The Problem: Video content owners are comfortable making their programming available over the internet only if the delivery device is a computer hitting a website (i.e. hulu.com or the thedailyshow.com).  More compelling platforms such as tablets (and, um, televisions) are denied access to this premium content – precisely because they are more compelling platforms  (and would be too disruptive to incumbent business models).  For example, note hulu’s cat-and-mouse maneuvering to fend off access by boxee television software for almost two years now – or Viacom’s threats to sue various cable providers over their new internet-based on-demand mobile device apps.

The Solution (for now, at least): If you can’t beat ‘em, join ‘em.  Until internet television really ‘happens’, the best solution (for me and many others) is to get video and audio from the computer over to the television, so I can appear to the internet to be someone sitting in front of their computer – when in fact I’m a guy sitting on his couch in front of his television.  This way, I have access to all that web-only content (take that, hulu!).

It does involve solving the technical problem of getting audio and video (in at least 720p resolution) over to the television, though.  That’s a lot of data to move, and an HDMI cable running across the floor is not an option – what’s required instead is a  ‘short fat pipe’ capable of moving a lot of data over a short distance wirelessly.  I’ve written about the various options available (and what I’ve been using for the past few months) here.

Is my solution a bit clunky?  Sure – I have to go to the computer, enter full-screen mode, and then control the video transport from there.  But the fact remains that until the business-side issues preventing true internet television get resolved, the web will continue to offer a richer video selection than dedicated systems such as Apple TV or Google TV – and for all its lack of elegance, my low-cost solution makes that problem just go away.

In fact, it has been working so well for me, I wonder if there’s a business opportunity being missed…

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For while now, we’ve been puzzled by the surprisingly large number of industry analysts operating under the assumption that “internet video” represents just another (albeit fast-growing) computer/web browser use case.  It  comes up most often during panel discussions and articles covering the seemingly intractable problem of how to monetize internet video – “how can we get internet video users tolerate a TV-like higher ad load?” is often the point at which shoulders start to shrug, hands get thrown up in the air, and the discussion grinds to a halt.

“By making the internet video user experience more like TV” is one obvious answer – and one that at least allows the discussion to continue…

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Who doesn’t like Hulu.  As a fan of user interface design, I enjoy the elegance and simplicity of the site almost as much as the video streams themselves.  Launched in 2007 as a joint venture between NBCU and News Corp. (Fox/Paramount), the service has since grown to offer streams from many other content owners as well (recently Disney signed on, and is also reportedly planning to become an equity stakeholder).
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I attended a Boxee meetup/beta announcement event here in New York last night.

Boxee, for those of you unfamiliar with it, is the small New York-based startup behind a “media browser” application that has received a lot of attention lately, despite being still in alpha testing.  Optimized for a 10 ft. lean-back internet video experience, the app can be installed on an Apple TV – or you can connect that spare Mac Mini you have laying around the house to your television and install it there.

Either way, this is precisely the kind of solution that’s needed for internet video to evolve beyond the solitary dorm-room/workplace short-form diversion it currently is to a true home entertainment medium.

The profoundly disruptive implications of such a scenario were not lost on Hulu owners News Corp. (Fox/Paramount) and NBCU, who decided to deny access from the Boxee client a few weeks ago, just as the app’s ability to provide a compelling Hulu experience on the television was becoming more widely known.  This started of a series of back-and-forth technical maneuvers between the two companies: Hulu first started refusing any connections originating from Boxee rather than from standard web browsers.   In response, Boxee quickly implemented a workaround solution, instead accessing Hulu streams via the site’s public RSS feed, only to have Hulu implement a block on all Boxee RSS subscription requests a day or two later.   And on it goes – Boxee tweaks their RSS reader implementation to get through, Hulu tweaks their RSS feed implementation to deny it…  It’s gotten to the point that recent Boxee releases include a status message in the upper right corner, alerting users to whether the Hulu service happens to be available at that particular moment.

It was interesting last night, then, as Boxee CEO Avner Ronen slipped in the following item while listing the feature set of Boxee’s upcoming beta release: Boxee will now include, as Ronen put it, a fully Mozilla (i.e. FireFox)-compliant browser.  Although not explicitly stated, the implication is that Hulu will no longer be able to identify Boxee and block it. In other words, when you select Hulu content on the next Boxee beta, the software will first connect to the Hulu web page rather than the stream itself, and will appear to Hulu as simply yet another instance of Firefox on yet another computer.   Boxee will then automatically display the stream in full screen mode.

