DRAFT
SHOULD CORUS ENTERTAINMENT GO OVER THE TOP?1
Avinash Tangirala wrote this case under the supervision of Lee Watkiss solely to provide material for class
discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation.
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Copyright © 2024, Avinash Tangirala & Lee Watkiss
Version: 2024-04-27
INTRODUCTION
In 2019, Corus Entertainment (hereafter, Corus), a television and media company based in Toronto,
Ontario, is considering launching its own online video-streaming or over-the-top (OTT) service. Since
2009, Corus has seen its profits and subscriber base decline,1 largely due to consumers moving away from
cable television towards OTT.2 Subscribers to OTT services in Canada have grown from 9.1 million in
2014 to 19.9 million in 2019.3 By 2025, it is predicted that OTT will account for 86.3% of Canadian
video viewing.4 Consumers are drawn to the lower price, enhanced choice, and greater flexibility offered
by OTT platforms such as Netflix and Amazon PRIME Video to that of cable television.
The advent of OTT services has made Corus’ position as an independent content distributor precarious. In
addition to the OTTs appropriating customers from Corus, content owners such as Disney and Viacom are
demanding higher prices for their content from distributors. Broadcast Distribution Undertakings (BDUs)
such as Bell and Rogers are looking to reduce the price they pay to distributors such as Corus for content
that they subsequently sell to end consumers. How should Corus respond? Should it launch its own OTT
service? If it does, how would the content owners and BDUs that Corus currently rely upon respond?
How will the OTT platforms react?
CABLE TELEVISION INDUSTRY
Before the rise in popularity of OTT services, the cable television industry comprised three main actors:
content owners, BDUs, and end consumers. The majority of content on Canadian television was created
in the United States by a few major companies including Disney and Viacom. This content was acquired
by BDUs in Canada and packaged to form local television channels. BDUs bundled various channels into
tiers that they then sold to end consumers. These tiers were simple and followed a “good, better, best”
model where each package increased both the number of channels included and the price charged to the
consumer. Consumers had few options to watch their favourite shows other than to subscribe with a
BDU. In Canada, BDUs are licensed by the Canadian Radio-television and Telecommunications
Commission (CRTC). The CRTC’s mandate includes a) protecting and encouraging the production of
Canadian content, and b) preventing non-Canadian BDUs from unduly harming Canadian BDUs.5 In
1
This case has been written, partially, on the basis of published sources. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Corus Entertainment or any of its employees.
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2018, five BDUs–Bell, Rogers, Shaw, Telus, and Vidéotron–serviced approximately 75% of the end
consumers. Yet, they have limited presence outside of Canada. They had experienced a decade of growth
in subscribers and revenues.6 CRTC limited the number of BDUs that could offer service in particular
locations. As a result, BDUs tended to offer similar content and customer experience.
Content owners invest heavily in content to remain competitive. They either produce the content
themselves, e.g., Viacom produces the NCIS series, or they purchase the content from third parties.
Scripted series are the most profitable, but they are also the most expensive. The high costs involved has
resulted in consolidation of content ownership. In 1983, 90% of American media was owned by 50
companies; by 2012, it was owned by fewer than 6 companies.7 To recoup these high costs, content
owners often tie BDUs into long-term contracts. In return, content owners grant BDUs exclusive
distribution rights across specific geographic territories.
Over-The-Top Platform Disruption of The Cable Television Industry
The introduction of OTT platforms precipitated a seismic shift in the cable television industry. With the
growing availability of high-speed internet, Netflix entered the Canadian market in 2010,8 streaming
third-party content to its customers. Its compelling value proposition was threefold: one, it was
inexpensive. Original monthly subscriptions were $7.99 per month. Two, it had zero advertising.
Consumers could enjoy shows without being interrupted by commercial breaks. Three, it offered
flexibility in watching content. Consumers did not need to wait a week for the next installment of their
favorite show, popularizing the act of binge watching. Subscribers to OTT services in Canada grew to
19.9 million by 2019.9 At which time, there were more than a dozen OTT offerings in Canada with this
number likely to rise.10
By 2013, OTT platforms were also investing in proprietary content, particularly scripted series in an
attempt to attract subscribers. This took one of the two forms: the first was the acquisition from content
providers of the exclusive rights to that content. For example, Disney, with its acquisitions of Marvel in
2009 and LucasFilms in 2012, each for approximately $4.0 Billion USD,11 amassed an expansive library
of sought-after titles. The increasingly prevalent second form involved OTT platforms developing their
own content. For example, Netflix developed in-house the breakout hits Stranger Things and Mindhunter.
