As Q4 Begins, Online Video Is Now Mainstream

Table of Contents

  1. Summary
  2. Distribution
    1. TV Everywhere Forging Ahead
    2. Redbox Making Waves
    3. Google’s Video Play
    4. ABC Online
  3. Hardware
    1. New Products for Content Access and Storage
    2. Vudu: Bypassing the Set-Top Box
    3. A Brand New Remote
    4. New Netflix Devices
  4. Business
    1. YouTube
    2. 10 Key Funding Events
  5. Statistics
    1. Is Video Dethroning Social Networking as the King of the Web?
    2. U.S. Online Video Viewers to Surpass 150 Million Next Year
    3. Online Video: People Are Willing to Pay
  6. Legal
    1. TiVo Battling in Court All Summer Long
    2. Copyright in the Courts
    3. Redbox Dividing Hollywood
  7. Key Takeaways

1. Summary

Third quarter saw the continuing advancement of online video, as research from eMarketer indicated that nearly three-quarters of Internet users, or 47 percent of the U.S. population, say they watch video online. In fact, according to research from Pew, more Internet users are watching video online than are participating social networking. While this does not indicate that total time spent viewing video is greater than the time spent on social networking sites, the total user base is now larger, indicating enormous growth in adoption. Furthermore, for the first time, fee-based video is expected to generate more revenues than ad-based video this year.

This is positive news for the growing consortium of distributors pursuing fee-based solutions for delivering premium content online. The growing movement, coined “TV Everywhere,” is an effort to place premium online content behind a subscription wall. While the movement was initiated by the cable operators (specifically Time Warner Cable and Comcast), telcos and satellite operators are also now jumping onboard. Comcast was very active in the third quarter, building up its roster of content providers announcing partnerships with CBS, Starz, Discovery, HBO and Cinemax.

This initiative could have serious implications for ad-based video sites such as Hulu. Hulu’s network owners are already exerting their influence on the company by imposing delayed windows on certain content and allowing just a limited number of episodes available at any given time. It is possible that the paid content revival may have significant implications for Hulu as it exists today.

In the video rental market, Redbox, the kiosk DVD rental company continues to make waves. Hollywood has taken issue with its low-cost $1 rental fee, claiming that it hurts video rental and sales revenues. Therefore, some studios have decided to impose restrictions on when Redbox receives new releases, delaying new releases to the company by 30-45 days. Redbox is fighting back, filing lawsuits against offending studios, including 20th Century Fox, Universal and Warner Home Entertainment.

TiVo also spent the summer in court battling DVR patent infringement. The company has filed suit against Dish, as well as AT&T and Verizon. A decision on the Dish case was released in early September awarded TiVo a total award of $200 million, far below the company’s claimed damages of $1 billion.

The set-top box market continued to evolve in the third quarter as well. Brite-View introduced the low-cost CinemaCube set-top box and Netgear also released its Digital Entertainer Live, a scaled-down version of the Digital Entertainer Elite. Both of these products appear to be in reaction to the economic downturn and the consumer demand for lower cost products. Roku added more content to its set-top device, announcing partnerships with MLB.TV and However, Vudu’s efforts this quarter may be more telling for the future; the company is now bypassing the set-top box and integrating its service directly into the TV. The company had several new wins in the quarter, announcing its service will be included on Mitsubishi and LG TVs.

Despite the continuing difficult economic environment, the third quarter has been fairly positive for online video. Funding continues to flow into the market with numerous financing deals being announced. Along with other factors, the funding environment indicates a growing interest in services that promote interactivity and the ability for users to deliver their content to any screen in their home. As online video has now reached a sizeable portion of the mainstream audience, improving the user experience and access to content are becoming more critical business objectives for players throughout the space.

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