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Canadian cable TV behemoths Rogers Communications Inc. (RCI - Analyst Report) and Shaw Communications Inc. (SJR - Analyst Report) have decided to form a joint venture to introduce an innovative subscription-based video-on-demand (VOD) service in the country. The new service will be called “Shomi” and function as a separate entity with an independent management structure.

Cable MSOs (multi service operators) in the U.S. and Canada are facing severe competitive threat from low-cost online video streaming operators such as Netflix Inc. (NFLX - Analyst Report).

Cord cutting has become a major concern for cable TV operators. Video offering, the core business area of the cable TV operators, seems to be slipping out of their hands. In order to counter the over-the-top service providers, cable MSOs are increasing relying on the TVEverywhere technology, popularly known as VOD.

The Shomi service will launch on Nov. 2014 for a subscription of C$8.99 per month. The service will offer more than 11,000 hours of TV episodes and 1,200 movies based on personalized video recommendation.

Subscribers will be able to access video content on TV through set-tops and the Xbox 360, as well as on tablets and smartphones via the Internet. Technically, Shomi will use the software user interface of YOUi Labs Inc. to be installed in every iOS or Android-based mobile devices.

Even in the U.S., several pay-TV operators (cable MSOs, satellite TV and telecom operators) are gradually turning to the VOD service. Comcast Corp. (CMCSA - Analyst Report) launched Xfinity Streampix, a subscription based on-demand video streaming service for $4.99 per month offering instantmovie viewing both in and outside homes on multiple platforms.

Likewise, Verizon Communications is offering Redbox Instant service at $8 per month to provide on-demand movies and video games. AT&T is associated with The Chernin Group for the development of online video services. Additionally, DISH Network has decided to launch Internet TV service in 2014.   

Notably, this is not the first collaboration between Rogers and Shaw. On Jan 2013, Rogers entered into an agreement with Shaw to acquire the latter’s cable system in Hamilton, Ontario and secure an option to purchase its Advanced Wireless Services (AWS) spectrum holdings in 2014.

Rogers will sell its one-third interest in specialty channel, TVtropolis, to Shaw and has also entered into negotiations with Shaw for the provision of certain services in Western Canada. Total investment of Rogers will be C$700 million to complete the deal.

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