A study conducted by Ampere Analysis states that expenditure on content increased from $100 Billion
USD to $165 Billion USD between 2008 and 2018, with close to $50 Billion USD of that growth
occurring in the most recent 5 years.12
Impact of Over-the-Top on Content Owners
Early OTT platforms relied on existing content owners to increase the volume of its content offerings to
attract new subscribers and retain existing ones. This was initially beneficial to content owners as OTT
platforms acquired this content from them on a contractual basis, creating a new and predictable revenue
stream. Over time, OTT platforms began to create their own content, which made them less reliant on
existing content owners.
Content owners saw an opportunity to bypass the BDUs by creating their own OTT platforms. For
example, Disney+ will launch in Canada in November of 2019 turning Disney from a distributor of its
properties through third parties, to a direct-to-consumer service. As content owners such as Discovery,
AMC, and Paramount follow suit, the already fierce competition will increase the need to develop
differentiated content. From 210 scripted series developed in 2009 in the US, the number has increased to
532 in 2019 (see Exhibit 1).13 The cost per episode of scripted content also increased to between $5-7
million in 2019 from $3-4 million a few years earlier.14 Content Owners tried to pass these increased
production costs onto BDUs by charging higher premiums.15 This was aided by consolidation among
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Content Owners. In 1983 more than 50 companies owned more than 50% of the content in the United
States.16 By the end of 2019, it is likely that fewer than four companies–Disney, Comcast, ViacomCBS,
and Time Warner–will own the majority of the content in the United States.17
Content Owners were also beginning to offer their own OTT platforms. This was impacting content
owners’ relationships with OTT platforms and their ability to procure content. For instance, Disney’s
content such as Marvel and Disney classics can be streamed on Netflix. Yet, as the existing contract
between Disney and Netflix expires, it is expected that Disney content will no longer be available on
Netflix; instead, it will be exclusively available on Disney+.
Impact of Over-the-Top on Broadcaster Distribution Undertakings
At the outset, OTT services were made possible by the availability of high-speed internet access. BDUs
were often the internet service providers, suggesting that OTT platform providers and BDUs benefitted
from the services offered by the other. However, OTT platforms were also a substitute for cable
television; many consumers supplemented their cable packages with OTT offerings, new customers,
particularly younger customers, were harder to pick-up. These customers were attracted to the scripted
shows available on OTT platforms, and they were less willing to pay a premium (basic cable packages
cost more than $50 per month in 2010 compared to $7.99 for Netflix) for the content offered by cable but
not by OTT such as news stations, live sports, and current series shows. The result was lower growth for
BDUs in acquiring new customers and by 2012 an absolute decline in cable subscribers (see Exhibit 2).18
Yet, the core business of BDUs was still highly profitable and retained significant demand across large
segments of the population. Their focus was on ensuring internet access to customers within their
geographic territory.
BDUs adopted three main responses to the challenge posed by OTT services: one, they began to offer
more choice and flexibility with their packaging. Traditionally, they offered consumers three tiers of
television service that increased in price for the number and quality of channels. They began bundling
channels via themes instead of strict tiers, so that customers could cater their channels to their tastes. They
also gave customers the option to swap out channels every month to suit their changing viewing habits.
Some even offered OTT services in combination with their television services.
Two, BDUs began pruning their channel line-ups to reduce costs. Single channel providers such as BBC
Canada or niche content providers such as Cosmopolitan were favorites for the chopping block. Three,
BDUs introduced their own OTT platforms. For example, Bell created Crave and Rogers partnered with
Netflix to offer it as part of cable packages.19
Despite these efforts, revenues continued to decline from $5.5 billion in 2012 to $4.4 billion in 2019.20
The number of cable subscribers also continued to decline. In 2015, BDUs accounted for fewer
subscribers than OTT platforms in Canada for the first time.21
Impact of Over-the-Top on Consumers
The low price, zero advertising, and viewing flexibility of OTT platforms were attractive to consumers.