In general, there was no shortage of Hulu-related catcalls from the assembled faithful throughout last night’s event – so I found it interesting that these two or three sentences failed to generate much immediate crowd reaction, especially since Mozilla compliance is both a major new feature and the strategy behind Boxee’s next round of maneuvers to maintain access to Hulu.

One has to give Boxee credit: the tiny (12 person) company is going up against News Corp. and (indirectly) NBCU owner General Electric – yet they are not going away.  In fact, Boxee appears more determined than ever to keep forcing Hulu’s hand, leaving America’s preeminent premium web video streaming service with no choice other than to continue having to do (as Hulu itself puts it) “a hard thing” – to  block access to users depending on what software they’re using – or to put it more accurately, depending on where (the desk or the couch) that software is being used.

Although it met with a similarly underwhelming audience response at the time, the other announcement worth noting consisted of one literally one sentence: “Look for Boxee to announce major content partnerships in 2009.“  Boxee has already partnered with some major content owners (CBS, CNN, and Netflix, to name a few), so it will be interesting to see who’s next.   Probably not Disney, due to their close relationship with Hulu competitor Apple/iTunes – but maybe Viacom (Comedy Central/MTV, etc)?

One thing is clear: Boxee will continue to be a fascinating company to watch in 2009.

I recently attended an event in New York presented by videonuze (a highly recommended resource for all things internet video, by the way).  The  evening’s panel discussion tended to focus primarily on three issues:

• Monetization
• Content aggregation
• Whether overall video consumption will continue to grow to accomodate increased internet video usage, or will terrestrial television (cable and broadcast) start to lose market share

Listening to the panelists, I found myself increasingly struck by fact that they all appeared to be laboring under the assumption that as a technology, internet video is necessarily a function of the personal computer and the web browser (and perhaps someday the smartphone).   It wasn’t until moderator Will Richmond explicitly addressed the issue in his final question that what I consider to be the elephant in the room was even mentioned: internet video on the television.

That the subject sat so low on the panelists’ collective radar screen was interesting, only because there happens to be such a major CE push underway right now: a slew of network-enabled hardware was just announced at CES, Adobe’s got Flash running a chip, and several noteworthy cross-industry partnerships have been struck between some pretty heavy hitters – I’ve commented previously on a few of them:

• zillion tv
• yahoo connected tv
• tivo search

The question was put to the panelists: “Do you see internet video coming to the television in two years?”  Answers ranged from a clear “no” to a hedged “it’s a ways off” to an interesting prediction (from a cable executive) that users will likely be frustrated attempting to connect such devices themselves without the high level of customer care they’re used to receiving from their cable company.

The consensus?  That ‘killer app’ internet television solution you’ve been waiting for is probably closer to five years away than two.  While I’m of the opinion that it will come sooner than that (and sooner than might be comfortable for many in the industry), the one thing everyone agrees on is that it is coming.  There are not ‘ifs’ in this conversation – only ‘whens’.  Here then is my take on how it will impact the three core issues listed above:

Monetization: Internet video on the television will mean the high-CPM targeted ads of the internet, and (due to the lean-back, social nature of the television viewing experience) an audience finally willing to tolerate a more traditional (i.e. heavier) ad load.  From the perspective of the advertising industry, this long-awaited combination represents the best of both worlds – and so in the long run, I’m optimistic that internet video on the television will more than solve the monetization issues many industry analysts and executives have struggled to address so far.

Content Aggregation: This is a very interesting topic.  The web (and the web browser) are arguably the killer apps of at least the last several decades (happy 20th birthday, btw), but a wide-open browser paradigm (with all the accompanying complexity, security, and instability issues) is not really an appropriate solution for a CE device such as a television or set-top box (nobody wants to have to worry about their television crashing).  In place of all that convenient web standardization, though, there will be some heavy lifting needed to create more appropriate dedicated solutions.  Unlike the web, the system architecture will be closed and centralized: in other words, the hardware will present the viewer with a user interface containing all necessary controls and content meta data, and upstream communication will be limited to a single service-providing host – even if the actual video data streams are then streamed from an assortment of asset-owning partners and their optimized CDNs.  The goal is an elegant and cohesive user experience that still solves the tricky problem of allowing content search, discovery, and delivery across multiple sources and multiple video formats (TiVo, for one, recognizes the challenge and is taking an interesting search-based approach to solving it).

