Study: Online video mountain can be climbed

Online video consumption is growing at an explosive rate and video cord-cutting is a nascent concern for TV service providers, but consumers may not be fully committed to these trends, and service providers still have an opportunity to craft new identities as media companies, according to new research from Parks Associates.

That’s good news for service providers experimenting with TV Everywhere–style hybrid strategies, said Jayant Dasari, research analyst with Parks Associates and author of the report “Online Video and Service Provider Strategies.” It is not clear these strategies can completely head off video cord-cutting, but significantly they provide service providers with the foundation for a new business model for how they distribute premium video content to consumers.

The number of people watching premium video content — like full-length TV shows — online doubled last year to about 25 million, and more than 20 million people watched movies online, according to the Parks research report.

“There is not a lot of video cord-cutting happening today,” Dasari said. “Really, the more severe implication for service providers will be in the future growth of more connected devices, like Blu-ray players, connected TVs and video game consoles.”

It’s incumbent upon both service providers and content owners, which of course don’t want to jeopardize their own cut of pay TV subscription fees, to get the new business models established while there is still some neutrality among consumers regarding where they go online for video content, Dasari said. He added that Comcast’s Xfinity service provides an early model for the kinds of media distribution operations that service providers need to emulate.

“This allows them to sustain their current business model while getting in line for the future revenue opportunity,” he said. Still, service providers need to understand that they will not be able to banish free video content distribution from the online universe. Though it sounds like an uneasy mix, Dasari said TV Everywhere–style approaches likely will cater to consumer desires for premium content, while some other content remains available for free.

If it’s hard to imagine where all the content might come from to feed both these channels, Dasari said he recently spoke with folks in the content production realm that told him only about 5% of all content has been digitized thus far. “When more content is getting digitized, you will see some of that coming into a TV Everywhere–type of premium offering while other content is offered for free,” Dasari said. “The content owners and the service providers will need to decide what’s premium and what’s not, as if content negotiations aren’t complicated enough already.”