As these services became available on mobile devices, consumers shifted from BDUs to OTT platforms
in greater numbers. In 2013, 100,000 Canadian households cut the cord on their cable services. In 2019,
this number had increased to 400,000.22 In contrast, subscribers to OTT services in Canada has grown to
19.9 million in 2019.23 Viewing habits have also changed with consumers increasingly watching shortform content that lasted only a few minutes that was uninterrupted by advertisements.
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CORUS ENTERTAINMENT
Corus was formed in 1998 as a wholly independent subsidiary of Shaw Communications for Shaw’s
previously held radio stations and women’s and children’s cable channels.24 Its value proposition was
twofold: 1) to provide high-quality content that matched audience desires, and 2) to offer advertisers
highly targeted access to these audiences.
When it spun-off Corus, Shaw Communications retained ownership of a handful of its key specialty cable
channels as well as Global Television and its news properties under the name Shaw Media. In 2016,
Corus Entertainment purchased Shaw Media for $2.65 Billion CAD. By 2019, Corus boasted a roster of
35 specialty television networks, 39 radio stations and 15 conventional television stations.25
In Canada, Corus has the largest library of lifestyle and children’s content. BDUs such as Rogers and Bell
rely on Corus to offer channels such as Food Network, HGTV, W Network, and YTV in order to attract
families to their service offerings. Corus sits between content owners and BDUs as an independent
content distributor.
A core component of Corus’ strategy is to make the Canadian television market attractive to United
States’ content owners. At the time of Corus’ founding, United States’ content owners were reluctant to
enter the Canadian market. It was 10% the size of the American market and required them to develop
relationships with Canadian BDUs and advertising organizations. Content owners generated revenue from
two main sources: 1) selling the rights to distribute their content in the form of channels to BDUs, and 2)
selling advertising on their channels. Without advertising, these channels were less attractive to BDUs.
Corus acquired the exclusive rights from US content owners to distribute that content throughout Canada.
They also added advertising to the content before selling it to Canadian BDUs, who in turn distributed it
to end consumers.
Corus choreographs the content to enhance its appeal to the Canadian market for each channel in three
ways: first, Corus schedules the content for each channel based on the library of content they acquired
from content owners. Second, Corus supplement this content with other content. For example, Corus
created the Property Brothers, an award winning and critically acclaimed home renovation show that it
added to the HGTV channel. Third, Corus contracts with third parties such as Proctor & Gamble to run
advertising on Corus-controlled content.
The company has three main sources of revenue generation: consumer subscriptions, advertising, and
merchandising/distribution (see Exhibit 3). In 2019, subscriber revenues were $496 million or
approximately one third of all revenues.26 Advertising revenues in 2019 were $1.1 billion, or 66% of
overall revenue for the year.27 Merchandising only accounted for 5.3% of overall revenue in 2019.
STACKTV: CORUS’ OVER-THE-TOP OPPORTUNITY
The proliferation of OTT platforms has created numerous problems for Corus. Sandwiched between the
content owners and BDUs, Corus feels the squeeze from both sides of its value chain. Content owners
have raised the price they charg for content as competition for production talent continues to increase. In
2018 Warner Bros signed a deal worth $400 million with screenwriter Greg Berlanti (Dawson’s Creek,
Riverdale) to keep him exclusive to their studio until 2024–unheard of pre-OTT. Content owners are also
distributing their own content with their own OTT platforms. For example, Disney is preparing to launch
Disney+ in the Fall of 2019. Corus is the sole cable distributor of Disney Channel, Disney XD, Disney
Junior, and La Chaine Disney in Canada. Will Corus lose some of its customers to Disney+? And, if
Disney has a direct foothold in Canada, will it continue to need Corus to distribute its content? Or, will
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Disney serve Canada exclusively through its OTT offering? Whatever Disney chooses to do, Corus will
be in a less advantageous negotiating position when its distribution contract with Disney comes up for
renewal.