The Size of the Pie: The prospect of a disruptively successful lean-back internet video experience eating into terrestrial broadcast and cable viewership (and the resulting impact on traditional advertising and cable/satellite subscription revenue models) is on a lot of people’s minds these days.  For example,  note how quickly (and how thoroughly) joint owners Fox and NBCU recently forced hulu to shut down access from the boxee application after it became clear the small startup had plans to release a set-top hardware device (and that people were already installing boxee on their Apple TVs).  To insulate the incumbents from such zero-sum viewership concerns, several recently-announced initiatives (Time Warner’s TV Everywhere and Zillion TV) have announced they plan to require customers maintain at least one concurrent cable or satellite television service contract.  Of course, there’s no technical reason for this policy – it’s just there to prevent viewers from canceling their cable subscription and going “over the top” with only their broadband internet connection.  Long term, such an arbitrary restriction will prove unsustainable in the marketplace, but in the short term it’s a smart move: in a nascent market such as internet-enabled CE, first-mover advantage is huge, and any insurgent internet television solution that makes the cable companies feel at least a little less threatened (even if only for the time being) is going to have an advantage gaining traction quickly.

All in all, aside from the realtively short shrift given to the CE industry’s recent discovery of the internet by the panelists, it was an excellent discussion – and once again, if you’re at all curious about the future of internet video, I highly recommend videonuze.

Time Warner CEO Jeff Bewkes in a recent BusinessWeek article:
“We believe in TV everywhere, that consumers should have access on broadband to the same channels they see on television. But the online model has to support, not undermine, the distribution fee and advertising arrangements between programmers and distributors. Those with a subscription to a video service would also get access to shows online.”

“We believe in TV everywhere…” – it happens that TV Everywhere is also the name of a new cross-network, cross-industry initiative Bewkes announced several days earlier in an Ad Age interview. In short, TV Everywhere is designed to enforce the vision of the future Bewkes describes in the BusnessWeek article: to make internet access to cable network content possible only if you can prove you also happen to have a multi-channel  (i.e. cable, satellite or fiber) television account.

To the technical purists among us, this might seem a bit like limiting the availability of the Model T to those who can prove they already own a horse, but it’s worth remembering that an awful lot of money flows from the consumer to the cable carrier and on to the cable network: in fact, it amounts to 50% of the networks’ income.  In other words, the cable networks need the carriers – and they won’t make a truly comprehensive move onto the internet without bringing them along for the ride.

Conversely, the availability of cable network content is the primary value proposition of the cable/satellite industry, especially now that terrestrial networks are broadcasting in HD over the air.  In other words, since good reception of a local affiliate’s broadcast is less dependent on that cable connection, the cable carriers need the networks, now more than ever – and so are doing the heavy lifting of putting the “TV Everywhere” initiative together.

It’s a very lucrative (and interestingly circular) business relationship – and one that both parties have an interest in protecting from the wild-wild-west of the internet.

So, which major players are  on board?  On the network side, we have Viacom and (Hulu co-owner) NBCU, while (Hulu’s other co-owner) News Corp. and (Apple-friendly) Disney are said to be in talks.  On the carrier side, DirecTV and Dish Network have yet to officially announce, but Bewkes clearly intends to include the satellite carriers.  Comcast, meanwhile, plans to stick with their “Fancast” service for now, but has made some friendly remarks about the two services possibly becoming compatible.  Of course, the prospect of an ISP such as Comcast (the largest MSO in the country) selling both their own proprietary internet video walled garden while simultaneously selling internet access raises issues of net neutrality – so in Time Warner’s case, it’s interesting that the conglomeorate that includes cable networks Turner Broadcasting and HBO) will be splitting off the Time Warner Cable subsidiary on March 12th – just one week after announcing the TV Everywhere initiative.

