers will be able to tap into Canadian content funding for the Vice TV channel, which will be distributed through the traditional TV system. Ashton said the announcement is exciting, more so even than when Rogers announced in August that it was launching an OTT streaming service with Shaw Communications Inc. called Shomi. That was followed by the news in September that it was putting out the NHL GameCentre Live hockey streaming service. “This is making Rogers stand out from the pack. It’s not, ‘OK, we’re going to compete with Netflix in their own game. Yeah, they’re already doing that with Shomi. Here they’re being innovative and trying something new,” she said. “This partnership is going after people where they are and in the space that they’re already playing,” she said, noting that the partnership means money will be invested in creating Canadian content. “So to me that’s really exciting.” Ashton said it’s not clear what will happen with the youth demographic as they mature, and whether they’ll start signing up for cable as they become financially established and start families, or whether they’ll stay outside the traditional TV system. If that happens, “the only way to get them to be revenue-generating for those cable companies is to reach out to them where they are, and to provide them with compelling content to seduce them into the cable space.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Rogers takes aim at youth with Vice partnership

News | October 30, 2014

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Rogers takes aim at youth with Vice partnership

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