Online Video

Future Viability: Growth

Breaking conventional rules of TV on content, price and platforms… and consumers love it

  • Global pure-play online video services like Netflix have disrupted the video market
  • Consumer-friendly platforms, low pricing and globally competitive content is expected to continue to attract subscribers
  • This model is strong and growing
  • Higher penetration in Canada’s English-language market than its French-language market, but domestic online video providers are more prominent in the French-language market

A key risk to the growth of this model is the continued need to make massive investments in content and platforms, as well as competitive responses from traditional TV distributors. As a result, this model is currently characterized by low or even negative profits.

Read time: approx. 6 min

The Fundamentals

Netflix, Amazon Prime, CraveTV, ICI, club Illico… Online video—also known as over-the-top (OTT) video—delivers on-demand, live and long-form content over the Internet. Canada has access to several global and Canadian providers. A number of large US-only services are exploring global expansion, including CBS All Access, which is going direct to consumers in Canada.

A growth industry that is currently in its investment phase. The biggest pure-play online video players are largely driven to leverage the economies of scale that come with their global operations. This global element, however, also means that providers must make massive investments in technology to effectively deliver content to consumers in multiple geographies on multiple devices. These providers use algorithms to help consumers discover content and analytics to help the provider understand market and technical performance. The other significant cost for online video providers is the major expense associated with creating original content with global appeal. More than ever, this original content is not a nice-to-have, but a business fundamental.

Principally subscription driven, for now. Advertising may be part of the revenue mix in the future in Canada, but subscriptions with monthly fees are currently the foundation of this model. Despite all of the investment associated with this model, it must also offer users very low retail prices to draw them from traditional video services and create scale. With Netflix, for example, the monthly cost for subscribers may vary somewhat based on the number of simultaneous streams and video quality but is generally about $11.

Morphing into broad-based video competitors. The online video space is evolving to meet consumer needs. In the U.S., some online video services are expanding their offering to provide consumers with on-demand content as well as packages of traditional linear TV channels. The retail price point for these services is about $40USD/month. These services, like Hulu, SlingTV and DirectTV Now, are looking to be more directly competitive with traditional cable, satellite and fibre TV subscription services, and research suggests that they are stemming cord-cutting. This industry trend is not yet evident in Canada.

Dependent on competitors to access consumers. Broadband Internet subscribers are upgrading to faster, more expensive packages mostly to watch online video services, which now represent the largest component of broadband consumption. Online video providers are in an unusual position: they are dependent on access to subscribers through last-mile broadband infrastructure, and also compete with those broadband competitors’ TV service offerings.

Canadian Contribution

Potential for unconventional contributions to Canadian production on a global scale. Online video services do not have any regulatory obligations, making it difficult to determine what they contribute to Canadian content creation. The largest of these services tend to be global, giving domestic producers the opportunity to partner on content intended for global markets (e.g. Anne, Frontier) or to provide a platform for taking popular Canadian programs to a global market (e.g. Trailer Park Boys and Degrassi spin-off Next Class). They are also using the high-quality Canadian production market to produce content in Canada for a global market (e.g. Sense8). Domestic online providers also recognize that original content is important for consumer take-up and have made some key investments (e.g. LetterKenny, Victor Lessard) to showcase domestic programming.

Consumer Profile

A popular and growing viewing experience. There are no standard industry measures for online video services, but estimates show that their reach and the time spent viewing them have become significant. Subscribers have grown to over half (54%) of the Canadian population and are higher in the English-language market (58%) than the French-language market (41%). Average viewing hours are significant among users in Canada, amounting to 7.9 hours/week (Anglophones 8.1 hours, Francophones 6.5 hours).

Audience trends for online video

Source: MTM

Note: Viewing hours for all OTT services is not available, so the largest provider has been used as a proxy (i.e. Netflix).


Strong growth but not yet profitable. Revenues for online video are primarily derived from subscriptions, and they have quadrupled from 2012 to 2016, reaching $1.1 billion in 2016. Despite this increase, OTT services’ market share remains small at 7.4% in 2016.

Notwithstanding strong revenue growth, profitability is expected to remain low or negative for OTT services, largely because these services are still making significant investments aimed at capturing market share. For example, although Netflix reported a small profit in 2016 in both the U.S. and international markets (including Canada), it funded nearly all of its content production for the year through loans.

Financial trends for online video

Source: CRTC estimates (CRTC data collection; Ovum; MTM consumer data)

Note: Splits by language markets are estimated based on MTM data.