CES 2009 Targets Internet-TV Connectivity
One of the greatest challenges for online video has been a strong consumer preference for viewing video on the TV. 2009 International CES is turning into a showcase for companies trying to bridge this gap. Every device platform in the home is now being turned into a channel for transferring Internet video content to the TV.
- Gaming consoles: Nintendo is planning a dedicated Internet video service for its Wii platform in partnership with Japanese ad agency Dentsu Inc., while Microsoft Corp. (Nasdaq: MSFT) had already launched a service with Netflix Inc. in November 2008 to distribute videos to its Xbox LIVE console. Steve Ballmer also reiterated Microsoft’s multiscreen video strategy during his CES keynote.
- TV sets: LG Electronics Inc. (London: LGLD; Korea: 6657.KS) has announced that it will launch a range of broadband-enabled HDTVs that will stream movies, TV shows, and other HD videos from Netflix. Adobe Systems Inc. has struck deals with Intel Corp. (Nasdaq: INTC), Broadcom Corp. (Nasdaq: BRCM), and Sigma to embed its Flash Lite video format in their chips. This will make Flash available in a range of digital TVs and set-top boxes.
- Blu-ray players and other set-top boxes: LG launched its first network-connected Blu-ray player offering 12,000 videos from Netflix and 14,000 from CinemaNow . It also allows customers to stream other videos from the Internet directly to their new range of Internet connected TVs. Samsung Corp. also has a new range of Blu-ray home theater systems with a similar offering of Netflix videos. Digital set-top box provider Roku Inc. had also announced a partnership with Netflix for video downloads, and has now added Amazon.com’s streaming VoD service as well.
- Home digital media hubs: Cisco Systems Inc. (Nasdaq: CSCO) has launched a series of digital media hubs for connecting devices in the home and centralizing access to audio, video, and photo content in the home. Customers can also upload and download media through any Web browser.
- Programmers: ActiveVideo Networks Inc. has added content from Blip.tv on the ActiveVideo Distribution Network, carried by some cable and IPTV providers. The network offers a combination of traditional TV programming and online video.
- Online companies: Yahoo Inc. (Nasdaq: YHOO)’s Connected TV, a TV-based overlay widget service launched with Intel, has pulled in some high profile support. MySpace will be offering a channel on the service and major manufacturers like Toshiba Corp. (Tokyo: 6502) and Samsung will be manufacturing the TV sets. It’s a great sign that companies across the value chain want to get bridge this gap and drive online video adoption. Recent data from comScore Inc. shows that online video viewing in the U.S. was up by 34 percent year-over-year in November 2008, with 12.7 billion videos being viewed during the month.It is important, however, to recognize that the bulk of video viewing is composed of short clips that are in themselves part of a more interactive Web surfing video experience. For example, comScore reports that the duration of the average online video was just 3.1 minutes. Moving these video clips to the TV may not drive much value to consumers since they do not offer the fundamentally “lean back” experience that TV is all about. What’s much more important is opening a channel for online distribution of professionally produced, high-quality video like movies and TV shows. ComScore points out that the duration of the average video viewed on Hulu LLC was 11.9 minutes, nearly four times the average of all videos viewed in November. Hulu’s offerings are predominantly high-quality, professionally produced programming. That’s also the kind of content that is most likely to create a revenue stream, be it via subscription, as with Netflix; pay-per-view, as with Amazon.com Inc. (Nasdaq: AMZN); or advertising, as with Hulu.
So which of the many device platforms listed here will win? Potentially none of them, since getting video to the TV will still require a cost premium of some sort and may not always meet the quality standard that TV has set. There’s also the possibility that service providers will do a better job of creating the link between the TV and the PC and do it before the consumer electronics industry.
Still, amongst the candidates listed, my vote goes to the Blu-ray players. They are movie-specific devices, which sets up the concept of movie download more readily for consumers. More importantly, the content libraries and software for accessing content online is pre-built into the box. With a wireless home network and one of these boxes, consumers have to do relatively little to enjoy online video on their preferred screen.
