Telco TV: Online video, prime-time TV both growing

Service providers such as IPTV operators and cable players can take advantage of these trends by developing their own online content services as a complement to their video offerings, Scherf said. Comcast is already doing some of this through its Fancast online offering, and Verizon is as well, through its StarzCast and its Media Manager, which links the Web and the TV, Scherf noted. AT&T has a more limited model through its BlueRoom site for music and specific events, he said.

But broadband service providers face competition from Netflix, which has forged agreements with consumer electronics devices to make its Watch Instantly content available directly on the TV. If Netflix is able to add on-demand TV shows to its vast content library, the company is poised for major growth, Scherf said.

Similarly, the Microsoft Xbox 360 game console has become a video downloading platform. “There are 15 million game consoles connected to the Internet today, and 5.1 million households actively use those for internet video, at least monthly,” Scherf said. Sixty-two percent of the Xbox 360s in use today are connected to the Internet, possibly initially for gaming, but do not access the Microsoft download store, and one third are now downloading music and video, with about one quarter paying Microsoft for content downloads that include a growing base of high-definition content, Scherf said.

Other trends he noted:

• Major Web players – AOL, Google/YouTube and Yahoo have moved from transactional to advertising-based models for video.
• There is a need to make content accessible on any device but also to make advertising available and measurable on a consistent basis across devices.
• Only 5% of those viewing downloaded videos are doing it on a portable multimedia device such as an iPod, a stat Scherf found surprising.
• Ad rates are relatively high right now for Web videos, on a cost-per-thousand basis, but that is likely to change as inventories increase and more ad space is available. The industry will be challenged to determine how to differentiate ad products and not have them be so repetitious as to annoy viewers, Scherf said.