In the past few years, Corus has been able to increase the price they charge BDUs despite lower
subscriber numbers. BDUs rely on Corus’ library of specialty and children’s programming to satisfy end
consumer demand. Yet, BDUs are increasingly pushing to reduce the price they pay to Corus. As their
contracts with Corus came-up for renewal, they have been trying to negotiate a lower price by threatening
to drop some of Corus’ channels from its line-up. This would hit Corus in two ways: first, it would lose
revenue from the BDU. Second, it would retain the cost of carrying the channel because it was tied into
long-term contracts with content owners.
The final major concern was about future advertising revenue. As they expected the number of
subscribers to its content to continue to decline, will advertisers stay away? Will they become more price
sensitive?
One response under consideration to these threats to their business is a collaboration with Amazon. Corus
and Amazon would create an OTT product in Canada named STACKTV. Tapping into Amazon’s PRIME
Video viewers of 7 million in Canada is attractive to Corus.28 It is consistent with its new value
proposition to customers of offering its content across multiple platforms. It is also less costly and
resource-intensive than developing its own platform, something with which Corus has limited experience.
Corus would provide 12 of its premium channels to Amazon (see Exhibit 4), which would host them on
its PRIME Video platform. These channels would include Global, Food Network Canada, HGTV Canada,
W Network, History Channel, Adult Swim, W Network, Slice, Showcase, National Geographic, Teletoon,
Treehouse, and YTV.29 This would offer households a wide selection of Corus’s most popular content for
both adults and children alike. STACKTV would provide both a video-on-demand (VOD) and live
channel feed for users. Corus and Amazon are considering adding advertising to the platform. These
advertisements would run periodically during the shows. Although this is not unprecedent for OTT
products, the majority have been zero advertisement platforms, relying only on subscriber revenue. Corus
and Amazon would share the subscriber revenue; however, Corus would keep all the advertising revenue.
In addition to the concerns of launching the product with Amazon, there are the other external
relationships that Corus will need to consider. Given the longstanding relationships with BDUs such as
Bell and Rogers, how will they feel if Corus starts offering a similar product to consumers at a more
budget friendly OTT cost compared to cable? It will be a risk as most of Corus’s content distribution is
held within the BDU ecosystem and by extension, most of Corus’s revenue relies upon these BDU
relationships. If BDUs see the launch of STACKTV as a deliberate effort to cannibalize its subscriber
base, how might this affect future negotiations and revenue with these partners?
Corus senses that content owners will likely welcome additional subscribers to its content in the short
term. However, it is unclear how they will respond when Corus needs to renegotiate the acquisition of the
content in the future. Will BDUs lose revenue as consumers shift to STACKTV?
How will advertisers’ respond if STACKTV includes advertisements? Only some OTT platforms
currently include advertising. With its differentiated audience, Corus might be able to attract advertisers
seeking to modify their market mix.
The decision is not clear-cut. How will the other actors in the industry value chain respond? Will Amazon
PRIME customer be willing to pay for STACKTV in addition to their PRIME membership? Each
household on average subscribes to 3.4 streaming services.30 In Canada with Netflix, Amazon Prime
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Video and Crave driving most of the market share, and with Disney+ on the horizon, STACKTV will face
an uphill battle to gain share of its own.
Exhibit 1
NUMBER OF SCRIPTED SERIES PRODUCED IN THE UNITED STATES 2009-2019
600
532
500
487
495
2017
2018
454
Nr. of Scripted Series
420
389
400
349
300
266
210
216
2009
2010
288
200
100
0
2011
2012
2013
2014
2015
2016
2019
Year
Source: Created by case authors on content from Rick Porter, “Peak TV Update: Scripted Series Volume
Hits All-Time High in 2021,” The Hollywood Reporter, January 14, 2022,
https://www.hollywoodreporter.com/tv/tv-news/peak-tv-scripted-series-all-time-high-2021-1235075677/.