So what exactly is “TV Everywhere” going to look like?  Evidently an identity-based access system running over the top  at “no extra cost”  to the user.  I imagine the pledge to make the service free is based on the fact that recent election-related spikes in internet streams of The Daily Show and SNL clips did not appear to cannibalize broadcast ratings and that all-important symbiotic relationship between the carrier and the cable network.   There’s something most coverage of TV Everywhere misses, though:

The most interesting thing about TV Everywhere is that it’s still only about the PC/web browser/mobile device – conspicuously absent is any mention of network-enabled televisions and set-top boxes.

The next generation of internet-enabled television hardware is the elephant in the room – and the content owners know it: how else to explain NBCU and Fox suddenly forcing Hulu to back out of Boxee once it became clear the service was ultimately aimed not at the (lean-forward) PC but at the (lean-back) TV?  (I would’ve thought the prominent placement of the letters ‘b-o-x’ in the company’s name would’ve been a red flag, but that’s just me.)

The whole TV Everywhere model is intended to preserve the current carrier/cable network revenue stream.  To that extent, it’s intended to prevent (or at least slow down the progress of) access to internet video from the television. That’s going to be difficult, though, because while users really don’t care whether their programs arrive at the TV via a cable stream or via IP packets, what they ultimately will demand is the same freedom from program schedule tyranny they enjoy over on a website – in other words, it’s not about “TV Everywhere” – it’s about “TV Anytime.”

I’m looking over some recent numbers from nielsen online and I’m struck by something: while hulu may indeed be a big fish, long-form internet video is still a pretty small pond.  Consider:

Of the four major broadcast networks, hulu partners Fox and NBC saw the largest month-over-month increases in October 2008:  Fox was up 165%, while NBC (helped by Tina Fey’s triumphant if temporary return to SNL as America’s favorite eye-winking, Russia-seeing hockey mom) saw a whopping 312% increase (by contrast, ABC was up 105% and internet video laggard CBS was only up 38%.)

312 % and 165 % increases over the course of one month? Let’s celebrate – professionally produced long-form video has finally come into its own, right?

Wrong.

From that same Nielsen report, here’s another statistic: during October, YouTube had almost 82 million unique visitors to hulu’s 6.3 million – that’s a factor of fifteen (even with Tina Fey’s Palin sketches driving users to hulu).

A direct comparison between the two by total streams delivered would skew unfairly towards YouTube due to the shorter running time of the average user-generated video – but what the heck, let’s do it anyway, just for fun…  because the difference between those Nielsen numbers is even more stark than you might imagine: YouTube delivered almost 38 times the total number of streams delivered by hulu.

That’s thirty eight times more streams from YouTube than hulu.

Granted, hulu is one well-executed website.  Yet clearly, long-form premium video over the internet still has a long way to go.  What’s the takeaway here?  In my opinion, the answer is somewhat obvious: people don’t want to sit alone in front of their computers for a half hour or more at a time to view long-form video – in other words, the effectiveness of the personal computer as a video-viewing device is inversely proportional to the program length of the video being viewed.

The numbers in this report clearly put Hulu and YouTube in stark contrast against one another in terms of actual usage.  However, it would be a mistake to fail to take into account the fundamental differences between the short form/long-tail (user generated) and long form/short-tail (professionally produced) video viewing experiences – or the fact that we don’t have a truly compelling lean-back device for delivering long-form internet video viewing just yet.  Therefore, it would be a mistake to infer from reports such as this that internet video will remain primarily a short-form UGC medium.

For long-form premium video over the internet, it’s going to take a new generation of device that offers content directly from the couch before we can make any such comparisons.   The user interface on these devices will not be a web-browser, instead it will be simpler and optimized for lean-back media. Companies such as boxee (at left) and Yahoo/Intel are working on just such user interfaces. While I’ve already written a bit on the Yahoo initiative here, Boxee is more recent development. Right now it’s just a Windows/Mac application that aggregates disparate video sources (including Hulu) into a cohesive whole. While that’s pretty cool in itself, what makes Boxee really interesting is that the company plans to bring dedicated set-top Boxee hardware to the market within the next year or so – and in ther meantime, the software can be installed on the Apple TV device today. As I’ve said before, I think the prospect of Boxee on – well, a box – changes everything.

We shall see – but in the meantime, a quick reality check is in order: while well-suited to workplace video snacking, the computer and web browser are inappropriate (and ultimately intermediate) solutions for viewing long-form video – no matter how well-implemented a given website (such as Hulu) happens to be.