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Exhibit 2
NUMBER OF CABLE SUBSCRIBERS IN MILLIONS IN CANADA 2009-2019
9.00
8.09
8.29
8.52
7.70
8.00
7.35
6.98
Nr. of Cable Subscribers
7.00
6.73
6.42
6.25
6.08
6.00
5.77
5.00
4.00
3.00
2.00
1.00
0.00
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Year
Source: Created by case authors on content from Canadian Radio-television and Telecommunications
Commission, “Communications Market Reports - Open Data, Data – BDU,” accessed April 27, 2024,
https://applications.crtc.gc.ca/OpenData/CASP/COMMUNICATION%20MONITORING%20REPORTS
/Broadcasting%20Distribution%20Sector/English/data-broadcasting-distributionsector.xlsx?_ga=2.45651812.1719167742.1714327834-398692342.1714327834.
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Exhibit 3
CORUS REVENUE IN MILLIONS OF CAD BY SEGMENT 2011-2019
1,200
Revenue by Segment in CAD Millions
1,081
1,102
1,044
1,000
800
662
600
390
386
400
404
390
335
340
93
85
2014
2015
352
507
508
496
104
91
96
89
2016
2017
2018
2019
406
200
300
298
135
158
276
123
0
2011
2012
2013
Year
Advertising
Subscriber Fees
Merchandising, Distribution & Other
Source: Created by case authors on content from Corus Entertainment, Financial Reports, accessed April
27, 2024, https://www.corusent.com/investor-relations/financial-reports/,
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Exhibit 4
STACKTV CHANNEL LINE-UP IN 2019
Number
1
2
2
4
5
6
7
8
9
10
11
12
Service
Global TV
Food Network
HGTV
W Network
History Channel
Adult Swim
Slice
Showcase
National Geographic
Teletoon
Treehouse
YTV
Ownership
Corus, CBS, and others
Discovery Scripps
Discovery Scripps
Various
A+E Networks
Warner Bros
Various
Various
Disney
Paramount, Disney, and others
Various
Paramount, Disney, and others
Source: Created by case authors on content from Corus Entertainment, News, June 3, 2019, accessed
April 27, 2024, https://www.corusent.com/news/upfront-announcement/.
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ENDNOTES
1
Corus Entertainment, Fourth Quarter 2019 Report to Shareholders, accessed April 27, 2024,
https://assets.corusent.com/wp-content/uploads/2021/09/s_zkfhri20_ghdk468.pdf.
2
“Pay TV Households & Viewers, Canada,” eMarketer, accessed August 1, 2021, https://forecastsna1.emarketer.com/61243704b215ff074c910810/612416a9ea9f200b2c6ca866.
3
“Over-the-Top (OTT) Video Service Users, Canada,” eMarketer, accessed September 1, 2021 https://forecastsna1.emarketer.com/5b3ba49481f26a04c8be0966/5b3b8f0b81f26a0dc49177bb.
4
“Over-the-Top (OTT) Video Service Users, Canada.”
5
Canadian Radio-television and Telecommunications Commission, “Our Mandate, Mission and What We Do,”
accessed April 27, 2024, https://crtc.gc.ca/eng/acrtc/acrtc.htm.
6
Canadian Radio-television and Telecommunications Commission, “Communications Monitoring Report 2019,”
accessed April 27, 2024, https://crtc.gc.ca/eng/publications/reports/policymonitoring/2019/cmr7.htm.
7
Helen Johnson, “The Unprecedented Consolidation of The Modern Media Industry Has Severe Consequences,”
The Miscellany News, April 29, 2021, https://miscellanynews.org/2021/04/29/opinions/the-unprecedentedconsolidation-of-the-modern-media-industry-has-severe-consequences/.
8
Star Staff and Canadian Press, “Netflix Stumbles as It Launches in Canada,” Toronto Star, September 22, 2010,
https://www.thestar.com/entertainment/2010/09/22/netflix_stumbles_as_it_launches_in_canada.html.
9
“Over-the-Top (OTT) Video Service Users, Canada.”
10
Andrew Mohan, “MobileSyrup’s Guide to Video Streaming Services in Canada,” MobileSyrup, April 3, 2019,
https://mobilesyrup.com/2019/04/03/comparing-streaming-services-canada/.
11
Kemet High, K, “A Timeline of Disney’s Media Acquisitions,” November 12, 2019,
https://www.complex.com/pop-culture/2019/11/disney-acquisition-timeline.
12
“Analyst: TV Market Competition Boosts Content Spend,” Advanced Television Ltd., October 25, 2019,
https://advanced-television.com/2019/10/25/analyst-tv-market-competition-boosts-content-spend/.
13
Rick Porter, “Peak TV Update: Scripted Series Volume Hits All-Time High in 2021,” The Hollywood Reporter,
January 14, 2022, https://www.hollywoodreporter.com/tv/tv-news/peak-tv-scripted-series-all-time-high-20211235075677/.
14
Maureen Ryan and Cynthia Littleton, “TV Series Budgets Hit the Breaking Point as Costs Skyrocket in Peak TV
Era,” Variety, September 26, 2017, https://variety.com/2017/tv/news/tv-series-budgets-costs-rising-peak-tv1202570158/.
15
Michael Balderston, “TV Content Spending Increased $50B Over Last Five Years,” TV Tech, October 25, 2019,
https://www.tvtechnology.com/news/tv-content-spending-increased-50b-over-last-five-years.
16
Paul Wellstone, “Growing Media Consolidation Must Be Examined to Preserve Our Democracy,” Federal
Communication Law Journal, 52, 3, 7 (2000): 551-554,
https://heinonline.org/HOL/Page?handle=hein.journals/fedcom52&div=27&g_sent=1&casa_token=kuWzHy6CTsAAAAA:UWZiA0_ZLhPu1IC5pZJZQQihhv2mQg2TIaXT6IpORa_TJkJUysrGMo9ifmBeueaua2FO1ms&collection=journals
17
Rani Molla and Peter Kafka, “Here’s Who Owns Everything in Big Media Today,” May 27, 2021,
https://www.vox.com/2018/1/23/16905844/media-landscape-verizon-amazon-comcast-disney-fox-relationshipschart.
18
Canadian Radio-television and Telecommunications Commission, “Communications Market Reports - Open
Data, Data – BDU,” accessed April 27, 2024,
https://applications.crtc.gc.ca/OpenData/CASP/COMMUNICATION%20MONITORING%20REPORTS/Broadcast
ing%20Distribution%20Sector/English/data-broadcasting-distributionsector.xlsx?_ga=2.45651812.1719167742.1714327834-398692342.1714327834.
19
“Netflix on IgniteTV” Rogers, accessed January 11, 2022,
https://www.rogers.com/customer/support/article/netflix-on-ignite-tv.
20
Julia Stoll, “BDU revenue in Canada from 2012 to 2019, by service,” Statista, May 9, 2022,
https://www.statista.com/statistics/430612/bdu-revenue-canada-service/
21
“Pay TV Households & Viewers, Canada,” eMarketer.
22
Julia Stoll, “Number of Households in Canada that Cut Their TV Subscription or Never Had One from 2012 to
2020,” Statista, September 7, 2021, https://www.statista.com/statistics/258444/number-of-tv-cord-cutterhouseholds-in-canada/.
Page 12
“Over-the-Top (OTT) Video Service Users, Canada.”
History of Canadian Broadcasting, “Corus Entertainment Inc.,” accessed February 1, 2022, https://broadcastinghistory.com/listing_and_histories/corus-entertainment-inc.
25
Corus Entertainment, Fourth Quarter 2019 Report to Shareholders.
26
Corus Entertainment, Fourth Quarter 2019 Report to Shareholders.
27
Corus Entertainment, Fourth Quarter 2019 Report to Shareholders.
28
“Number of Amazon Prime Video viewers in Canada, 2019 to 2025,” eMarketer, accessed February 1, 2022,
https://www.insiderintelligence.com/chart/250308/amazon-prime-video-viewers-canada-2019-2025.
29
Corus Entertainment, “Corus Debuts StackTV On Amazon Prime Video Channels,” June 3, 2019, accessed April
27., 2024, https://www.corusent.com/news/upfront-announcement/.
30
Toni Fitzgerald, “How Many Streaming Video Services Does The Average Person Subscribe To?” Forbes, March
29, 2019, https://www.forbes.com/sites/tonifitzgerald/2019/03/29/how-many-streaming-video-services-does-theaverage-person-subscribe-to/?sh=52c6c75f6301.
23
24